BILL ANALYSIS �
Bill No: SB
591
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 591 Author: Gaines
Amended: March 29, 2011
Hearing Date: April 26, 2011
Consultant: Paul Donahue
SUBJECT : Regulations: Mandated reductions and review for
regulatory burden
SUMMARY : Requires state agencies to determine how many
regulations it imposes and reduce the total number of
regulations it has identified by 33% according to specified
priorities. Requires review of regulations to determine
burden on regulated persons.
Existing law :
1) The Administrative Procedure Act establishes rulemaking
procedures and standards for the adoption, amendment, or
repeal of regulations by state agencies charged with the
enforcement of state laws, and for the review of those
regulatory actions by the Office of Administrative Law
(OAL). (Govt. Code � 11340 et seq.)
2) Requires OAL to review a proposed regulation for
necessity, authority, clarity, consistency, reference, and
non-duplication, as defined. (Govt. Code � 11349.1)
This bill :
1) Requires OAL, in reviewing a proposed regulation, to
additionally determine if it would impose a "burden" on the
persons subject to the regulation.
2) Defines "burden" in the context of OAL review to mean
that the record of the rulemaking proceeding demonstrates
by substantial evidence, taking into account the totality
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of that record, that no alternative regulation proposed to
the agency would be less costly to persons subject to the
regulation, and would be equally effective in achieving the
purpose of the statute, court decision, or other provision
of law that the regulation implements, interprets, or makes
specific.
3) Enacts the California Smart Regulation Act, which, in
addition to directing each agency to determine by July 1,
2012 how many regulations it imposes, also specifies that:
a) Upon review, every agency is required to reduce the
total number of regulations it has identified by 33
percent before 12/31/13, giving priority to
eliminating regulations that increase the regulatory
burden on businesses and the business climate.
b) An agency shall submit a report of the regulations
eliminated or identified for elimination to the State
Auditor, which shall evaluate the regulations to
determine if removal of the regulations would have a
positive impact on the regulatory burden on businesses
and the business climate.
c) Directs the Legislature to appropriate funds to the
State Auditor sufficient to fulfill the duties imposed
on the State Auditor pursuant to this mandate.
d) Until December 31, 2021, any new regulation
proposed by an agency shall also eliminate another
regulation.
e) These provisions of the Smart Regulation Act remain
in effect only until January 1, 2022.
COMMENTS :
1) Purpose of the bill : The author states that California
is considered one of the least business-friendly states in
the nation, partly because of a regulatory burden that
frustrates existing and would-be business owners. A
reformed regulatory environment could help California
become more attractive to businesses, encouraging them to
open, expand, and hire more workers in the state.
2) Actions required by agencies could be deemed arbitrary
and capricious : Actions taken by administrative agencies
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to adopt regulations are considered to be a
quasi-legislative action that has been legitimately
delegated to the executive branch agency by the
Legislature. A reviewing court has limited authority to
invalidate a regulatory action, and cannot invalidate a
regulatory decision of the agency unless its decision was
"arbitrary, capricious, entirely lacking in evidentiary
support, or unlawfully or procedurally unfair."<1> The
limited scope of review of quasi-legislative administrative
action is based on the doctrine of separation of powers,
which (1) allows legislative delegation of authority to an
appropriate administrative agency and (2) acknowledges the
presumed expertise of the agency.<2> In applying this
deferential test, a court "must ensure that an agency has
adequately considered all relevant factors, and has
demonstrated a rational connection between those factors,
the choice made, and the purposes of the enabling statute."
Provisions in this bill that require agencies to (1) reduce
the number of regulations by 33 percent, and (2) eliminate
a regulation whenever it adopts a new regulation could
reasonably be regarded as arbitrary and capricious
decisions, and therefore declared invalid if challenged in
court.
In light of this, the committee may wish to consider
amendments deleting SECTION 4 of the bill, which enacts the
California Smart Regulation Act.
3) Opposition : Opponents to the bill argue that to mandate
blanket across-the-board reductions in standards is the
opposite of smart regulation. Opponents further allege that
the process for defining and identifying "burden" is tilted
against the proposing agency, requires subjective judgments
by OAL, and would mainly serve the purpose of providing new
ways to obstruct and delay necessary standards.
4) Note : This bill is double referred to Senate Rules
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<1> Fullerton Joint Union High School Dist. v. State Bd. of
Education (1982) 32 Cal.3d 779. The courts refer to this
formulation as the "arbitrary and capricious" standard.
(Western States Petroleum Assn. v. Superior Court (1995) 9
Cal.4th 559)
<2> California Hotel & Motel Assn. v. Industrial Welfare
Com. (1979) 25 Cal.3d 200)
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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 688 (Wright, 2011) specifies that an economic impact
statement for a proposed regulation must include a detailed
estimate of the total actual costs of compliance for
affected businesses and individuals. Requires the adopting
agency to (1) notify appropriate committees of the
Legislature if the estimated total costs of compliance
exceed $10 million and (2) delay the effective date of the
regulation by one year. (On calendar today in this
Committee)
SB 954 (Harman, 2010) would have required the Assembly
Committee on Rules and the Senate Committee on Rules to
refer any bill with adverse economic impacts on business to
a new Joint Committee for preparation of an economic impact
analysis. 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)
SUPPORT:
Acclamation Insurance Management Services
Allied Managed Care
Amway-Nutrilite
California Association of Bed and Breakfast Inns
California Business Properties Association
California Chapter of the American Fence Association
California Construction and Industrial Material Association
California Fence Contractors' Association
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California Grocers Association
California Hotel and Lodging Association
California Manufacturers and Technology Association
California Retailers Association
Chemical Industry Council of California
Consumer Specialty Products Association
Engineering and Utility Contractors Association
Engineering Contractors' Association
Flasher Barricade Association
Golden State Builders Exchanges
Independent Waste Oil Collectors and Transporters
Association
Marin Builders' Association
National Federation of Independent Business
Small Business Economic Impact Alliance
OPPOSE:
Breathe California
Center for Biological Diversity
Clean Water Action California
Environmental Defense Fund
Sierra Club California
FISCAL COMMITTEE: Yes
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