BILL ANALYSIS �
SB 617
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Date of Hearing: September 6, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 617 (Ron Calderon) - As Amended: September 2, 2011
SENATE VOTE : 37-0
SUBJECT : State government: financial and administrative
accountability.
SUMMARY : Revises various provisions of the Administrative
Procedures Act (APA) and requires 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 January 1, 2013. Specifically,
this bill :
1)Defines "major regulation" to mean any proposed adoption,
amendment, or repeal of a regulation that will have an
economic impact on California business enterprises and
individuals in an amount exceeding $50 million, as estimated
by the agency.
2)Requires agencies to include, when submitting an initial
statement of reasons (ISOR) for adopting, amending, or
repealing a regulation to the Office of Administrative Law
(OAL), the problem the agency intends to address, enumerating
the benefits anticipated from the regulatory action, including
the benefits or goals provided in the authorizing statute.
Provides that the benefits may include nonmonetary benefits
such as the protection of public health and safety; worker
safety; the environment; the prevention of discrimination; the
promotion of fairness or social equity; and, the increase in
openness and transparency in business and government, among
other things.
3)Requires a standardized regulation impact analysis, as
specified, be included in the ISOR for a proposed major
regulation on or after January 1, 2013.
4)Specifies that reasonable alternatives included in the ISOR
include alternatives that are proposed as less burdensome and
equally effective in achieving the purposes of the regulation
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in a manner that ensures full compliance with the authorizing
statute or other law being implemented or made specific by the
proposed regulation.
5)Requires agencies proposing to adopt, amend, or repeal a
regulation that is not a major regulation or that is a major
regulation proposed prior to January 1, 2013, to prepare an
economic impact analysis, as specified, that includes the
benefits of the regulation to the health and welfare of
California residents, worker safety, and the state's
environment.
6)Requires agencies proposing to adopt, amend, or repeal a major
regulation on or after January 1, 2013, to prepare a
standardized regulatory impact assessment as prescribed by the
Department of Finance (DOF), as specified, addressing the
following:
a) The creation or elimination of jobs within the state;
b) The creation of new businesses or the elimination of
existing businesses within the state;
c) The competitive advantages or disadvantages for
businesses currently doing business within the state;
d) The increase or decrease of investment in the state;
e) The incentives for innovation in products, material, or
processes; and,
f) Monetization, to the extent practicable, of the benefits
of the regulations, including benefits to the health,
safety, and welfare of California residents, worker safety,
and the state's environment and quality of life, among any
other benefits identified by the agency.
7)Exempts the University of California, the Hastings College of
Law, and the Fair Political Practices Commission from the
requirements of this bill.
8)Allows state agencies, for the purpose of completing the
assessment, to derive information from existing state, federal
or academic publications.
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9)Specifies that analyses conducted pursuant to this bill are
intended to provide agencies and the public with tools to
determine whether the regulatory proposal is an efficient and
effective means of implementing the policy decisions enacted
in statute or by other provisions of law in the least
burdensome manner.
10)Specifies that regulatory impact analyses shall inform the
agencies and the public of the economic consequences of
regulatory choices, not reassess statutory policy.
11)Provides that the baseline for the regulatory analysis shall
be the most cost-effective set of regulatory measures that
will effectively implement the statutory policy or other
provisions of law.
12)Requires state agencies proposing to adopt, amend, or repeal
a major regulation on or after January 1, 2013, and that have
prepared a standardized regulatory impact assessment, to
submit that assessment to DOF upon completion.
13)Requires DOF to comment, within 30 days of receipt of the
assessment, on the extent to which the assessment adheres to
the regulations adopted, as specified. Authorizes state
agencies to update their analysis to reflect these comments,
as specified.
14)Requires DOF, in consultation with OAL and other state
agencies, to adopt regulations for conducting the standardized
regulatory impact analyses, as specified.
15)Provides that DOF's regulations shall assist the agencies in
specifying the methodologies for:
a) Assessing and determining the benefits and costs of the
proposed regulation, expressed in monetary terms to the
extent feasible and appropriate;
b) Comparing proposed regulatory alternatives with an
established baseline so agencies can make analytical
decisions for the adoption, amendment, or repeal of
regulations necessary to determine that the proposed action
is the most effective, or equally effective and less
burdensome, alternative in carrying out the purpose for
which the action is proposed, or the most cost-effective
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alternative to the economy and to affected private persons
that would be equally effective in implementing the
statutory policy or other provision of law;
c) Determining the impact of a regulatory proposal on the
state economy, business, and the public welfare, as
specified;
d) Assessing the effects of a regulatory proposal on the
General Fund and special funds of the state and affected
local government agencies attributable to the proposed
regulation;
e) Determining the cost of enforcement and compliance to
the agency and to affected business enterprises and
individuals; and,
f) Making the estimation if a regulation is to be deemed a
major regulation.
16)Requires DOF to convene a public hearing or hearings and take
public comment on any draft regulation, affording
representatives from state agencies and the public at large
the opportunity to review and comment on the draft regulation
before it is adopted in final form.
17)Requires state agencies to provide DOF and OAL ready access
to their records and full information and reasonable
assistance in any matter requested for purposes of developing
the regulations required by this bill. This requirement shall
not be construed to authorize an agency to provide access to
records required by statute to be kept confidential.
18)Requires agencies to include a standardized regulatory impact
analysis in the ISOR, as specified.
19)Requires DOF to submit the adopted regulations to the Senate
and Assembly Committees on Governmental Organization and to
publish them in the State Administrative Manual by January 1,
2013.
20)Requires the notice of proposed adoption, amendment, or
repeal of a regulation submitted by the proposing agency to
OAL to also include:
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a) A policy statement overview of the benefits anticipated
by the proposed adoption, amendment, or repeal of a
regulation, including, to the extent applicable,
nonmonetary benefits such as the protection of public
health and safety, worker safety or the environment, the
prevention of discrimination, the promotion of fairness or
social equity, and the increase in openness and
transparency in business and government, among other
things;
b) An evaluation of whether a proposed regulation is
inconsistent or incompatible with existing state
regulations;
c) A statement of the results of the economic impact
assessment or the standardized regulatory impact analysis,
as specified; and,
d) A statement that the adopting agency must determine that
no reasonable alternative considered by the agency or that
has otherwise been identified would be more cost-effective
to affected private persons and equally effective in
implementing the statutory policy or other provision of
law. For a major regulation proposed on or after January
1, 2013, the statement shall be based upon the standardized
regulatory impact analysis of the proposed regulation, as
specified, as well as upon the benefits of the proposed
regulation, as specified.
21)Requires agencies when submitting to OAL a final statement of
reasons with the adopted regulation, to also include:
a) A determination with supporting information that no
alternative considered by the agency would be more cost
effective to affected private persons and equally effective
in implementing the statutory policy or other provision of
law. For a major regulation proposed on or after January
1, 2013, the determination shall be based upon the
standardized regulatory impact analysis of the proposed
regulation, and upon the statement of benefits, as
specified; and,
b) An explanation setting forth the reasons for rejecting
any proposed alternatives that would lessen the adverse
economic impact on small businesses including the
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standardized regulatory impact analysis for a major
regulation, as well as the benefits of the proposed
regulation, as specified.
22)Requires agencies to include the economic impact assessment
or standardized regulatory impact analysis in the file the
agency maintains for each rulemaking.
23)Defines "noncompliance" to mean that the agency failed to
complete the economic impact assessment or standardized
regulatory impact analysis, or failed to include the
assessment or analysis in the file of the rulemaking
proceeding, as specified.
24)Requires OAL to return a regulation to the adopting agency if
the proposed regulation conflicts with an existing regulation
and the agency has not identified the manner in which the
conflict may be resolved or the agency has not made the
alternatives determination, as specified.
25)Provides that, notwithstanding any other law, the return of a
regulation to the adopting agency by OAL is the exclusive
remedy for a failure to comply with certain requirements, as
specified.
26)Requires DOF and OAL to review the standardized regulatory
impact analyses for adherence to the regulations adopted by
DOF, as specified, from time to time.
27)Requires DOF to submit to the Senate and Assembly Committees
on Governmental Organization a report describing the extent to
which submitted standardized regulatory impact analyses for
proposed major regulations adhere to the regulations adopted,
as specified, by January 1, 2014. Allows DOF to include any
recommendations from OAL for actions the Legislature might
consider for improving state agency performance.
28)Authorizes OAL to notify the Legislature of noncompliance by
a state agency with the adopted regulations, in any manner or
form, as specified.
29)Provides that state agency heads are responsible for the
establishment and maintenance of effective, independent, and
objective ongoing monitoring of the internal accounting and
administrative controls within their agencies.
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30)Provides that monitoring systems and processes, included with
existing elements of a satisfactory system of internal
accounting and administrative control, are vital to:
a) Ensuring that routine application of internal controls
do not diminish their efficacy over time;
b) Providing timely notice and opportunity for correction
of emerging weaknesses with established internal controls;
c) Facilitating public resources and other decisions by
ensuring availability of accurate and reliable information;
and,
d) Facilitating production of timely and accurate financial
reports.
31)Requires state agency heads to implement systems and
processes to ensure the independence and objectivity of the
monitoring of internal accounting and administrative control
as an ongoing activity, as specified.
32)Adds the Controller, the Treasurer, and the Attorney General
to the list of recipients of a biennial report regarding the
adequacy of each state agency's systems of internal
accounting, administrative control, and monitory practices, as
specified.
33)Requires the director of DOF, in consultation with the State
Auditor and the Controller, to establish, and modify as
necessary, a general framework of recommended practices to
guide state agencies in conducting active, ongoing monitoring
of processes for internal accounting and administrative
control.
34)Deletes legislative intent language related to imposing
additional criteria on agencies.
35)States legislative findings.
36)Makes technical, conforming changes.
EXISTING LAW :
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1)Governs the procedures for the adoption, amendment, or repeal
of regulations by state agencies and for the review of those
regulatory actions by the OAL under the APA.
2)Establishes procedures state agencies are required to use to
make a determination of whether a proposed administrative
regulation or proposed amendment to an administrative
regulation has the potential for significant, statewide
adverse economic impact directly affecting California business
enterprises.
3)Provides that state agency heads are responsible for the
establishment and maintenance of a system or systems of
internal accounting and administrative control within their
agencies, under the Financial Integrity and State Manager's
Accountability Act (FISMA) of 1983.
FISCAL EFFECT : Unknown
COMMENTS : Purpose of this bill . According to the author, this
bill "will require agencies to review regulations with an
estimated cost of more than $50 million and mandates that the
least burdensome, most cost-efficient method of implementation
be adopted to lessen the burden on affected businesses."
Background . 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.
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
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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.
This bill revises the APA by requiring each state agency to
prepare a standardized regulatory impact analysis with respect
to the adoption, amendment, or repeal of a major regulation, as
defined, on or after January 1, 2013, and submit the analysis to
DOF for review and comments.
This bill also requires DOF to adopt regulations for conducting
the standardized regulatory impact analyses to be utilized by
state agencies in developing the standardized regulatory impact
analysis.
Additionally, this bill updates FISMA to include ongoing
monitoring of internal auditing and financial controls and other
best practices in financial accounting.
Related legislation . AB 127 (Logue) of 2011, requires that a
regulation or an order of repeal of a regulation become
effective on the following January 1 after a 90-day period
following the date it is filed with the Secretary of State
(SOS), instead of 30 days after the date of filing, except where
already exempted. This bill was held in the Assembly Business,
Professions and Consumer Protection Committee.
AB 213 (Silva) of 2011, requires agencies to mail or
electronically mail a notice of prosed action to adopt, amend,
or repeal a regulation to local government agencies or local
government agency representatives that are likely to be affected
by the proposed action. This bill was held in the Assembly
Appropriations Committee.
AB 273 (Valadao) of 2011, requires the Department of Finance
(DOF) to adopt and update instructions for inclusion in the
State Administrative Manual prescribing the methods that any
agency shall use in making certain determinations, estimates,
statements, and findings relating to the economic and cost
impacts of a regulation on businesses and private individuals.
This bill was held in the Assembly Appropriations Committee.
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AB 338 (Wagner) of 2011, increases the effective date for a
regulation or an order of repeal of a regulation from 30 days to
90 days and requires the OAL to submit a copy of disapproved
regulations to the Legislature when certain criteria are met, as
specified. This bill was held in the Senate Environmental
Quality Committee.
AB 410 (Swanson) of 2011, requires an agency, upon a request
from a person with a visual disability or other disability for
which effective communication is required to provide that person
a narrative description of the proposed regulation and for an
extended public comment period for that person. This bill is
pending on the Assembly Floor.
AB 425 (Nestande) of 2011, requires each state entity that
promulgates regulations to review those regulations, and repeal
or report to the Legislature those identified as duplicative,
archaic, or inconsistent with statute or other regulations or
deemed to inhibit economic growth in the state by December 31,
2012. This bill was held in the Assembly Appropriations
Committee.
AB 429 (Knight) of 2011, requires an agency, for any regulation
that it has identified as having a gross cost of $15 million or
more, an increased cost of 5% or more over the cost of an
existing regulation, or both, to submit a copy of the rulemaking
record for that regulation to the appropriate policy committee
in each house of the Legislature when the agency submits the
regulation to the OAL for approval. This bill was held in the
Assembly Business, Professions and Consumer Protection
Committee.
AB 530 (Smyth) of 2011, requires a state agency, when it files a
notice of proposed action with the OAL, to include technical,
theoretical, and empirical studies, reports, or similar
documents, upon which the agency relied in rejecting each
reasonable alternative. Additionally, this bill would prohibit
an agency from rejecting a reasonable alternative unless the
statement of reasons includes at least one of these documents.
Further, this bill requires an agency to determine whether a
proposed regulation will have a significant adverse economic
impact by completing an economic impact statement, using a form
developed by DOF, as specified. This bill was held in the
Assembly Appropriations Committee.
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AB 535 (Morrell) of 2011, requires a state agency to review and
report to the Legislature on regulations that it adopts or
amends on and after January 1, 2012, five years after adoption,
as specified. This bill was held in the Assembly Appropriations
Committee.
AB 541 (Morrell) of 2011, requires the California Small Business
Board, until January 1, 2014, to review the state's licensing
and permitting regulations as they impact small businesses, with
special attention to the regulatory impact on small business
startups, and would require each state agency to cooperate with
the board in that review. This bill was held in the Assembly
Appropriations Committee.
AB 586 (Garrick) of 2011, requires standing committees of the
Legislature to hold informational hearings regarding any
proposed regulation with a gross cost in excess of $10 million.
This bill was held in the Assembly Business, Professions and
Consumer Protection Committee.
AB 632 (Wagner) of 2011, requires state agencies to submit to
the Legislature a notice of a proposed action to adopt, amend or
repeal a regulation, if the notice identifies an economic
impact, cost impact, statement or finding related to the
proposed regulation, as specified. This bill was held in the
Assembly Business, Professions and Consumer Protection
Committee.
AB 1037 (V. Manuel Perez) of 2011, increases the threshold for
business activities under the definition of "small business" and
requires agencies to reassess regulations five years after
adoption, as specified. This bill was held in the Assembly
Appropriations Committee.
AB 1213 (Nielsen) of 2011, authorizes a chair or vice chair of a
standing, select, or joint committee of the Legislature to
initiate a priority review of any regulation, as specified.
This bill was held in the Assembly Business, Professions and
Consumer Protection Committee.
AB 1322 (Bradford) of 2011, adopts the regulatory philosophy and
the principles of regulation, as outlined in Presidential
Executive Order 12866, in order to achieve the same regulatory
benefits within the state, as specified. This bill was held in
the Assembly Appropriations Committee.
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Previous legislation . AB 1833 (Logue) of 2010, requires the
California Environmental Protection Agency, the Division of
Occupational Safety and Health and the State Air Resources Board
to complete an economic impact analysis prior to adopting,
amending, or repealing an administrative regulation. This bill
was held in the Assembly Business, Professions and Consumer
Protection Committee.
AB 1949 (Logue) of 2010, requires a state agency to review and
report on regulations that it adopts or amends on and after
January 1, 2011, five years after adoption, as specified. This
bill was held in the Assembly Business, Professions and Consumer
Protection Committee.
AB 1957 (Silva) of 2010, requires state agencies, when providing
notice of proposed adoption, amendment, or repeal of a
regulation, to mail the notice to local government agencies or
local government agency representatives that the agency believes
may be interested in, or impacted by, the proposed action. This
bill was held in the Assembly Appropriations Committee.
AB 2466 (Smyth) of 2010, requires the OAL submit all regulations
packages to the Legislature and require that the appropriate
legislative policy committees review those regulations. This
bill was held in the Assembly Appropriations Committee.
AB 2529 (Fuentes) of 2010, establishes, until January 1, 2016, a
process for peer review of economic impacts analyses for a
proposed regulation and requires OAL to send specified
regulations to the fiscal committees in both houses of the
Legislature if they meet certain criteria. This bill was held
in the Senate Business, Professions and Economic Development
Committee.
AB 2603 (Gaines) of 2010, requires every state agency to reduce
its total number of regulations by 33% by December 31, 2012.
This bill was held in the Assembly Business, Professions and
Consumer Protection Committee.
AB 2738 (Niello), Chapter 398, Statutes of 2010, requires the
initial statement of reasons submitted by an agency to the OAL
to include a description of any performance standard that was
considered as an alternative to a proposed adoption, amendment,
or repeal of a regulation.
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AB 2118 (Villines) of 2008, prohibits state agencies from
adopting regulations that require the use of a specific
technology unless it has been operational and proven effective
for more than two years, or that would place an undue burden on
business on an annual basis and result in a significant loss of
jobs. This bill was held in the Assembly Business and
Professions Committee.
Double referred . This bill is double-referred to Assembly
Accountability and Administrative Review Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Asian Pacific Chamber of Commerce
California Association of Bed & Breakfast Inns
California Building Industry Association
California Business Properties Association
California Construction and Industrial Materials Association
California Farm Bureau Federation
California Grocers Association
California Hotel & Lodging Association
California Independent Oil Marketers Association
California League of Food Processors
California Manufacturers & Technology Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
Chemical Industry Council of California
Consumer Specialty Products Association
International Fragrance Association - North America
Los Angeles Chamber of Commerce
National Federation of Independent Business - California
Western States Petroleum Association
Opposition
None on file.
Analysis Prepared by : Rebecca May / B.,P. & C.P. / (916)
319-3301
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