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AB-2090 Regulations.(2011-2012)

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AB2090:v97#DOCUMENT

Amended  IN  Assembly  April 10, 2012
Amended  IN  Assembly  March 29, 2012

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 2090


Introduced  by  Assembly Member Bill Berryhill

February 23, 2012


An act to amend Sections 11342.548, 11346.3, 11346.45, and 11349.1 of, and to add Section 11346.39 to, the Government Code, relating to regulations.


LEGISLATIVE COUNSEL'S DIGEST


AB 2090, as amended, Bill Berryhill. Regulations.
(1) The Administrative Procedure Act generally sets forth the requirements for the adoption, publication, review, and implementation of regulations by state agencies, and for review of those regulatory actions by the Office of Administrative Law. The act requires an agency, prior to submitting a proposal to adopt, amend, or repeal an administrative regulation, to determine the economic impact of the regulation by preparing an economic impact analysis. The act defines a major regulation as a regulation that the agency determines has an expected economic impact on California business enterprises and individuals in an amount exceeding $50,000,000. Existing law requires an agency proposing to adopt, amend, or repeal a major regulation to also prepare a standardized regulatory impact analysis.
This bill would instead define a major regulation as a regulation that the agency determines has an expected economic impact on California business enterprises and individuals in an amount exceeding $15,000,000.
This bill would modify the requirements that an adopting agency must meet when preparing the economic impact analysis and the standardized regulatory impact analysis.

(2)The act requires the office to initiate, at the request of a standing, select, or joint committee of the Legislature, a priority review of an existing regulation that uses prescribed procedures to determine whether the regulation continues to satisfy specified standards.

This bill would require an agency proposing to adopt a major regulation to submit a detailed summary of the standardized regulatory impact analysis to specified persons and entities. This bill would require the agency to submit a full copy of that analysis if requested by specified persons and entities. This bill would require the office to initiate, at the request of specified persons and entities, a priority review of a proposed regulation, in accordance with certain procedures, to determine whether the regulation continues to satisfy specified standards. This bill would require the agency, if requested by specified persons or entities, to hold up to 2 additional public hearings or public workshops on the proposed major regulation.

(3)

(2) The act requires that state agencies proposing to adopt regulations, prior to publication of the notice of proposed action, involve parties that would be subject to the proposed regulations in public discussions regarding those proposed regulations, when the proposed regulations involve complex proposals or a large number of proposals that cannot easily be reviewed during the comment period. The act also provides that these requirements are not subject to judicial review or a specified review by the office.
This bill would instead make that requirement applicable to all proposed regulations. The bill would repeal the provisions that exempt these requirements from judicial review and review by the office. The bill would require the office to return the regulation to the agency if the agency does not comply with these requirements.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Robust jobs and economic growth are the key to repairing California’s chronic budget problems and generating adequate revenues to fund vital programs like education, infrastructure, and public safety.
(b) California’s jobs, business, and economic climate have been in dire straits for several years, resulting in higher unemployment, and a reduction in the number of businesses, small businesses in particular, operating in the state and concomitant decline in state revenues.
(c) California’s regulatory burdens are often cited as one of the main causes of stagnant job and economic growth and why many businesses decide to expand in other states instead of California. In fact, in 2011 CEO magazine ranked California last among states where companies prefer to do business for the seventh straight year.
(d) A large part of the problem is that too much authority over the California economy and jobs climate has been ceded to the unelected state bureaucracy. Regulations adopted by state agencies often impose unnecessary burdens on California’s economic and jobs climate at a time when California can least afford to discourage economic and job growth.
(e) Today, instead of using due diligence in analyzing the economic impacts of proposed regulations, state agencies often merely fill out a four-page economic questionnaire that provides little more than one-word answers and checked-off boxes and is devoid of supporting data. On top of that, this information is not currently required to be made available to the public.
(f) More sunshine and public input is needed in the regulatory rulemaking process. Those subject to regulations are often in the best position to determine the actual costs of regulations, and also to identify equally effective but less burdensome alternatives.
(g) Additionally, the connection between those that adopt laws and those that implement them has been eroded. Stronger and more direct oversight of the regulatory rulemaking process by the Legislature, as the body conferring authority to adopt regulations, will improve the regulatory rulemaking process.
(h) It is not the intent of this act to unduly impede the regulatory rulemaking process. It is rather to provide greater sunshine and public participation in the fastest-growing area of government and to develop the most thoughtful, economically efficient, and least burdensome regulations on jobs and businesses when carrying out the intent of authorizing statutes.
(i) Under this act, if a state agency has sufficiently involved the public in the rulemaking process and conducted a thorough analysis of a regulation’s economic impacts, this act should have no adverse effect on the regulatory rulemaking process.
(j) Further, the purpose of this act is not to prevent or postpone the adoption of any particular type of regulation or regulations but simply to ensure that accurate and honest information about a proposed regulation’s true economic impact is prepared and made available to the public and the legislative and executive branches of government.

SEC. 2.

 Section 11342.548 of the Government Code is amended to read:

11342.548.
 “Major regulation” means any proposed adoption, amendment, or repeal of a regulation subject to review by the Office of Administrative Law pursuant to Article 6 (commencing with Section 11349) that will have an economic impact on California business enterprises and individuals in an amount exceeding fifteen million dollars ($15,000,000), as estimated by the agency in the economic impact analysis prepared pursuant to Section 11346.3.

SEC. 3.

 Section 11346.3 of the Government Code is amended to read:

11346.3.
 (a) State agencies proposing to adopt, amend, or repeal any administrative regulation shall assess the potential for adverse economic impact on California business enterprises and individuals, avoiding the imposition of unnecessary or unreasonable regulations or reporting, recordkeeping, or compliance requirements. For purposes of this subdivision, assessing the potential for adverse economic impact shall require agencies, when proposing to adopt, amend, or repeal a regulation, to adhere to the following requirements, to the extent that these requirements do not conflict with other state or federal laws:
(1) The proposed adoption, amendment, or repeal of a regulation shall be based on adequate information concerning the need for, and consequences of, proposed governmental action.
(2) The state agency, prior to before submitting a proposal to adopt, amend, or repeal a regulation to the office, shall consider the proposal’s impact on business, with consideration of industries affected including the ability of California businesses to compete with businesses in other states. For purposes of evaluating the impact on the ability of California businesses to compete with businesses in other states, an agency shall consider, but not be limited to, information supplied by interested parties.
(3) An economic analysis prepared pursuant to this subdivision for a proposed regulation that is not a major regulation or that is a major regulation proposed prior to before November 1, 2013, shall be prepared in accordance with pursuant to subdivision (b). An economic analysis prepared pursuant to this subdivision for a major regulation proposed on or after November 1, 2013, shall be prepared in accordance with pursuant to subdivision (c), and shall be included in the initial statement of reasons as required by Section 11346.2.
(b) (1) All state agencies proposing to adopt, amend, or repeal a regulation that is not a major regulation or that is a major regulation proposed prior to before November 1, 2013, shall prepare an economic impact analysis that meets all of the following requirements:
(A) Estimates the total actual costs of compliance for affected small businesses, large businesses, and other parties subject to the regulation or group of regulations. The economic impact analysis shall, at a minimum, estimate the costs of individual compliance for a representative small business, large business, and other party subject to the regulation as well as the cumulative statewide cost of compliance.
(B) If an agency declares that it is not aware of any cost impact that a representative small business, large business, or other party subject to the regulation would incur in compliance with the regulation, or group of regulations authorized by the same statute, the economic impact analysis shall include an express statement to that effect as well as a detailed statement describing how a small business, large business, or other party subject to the regulation could comply with the regulation or group of regulations without incurring cost.
(C) If an economic impact analysis prepared pursuant to this section finds that the cumulative statewide cost of compliance of any regulation, or group of regulations authorized by the same statute, exceeds fifteen million dollars ($15,000,000) then the regulation or group of regulations shall be deemed to be a major regulation. If reasonable doubt exists as to whether the cumulative statewide cost of compliance of any regulation or group of regulations authorized by the same statute exceeds fifteen million dollars ($15,000,000), the doubt shall be resolved in favor of finding that the regulation or group of regulations authorized by the same statute qualifies as a major regulation.
(D) Each economic impact analysis that an agency prepares shall be maintained in the agency’s records and shall be made available to the office and the parties identified in subdivision (a) of Section 11346.39 upon request Governor’s Office of Planning and Research, the Director of Finance, the Legislative Analyst, the State Auditor, the Controller, the President pro Tempore of the Senate, the Minority Floor Leader of the Senate, the Speaker of the Assembly, the Minority Floor Leader of the Assembly, and the chair and ranking minority party member of the appropriate fiscal and policy committees of the Senate and the Assembly, upon request.
(E) An adopting agency shall prepare a standardized regulatory impact analysis for any regulation that the agency determines is a major regulation.
(F) Each economic impact analysis shall assess the benefits of the regulation to the health and welfare of California residents, worker safety, and the state’s environment.
(2) This subdivision shall not apply to the University of California, the Hastings College of the Law, or the Fair Political Practices Commission.
(3) Information required from state agencies for the purpose of completing the assessment may come from existing state publications.
(c) (1) Each state agency proposing to adopt, amend, or repeal a major regulation on or after November 1, 2013, shall prepare a standardized regulatory impact assessment in the manner prescribed by the Department of Finance pursuant to Section 11346.36. The standardized regulatory impact analysis shall contain all of the following:
(A) A detailed estimate, in both the short term and long term, of the average individual cost of compliance for small businesses, large businesses, and other parties subject to the major regulation.
(B) A detailed estimate, in both the short term and long term, of the cumulative statewide cost of compliance with the major regulation for small businesses, large businesses, and other parties.
(C) A detailed distributional assessment that evaluates, in both the short term and long term, how certain industries, income groups, and geographic regions are likely to experience benefits or costs as a consequence of the major regulation.
(D) A detailed estimate of the short-term and long-term creation or elimination of jobs in individual sectors as a result of the major regulation.
(E) A detailed estimate, in both the short term and long term, of the potential for economic leakage as a result of the major regulation in which economic activity is relocated from California to another state or country.
(F) A detailed estimate, in both the short term and long term, of the impact on the ability of California businesses to compete with businesses in other states and California’s ability to attract businesses to locate in the state as a result of the major regulation.
(G) A detailed estimate, in both the short term and long term, of the effects on excise tax, sales and use tax, income tax, corporation tax, and other tax revenue to the General Fund, and fee revenues to special funds, as a result of the major regulation and changes in economic activity as a result of the major regulation.
(H) A precise statement enumerating the benefits, in both the short term and long term, anticipated from the major regulation, including the benefits or goals provided in the authorizing statutes. Where applicable, the statement shall include the failures in private markets or public institutions that warrant the proposed major regulation, in a manner consistent with the guidelines published by the federal Office of Management and Budget in OMB Circular No. A-94, Revised.
(I) An identification of each technical, theoretical, and empirical study, report, or similar document, if any, upon which the agency relies in proposing the major regulation.
(J) A copy of the economic impact analysis prepared pursuant to subdivision (b).

(K)Any written comments submitted pursuant subdivision (c) of Section 11346.39, as well as the agency’s written responses to those comments.

(K) A description of the benefits of the regulation, including, but not limited to, 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.
(2) This subdivision shall not apply to the University of California, the Hastings College of the Law, or the Fair Political Practices Commission.
(3) Information required from state agencies for the purpose of completing the assessment may be derived from existing state, federal, or academic publications.
(d) Any administrative regulation adopted on or after January 1, 1993, that requires a report shall not apply to businesses, unless the state agency adopting the regulation makes a finding that it is necessary for the health, safety, or welfare of the people of the state that the regulation apply to businesses.
(e) Analyses conducted pursuant to this section 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. Regulatory impact analyses shall inform the agencies and the public of the economic consequences of regulatory choices, not reassess statutory policy. The baseline for the regulatory analysis shall be the most cost-effective set of regulatory measures that are equally effective in achieving the purpose 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.
(f) Each state agency proposing to adopt, amend, or repeal a major regulation on or after November 1, 2013, and that has prepared a standardized regulatory impact assessment pursuant to subdivision (c), shall submit that assessment to the Department of Finance upon completion. The department shall comment, within 30 days of receiving such the assessment, on the extent to which the assessment adheres to the regulations adopted pursuant to Section 11346.36. Upon receiving the comments from the department, the agency may update its analysis to reflect any comments received from the department and shall summarize the comments and the response of the agency along with a statement of the results of the updated analysis for the statement required by paragraph (10) of subdivision (a) of Section 11346.5.

SEC. 4.Section 11346.39 is added to the Government Code, immediately following 11346.36, to read:
11346.39.

(a)After completing a standardized regulatory impact analysis pursuant to Section 11346.3, the adopting agency shall submit a detailed summary of that analysis to the Governor’s Office of Planning and Research, the Director of Finance, the Legislative Analyst, the State Auditor, the Controller, the President pro Tempore of the Senate, the Minority Floor Leader of the Senate, the Speaker of the Assembly, the Minority Floor Leader of the Assembly, and the chair and ranking minority party member of the appropriate fiscal and policy committees of the Senate and the Assembly.

(b)Any party identified in subdivision (a) may request the adopting agency to provide a complete copy of the standardized regulatory impact analysis. The adopting agency shall comply with that request within 10 working days of receiving the request.

(c)Within 60 days of receiving a complete copy of standardized regulatory impact analysis pursuant to subdivision (b), any party identified in subdivision (a) may submit written comments to the adopting agency on that report. The adopting agency shall consider any of those written comments submitted to it, and shall respond to those comments in writing. Any comments submitted to the adopting agency pursuant to this section, and any responses to those comments, shall be included in the rulemaking file pursuant to Section 11347.3.

(d)The office, at the request of any of the parties identified in subdivision (a), shall initiate a priority review of any regulation, group of regulations, or series of regulations that the party believes does not meet the requirements of this chapter. For major regulations adopted on or after January 1, 2013, a party identified in subdivision (a) may also request a priority review to evaluate whether the major regulation fails to utilize a less burdensome alternative. The office shall conduct a priority review under this subdivision in accordance with the procedures set out in Section 11349.7.

(e)An agency proposing to adopt a major regulation, upon the request of a party identified in subdivision (a), shall hold up to two additional public hearings or two additional public workshops on the proposed major regulation.

SEC. 5.SEC. 4.

 Section 11346.45 of the Government Code is amended to read:

11346.45.
 (a) In order to increase public participation and improve the quality of regulations, state agencies proposing to adopt regulations shall, prior to before publication of the notice required by Section 11346.5, involve parties who would be subject to the proposed regulations in public discussions regarding those proposed regulations.
(b) This section shall not apply to a state agency in any instance where that state agency is required to implement federal law and regulations for which there is little or no discretion on the part of the state to vary.
(c) If the agency does not or cannot comply with the subdivision (a), it shall state the reasons for noncompliance with reasonable specificity in the rulemaking record.

SEC. 6.SEC. 5.

 Section 11349.1 of the Government Code is amended to read:

11349.1.
 (a) The office shall review all regulations adopted, amended, or repealed pursuant to the procedure specified in Article 5 (commencing with Section 11346) and submitted to it for publication in the California Code of Regulations Supplement and for transmittal to the Secretary of State and make determinations using all of the following standards:
(1) Necessity.
(2) Authority.
(3) Clarity.
(4) Consistency.
(5) Reference.
(6) Nonduplication.
In reviewing regulations pursuant to this section, the office shall restrict its review to the regulation and the record of the rulemaking proceeding. The office shall approve the regulation or order of repeal if it complies with the standards set forth in this section and with this chapter.
(b) In reviewing proposed regulations for the criteria in subdivision (a), the office may consider the clarity of the proposed regulation in the context of related regulations already in existence.
(c) The office shall adopt regulations governing the procedures it uses in reviewing regulations submitted to it. The regulations shall provide for an orderly review and shall specify the methods, standards, presumptions, and principles the office uses, and the limitations it observes, in reviewing regulations to establish compliance with the standards specified in subdivision (a). The regulations adopted by the office shall ensure that it does not substitute its judgment for that of the rulemaking agency as expressed in the substantive content of adopted regulations.
(d) The office shall return any regulation subject to this chapter to the adopting agency if any of the following occur:
(1) The adopting agency has not prepared the estimate required by paragraph (6) of subdivision (a) of Section 11346.5 and has not included the data used and calculations made and the summary report of the estimate in the file of the rulemaking.
(2) The adopting agency has not complied with Section 11346.3. “Noncompliance” means that the agency failed to complete the economic impact assessment or standardized regulatory impact analysis required by Section 11346.3 or failed to include the assessment or analysis in the file of the rulemaking proceeding as required by Section 11347.3.
(3) The adopting agency has prepared the estimate required by paragraph (6) of subdivision (a) of Section 11346.5, the estimate indicates that the regulation will result in a cost to local agencies or school districts that is required to be reimbursed under Part 7 (commencing with Section 17500) of Division 4, and the adopting agency fails to do any of the following:
(A) Cite an item in the Budget Act for the fiscal year in which the regulation will go into effect as the source from which the Controller may pay the claims of local agencies or school districts.
(B) Cite an accompanying bill appropriating funds as the source from which the Controller may pay the claims of local agencies or school districts.
(C) Attach a letter or other documentation from the Department of Finance which states that the Department of Finance has approved a request by the agency that funds be included in the Budget Bill for the next following fiscal year to reimburse local agencies or school districts for the costs mandated by the regulation.
(D) Attach a letter or other documentation from the Department of Finance which states that the Department of Finance has authorized the augmentation of the amount available for expenditure under the agency’s appropriation in the Budget Act which is for reimbursement pursuant to Part 7 (commencing with Section 17500) of Division 4 to local agencies or school districts from the unencumbered balances of other appropriations in the Budget Act and that this augmentation is sufficient to reimburse local agencies or school districts for their costs mandated by the regulation.
(4) The proposed regulation conflicts with an existing state regulation and the agency has not identified the manner in which the conflict may be resolved.
(5) The adopting agency did not make the alternatives determination as required by paragraph (4) of subdivision (a) of Section 11346.9.
(6) The adopting agency did not comply with Section 11346.10.
(e) The office shall notify the Department of Finance of all regulations returned pursuant to subdivision (d).
(f) The office shall return a rulemaking file to the submitting agency if the file does not comply with subdivisions (a) and (b) of Section 11347.3. Within three state working days of the receipt of a rulemaking file, the office shall notify the submitting agency of any deficiency identified. If no notice of deficiency is mailed to the adopting agency within that time, a rulemaking file shall be deemed submitted as of the date of its original receipt by the office. A rulemaking file shall not be deemed submitted until each deficiency identified under this subdivision has been corrected.
(g) Notwithstanding any other law, return of the regulation to the adopting agency by the office pursuant to this section is the exclusive remedy for a failure to comply with subdivision (c) of Section 11346.3 or paragraph (10) of subdivision (a) of Section 11346.5.