BILL ANALYSIS �
Bill No: SB
560
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 560 Author: Wright
Introduced: February 17, 2011
Hearing Date: April 12, 2011
Consultant: Paul Donahue
SUBJECT : Regulations: Small Business
DESCRIPTION :
Existing law , the Administrative Procedure Act (APA),
governs the process for adoption, amendment, or repeal of
regulations by state agencies charged with the
implementation of statutes, and for legal review of those
regulatory actions. (Govt. Code � 11340 et seq.)
Under current law , an agency that is considering adopting,
amending, or repealing a regulation is authorized to
consult with interested persons before initiating
regulatory action, and required to do so when the
regulation involves complex or numerous proposals.
This bill requires an agency, if it does not, or is not
able to consult with these parties to inform the Office of
Small Business Advocate and the Department of Finance in
writing of its decision and the reasons for not consulting
the impacted businesses.
Under the APA , a state agency is required to include, along
with its Notice of Proposed Action to adopt, amend or
repeal a regulation, an Initial Statement of Reasons for
proposing to take the regulatory action.
Under the APA , the Initial Statement of Reasons is required
to include a description of any reasonable alternatives
that would lessen any adverse impact on small business and
the agency's reasons for rejecting those reasonable
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alternatives.<1>
This bill requires the agency to describe its reasons for
rejecting each specific alternative, and would repeal the
law stating that an agency is not required to artificially
construct alternatives, describe unreasonable alternatives,
or justify why it has not described any.
The APA requires a state agency to assess the potential of
a proposed regulation to adversely affect business
enterprises and individuals.
This bill requires an agency to submit an economic impact
statement that makes that assessment, and also requires an
agency, before submitting a proposal, to prepare a small
business economic impact statement that contains the
following information:
a) An identification and estimate of the number of
small businesses subject to the proposed regulation.
b) The estimated annual average cost of compliance by
a small business subject to the proposed regulation.
c) The estimated statewide annual average cost of
compliance by small businesses subject to the proposed
regulation.
This bill directs an agency adopting a regulation that
requires the use of a new or emerging technology or
equipment in order to achieve the identified purpose of the
regulation to post a statement on its website and in the
California Regulatory Notice Register prior to the
effective date of the regulation that the required
technology or equipment is commercially available, or will
be commercially available, prior to the effective date of
the regulation.
This bill specifies that, if the required technology or
equipment is not commercially available on the effective
date of a regulation, the agency is prohibited from
enforcing a violation of the regulation until at least 6
-------------------------
<1> The APA also states that the agency is not required, in
this initial statement, to artificially construct
alternatives, describe unreasonable alternatives, or
justify why it has not described alternatives.
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months after the technology or equipment becomes
commercially available and the agency posts that
information.
This bill specifies that, in the event that a person or
business incurs costs purchasing new or emerging technology
or other equipment that is required by a regulation, but
the agency determines that the regulatory program is not
workable because the new or emerging technology or other
equipment does not function as the agency intended, the
agency is responsible for reimbursing the person or
business for those incurred costs.
Under the APA , if a state agency makes an initial
determination that the adoption of a regulation will not
have a significant statewide adverse economic impact
directly affecting business, that it provide a declaration
of that determination.
This bill would delete that requirement and instead
require, if an agency declares that it is not aware of any
cost impact, that the notice of proposed regulatory action
include a statement describing how a private person or
business could comply with the proposed regulation without
incurring a cost.
This bill specifies that a notice of proposed regulatory
action include the small business economic impact statement
that this bill requires an agency to prepare.
The APA requires the Department of Finance (DOF) to adopt
and update instructions for inclusion in the State
Administrative Manual prescribing the methods that any
agency is required to use in making the determinations
relating to mandates on local agencies or school districts.
This bill also requires DOF to adopt and update
instructions prescribing the methods that any agency is
required to use in making the determinations relating to
significant, statewide adverse economic impacts directly
affecting business.
Under the APA , the Office of Administrative Law (OAL)
reviews, approves or rejects proposed regulations.
This bill would require OAL to reject a proposed regulation
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if the adopting agency does not provide all relevant
information concerning the small business economic impact
statement.
The APA authorizes any interested person to obtain a
judicial declaration as to the validity of specified
regulations or orders of repeal, by bringing a civil action
for declaratory relief in the superior court.
This bill specifies that an interested person includes a
small business or an organization or trade association that
represents small businesses, and whose members are affected
by the regulation.
COMMENTS :
1) Purpose and intent : The author states that this bill
makes a number of reforms to help small businesses grow by
encouraging more realistic regulations and requiring a
genuine assessment of the actual costs of regulations to
the business community. The author notes that California's
burdensome regulatory climate is driving businesses - and
jobs - to other states. With the US Department of Labor
reporting last month that California's jobless rate is now
the 2nd highest in the nation, it is essential that
California take steps to become a more attractive location
to remain and expand.
"California has lost 600,000 manufacturing jobs since 2000.
For the 3rd year, CEO Magazine ranked California as the
worst state for business, based on the opinions of over 600
CEOs surveyed. A 2010 Kosmont-Rose Institute survey on the
cost of doing business, based on a variety of fees and
taxes, found that California is home to one third of the 40
most expensive cities. Kosmont CEO Larry Kosmont stated,
'Just by being located in California, cities are at a
'cost' disadvantage right out of the gate.' A survey for
the Business Roundtable found that it costs 30% more to
operate in California than in the average western state."
2) 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,
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overlap, inconsistency, or out-of-date provisions. (Pending
in this Committee)
SB 396 (Huff, 2011) . Requires each state agency to review
each regulation adopted prior to January 1, 2011, and
report to the Legislature on the regulations. Beginning in
2018, at least every 5 years afterwards, each agency is
directed to review its regulations that have been in effect
for at least 20 years and submit a report to the
Legislature on its findings associated with the review. (On
calendar today in this Committee)
SB 400 (Dutton, 2011) . Requires that an economic impact
assessment on a proposed regulation include additional
criteria, and that agencies submit economic assessments for
certain regulations to OAL for it to determine whether the
assessment is based upon sound economic knowledge, methods,
and practices. OAL must reject a regulation that is based
upon an economic assessment that it determines not to be
based on sound economic knowledge, methods, and practices.
(On calendar today 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)
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
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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)
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)
SB 1436 (Figueroa, 2006) Enhanced the state's technical
assistance to small businesses by improving the state's
Internet information for small businesses and requiring the
designation of agency-level small business liaisons. (Chap.
234, Stats. 2006)
3) Note : This bill is double referred to Senate Rules
Committee
SUPPORT:
American Chemistry Council
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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 Small Business Association
Coalition of Small and Disabled Veteran Businesses
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
Small Business Association
OPPOSE: None on file as of April 8, 2011
FISCAL COMMITTEE: Yes
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