BILL ANALYSIS �
AB 2090
Page 1
Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2090 (Bill Berryhill) - As Amended: April 10, 2012
SUBJECT : Regulations.
SUMMARY : Modifies the requirements that an adopting agency
must meet when preparing economic impact and standardized
regulatory impact analyses and lowers the threshold for a major
regulation to $15 million. Specifically, this bill :
1)Lowers the threshold for a "major regulation" from $50 million
to $15 million, as estimated by the agency in its economic
impact analysis.
2)Deletes the requirement that state agencies include in the
economic impact analysis an assessment of whether and to what
extent the proposed adoption, amendment, or repeal of a
regulation will affect:
a) The creation or elimination of jobs within the State of
California;
b) The creation of new businesses or the elimination of
existing businesses within the state of California; and,
c) The expansion of businesses currently doing business
within the state of California.
3)Requires state agencies proposing to adopt, amend, or repeal a
regulation to prepare an economic impact analysis that:
a) Estimates the total actual costs of compliance for
affected small businesses, large businesses, and other
parties subject to the regulation or group of regulations,
including, the costs of individual compliance as well as
the cumulative statewide cost of compliance, as specified;
and,
b) Includes an express statement as well as a detailed
statement describing how a small business, large business,
or other party subject to the regulation could comply with
AB 2090
Page 2
the regulation or group of regulations without incurring
cost, if an agency declares that it is not aware of any
cost impact, as specified.
4)Provides that if reasonable doubt exists as to whether the
cumulative statewide cost of compliance of any regulation or
group of regulations authorized by the same statute exceeds
$15 million, the doubt shall be resolved in favor of finding
that the regulation or group of regulations authorized by the
same statute qualifies as a major regulation.
5)Requires agencies to maintain each economic impact analysis
and make it available to the Office of Administrative Law, the
Governor's Office of Planning and Research, the Director of
Finance, the Legislative Analyst, the State Auditor, the
Controller, the President pro Tempore of the Senate, the
Senate Minority Floor Leader, the Speaker of the Assembly, the
Assembly Minority Floor Leader, and the chair and ranking
minority party member of the appropriate fiscal and policy
committees of the Senate and the Assembly upon request.
6)Requires the adopting agency to prepare a standardized
regulatory impact analysis for any major regulation that
includes:
a) A detailed estimate, in both the short and long term, of
the average individual cost of compliance for small
businesses, large businesses, and other parties subject to
the major regulation;
b) A detailed estimate, in both the short and long term, of
the cumulative statewide cost of compliance with the major
regulation for small businesses, large businesses, and
other parties;
c) A detailed distributional assessment that evaluates, in
both the short and long term, how certain industries,
income groups, and geographic regions are likely to
experience benefits or costs as a consequence of the major
regulation;
d) A detailed estimate of the short- and long-term creation
or elimination of jobs in individual sectors as a result of
the major regulation;
AB 2090
Page 3
e) A detailed estimate, in both the short and long term, of
the potential for economic leakage as a result of the major
regulation in which economic activity is relocated from
California to another state or country;
f) A detailed estimate, in both the short and long term, of
the impact on the ability of California businesses to
compete with businesses in other states and California's
ability to attract businesses to locate in the state as a
result of the major regulation;
g) A detailed estimate, in both the short and long term, of
the effects on excise tax, sales and use tax, income tax,
corporation tax, and other tax revenue to the General Fund,
and fee revenues to special funds, as a result of the major
regulation and changes in economic activity as a result of
the major regulation;
h) A precise statement enumerating the benefits, in both
the short and long term, anticipated from the major
regulation, including the benefits or goals provided in the
authorizing statutes, including the failures in private
markets or public institutions that warrant the proposed
major regulation, when applicable, as specified;
i) An identification of each technical, theoretical, and
empirical study, report, or similar document, if any, upon
which the agency relies in proposing the major regulation;
and,
j) A copy of the economic impact analysis.
7)Deletes the requirement for the adopting agency to include in
the standardized regulatory impact assessment:
a) The creation of new businesses or the elimination of
existing businesses within the state;
b) The competitive advantages or disadvantages for
businesses currently doing business within the state;
c) The increase or decrease of investment in the state;
and,
d) The incentives for innovation in products, materials, or
AB 2090
Page 4
processes; and,
8)Deletes the requirement that state agencies proposing to adopt
regulations involve parties subject to the proposed
regulations in public discussions regarding those proposed
regulations, when the proposed regulations involve complex
proposals or a large number of proposals that cannot easily be
reviewed during the comment period, and instead makes this
requirement applicable to all regulations.
9)Repeals the provisions exempting public participation
requirements during the regulatory process from judicial
review or review by OAL, as specified.
10)Requires OAL to return any regulations to the adopting agency
if the adopting agency does not comply with the requirements
of this bill.
11)States legislative intent.
12)Makes technical changes.
EXISTING LAW
1)Establishes the requirements for the adoption, publication,
review, and implementation of regulations by state agencies,
and for review of those regulatory actions by the OAL under
the Administrative Procedure Act (APA).
2)Requires an agency, prior to submitting a proposal to adopt,
amend, or repeal an administrative regulation, to determine
the economic impact of the regulation by preparing an economic
impact analysis and a standardized regulatory impact analysis
that meet certain requirements.
3)Defines a major regulation as a regulation that the agency
determines has an expected economic impact on California
business enterprises and individuals in an amount exceeding
$50 million.
4)Requires state agencies proposing to adopt regulations to
involve parties that would be subject to the proposed
regulations in public discussions regarding those proposed
regulations, when the proposed regulations involve complex
proposals or a large number of proposals that cannot easily be
AB 2090
Page 5
reviewed during the comment period and provides that these
requirements are not subject to judicial review or a specified
review by OAL.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author, "California's
economy is among the worst in the nation. The most recent
United States Department of Labor statistics show the state
hovering around 11% unemployment, the second highest in the
nation. The state's burdensome regulatory climate has been one
of the leading contributors that have driven many businesses out
of state or to shut their doors altogether. Without significant
changes that can attract more businesses to the state, this
trend will continue, and California's educational and safety net
programs will continue to take the brunt of the punishment.
"The job of state agencies is to adopt regulations based on laws
passed by the Legislature. However, agencies do not involve
businesses in the rulemaking process until nearing the end.
What this bill intends to resolve is an issue of transparency;
to foster an understanding of unintended consequences for all
affected parties.
"Oftentimes, regulations are made with a narrow view of impact.
This has caused several scenarios in which the cost on business'
time, money, staff, and office space eventually deplete their
sources completely. It is not until this happens that agencies
will review such regulations to account for the economic impact.
This is simply too little, too late.
"With a broadened scope of long-term benefits as well as the
ripple effects they cause, regulations can be more successfully
implemented, and agencies won't be forced to step backwards to
repeal or amend decisions after the damage has already been
done.
"A broad view of regulatory economic impact on our state and the
businesses that provide jobs and bring in tax revenue will
create efficiency and longevity. California needs to implement
policies that encourage the growth of our economy by creating an
environment that is business-friendly."
AB 2090
Page 6
Background . This bill amends the requirements that an adopting
agency must meet when preparing economic impact and standardized
regulatory impact analyses and lowers the threshold for a major
regulation from $50 to $15 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
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 Regional Council of Rural Counties (RCRC) writes
in support, "RCRC firmly believes that the current regulatory
process has alienated the regulated community which includes
both counties and the businesses that operate within their
borders. During these economic times, agencies should strive for
a balance. While RCRC and its member counties understand the
need for regulations and believe that public health is of
paramount concern, most regulations proposed by the state's
various agencies could be implemented in a more feasible way if
agency staff would analyze costs and work with the regulated
community to come up with more cost effective alternatives to
AB 2090
Page 7
achieve the desired regulatory goals.
"While we supported Senator Calderon's legislation from last
year - SB 617, which designated regulations having a statewide
fiscal impact of $50 million or more as "major regulations"
subject to full economic impact analysis--RCRC fully supports
lowering that number to $15 million. RCRC, in fact, argued for a
lower threshold in its support for SB 617.
"Local governments and small rural businesses are often subject
to state regulations, and suffer from disproportionate
compliance costs in rural communities. The statewide cost of a
regulation might not reach $50 million because it affects
smaller entities, but those entities are usually affected in a
more profound way, especially in the economically-challenged
rural areas of California."
Previous legislation . SB 617 (Ron Calderon), Chapter 496,
Statutes of 2011, revised various provisions of the APA and
required 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
Regional Council of Rural Counties
Opposition
None on file.
Analysis Prepared by : Rebecca May / B.,P. & C.P. / (916)
319-3301