BILL ANALYSIS �
AB 1504
Page 1
Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 1504 (Morrell) - As Amended: April 16, 2012
SUBJECT : Administrative regulations.
SUMMARY : Revises various provisions of the Administrative
Procedures Act (APA) related to public participation and lowers
the threshold for the "major regulation" from $50 to $25
million. Specifically, this bill :
1)Lowers the threshold for a "major regulation" from $50 to $25
million.
2)Requires an agency that is considering adopting, amending, or
repealing a regulation to complete an economic assessment of
the proposed action 90 days prior to submitting a notice of
proposed action to the Office of Administrative Law (OAL) that
includes:
a) An assessment of the cost associated with the proposed
action including whether it would result in the expenditure
of moneys by any individual, business, state government
entity, or local government entity;
b) A description of the expenditure of any moneys
identified, including examples of how the proposed action
may result in the expenditure of moneys by an individual,
business, state entity, or local entity;
c) An analysis of how the proposed action shall implement
or meet the statutory purpose for which it is necessary,
and the reason for its necessity;
d) An analysis that takes into consideration and addresses
the public comments received by the agency; and,
e) An analysis that considers alternative regulations in
the case of a major regulation, as specified.
3)Requires the agency to notify the public of the public comment
period for the economic assessment 90 days prior to submitting
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a notice of proposed action to OAL, as follows:
a) Identify all interested parties that may be affected by
the proposed regulation;
b) Post that identification on its Internet Web site along
with a preliminary notice of proposed rulemaking and
initial statement of reasons (ISOR);
c) Make public all comments received; and,
d) File the required economic assessment with the notice of
proposed action, as specified.
4)Requires an agency that proposes to adopt a major regulation
to include in its standardized regulatory impact assessment:
a) An assessment of the cost effectiveness of alternatives
that meet the statutory purpose of the proposed major
regulation and a determination of which alternative is the
lowest cost alternative; and,
b) A demonstration that the proposed major regulation is
the most cost-effective approach to meeting the statutory
purpose of the regulation as compared to all other
alternatives.
5)Requires an agency to make a substantial effort to engage all
regulated and interested parties in the development of
alternatives that would satisfy the statutory purpose of the
proposed major regulation, as specified.
6)Defines "alternative" to mean any other alternative approach
or project that could be, or could have been, considered by
the agency in lieu of the proposed major regulation.
7)Makes conforming and technical changes.
EXISTING LAW :
1)Governs the procedures for the adoption, amendment, or repeal
of regulations by state agencies and the review of those
regulatory actions by OAL under the APA.
2)Establishes procedures for notifying interested persons of the
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proposed adoption, amendment, or repeal of a regulation.
3)Requires a state agency that proposes to adopt, amend, or
repeal an administrative regulation to assess the potential
for adverse economic impact on California businesses and
individuals, as specified.
4)Requires, on and after November 1, 2013, a state agency
proposing to adopt, amend, or repeal a regulation that will
have an economic impact of more than $50 million to conduct a
standardized regulatory impact assessment, as specified, to be
included in the ISOR for the regulation.
5)Requires the Department of Finance (DOF) to adopt regulations
for conducting the standardized regulatory impact assessment.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author, "The Legislature
has entrusted many state agencies with the authority to write
policy that carries the weight of law. While California's
regulatory system once held an esteemed position among rule
making bodies, a lack of consistency between agencies has caused
the growth of a bureaucracy to run rampant. In many cases
regulations are duplicative, are inadequate or fail all together
in addressing the desired regulatory goal and succeed only in
wasting taxpayer's money while placing undue burden on citizens.
"The APA outlines the requirements an agency must meet in
forming a new regulation. Part of this process is the
completion of an economic analysis to understand the potential
impacts that it may have. However, few agencies provide for
this obligation in a systematic way and a lack of guidance can
be partly attributed to California's failing system.
"SB 617, passed in 2011, has charged DOF with providing a much
needed set of standards by November 1, 2013, for agencies to
follow in developing the required economic analysis for new
rules and regulations. However, the requirements for this new
standardized approach could allow agencies to reject alternative
solutions that are potentially less costly on the grounds that
they have "assessed the value of nonmonetary benefits" and found
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that a costly regulation is the best solution.
"AB 1504 will require DOF to include parameters for a Cost
Effectiveness Analysis (CEA) when drafting the new standards
outlined in SB 617, and will require that a CEA be completed for
all major regulations. Major regulations will be redefined by
this bill as a regulation having a cost of $25 million or
greater rather than $50 million as established by SB 617.
"For all new regulations, agencies will be required to actively
seek the input of affected parties in order to establish
alternative solutions that are less burdensome. The agency will
be required to identify all industries that a regulation has the
potential to affect and must list that information along with
other details about the proposed regulation on their website
before a proposal for the regulation is submitted.
"The system's shortcomings have cost the state time and money
and have earned California a reputation for having a lack of
fairness and legitimacy in the regulatory process. Many
regulations are passed without proper assessment of the costs
and as a result are over-burdensome and do not produced the
desired results. AB 1504 will help to restore trust in the
system and provide transparency and accountability for agencies
entrusted with the responsibilities of writing laws."
Background . This bill revises various provisions of the APA
related to public participation by requiring agencies to notify
the public of the public comment period for the economic
assessment 90 days prior to submitting a notice of proposed
action to OAL, list the parties it identifies as being affected
by the proposed regulation on its Internet Web site, and make
public all comments received. Additionally, this bill lowers
the threshold for the "major regulation" from $50 to $25
million.
The APA governs the adoption of regulations by state agencies
for purposes of ensuring that they are clear, necessary, legally
valid, and available to the public. In seeking adoption of a
proposed regulation, state agencies must comply with procedural
requirements that include publishing the proposed regulation
with a 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 to OAL which summarizes and responds to all
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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. Regulations take effect 30 days after being filed by the
OAL with the Secretary of State.
More specifically, the APA requires state agencies proposing to
adopt, amend, or repeal any administrative regulation to assess
the potential for adverse economic impact on California business
enterprises and individuals, and avoid imposing unnecessary or
unreasonable regulations. Agencies are required to consider the
proposal's impact on business, with consideration of industries
affected including the ability of California businesses to
compete with businesses in other states. Additionally, agencies
are required to assess whether and to what extent the proposed
regulation change will affect the creation or elimination of
jobs, the creation of new businesses or the elimination of
existing businesses, and the expansion of businesses currently
doing business within California.
Support . The California Grocers Association writes in support,
"As you are aware, California's regulatory climate is
challenging for businesses. The grocery industry is subject to
myriad regulations on a broad range of issues. More robust
public discussion about the potential impacts of proposed
regulations and reducing the threshold economic impact for a
proposed regulation to be considered a 'major regulation'
represent important steps toward bringing more certainty for the
regulated community."
Opposition . Health Access California writes in opposition, "In
our 25 years of advocacy on behalf of California health care
consumers, Health Access has weighed in on countless regulations
set by various state agencies. Though we would not assert that
the various stakeholder processes we have participated in have
been perfect, we have had various opportunities to represent
consumer voices. AB 1504 would make it more difficult for state
agencies to put into place important regulations to implement
hard fought consumer protection laws, and may even be construed
as an attempt to prevent consumer protections approved by the
Legislature and Administration from going into effect."
Related legislation . AB 2090 (Bill Berryhill) amends the
requirements that an adopting agency must meet when preparing
economic impact and standardized regulatory impact analyses and
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lowers the threshold for a major regulation from $50 to $15
million. This bill is pending the Assembly Appropriations
Committee.
Previous legislation . SB 617 (Ron Calderon), Chapter 496,
Statutes of 2010, revises various provisions of the APA and
requires each state agency to prepare a standardized regulatory
impact analysis, as specified, with respect to the adoption,
amendment, or repeal of a major regulation, proposed on or after
November 1, 2013.
REGISTERED SUPPORT / OPPOSITION :
Support
American Council of Engineering Companies
California Asian Pacific Chamber of Commerce
California Grocers Association
Opposition
California Board of Accountancy
Health Access California
Analysis Prepared by : Rebecca May / B.,P. & C.P. / (916)
319-3301