BILL ANALYSIS
Bill No: SB
988
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 988 Author: Huff
As Amended: March 25, 2010
Hearing Date: April 27, 2010
Consultant: Chris Lindstrom
SUBJECT
Regulations: 5 year review and report.
DESCRIPTION
SB 988, an urgency measure, requires the Office of
Administrative Law (OAL) to review and report, as
specified, on each regulation adopted or amended by any
state agency that has duties relating to state energy
regulations, five years after the adoption or amendment of
said regulation. Provides that the regulatory agency take
one of three actions, as specified in the bill, in response
to OAL's report.
Specifically, the bill:
1)Provides that the applicability of this bill is limited
to the State Energy Resources Conservation and
Development Commission, the Public Utilities Commission,
the California Consumer Power and Conservation Financing
Authority, and any other state agency that has duties
relating to state energy regulations or the
implementation of those regulations.
2)Requires OAL to review and report on any regulation that
an agency, as specified in 1, above, adopts or amends on
and after January 1, 2011, as required by this section.
3)Requires OAL to complete the review and report on or
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before May 1 immediately following five years after the
date the regulation was adopted or amended.
4)Requires OAL to make each report available on its
Internet Web site.
5)Requires the review and report to include all of the
following factors:
a) The general and specific statutes authorizing the
regulation.
b) The objective of the regulation.
c) The effectiveness of the regulation in achieving
the objective.
d) The consistency of the regulation with state and
federal statutes and regulations and a listing of the
statutes or regulation used in determining the
consistency.
e) The enforcement policy of the agency that adopted
or amended the regulation, including whether the
regulation is currently being enforced and, if so,
whether there are any problems with enforcement.
f) The view of the agency that adopted or amended the
regulation regarding the current wisdom of the
regulation.
g) The clarity, conciseness, and understandability of
the regulation.
h) A summary of the written criticisms of the
regulation received by the agency that adopted or
amended the regulation within the five years
immediately preceding OAL five-year review report,
including letters, memoranda, reports, and written
allegations made in litigation or administrative
proceedings to which the agency was a party, any
indication that the regulation is discriminatory,
unfair, unclear, inconsistent with statute, or beyond
the authority of the agency to enact, and the status
or result of the litigation or administrative
proceedings.
i) The estimated economic, small business, and
consumer impact of the regulation as compared to the
economic, small business, and consumer impact
statement prepared on the last making of the
regulation, or, if no economic, small business, and
consumer impact statement was prepared on the last
making of the rule, an assessment of the actual
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economic, small business, and consumer impact of the
regulation.
j) The course of action the agency that adopted or
amended the regulation proposes to take regarding the
regulation, including the month and year in which the
agency anticipates submitting the rules to OAL if the
agency determines it is necessary to amend or repeal
an existing rule, or to make a new rule.
6)Provides that the regulatory agency, in response to OAL's
review and report on the adopted or amended regulation,
may do any of the following:
a) Do nothing, in which case the regulation will cease
to be operative as of 2 years after the date the
office issued the report.
b) Implement the recommendations of OAL.
c) Develop its own plan to redress the concerns noted
by OAL in the report.
7)Takes effective immediately, as an urgency statute.
EXISTING LAW
Existing law, the Administrative Procedure Act, governs the
procedure for the adoption, amendment, or repeal of
regulations by state agencies, including requirements that
the notice of proposed action contains a statement of
reasons for proposing the adoption, amendment, or repeal of
a regulation that includes a description of reasonable
alternatives to the regulation and a prescribed cost
estimate associated with the proposed regulation.
Existing law requires state agencies to submit a final
statement of reasons with an adopted regulation that
provides, among other things, an update to the initial
statement of reasons, and, a summary of each objection or
recommendation made regarding the regulation and how the
regulation was changed to accommodate each objection or
recommendation, or the reasons for making no change.
Existing law also provides for the review of these
regulatory actions by OAL to ensure that regulations follow
the rulemaking procedures outlined in the APA.
Existing law requires OAL to review all regulations
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adopted, amended, or repealed and submitted to OAL for
publication in the California Code of Regulations
Supplement and for transmittal to the Secretary of State
and make determinations using all of the following
standards:
1) Necessity - it is necessary to effectuate the
law.
2) Authority - it is within the authority granted
by law.
3) Clarity - it is easily understood by those
persons directly impacted.
4) Consistency - it is consistent with the law.
5) Reference - it references the underlying law.
6) Nonduplication - it is non-duplicative of other
federal or state laws or regulations.
Existing law provides OAL with the authority to reject and
return to the proposing agency any regulation that it
determines to fail any one of the six standards mentioned
above.
Existing law restricts OAL in reviewing regulations to
restrict its review to the regulation and the record of the
rulemaking proceeding.
Existing law requires OAL to adopt regulations governing
the procedures it uses in reviewing regulations submitted
to it. The regulations shall provide for an orderly review
and shall specify the methods, standards, presumptions, and
principles OAL uses, and the limitations it observes, in
reviewing regulations to establish compliance with the
standards. The regulations adopted by OAL shall ensure
that it does not substitute its judgment for that of the
rulemaking agency as expressed in the substantive content
of adopted regulations.
BACKGROUND
Purpose of the bill . According to the author's office,
"Through the Administrative Procedures Act (APA), the
Office of Administrative Law (OAL) is generally tasked with
reviewing regulations to ensure they are clear, necessary,
legally valid, and available to the public. There is no
specific requirement, however, for an independent third
party to assess the impact of specific regulations on the
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economy or job market. Furthermore, there is no law
requiring the individual agencies to adjust regulations
after a review has been conducted.
"California's energy agencies have recently been under fire
for pursuing regulations that extend beyond their authority
and thus contributing severely to the discouragement of
business and the burden on individuals in the State. For
instance:
The Public Utilities Commission (PUC) approved a
plan in 2006 to require "smart meters" to be installed
on homes. In the months following installation,
customers complained of significantly higher electric
bills.
In 2008, the California Energy Commission (CEC) set
forth to require programmable communicating
thermostats in all new real estate, giving power to a
government agency to determine how hot or cold a
private home or building could be kept.
In 2009, the CEC approved an egregious overreach of
their authority by attempting to ban certain
televisions from being sold.
The CEC also has a record of ignoring clear
legislative intent. After passage of AB 1103, the CEC
was given authorization to use Energy Star Portfolio
Manager as a benchmarking tool; however, the CEC, by
claiming it had broad legislative authority to
establish energy efficiency regulations, instead
attempted to implement use of an alternate
benchmarking tool. This had clearly been prohibited
by AB 1103.
"In doing so, the energy agencies in California have
demonstrated a need for increased oversight.
"SB 988 will require the OAL to conduct period reviews of
the expedience, enforcement and economic impact of
energy-related agency regulations and develop
recommendations. Additionally, it will require agencies to
respond to the review in one of three ways:
1. Do nothing, in which case the regulation will cease
to be operative 2 years after the report.
2. Implement the OAL recommendations.
3. Develop its own plan to redress the concerns noted
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by the OAL in the report."
Background . OAL is responsible for reviewing
administrative regulations proposed by over 200 state
regulatory agencies for compliance with standards set forth
in California's APA, for transmitting these regulations to
the Secretary of State, and for publishing regulations in
the California Code of Regulations. Existing law requires
OAL to adopt regulations governing the procedures it uses
in reviewing proposed regulatory actions submitted to OAL.
Further, existing law prohibits OAL from substituting its
judgment for that of the rulemaking agency in regard to the
substantive content of the proposed regulations.
Administrative Procedures Act . The APA establishes
rulemaking procedures and standards for state agencies in
California. The requirements set forth in the APA are
designed to provide the public with a meaningful
opportunity to participate in the adoption of state
regulations and to ensure that regulations are clear,
necessary and legally valid.
In seeking adoption of a proposed regulation, state
agencies must comply with procedural requirements that
include publishing the proposed regulation along with
supporting statement of reasons; mailing and publishing a
notice of the proposed action 45 days before a hearing or
before the close of the public comment period; and
submitting a final statement of reasons to OAL which
summarizes and responds to all objections, recommendations,
and proposed alternatives that were raised during the
public comment period. The OAL is then required to approve
or reject the proposed regulation within 30 days.
Staff comments . This is one of a number of bills currently
before the Legislature intended to provide greater third
party review over the state regulatory adoption process.
Some bills delegate enhanced review authority to the Bureau
of State Audits, OAL, as well as, newly created entities.
(1) Impact on OAL . (a) Need for public participation or
definitions? SB 988 expands the responsibilities of OAL to
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review and report, as specified, on regulations that are
adopted or amended by specified agencies. The bill
requires the report to include ten specific factors. Of
the ten, three (19349.95.(c)(1), 19349.95.(c)(4) and
19349.95.(c)(7)) are similar to requirements contained in
the APA, and, three (19349.95.(c)(6), 19349.95.(c)(8), and
(19349.95.(c)(10)) are simply a reporting of information
that most likely will come from the regulatory agency.
There are three requirements that will require OAL to
exercise some judgment. Inasmuch as OAL's judgment could
be deemed subjective, should the bill include a process for
public participation, as well as, review standards for each
of the following subsections to minimize complaints about
the process being biased or subjective?
Section 19349.95.(c)(3) requires OAL to review and
report on the effectiveness of the regulation in
achieving the objective of the regulation.
Section 19349.95.(c)(5) requires OAL to review and
report whether there are problems with the enforcement
of regulations.
Section 19349.95.(c)(9) requires OAL to compare the
estimated economic, small business, and consumer
impacts of the regulation to the final estimated
impacts in those areas when the regulation was
adopted. Or if no final estimated impact statements
were prepared in those areas when the regulation was
adopted, then OAL shall make an assessment of the
actual economic, small business, and consumer impacts.
(b) Staffing. OAL currently consist of approximately 20
employees, most of which are attorneys. OAL does not have
any economists on staff or the type of subject matter
experts to perform some of the assessments required by the
bill. This bill may require OAL to hire personnel or
contract out to perform these types of assessments.
(c) Technical issues. (i) Section 19349.95.(c)(2) requires
OAL to review and report on the objective of regulations.
The APA currently requires agencies proposing regulatory
actions to submit a statement of reasons, including a
statement of the specific purpose of the proposed
regulatory action. The author may wish to replace the word
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"objective" with "purpose" in Sections 19349.95.(c)(2) and
(3) of the bill.
(ii) The bill requires OAL to review and report on specific
factors. The bill provides the regulatory agencies to take
specific actions in response to OAL's report, namely, to:
Implement the recommendations of OAL. [Section
19349.95.(d)(2)]
Develop its own plan to redress the concerns noted
by OAL in the report. [Section 19349.95.(d)(3)]
The bill does not require OAL to make any recommendations,
only to review and report on specific factors. The author
may wish to specify that OAL shall also make
recommendations in addition to reviewing and reporting.
Also, the author may which to replace "redress the concerns
noted" with "address the recommendations".
(2) Bureau of State Audits (BSA) . This bill expands the
authority of OAL to review and report on specific factors
related to the adoption or amendment of regulations five
years after a regulatory action takes place. This is
outside of the scope of the powers of OAL. OAL, for the
most part, is limited in its authority to examine the
technical and procedural aspects of regulations, to ensure
that regulations are clear, necessary and legally valid.
In reviewing regulations, OAL is: (1) restricted from
substituting its judgment for that of the rulemaking agency
as expressed in the substantive content of adopted
regulations, and (2) shall restrict its review to the
regulation and the record of the rulemaking proceeding.
The Bureau of State Audits (BSA), on the other hand, is the
state's independent external auditor that provides
independent, nonpartisan assessments of California
government's financial and operational activities in
compliance with generally accepted government auditing
standards. The BSA reports its findings to the Legislature
and recommends corrective actions. Existing law
specifically authorizes BSA to independently examine
records, administer oaths, issue subpoenas, and use other
discovery tools to conduct and report upon, financial and
performance audits of every state agency, constitutional
office, and local governmental agency.
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The requirements of this bill may be better suited to be
performed by BSA.
Arguments in support . Proponents argue "Many agencies in
California have broad authority to promulgate regulations
with no systematic review by the legislature or other
independent party to determine whether the regulations are
performing as desired many years later. The trend is for
an ever increasing regulatory environment with little
incentive for agencies to monitor performance or streamline
regulations.
"SB 988 would bring sunshine to existing regulations and
encourage agency action to improve regulations every five
years. In fact, the process of tracking and gathering
information for use by the OAL should become "business as
usual" for the agencies, available more frequently than
every five years if desired by the legislature or the
public. For example, a well-designed reporting process
could provide important information for legislative
committees responsible for subject-matter oversight or
agency budgets as part of a plan for performance-based
budgeting. However, the bill itself simply requires that
the agencies themselves make plans to redress concerns
raised in the reports - a modest proposal that would avoid
automatic sunsets."
PRIOR/RELATED LEGISLATION
SB 942 (Dutton), 2009-2010 Legislative Session .
establishes new requirements in the rulemaking process
under the Administrative Procedure Act (APA) to: (1)
require state agencies that are proposing a regulatory
action to submit more detailed information regarding the
costs of the proposed action, as specified, and, (2)
enhance the authority of the Office of Administrative Law
(OAL) in reviewing the cost estimates of proposed
regulatory actions, as specified. Also, SB 942 requires
agencies to catalog and review its existing regulations and
to report its findings to the Legislature. (Pending in
Senate Appropriations Committee)
SB 954 (Harman), 2009-2010 Legislative Session . Enacts the
Jobs Protection Act. Renames the Joint Committee on
Boards, Commissions, and Consumer Protection as the Joint
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Committee on Boards, Commissions, and Consumer or Business
Protection, and would create a new legislative procedure
with regard to any bill, as defined, that may have a
statewide economic impact affecting business. Requires the
Assembly Committee on Rules and the Senate Committee on
Rules to refer any bill that may have a statewide economic
impact affecting business, as specified, to the joint
committee for the preparation of an economic impact
analysis and a hearing and approval. Requires the joint
committee to move a bill estimated to generate a fiscal
impact of $10,000 or more on small business, as defined, or
$50,000 or more on any other business, to the suspense file
of the joint committee for further consideration, subject
to specified procedural requirements. Requires the joint
committee to make an annual report in that regard.
(Pending in Senate Rules Committee)
SB 1160 (Dutton), 2009-2010 Legislative Session . Restores
and expands a law that sunset in 2000 to require the
Department of Finance and the Legislative Analyst's Office
to perform dynamic analyses of tax bills that have
significant fiscal effects, as defined, and further, to
require state agencies to perform a dynamic analysis of
proposed regulations on jobs and businesses. (Pending in
Senate Appropriations Committee)
SB 1351 (Wright), 2009-2010 Legislative Session . Requires
an agency that adopts a regulation that requires the use of
a new or emerging technology or equipment in order to
achieve the identified purpose of the regulation to post on
its Internet Web site and in the California Regulatory
Notice Register, upon the effective date of the regulation,
that the required technology or equipment is commercially
available or will be commercially available prior to the
effective date of the regulation. Provides that, if the
required technology or equipment prescribed by the
regulation is not commercially available on the effective
date of a regulation, the adopting agency is prohibited
from enforcing a violation of the regulation until at least
six months after the technology or equipment becomes
commercially available and the agency posts on its Internet
Web site and in the California Regulatory Notice Register
that the required technology or equipment is commercially
available. Requires an agency to make any implementation
schedule, procedure, or form that is necessary for
compliance with a proposed regulation available to the
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public upon the agency's final adoption of that regulation.
Provides that, if the implementation schedule, procedure,
or form necessary for compliance with the regulation is not
available on the effective date of the regulation, the
agency is prohibited from enforcing a violation of the
regulation for at least six months after the implementation
schedule, procedure, or form becomes available and the
agency posts on its Internet Web site and in the California
Regulatory Notice Register that the that the require
implementation schedule, procedure, or form has become
available. (Pending in Senate Appropriations Committee)
SBX8 60 (Harman), 2009-2010 8th Extraordinary Session .
Enacts the Jobs Protection Act. Renames the Joint
Committee on Boards, Commissions, and Consumer Protection
as the Joint Committee on Boards, Commissions, and Consumer
or Business Protection, and would create a new legislative
procedure with regard to any bill, as defined, that may
have a statewide economic impact affecting business.
Requires the Assembly Committee on Rules and the Senate
Committee on Rules to refer any bill that may have a
statewide economic impact affecting business, as specified,
to the joint committee for the preparation of an economic
impact analysis and a hearing and approval. Requires the
joint committee to move a bill estimated to generate a
fiscal impact of $10,000 or more on small business, as
defined, or $50,000 or more on any other business, to the
suspense file of the joint committee for further
consideration, subject to specified procedural
requirements. Requires the joint committee to make an
annual report in that regard. (Held in Senate Rules
Committee)
AB 2466 (Smyth), 2009-2010 Legislative Session . Requires
OAL to also submit to the Legislature for review a copy of
any regulation that it submits to the Secretary of State.
Requires that a regulation become effective on the 90th day
after it is filed with the Secretary of State, unless
prescribed conditions occur. Requires the Legislature to
refer a copy of every regulation submitted to it by OAL to
an appropriate policy committee for review of its
consistency with the intent of the Legislature in regard to
the statute that authorizes the particular regulation and
to offer recommendations as to whether the regulation
should be repealed by statute. (Pending in Assembly
Appropriations Committee)
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AB 2529 (Fuentes), 2009-2010 Legislative Session . Adopts
the regulatory philosophy and the principles of regulation,
as outlined in Presidential Executive Order 12866, in order
to achieve the same regulatory benefits within the state.
Requires the Department of Finance to assist state agencies
with the review of new and existing regulations for
compliance and consistency with these requirements, and to
review analyses performed by agencies in promulgating new
regulations or in reviewing existing regulations. Requires
an agency to annually provide to the department a list of
its planned regulatory actions for that year and indicate
the actions which the agency believes are significant
regulatory actions. Requires an agency, for each
significant regulatory action, to submit prescribed
information to the director at least 30 days prior to
issuing a notice of proposed action. Requires the director
to review the submitted information. Requires the
department, in order to establish a baseline for the
determination of the costs and benefits of significant
regulatory actions that it reviews, to complete a review of
all significant regulatory actions completed by state
agencies since January 1, 2004, and summarize the costs and
benefits of those actions in a report to be completed prior
to July 1, 2011. Requires the Governor to convene an
interagency group with specified duties for the purpose of
formulating an effective methodology for performance of the
analysis and cost-benefit studies by state agencies, as
specified. (Pending in Assembly Appropriations Committee)
AB 2652 (Niello), 2009-2010 Legislative Session . Declares
the intent of the Legislature to enact legislation that
would require OAL to submit copies of proposed regulations
to the appropriate policy committee in each house of the
Legislature and that would require the policy committees to
conduct a hearing for the purpose of reviewing the proposed
regulation. (In Assembly Rules Committee)
SUPPORT : As of April 23, 2010:
American Council of Engineering Companies of California
California Business Properties Association
California Chamber of Commerce
California Grocers Association
California Independent Oil Marketers Association
California League of Food Processors
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California Manufacturers & Technology Association
California Retailers Association
Chemical Industry Council of California
National Federation of Independent Business
Western States Petroleum Association
OPPOSE : None on file as of April 23, 2010.
DUAL REFERRAL : Senate Rules Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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