The Administrative Procedure Act generally sets forth the requirements for the adoption, publication, review, and implementation of regulations by state agencies.

This bill would additionally require a state agency to review and report on regulations that it adopts or amends on and after January 1, 2018, 5 years after adoption, as specified. The bill would require that the review and report include 10 specified factors, including a summary of the written criticisms of the regulation received by the agency within the immediately preceding 5 years and the estimated economic, small business, and consumer impact of the regulation. The bill would require the Office of Administrative Law to make the review and report available on the offices Internet Web site.

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Steven Glazer

Chair

2017 - 2018 Regular

Bill No: SB Hearing Date: 3/28/2017

SUBJECT:

DIGEST: This bill requires a state agency to review and report on regulations that it adopts or amends on and after January 1, 2018, 5 years after adoption, as specified.

ANALYSIS:

Existing law:

1. Sets forth, under the Administrative Procedure Act (APA), the requirements for the adoption, publication, review, and implementation of regulations by state agencies.
2. Requires the Office of Administrative Law (OAL), at the request of any standing, select, or joint committee of the Legislature, to initiate a priority review of any regulation that the committee believes does not meet the standards of necessity, authority, clarity, reference, and nonduplication.
3. Specifies that if the OAL is notified of, or on its own becomes aware of, an existing regulation for which the statutory authority has been repealed or becomes ineffective, then the OAL shall order the agency to show cause of why the regulation should not be repealed and shall notify the Legislature in writing.
4. Authorizes an agency that is considering, adopting, amending, or repealing a regulation to consult with interested persons before initiating any regulatory action.

This bill:

1. Requires a state agency to review and report on all regulations that it adopts or amends on and after January 1, 2018.
2. Requires the report to include all of the following:
   1. The general and specific statutes authorizing the regulation.
   2. The objective of the regulation.
   3. The effectiveness of the regulation in achieving the objective.
   4. The consistency of the regulation with state and federal statutes and regulations and a listing of the statutes or regulations used in determining the consistency.
   5. The agency enforcement policy, including whether the regulation is currently being enforced and, if so, whether there are any problems with enforcement.
   6. The agency’s view regarding the current wisdom of the regulation.
   7. The clarity, conciseness, and understandability of the regulation.
   8. A summary of the written criticisms of the regulation received by the agency within the five years immediately preceding the five-year review report, as specified.
   9. The estimated economic, small business, and consumer impact of the regulation as compared to the economic, small business, and consumer impact statement prepared on the last making of the regulation, or, if no economic, small business and economic statement was prepared on the last making of the rule, an assessment of the actual economic, small business, and consumer impact of the regulation.
   10. The course of action the agency proposes to take regarding each regulation, including the month and year in which the agency anticipates submitting the rules to the OAL if the agency determines it is necessary to amend or repeal an existing rule or to make a new rule.
3. Requires the review and report to be completed and submitted to the OAL on or before May 1 immediately following five years after the date the regulation was adopted or amended.
4. Requires the OAL to make the report available on the office’s Internet Web site.

Background

Purpose of the bill. According to the author, “in creating new regulations, state agencies are required to comply with steps outlined by the APA. Among the factors to be considered, agencies must take into account the possibility that a particular regulation will harm small businesses and their employees or preclude job creation. However, a similar review of regulation does not automatically occur once they are approved. SB 555 would hold state agencies to greater accountability for their regulatory decisions by requiring an economic and small business assessment of regulations, five years after their adoption and implementation.”

The rulemaking process. The APA establishes rulemaking procedures and standards for state agencies in California for purposes of ensuring that regulations are clear, necessary, legally valid, and available to the public. A regulation is any rule, order or standard of general application or the amendment, supplement, or revision of any rule, regulation, order, or standards adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it. When adopting regulations, every department, division, office, bureau, board or commission in the executive branch must follow the rulemaking procedures in the APA, unless expressly exempted by statute from some or all requirements of the APA.

Under the APA, state agencies must comply with various procedural requirements which are designed to provide the public with a meaningful opportunity to participate in the adoption of regulations or rules. This includes publishing the proposed regulation with a supporting statement of reason; 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 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.

Staff comments. Some of the information that the bill is seeking to include in the report consists of information and criteria that is already taken into consideration when regulations are initially adopted. In addition, based on information provided by the author’s office, it appears that the goal of the bill is to provide an economic and small business assessment of regulations.

If that is, in fact, the case, the author may wish to amend the bill to simply require a state agency to perform an economic, small business, and consumer impact assessment on regulations that it adopts on and after January 1, 2018, 5 years after adoption of the regulation and require that the report be posted on the OAL’s Internet Web site.

Prior/Related Legislation

AB 12 (Cooley, 2017) would require each state agency, on or before January 1, 2020, to review, adopt, amend, or repeal any applicable regulations that are duplicative, overlapping, inconsistent, or out of date, and revise those identified regulations, as specified. (Pending in Assembly Accountability and Administrative Review Committee)

AB 12 (Cooley, 2015) would have required each state agency, on or before January 1, 2018, to review, adopt, amend, or repeal any applicable regulations that are duplicative, overlapping, inconsistent, or out of date, and revise those identified regulations, as specified. (Held in Senate Appropriations Committee)

SB 981 (Huff, 2014) would have required each state agency to review each regulation adopted prior to January 1, 2014, and to develop a report to the Legislature containing prescribed information. (Held in Senate Governmental Organization Committee)

AB 429 (Knight, 2011) would have required 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 OAL for approval. (Held in Assembly Business, Professions and Consumer Protections committee)

AB 535 (Morrell, 2011) would have required a state agency to review and report on regulations that it adopts or amends on and after January 1, 2018, 5 years after adoption, as specified. (Held in Assembly Appropriations Committee)

SB 366 (Calderon, 2011) would have required each state agency to review its regulations to identify duplicative, overlapping, inconsistent or outdated provisions and repeal or amend identified regulations. Also, would have created a Streamlined Permit Review Team charged with improving the efficiency of the state permitting process for development projects. (Held in Senate Governmental Organization Committee)

SB 396 (Huff, 2011) would have required each agency to review each regulation adopted prior to January 1, 2011, and develop a report with prescribed information to be submitted to the Legislature on or before January 1, 2013. (Held in Senate Environmental Quality Committee)

SB 401 (Fuller, 2011), among other things, would have required every regulation proposed by an agency after January 1, 2012, include a provision repealing the regulation in 5 years. (Held in Senate Environmental Quality Committee)

SB 553 (Fuller, 2011) would have required that a regulation or an order of repeal of a regulation that has been identified by the agency as having, or as being reasonably likely to have, an adverse economic impact of at least $10 million become effective 180 days after the date it is filed with the Secretary of State, except as provided. (Held in Senate Governmental Organization Committee)

SB 591 (Gaines, 2011) would have enacted the California Smart Regulation Act and required state agencies to reduce the total number of regulations they impose by 33 percent. (Held in Senate Governmental Organization Committee)

SB 617 (Calderon, Chapter 496, Statutes of 2011) revised various provisions of the APA and required 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 November 1, 2013.

SB 942 (Dutton, 2010) would have established an Economic Analysis Unit within OAL and would have required agencies to make publicly available and submit to the unit specified cost estimates related to a proposed regulation and specified information used to develop the cost estimates. (Held in Senate Appropriations Committee)

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

Automotive Specialty Products Alliance

California Apartment Association

California Association of Licensed Investigators, Inc.

California Business Properties Association

California Chamber of Commerce

California Farm Bureau Federation

California Growers Association

California Independent Petroleum Association

California Lodging Industry Association

California Manufacturers & Technology Association

California Professional Association of Specialty Contractors

California Retailers Association

California Sportsman’s Lobby

California Trucking Association

Camarillo Chamber of Commerce

Consumer Specialty Products Association

Family Business Association of California

Independent Lodging Industry Association

Industrial Environmental Association

Murrieta Chamber of Commerce, Inc.

National Shooting Sports Foundation

Outdoor Sportsmen's Coalition of California

Safari Club International

Santa Barbara Regional Chamber of Commerce

Torrance Area Chamber of Commerce

Western Growers Association

Western Wood Preservers Institute

OPPOSITION:

California Labor Federation

ARGUMENTS IN SUPPORT: According to Safari Club International, “SB 55 would bring more clarity and transparency to the regulatory process, and would help in gauging the effectiveness, or the need for, a state agency regulation. It would also help in identifying needed revisions or in determining whether a regulation should be repealed.”

DUAL REFERRAL:  Senate Environmental Quality Committee