BILL NUMBER: AB 2529	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Fuentes

                        FEBRUARY 19, 2010

   An act to add Article 5.5 (commencing with Section 11348.5) to
Chapter 3.5 of Part 1 of Division 3 of Title 2 of the Government
Code, relating to regulations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2529, as introduced, Fuentes. State agencies: regulations:
review.
   Existing law, the Administrative Procedure Act, governs the
procedure 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.
   This bill would adopt 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. This
bill would require the Department of Finance to assist state
agencies with the review of new and existing regulations for
compliance and consistency with these requirements, and to review
analyses performed by agencies in promulgating new regulations or in
reviewing existing regulations.
   This bill would require an agency to annually provide to the
department a list of its planned regulatory actions for that year, as
specified, and indicate the actions which the agency believes are
significant regulatory actions, as defined. This bill would require
an agency, for each significant regulatory action, to submit
prescribed information to the director at least 30 days prior to
issuing a notice of proposed action, as specified. The bill would
require the director to review the submitted information, as
specified. This bill would require the department, in order to
establish a baseline for the determination of the costs and benefits
of significant regulatory actions that it reviews, to complete a
review of all significant regulatory actions completed by state
agencies since January 1, 2004, and summarize the costs and benefits
of those actions in a report to be completed prior to July 1, 2011.
   This bill would require the Governor to convene an interagency
group with specified duties for the purpose of formulating an
effective methodology for performance of the analysis and
cost-benefit studies by state agencies, as specified.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Article 5.5 (commencing with Section 11348.5) is added
to Chapter 3.5 of Part 1 of Division 3 of Title 2 of the Government
Code, to read:

      Article 5.5.  Regulatory Planning and Review


   11348.5.  For purposes of this article, the following terms shall
have the following meanings:
   (a) "Department of Finance" or "department" shall have the same
meaning as Section 13000.
   (b) "Director of Finance" or "director" shall have the same
meaning as Section 13001.
   (c) "Significant regulatory action" means a regulatory action that
is likely to result in a regulation that may result in any one of
the following:
   (1) Have an annual cost to the state's economy of ten million
dollars ($10,000,000) or more or have a material adverse effect on
the economy, productivity, competition, public health or safety,
local governments, or tribal communities.
   (2) Create a serious inconsistency with, or otherwise interfere
with, an action taken or planned by another agency.
   (3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs, or the rights and obligations of its
recipients.
   (4) Raise novel legal or policy issues arising out of legal
mandates or involving the regulatory philosophies and principles
expressed in Section 11348.6.
   11348.6.  (a) The Legislature finds and declares all of the
following:
   (1) An efficient regulatory planning and review process is vital
to ensure that the state's regulatory system best serves the people
of this state.
   (2) There is a need for adequate information indicating the need
for and consequences of proposed regulatory actions, and that state
agencies should establish that potential benefits to the state
justify any potential costs of regulatory actions.
   (3) In 1993, President Clinton reviewed and revised the federal
government's program for regulatory review and issued Executive Order
12866, titled "Regulatory Planning and Review," establishing the
general principle that the benefits of intended regulations should
justify the costs.
   (4) Executive Order 12866 focused on the most significant rules,
established a 90-day period of review of proposed rules, and
increased the openness and accountability of the federal process for
reviewing regulations.
   (5) The federal Office of Management and Budget monitored and
assessed the implementation of Executive Order 12866, concluding that
significant improvements were made in all of the following six broad
areas of federal regulation:
   (A) Properly identifying problems and risks to be addressed, and
tailoring the regulatory approach narrowly to address them.
   (B) Developing alternative approaches to traditional command and
control regulation, such as using performance standards that tell
people what goals to meet instead of how to meet them, relying on
market incentives, or issuing nonbinding guidance instead of rules
and regulations.
   (C) Developing rules that, according to sound analysis, are
cost-effective and have benefits that justify their cost.
   (D) Consulting with those affected by the regulation, particularly
state, local, and tribal governments.
   (E) Ensuring that agency rules are well coordinated with rules and
policies of other agencies.
   (b) In order to achieve the benefits associated with Executive
Order 12866, this state adopts the following regulatory philosophy,
as outlined in Section 1(a) of Executive Order 12866:
   (1) Agencies should promulgate only those regulations as are
required by law, are necessary to interpret the law, or are made
necessary by compelling public need, such as material failures of
private markets to protect or improve the health and safety of the
public, the environment, or the well-being of Californians.
   (2) In deciding whether and how to regulate, agencies should
assess all costs and benefits of available regulatory alternatives,
including the alternative of not regulating. Costs and benefits shall
be understood to include both quantifiable measures, to the fullest
extent that these can be usefully estimated, and qualitative measures
of costs and benefits that are difficult to quantify, but
nevertheless essential to consider. Further, in choosing among
alternative regulatory approaches, agencies should select those
approaches that maximize net benefits, including potential economic,
environmental, public health and safety, and other advantages,
distributive impacts, and equity, unless a statute requires another
regulatory approach.
   (c) (1) In order to achieve the benefits associated with Executive
Order 12866, this state adopts the principles of regulation
contained in this subdivision, as outlined in Section 1(b) of
Executive Order 12866.
   (2) To ensure that the agencies' regulatory programs are
consistent with the philosophy set forth above, agencies should
adhere to the following principles to the extent permitted by law and
where applicable:
   (A) Each agency shall identify the problem that it intends to
address, including, where applicable, the failures of private markets
or public institutions that warrant new agency action, as well as
assess the significance of that problem.
   (B) Each agency shall examine whether existing regulations, or
other law, have created, or contributed to, the problem that a new
regulation is intended to correct and whether those regulations, or
other law, should be modified to achieve the intended goal of
regulation more effectively.
   (C) Each agency shall identify and assess available alternatives
to direct regulation, including providing economic incentives to
encourage the desired behavior, such as user fees or marketable
permits, or providing information upon which choices can be made by
the public.
   (D) In setting regulatory priorities, each agency shall consider,
to the extent reasonable, the degree and nature of the risks posed by
various substances or activities within its jurisdiction.
   (E) When an agency determines that a regulation is the best
available method of achieving the regulatory objective, it shall
design its regulations in the most cost-effective manner to achieve
the regulatory objective. In doing so, each agency shall consider
incentives for innovation, consistency, predictability, the costs of
enforcement and compliance, to the government, regulated entities,
and the public, flexibility, distributive impacts, and equity.
   (F) Each agency shall assess both the costs and the benefits of
the intended regulation and, recognizing that some costs and benefits
are difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs.
   (G) Each agency shall base its decisions on the best reasonably
obtainable scientific, technical, economic, and other information
concerning the need for, and consequences of, the intended
regulation.
   (H) Each agency shall identify and assess alternative forms of
regulation and shall, to the extent feasible, specify performance
objectives, rather than specifying the behavior or manner of
compliance that regulated entities must adopt.
   (I) Wherever feasible, agencies shall seek views of appropriate
state, local, and tribal officials before imposing regulatory
requirements that might significantly or uniquely affect those
governmental entities. Each agency shall assess the effects of
federal regulations on state, local, and tribal governments,
including specifically the availability of resources to carry out
those mandates, and seek to minimize those burdens that uniquely or
significantly affect those governmental entities, consistent with
achieving regulatory objectives. In addition, as appropriate,
agencies shall seek to harmonize federal regulatory actions with
related state, local, and tribal regulatory and other governmental
functions.
   (J) Each agency shall avoid regulations that are inconsistent,
incompatible, or duplicative with its other regulations or those of
other federal agencies.
   (K) Each agency shall tailor its regulations to impose the least
burden on society, including individuals, businesses of differing
sizes, and other entities, including small communities and
governmental entities, consistent with obtaining the regulatory
objectives, taking into account, among other things, and to the
extent practicable, the costs of cumulative regulations.
   (L) Each agency shall draft its regulations to be simple and easy
to understand, with the goal of minimizing the potential for
uncertainty and litigation arising from such uncertainty.
   11348.7.  (a) The department shall assist state agencies to review
new and existing regulations for compliance and consistency with
this article, and shall review analyses performed by agencies in
promulgating new regulations or in reviewing existing regulations.
   (b) Prior to January 1 of each year, a state agency shall provide
the department, at the time and in the manner specified by the
director, with a list of its planned regulatory actions for that year
and indicate the actions which the agency believes are significant
regulatory actions. A planned regulatory action that is not
designated as significant, absent a material change in the
development of that regulatory action, shall not be subject to review
under this section unless, within 10 days of receipt of the list,
the director notifies the agency that he or she has determined that a
planned regulation is a significant regulatory action.
   (c) (1) For each significant regulatory action, the agency shall
submit to the director for review, at least 30 days prior to the
issuance of a notice of proposed action required pursuant to Section
11346.4, all of the following:
   (A) The text of the draft regulatory language, together with a
reasonably detailed description of the need for the regulatory action
and an explanation of how the regulation will meet that need.
   (B) An analysis of the potential costs and benefits of the
regulatory action, including an explanation of the manner in which
the regulatory action is consistent with the statutory mandate.
   (2) For each significant regulatory action that satisfies the
criteria of paragraph (1) of subdivision (c) of Section 11348.5, the
agency shall also submit to the director for review, at least 30 days
prior to the issuance of a notice of proposed action required
pursuant to Section 11346.4, all of the following:
   (A) An assessment, including the underlying analysis, of benefits
anticipated from the regulatory action, including, but not limited
to, the promotion of the efficient functioning of the economy and
private markets, the enhancement of health and safety, the protection
of the natural environment, and the elimination or reduction of
discrimination or bias, together with, to the extent feasible, a
quantification of those benefits.
   (B) An assessment, including the underlying analysis, of costs
anticipated from the regulatory action, including, but not limited
to, the direct cost to both the government in administering the
regulation and to businesses and others in complying with the
regulation, and any adverse effects on the efficient functioning of
the economy, private markets, including productivity, employment, and
competitiveness, health, safety, and the natural environment,
together with, to the extent feasible, a quantification of those
costs.
   (C) An assessment, including the underlying analysis, of costs and
benefits of potentially effective and reasonably feasible
alternatives to the planned regulation, identified by the agencies or
the public, including improving the current regulation and
reasonably viable nonregulatory actions, and an explanation why the
planned regulatory action is preferable to the identified potential
alternatives.
   (d) No agency considering a significant regulatory action shall
issue a notice of proposed action pursuant to Section 11346.4 prior
to the department's completion of the review of the proposed
regulation and the agency's compliance with the requirements of this
article.
   (e) The director shall review the agency's submitted analysis of
new, amended, or existing regulations for consistency with the
regulatory philosophy and principles of regulation enumerated in
Section 11348.6. If the director determines that a planned regulatory
action may be inconsistent with the regulatory philosophy and
principles of regulation enumerated in Section 11348.6, the director
shall notify the agency in writing.
   (f) The agency shall include in its initial statement of reasons,
required pursuant to Section 11346.2, the director's analysis of new,
amended, or existing regulations, and the agency's responses to any
determinations made by the director.
   (g) The agency shall reimburse the department for the cost to the
department of the analysis, not to exceed 5 percent of the total cost
of developing the regulation. The agency shall build the cost of
reimbursement into the cost of developing the regulation.
   (h) In order to establish a baseline for the determination of the
costs and benefits of significant regulatory actions reviewed
pursuant to this article, the department shall complete a review of
all significant regulatory actions completed by state agencies since
January 1, 2004, and summarize the costs and benefits of those
actions. This review shall be completed prior to July 1, 2011.
   11348.8.  (a) In order to formulate an effective methodology for
performance of the analysis and cost-benefit studies by state
agencies pursuant to this article, by January 31, 2011, the Governor
shall convene an interagency group, to be chaired by the director, to
review the state of the art for analysis of regulatory action in
California at the state, regional, and local levels.
   (b) Prior to July 1, 2011, the director shall issue a "best
practices" report to the Legislature, detailing the findings of the
interagency group regarding the state of the art for regulatory
action analyses and proposing standard methods of regulatory analysis
for use by state agencies.
   11348.9.  Nothing in this article affects the current requirement
of state agencies to prepare an economic analysis of a proposed
regulation's potential for adverse economic impact on businesses and
individuals pursuant to Section 11346.3, or to make those economic
impact analyses available for public comment in the initial state of
reasons for the proposed regulation pursuant to Section 11346.2.