BILL ANALYSIS �
Bill No: SB
400
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 400 Author: Dutton
Introduced: February 16, 2011
Hearing Date: April 12, 2011
Consultant: Paul Donahue
SUBJECT : Regulations: Impact on business
SUMMARY : Requires a state agency to submit economic
assessments for certain regulations to the Office of
Administrative Law for a review and determination if the
assessment is based upon sound economic knowledge, methods,
and practices.
Existing law :
1) The Administrative Procedure Act (APA) establishes
rulemaking procedures and standards for the adoption,
amendment, or repeal of regulations<1> by state agencies
charged with the implementation of statutes, and for the
review of those regulatory actions by the Office of
Administrative Law (OAL). (Govt. Code � 11340 et seq.)
2) Requires a state agency that is proposing to adopt,
amend, or repeal a regulation under the APA to consider its
impact on business, with consideration of industries
affected, including the ability of California businesses to
compete with businesses in other states.
3) Authorizes OAL to review agency regulations for
-------------------------
<1> A regulation means "every rule, regulation, order, or
standard of general application or the amendment,
supplement, or revision of any rule, regulation, order, or
standard adopted by any state agency to implement,
interpret, or make specific the law enforced or
administered by it, or to govern its procedure." (Govt.
Code � 11342.600)
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compliance with the procedural requirements of the APA, and
for six specified criteria - authority, clarity, necessity,
reference, and non-duplication. OAL must approve or
disapprove the proposed regulatory changes within thirty
working days of submission of the rulemaking file.
4) Specifies that OAL regulations governing the regulation
adoption process must ensure that OAL does not substitute
its judgment for that of the adopting agency as set forth
in the content of the agency rulemaking file.
This bill :
1) Requires a state agency proposing to adopt, amend or
repeal a regulation to estimate the impact of the
regulations on business.
2) Specifies that the economic impact statement
additionally assess whether and to what extent it will
affect (1) short term and long term creation or elimination
of jobs in individual sectors within the state, and (2) the
cost of enforcement to the agency and regulated entities.
3) Requires the adopting agency to:
a) Assess whether the proposed regulation is
inconsistent with or incompatible with, or duplicative
of, the regulations of the agency, or other federal,
state or local regulatory agencies.
b) Determine, with supporting information, that no
alternative considered by the agency would be more
effective in carrying out the purpose for which the
regulation is proposed or would be equally effective
and less burdensome to affected private persons than
the proposed regulation.
c) Explain its reasons for rejecting any proposed
alternatives that would lessen the adverse impact on
small business.
4) Requires an adopting agency, prior to releasing a notice
of proposed regulatory action, to submit the above
assessment to OAL, which shall do the following:
a) For a proposed regulation with an estimated impact
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of $100 million or more, OAL shall determine within 30
days whether the economic assessment is based on sound
economic knowledge, methods and practices. OAL is
authorized to contract with a third party reviewer to
assist in this evaluation.
b) For a proposed regulation with an estimated impact
less than $100 million, a stakeholder may petition OAL
to review the agency's economic assessment, and the
OAL director shall have the sole discretion to approve
or deny the stakeholder petition. If the petition is
approved, OAL shall review the economic assessment as
if it had an estimated impact greater than $100
million.
5) Requires OAL to reject a regulation that is based upon
an economic assessment that it determines is not based on
sound economic knowledge, methods, and practices.
COMMENTS :
1) Purpose and intent : The author states, "a significant
reason for California's economic struggles is its poor
business climate as a result of onerous and/or poorly
implemented regulations. Forbes Magazine rank's
California's regulatory climate 43rd worst in the
nation..."
The author contends that, despite the existing procedures
set forth in the APA, OAL does little more with the
economic impact statement than simply check off a box that
the form has been included in a regulation package. Thus,
there is no assurance that state agencies are adequately
assessing the cost to business of proposed regulations, and
this measure would simply grant authority to OAL to return
an economic impact statement to the adopting agency if it
isn't based on sound economic knowledge, methods, and
practices.
2) Supporters : The supporters note that smart regulations
are necessary, cost effective, fairly enforced and
regularly updated to reflect changing conditions and needs.
Currently California regulations are adopted, reviewed, and
approved under a system established in 1979 and only
modestly changed thereafter. Since that time the
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Legislature has granted massive new powers to government
agencies and there has been exponential growth in
regulations concerning every aspect of the economy, mostly
outside the control or even awareness of elected officials.
Supporters believe that the OAL should have a more
meaningful role to reject and require improvement for
assessments that are not completely based on sound economic
knowledge, methods and practices.
3) Opposition : Opponents believe the new requirements
mandated by the bill are unnecessary, overly burdensome,
and would significantly delay or stop the adoption of
revision of regulations critical to public health and the
environment in California. They also believe it is
unjustified to give OAL authority to approve or deny a
broad array of regulations across many state agencies and
in many different areas of technical expertise.
Finally, opponents state that the criteria imposed by this
bill would straightjacket the regulatory process, focus
myopic attention on economic considerations in a manner
that artificially monetizes subjective considerations and
discounts costs and benefits to society that aren't, and
shouldn't, be required to be neatly quantifiable.
4) Note : This bill is double referred to Senate Rules
Committee
5) Related legislation :
SB 366 (Calderon, 2011) . Requires each state agency to
identify any regulations that are duplicative, overlapping,
inconsistent, or out of date, and adopt, amend, or repeal
regulations to reconcile or eliminate any duplication,
overlap, inconsistency, or out-of-date provisions. (Pending
in this Committee)
SB 643 (Correa, 2011) . Requires that the housing costs
evaluation associated with adoption of a regulation include
estimated costs of compliance. If a proposed regulation has
an impact on housing, then the initial statement of reasons
must include the estimated cost of compliance and the
related assumptions used in determining that estimate.
(Pending in Senate Rules Committee)
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SB 688 (Wright, 2011) . Specifies that an economic impact
statement for a proposed regulation shall include a
detailed estimate of the total actual costs of compliance
for affected businesses and individuals. Requires the
adopting agency to notify specified committees of the
Legislature if the estimated total costs of compliance
exceed an unspecified amount, and if the estimated cost of
compliance exceeds that amount, the regulation effective
date is postponed for a year. (On calendar today in this
Committee)
SB 356 (Wright, 2010) . Would have required an agency
considering a regulation to inform the Department of
Finance and the Small Business Advocate if it had not
consulted with interested persons before initiating
regulatory action, and specify its reasons for not
consulting affected businesses. Would have required a
state agency to describe the agency's reasons for rejecting
each specific alternative to the adoption of a proposed
regulation, and to submit an economic impact statement
containing specified information. (Held in Assembly Rules
Committee)
SB 942 (Dutton, 2010) . Would have established an Economic
Analysis Unit within OAL. Would have required agencies to
make publicly available and submit to the unit specified
cost estimates related to a proposed regulation and
specified information used to develop the cost estimates.
(Held in Senate Appropriations)
SB 954 (Harman, 2010) . Would have required 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 a newly created Joint
Committee for the preparation of an economic impact
analysis and a hearing and approval. Would have required
the Joint Committee to move a bill estimated to generate a
fiscal impact of $10,000 or more on small business, or
$50,000 or more on any other business, to the suspense file
of the committee for further consideration. (Dropped)
SB 1160 (Dutton, 2010) . Would have expanded a sunsetted
law requiring the Department of Finance and the LAO to
perform dynamic fiscal analyses of proposed regulations on
jobs and businesses. (Held in Assembly Budget Committee)
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AB 2330 (Arambula, 2006). Requires the Office of the Small
Business Advocate to examine the costs of state regulations
on small businesses. (Chap. 232, Stats. 2006)
SUPPORT:
American Chemistry Council
American Council of Engineering Companies of California
California Association of Bed and Breakfast Inns
California Building Industry Association
California Business Properties Association
California Chapter of the American Fence Association
California Construction and Industrial Material Association
California Fence Contractors' Association
California Grocers Association
California Hotel and Lodging Association
California Manufacturers and Technology Association
California Restaurant Association
California Retailers Association
California Taxpayers Association
Consumer Specialty Products Association
Engineering and Utility Contractors Association
Engineering Contractors' Association
Flasher Barricade Association
Golden State Builders Exchanges
Marin Builders' Association
National Federation of Independent Business
OPPOSE:
American Lung Association in California
Breathe California
CA Conference Board of the Amalgamated Transit Union
CA Conference of Machinists
California League of Conservation Voters
CA Official Court Reporters Association
California Teamsters Public Affairs Council
Center for Biological Diversity
Engineers and Scientists of California
International Longshore and Warehouse Union
Professional and Technical Engineers, Local 21
Sierra Club California
Union of Concerned Scientists
UNITE HERE!
United Food and Commercial Workers - Western States
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Conference
Utility Workers Union of America, Local 132
FISCAL COMMITTEE: Yes
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