BILL ANALYSIS �
AB 2723
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 2723
AUTHOR: Medina
AMENDED: May 1, 2014
FISCAL: Yes HEARING DATE: June 25, 2014
URGENCY: No CONSULTANT: Rachel Machi
Wagoner
SUBJECT : ADMINISTRATIVE PROCEDURE: SMALL BUSINESSES
SUMMARY :
Existing law :
1)The Administrative Procedure Act (APA) governs the
procedures for the adoption, amendment, or repeal of
regulations by state agencies and for the review of those
regulatory actions by the Office of Administrative Law
(OAL).
2)Establishes OAL to administer APA and ensure that state
agency regulations are clear, necessary, legally valid, and
available to the public.
3)Requires agencies, when submitting to OAL an Initial
Statement of Reasons (ISOR) for a proposed regulation to
identify the problem the agency intends to address, and
enumerate the benefits anticipated from the regulatory
action, including the benefits or goals provided in the
authorizing statute.
The benefits may include non-monetary benefits such as the
(a) protection of public health and safety; (b) worker
safety; (c) the environment; (d) the prevention of
discrimination; (e) the promotion of fairness or social
equity; and (f) the increase in openness and transparency in
business and government, among other things.
4)On and after November 1, 2013, requires the agency to
include in its ISOR for a proposed major regulation a
AB 2723
Page 2
standardized regulation impact assessment that is prepared
in a manner prescribed by the Department of Finance (DOF).
The assessment shall address:
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) 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.
1) Requires DOF and OAL to periodically review the
standardized regulatory impact analyses for adherence to
regulations adopted by DOF.
2) Requires an economic impact assessment (EIA) be
prepared for a proposed regulation that is not a major
regulation or a major regulation adopted prior to
November 1, 2013.
This bill makes changes to the Administrative Procedure Act
(APA) to include "sole proprietorships" and "small business"
in the required standardized regulatory impact analysis or EIA
when a state agency proposes to adopt, amend, or repeal
regulations. Specifically, this bill :
1)Adds "sole proprietorship" and "small business" to the
AB 2723
Page 3
definition of businesses covered within the definition of
"cost impact."
2)Adds landscape architects, architects, and building
designers with 50 or more employees to the list of
businesses and entities that are excluded under the
definition of "small business."
3)Specifies that nonprofit institutions with more than100
employees are excluded under the definition of "small
business."
4)Adds to the legislative findings and declarations in the APA
preamble, stating that, "given the importance of small
businesses within the California economy, it is especially
important that regulations that may have significant impacts
on the private sectors be evaluated to determine the
potential impact on these smaller size businesses."
COMMENTS :
1) Purpose of Bill . The author's office states that existing
law governing the rulemaking process declares that the
purpose of the rulemaking is to avoid the imposition of
unreasonable and unnecessary regulations, reporting,
recordkeeping, or compliance requirements. However, the
author notes that many businesses have repeatedly testified
before the Assembly Jobs Committee that they believe that
California's regulatory process is expensive, overly
burdensome, and that compliance has not necessarily
provided a better quality of life for people in the state.
2) Related Legislation . AB 1711 (Cooley) requires an Economic
Impact Assessment (EIA) to be included in the Initial
Statement of Reasons (ISOR) that a state agency submits to
the Office of Administrative Law (OAL) when adopting,
amending, or repealing a non-major regulation. AB 1711 is
before the Senate Environmental Quality Committee.
AB 12 (Cooley), 2013-14 Regular Session would have required
DOF and OAL to review annually the standardized regulatory
impact analyses for adherence to the regulations adopted by
a state agency, and report back to the Legislature.
AB 2723
Page 4
Governor Brown vetoed AB 12 stating, "Two years ago, I
signed legislation that significantly revised the
regulatory review process. As a result, beginning this
November the Department of Finance will review the economic
impact of regulations before they are published. The
annual review proposed by this bill would duplicate those
efforts."
SB 617 (Calderon), Chapter 496, Statutes of 2011, requires
all state agencies that create, modify, or repeal a major
regulation with an economic impact of $50 million or more
to issue a standardized economic impact report, and enacts
requirements for a regulatory impact report to be completed
by DOF and OAL.
3) Balanced Assessment . The purpose of an ISOR is to
articulate the problem the agency intends to address and
the rationale for the determination by the agency that each
adoption, amendment, or repeal is reasonably necessary to
carry out the purpose and address the problem for which it
is proposed.
The statement shall enumerate the benefits anticipated from
the regulatory action, including the benefits or goals
provided in the authorizing statute.
The benefits may include, 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.
The standardized regulation impact assessment for major
regulations or the EIA for non-major regulations considers
the economic impact of the proposed regulation and is
intended to be a part of the overall and holistic analysis
of the benefits and costs of a proposed regulatory package.
Current law allows for the economic impact analysis to
consider the economic benefit of the regulation. This bill
AB 2723
Page 5
adds consideration of the economic impact to small
businesses and sole proprietorships as one of the
considerations to be made as part of this evaluation.
The author asserts that regulations can have different
economic impacts on different size businesses and that
consideration should be made as a part of the initial
evaluation of the regulations.
Because many regulatory packages promulgated by
environmental agencies address an environmental impact as
opposed to a regulation on a specific industry, it may also
be true that one regulation could have different economic
impacts on different types of businesses. It is unclear
how an agency would account for those differences or if
they would have the information to do so at the submission
of the ISOR.
4) Double Referral to Senate Governmental Organization
Committee . This measure was heard in Senate Governmental
Organization Committee on June 10, 2014, and passed out of
committee with a vote of 8-0.
SOURCE : Author
SUPPORT : Air Conditioning Trade Association
American Institute of Architects, California
Council
American Society of Landscape Architects,
California
Council
Associated Builders and Contractors of
California
Associated Builders and Contractors - San Diego
Chapter
Building Owners & Managers Association of
California
California Asian Pacific Chamber of Commerce
California Association for Health Services at
Home
California Association for Micro Enterprise
Opportunity
California Association of Boutique & Breakfast
AB 2723
Page 6
Inns
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California Chapter of American Fence
Association
California Construction and Industrial
Materials Association
California Fence Contractors' Association
California Grocers Association
California Hispanic Chambers of Commerce
California Hotel & Lodging Association
California Manufacturers & Technology
Association
California Restaurant Association
California Small Business Development Center
Leadership Council
Coalition of Small and Disabled Veteran
Businesses
Commercial Real Estate Development Association,
NAIOP
of California
Family Business Association
Flasher Barricade Association
Industrial Environmental Association
International Council of Shopping Centers
Los Angeles County Economic Development Corp.
Marin Builders Association
National Federation of Independent Business
Plumbing-Heating-Cooling Contractors
Association of
California
San Jose Silicon Valley Chamber of Commerce
Small Business California
Southwest California Legislative Council
Star Milling Company
State of California Auto Dismantler's
Association
United Contractors
Western Electrical Contractors Association
OPPOSITION : None on file
AB 2723
Page 7