BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1160 (Dutton)
Hearing Date: 05/03/2010 Amended: 04/05/2010
Consultant: Brendan McCarthy Policy Vote: GO 7-1
SB 1160 (Dutton), Page 2
_________________________________________________________________
____
BILL SUMMARY: SB 1160 requires the Legislative Analyst's Office
and the Department of Finance to use dynamic economic modeling
techniques when estimating the impacts of tax law changes that
will have a fiscal impact in excess of $10 million per year. The
bill requires state agencies that are proposing to adopt, amend,
or repeal regulations that will have an impact of more than $100
million per year to use dynamic economic modeling techniques to
assess the economic impact of the regulation.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
LAO economic analysis Variable, about $25 per year, on
averageGeneral
DOF economic analysis Variable, about $25 per year, on
averageGeneral
State agency economic Potentially in the hundreds of thousands
Various
analysis per year
_________________________________________________________________
____
STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
As part of the annual budget process, the Legislative Analyst's
Office (LAO) and the Department of Finance (DOF) make
projections of future state revenues and expenditures. When tax
law changes are included in the budget or separate legislation,
LAO and DOF incorporate those changes into their projections.
From 1994 to 2000, state law (SB 1837, Campbell, Chapter 383,
Statutes of 1994) required LAO and DOF to prepare "dynamic"
estimates of the impact of tax law changes. Such dynamic
estimates attempt to fully account for the economic impacts of
changing conditions in the state economy, by incorporating
potential behavioral changes of individuals and firms to
changing conditions. The intent of dynamic economic modeling is
to better understand the economic impacts of government policies
SB 1160 (Dutton), Page 2
and more accurately forecast how they will impact future tax
revenues.
Under current law, state agencies proposing to adopt, amend, or
repeal regulations must undertake certain analyses of the impact
of those regulations. State agencies are required to assess the
potential impacts of the regulation on the creation or
elimination of jobs and the creation or elimination of
businesses in the state.
SB 1160 requires LAO and DOF to perform dynamic economic
analysis of any changes to state tax law that are estimated to
have an impact greater than $10 million in any fiscal year.
SB 1160 requires state agencies that are proposing to adopt
amend, or repeal regulations to additionally perform a dynamic
economic analysis of the regulation, if the regulation is
estimated to have a direct economic impact of more than $100
million per year on the private sector.
Staff estimates that LAO and DOF would have to increase their
current capability to perform economic analysis under the bill.
The workload under the bill is uncertain, because significant
changes to tax law or tax rates are not enacted every year.
Staff estates that the two offices would need, on average, about
$25,000 per year to perform the required analyses.
Over the last decade, between 600 and 800 regulations per year
have been considered by state agencies. However, no centralized
information is available about the cost of those regulations.
Thus, the number of regulations that would trigger the
requirements of this bill is unknown. Based on discussions with
several agencies that perform economic analysis of regulations,
staff estimates that the cost to perform the required economic
analysis on a regulation would be between $50,000 and $100,000
per regulation. (On occasion, for complex regulations, costs to
perform economic analysis can be in the hundreds of thousands.)
Staff believes that the proportion of regulations that meet the
$100 million threshold in any given year would be low. However,
because of the large number of regulations considered every year
by state agencies, staff estimates that the total annual cost to
state agencies could be in the hundreds of thousands.
SB 942 (Dutton) requires the Office of Administrative Law to
conduct economic analyses of regulations costing more than $50
SB 1160 (Dutton), Page 2
million per year and requires state agencies to review existing
regulations. That bill is currently on the Appropriations
Committee suspense file.