BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 357 (Dutton)
          
          Hearing Date: 05/23/2011        Amended: 05/10/2011
          Consultant: Brendan McCarthy    Policy Vote: GO 8-2, EQ 4-0
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          BILL SUMMARY: SB 357 requires state agencies that are adopting 
          regulations to estimate the lost revenue to the state as a 
          result of provisions of the proposed regulation that would make 
          equipment obsolete.
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                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           
          Economic analysis      Unknown costs, potentially in theVarious
                                   millions annually                  
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          ____

          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File. 

          Under the Administrative Procedures Act, state agencies adopting 
          regulations must conduct certain analyses of the impacts of the 
          proposed regulation and follow specific procedures for allowing 
          public input and review of the proposed regulation. In 
          particular, state agencies are required to analyze the potential 
          impact of a proposed regulation on businesses or job creation in 
          the state and potential financial impacts on state agencies.

          Under state and federal tax law, businesses are generally 
          allowed to depreciate equipment purchases over the equipment's 
          useful life. In other words, the full tax deduction for the 
          purchase of a piece of equipment cannot be claimed in the year 
          of purchase; the deduction is spread over the useful life of the 
          equipment.

          SB 357 requires state agencies, when estimating the cost of a 
          specific regulations, to estimate potential losses in state 
          revenues due regulations that make equipment obsolete, where 
          that equipment would otherwise have remaining depreciable life. 








          SB 357 (Dutton)
          Page 1


          (If a regulation would make a piece of equipment obsolete, the 
          owner can immediately deduct the remaining depreciable value of 
          the equipment in that tax year, rather than over the remaining 
          years of useful life. Presumably, this would reduce tax revenues 
          in the current year, with an offsetting increase in later 
          years.)

          While state agencies are already required to perform certain 
          analyses of the economic impacts of regulations, this bill adds 
          a new requirement that has the potential to be costly. Some 
          state agencies adopt regulations that are based on performance 
          standards, rather than prohibiting or mandating the use of 
          specific equipment. In those cases, the state agencies may have 
          limited data about the existing equipment that businesses use to 
          comply with any existing regulations. In such cases, state 
          agencies will have to conduct significant amounts of additional 
          research to understand the equipment currently in use, the 
          typical useful life of that equipment, and the extent to which 
          the regulation will actually make such equipment obsolete. The 
          costs to conduct those analyses are unknown, but could be in the 
          millions per year, depending on the specific regulations adopted 
          and the particular circumstances of the regulated industries.


          SB 643 (Correa) requires state agencies adopting regulations 
          relating to building standards to disclose the estimated costs 
          and benefits of the proposed regulation at the outset of the 
          process for adopting the regulation. That bill will be heard in 
          this committee.