BILL ANALYSIS �
SB 617
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Date of Hearing: September 7, 2011
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Roger Dickinson, Chair
SB 617 (Ron Calderon/ Pavley) - As Amended: September 2, 2011
SENATE VOTE : 37-0 (Not relevant)
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTIONS 9-0
Ayes: Allen, Berryhill, Butler, Eng, Hagman, Hayashi, Hill, Ma,
Smythe
SUBJECT : STATE GOVERNMENT: FINANCIAL AND ADMINISTRATIVE
ACCOUNTABILITY
SUMMARY : Revises the state Administrative Procedure Act to
require each state agency adopting a major regulation to prepare
an economic impact analysis and requires state agencies to
implement ongoing monitoring of internal auditing and financial
controls and other best practices in financial accounting.
Specifically, this bill :
1) Defines a major regulation as any proposed
adoption, amendment or repeal of a regulation that
will have an economic impact on California
businesses and individuals in an amount exceeding
$50 million, as estimated by the agency proposing
the regulation.
2) Requires agencies adopting, amending or
repealing a regulation to submit to the Office of
Administrative Law (OAL) an initial statement of
reasons that includes the problem the agency is
addressing. The statement shall enumerate the
benefits of the new proposal, and include
nonmonetary benefits such as 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 transparency in government or business,
among other things.
3) Requires that every state agency proposing
to adopt, amend, or repeal a major regulation on or
after January 1, 2013 prepare a standardized
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regulatory impact assessment that addresses all of
the following:
a) The creation or elimination of jobs.
b) The creation or elimination of new business.
c) The competitive advantages or disadvantages
to California business.
d) The increase or decrease in investment in
the state.
e) The incentives for innovation in products,
materials or processes; and,
f) The benefits to the health, safety and
welfare of Californians.
4) States that economic impact analyses are a
tool to alert the agencies and the public of the
economic consequences of regulatory choices and are
not to be used to reassess statutory policy.
5) Requires that every state agency proposing
to adopt, amend, or repeal a regulation that is not
a major regulation or that is a major regulation
proposed before January 1, 2013 prepare an economic
impact analysis that includes analysis of the
benefits of the regulation to the health and welfare
of California residents, worker safety and the
state's environment.
6) Exempts the University of California, the
Hastings College of Law and the Fair Political
Practices Commission.
7) Requires the Department of Finance, in
consultation with the Office of Administrative Law,
to adopt regulations on or before January 1, 2013
describing the processes agencies must use to
develop a standardized regulatory impact analysis.
8) Requires that every state agency proposing
to adopt, amend, or repeal a major regulation on or
after January 1, 2013 submit its standardized
regulatory impact analysis to the Department of
Finance for review. The department shall comment,
within 30 days, on the extent to which the analysis
adheres to the regulations the department has
adopted regarding the preparation of regulatory
impact analyses.
9) Authorizes agencies to update their
analysis and reflect those comments.
10) Provides that the baseline for the
regulatory analysis shall be the most cost-effective
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set of regulatory measures that will effectively
implement the statutory policy or other provisions
of law.
11) Requires agencies, when submitting to OAL
a final statement of reasons for the proposed
regulation, to include:
a. A determination with supporting
information that no alternative considered by
the agency would be more cost effective in
implementing the regulation, and,
b. An explanation of the reasons
for rejecting any proposed alternatives that
would lessen the adverse economic impact on
small business.
12) Requires OAL to return a regulation to the
adopting agency if the agency has not examined
alternatives as required.
13) Requires OAL to prepare a report, on or
before January 1, 2014, describing state agencies'
use of regulatory impact analyses, and whether
agencies are adhering to regulations describing the
development of the analyses. The report may also
include any recommendations to the Legislature for
improving the program.
14) Renames the Financial Integrity and State
Managers Accountability Act of 1983 as the State
Government Fraud Prevention, Detection and Financial
Integrity Monitoring and Accountability Act of 2011.
15) Expands upon existing legislative
findings, specified, and declares that active
oversight processes, including regular and ongoing
monitoring processes, for the prevention and early
detection of fraud and errors in program
administration are vital to the appropriate and
efficient use of public resources.
16) Adds the requirement that effective,
independent, and objective ongoing monitoring of the
internal accounting and administrative controls be
included within each state agency's system of
internal accounting and control.
17) Stipulates that state agency heads must
implement systems and processes to ensure the
independence and objectivity of the monitoring of
internal accounting and administrative control as an
ongoing activity.
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18) Requires the Director of Finance to
establish a framework of recommended practices to
guide state agencies in conducting active ongoing
monitoring of processes for internal accounting and
administrative control.
19) Sunsets on January 1, 2014, an existing
reporting requirement that directs state agencies to
report on the adequacy of their systems of internal
accounting and administrative control.
EXISTING LAW:
1) Under the Administrative Procedure Act
(APA) (Government Code �11340 et seq.), establishes
rulemaking procedures and standards for state
agencies. State regulations must also be adopted in
compliance with regulations adopted by the Office of
Administrative Law (OAL). The APA, among other
things:
a) Requires every agency to prepare
and submit a
specified notice of the proposed action
and make certain
information available to the public
(e.g., draft
regulation in "plain English";
statement of reasons for
proposing the adoption, amendment, or
repeal of a
regulation; evidence to support a
determination that the
action will not have a significant
adverse economic
impact on business). (�11346.2). The
statement of
reasons must identify each technical,
theoretical, and
empirical report upon which the agency
relies in
proposing the regulation.
(�11346.2(b)(2)).
b) Requires state agencies in
proposing to adopt, amend,
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or repeal any regulation to assess the
potential for
adverse economic impact on California
business
enterprises and individuals. In
assessing the potential
for adverse economic impact, state
agencies must meet
certain requirements (e.g., be based on
adequate
information concerning the need for,
and consequences
of, proposed action; consider industries
affected including the ability to compete
with businesses in other states). State
agencies must also assess whether, and to
what extent, regulations will affect certain
matters (e.g., creation or elimination of
jobs in the
state, creation of new businesses or
elimination of
existing businesses in the state,
expansion of
businesses currently doing business in
the state).
(Government Code �11346.3). OAL must
return any
regulation to the adopting agency
under certain
conditions, including failure to comply
with this
requirement to assess potential adverse
economic
impacts. (�11349.1).
c) Requires the notice of proposed
adoption, amendment,
or repeal of a regulation to include
certain matters
(e.g., include specified information if
there may be a
significant, statewide adverse economic
impact;
description of all cost impacts to be
incurred by a
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private person or business; statement
of the results of
the economic impact assessment).
(�11346.5).
d) Requires OAL to either approve a
submitted regulation
and transmit it to the Secretary of
State for filing, or
disapprove it, within 30 working days.
If OAL fails to
act within 30 days, the regulation is
deemed approved
and OAL must transmit it to the
Secretary of State.
(�11349.3).
FISCAL EFFECT : Unknown
COMMENTS : Author's amendments will be heard in Committee
today. The amendments:
1) Require the Department of Finance to
adopt new regulations describing the process
agencies must use to develop regulatory impact
analyses by November 1, 2013, instead of January
1, 2013. Subsequently, agencies adopting,
amending or repealing major regulations on or
after November 1, 2013 would be required to
conduct a regulatory impact analysis, and the OAL
would prepare a report describing state agencies'
use of regulatory impact analyses by November 1,
2015.
2) Clarify the definition of a major
regulation to mean any proposed adoption,
amendment, or repeal of a regulation subject to
review by the OAL.
3) Clarify the benefits of a proposed
regulation by eliminating the vague requirement
that agencies monetize, to the extent practicable,
the benefits of regulations, including but not
limited to the health, safety and welfare of
California residents, worker safety, and the
state's environment and quality of life.
4) State that the baseline for regulatory
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analysis shall be the most cost-effective set of
regulatory measures that are equally effective in
achieving the purposes of the regulation in a
manner that ensures full compliance with the
authorizing statute or other law being implemented
or made specific by the proposed regulation.
5) Further emphasize the importance of
analyzing the nonmonetary benefits of a
regulation, 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 the
openness and transparency of business and
government.
The bill seeks to improve communication between state agencies
and the public during the regulatory development process, and
require a more thorough and standardized economic impact
analysis of regulations before they are approved.
In testimony to the Little Hoover Commission last year, the
acting director of OAL suggested the current economic impact
analysis practices required by the Administrative Procedures Act
are "illusory and ineffective because it allows an agency to
make a perfunctory, after-the-fact assessment of impact that is
more symbolic than real."
The bill's author states that this legislation will improve
California's economic climate by requiring agencies to
thoroughly study the impacts of regulation, adopt the least
burdensome, most efficient regulations possible and by allowing
more public input during the regulatory development process.
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 Chamber of Commerce
California Construction and Industrial Materials Association
California Farm Bureau Federation
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California Grocers Association
California Hotel & Lodging Association
California Independent Oil Marketers Association
California League of Food Processors
California Manufacturers & Technology Association
California New Car Dealers Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
Chemical Industry Council of California
Consumer Specialty Products Association
Industrial Environmental Association
International Fragrance Association - North America
Los Angeles Chamber of Commerce
National Federation of Independent Business - California
Pacific Merchant Shipping Association
Western States Petroleum Association
Opposition
None on file.
Analysis Prepared by : Mark Martin / A. & A.R. / (916)
319-3600