BILL NUMBER: AB 1037	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member V. Manuel Pérez

                        FEBRUARY 18, 2011

   An act to amend Sections 11340.1, 11342.610, 11346.2, 11346.3,
11346.8, and 11346.9 of, and to add Section 11349.95 to, the
Government Code, relating to regulations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1037, as introduced, V. Manuel Pérez. Regulations: small
business impact.
   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. The act declares that it is the intent
of the Legislature that neither the Office of Administrative Law nor
the court should substitute its judgment for that of the rulemaking
agency as expressed in the substantive content of adopted
regulations.
   This bill would, instead, declare that it is the intent of the
Legislature that only the court not substitute its judgment for that
of the rulemaking agency.
   The act defines "small business" in a manner that does not include
certain business activities that exceed prescribed thresholds for
annual gross receipts.
   This bill would increase the prescribed thresholds for these
business activities and would add computer programming, data
processing, and systems design to the list of business activities
that are not small businesses if they exceed $25,000,000 in annual
gross receipts.
   The act requires an agency to submit an initial statement of
reasons for proposing a regulation to the office with specified
information, including, among other things, a description of
reasonable alternatives to the regulation.
   This bill would, instead, require an agency to document why no
alternatives were developed and list any alternatives that were
submitted and determined to be unreasonable.
   The act requires an agency, as part of the regulatory adoption
process, to assess the potential for adverse economic impact on
California business enterprises and individuals, as specified.
   This bill would require that the assessment be based on sound
economic theory and practice that is generally accepted within the
related professional fields. The bill would require the assessment to
include a determination whether there is a similar or related
regulation that has been adopted by any other regulatory agency and
information come from reasonably current existing state publications.
The bill would require the agency, as part of the assessment to seek
assistance from relevant persons or organizations to identify and
develop alternatives to the regulation for consideration by the
agency. The bill would require an agency, if it ultimately adopts the
regulation, to perform the business assessment again, 5 years after
the adoption of the regulation, as specified.
   The act requires that an agency submit a final statement of
reasons to the office that includes specified information, including,
among other things, a determination that no alternative considered
by the agency would be more effective in carrying out the purpose for
which the regulation was proposed.
   This bill would, instead, require a determination that no
alternative would be equally or more effective in carrying out the
purpose for which the regulation was proposed. The bill would also
require the final statement of reasons to include a determination
whether opportunities for cooperation exist with another state or
federal agency that is implementing a similar regulation in order to
reduce the cumulative negative impact of the regulation on small
businesses.
   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.  Section 11340.1 of the Government Code is amended to
read:
   11340.1.  (a) The Legislature therefore declares that it is in the
public interest to establish an Office of Administrative Law which
shall be charged with the orderly review of adopted regulations. It
is the intent of the Legislature that the purpose of such review
shall be to reduce the number of administrative regulations and to
improve the quality of those regulations which are adopted. It is the
intent of the Legislature that agencies shall actively seek to
reduce the unnecessary regulatory burden on private individuals and
entities by substituting performance standards for prescriptive
standards wherever performance standards can be reasonably expected
to be as effective and less burdensome, and that this substitution
shall be considered during the course of the agency rulemaking
process. It is the intent of the Legislature that  neither
the Office of Administrative Law nor  the court should 
not  substitute its judgment for that of the rulemaking agency
as expressed in the substantive content of adopted regulations. It is
the intent of the Legislature that while the Office of
Administrative Law will be part of the executive branch of state
government, that the office work closely with, and upon request
report directly to, the Legislature in order to accomplish regulatory
reform in California.
   (b) It is the intent of the Legislature that the California Code
of Regulations made available on the Internet by the office pursuant
to Section 11344 include complete authority and reference citations
and history notes.
  SEC. 2.  Section 11342.610 of the Government Code is amended to
read:
   11342.610.  (a) "Small business" means a business activity in
agriculture, general construction, special trade construction, retail
trade, wholesale trade, services, transportation and warehousing,
manufacturing, generation and transmission of electric power, or a
health care facility, unless excluded in subdivision (b), that is
both of the following:
   (1) Independently owned and operated.
   (2) Not dominant in its field of operation.
   (b) "Small business" does not include the following professional
and business activities:
   (1) A financial institution including a bank, a trust, a savings
and loan association, a thrift institution, a consumer finance
company, a commercial finance company, an industrial finance company,
a credit union, a mortgage and investment banker, a securities
broker-dealer, or an investment adviser.
   (2) An insurance company, either stock or mutual.
   (3) A mineral, oil, or gas broker.
   (4) A subdivider or developer.
   (5) A landscape architect, an architect, or a building designer.
   (6) An entity organized as a nonprofit institution.
   (7) An entertainment activity or production, including a motion
picture, a stage performance, a television or radio station, or a
production company.
   (8) A utility, a water company, or a power transmission company
generating and transmitting more than 4.5 million kilowatt hours
annually.
   (9) A petroleum producer, a natural gas producer, a refiner, or a
pipeline.
   (10) A manufacturing enterprise exceeding 250 employees.
   (11) A health care facility exceeding 150 beds or one million five
hundred thousand dollars ($1,500,000) in annual gross receipts.
   (c) "Small business" does not include the following business
activities:
   (1) Agriculture, where the annual gross receipts exceed 
one million dollars ($1,000,000)   seven million dollars
($7,000,000)  .
   (2) General construction, where the annual gross receipts exceed
 nine million five hundred thousand dollars ($9,500,000)
  thirty millio   n dollars ($30,000,000) 
.
   (3) Special trade construction, where the annual gross receipts
exceed  five million dollars ($5,000,000)  
fourteen million dollars ($14,000,000)  .
   (4) Retail trade, where the annual gross receipts exceed 
two million dollars ($2,000,000)   seven million dollars
($7,000,000)  .
   (5) Wholesale trade, where the annual gross receipts exceed nine
million five hundred thousand dollars ($9,500,000).
   (6) Services, where the annual gross receipts exceed  two
million dollars ($2,000,000)   seven million dollars
($7,000,000)  .
   (7) Transportation and warehousing, where the annual gross
receipts exceed  one million five hundred thousand dollars
($1,500,000).   seven million dollars ($7,000,000).
 
   (8) Computer programming, data processing, and systems design,
where the annual gross receipts exceed twenty-five million dollars
($25,000,000). 
  SEC. 3.  Section 11346.2 of the Government Code, as amended by
Section 1 of Chapter 398 of the Statutes of 2010, is amended to read:

   11346.2.  Every agency subject to this chapter shall prepare,
submit to the office with the notice of the proposed action as
described in Section 11346.5, and make available to the public upon
request, all of the following:
   (a) A copy of the express terms of the proposed regulation.
   (1) The agency shall draft the regulation in plain,
straightforward language, avoiding technical terms as much as
possible, and using a coherent and easily readable style. The agency
shall draft the regulation in plain English.
   (2) The agency shall include a notation following the express
terms of each California Code of Regulations section, listing the
specific statutes or other provisions of law authorizing the adoption
of the regulation and listing the specific statutes or other
provisions of law being implemented, interpreted, or made specific by
that section in the California Code of Regulations.
   (3) The agency shall use underline or italics to indicate
additions to, and strikeout to indicate deletions from, the
California Code of Regulations.
   (b) An initial statement of reasons for proposing the adoption,
amendment, or repeal of a regulation. This statement of reasons shall
include, but not be limited to, all of the following:
   (1) A statement of the specific purpose of each adoption,
amendment, or repeal and the rationale for the determination by the
agency that each adoption, amendment, or repeal is reasonably
necessary to carry out the purpose for which it is proposed. Where
the adoption or amendment of a regulation would mandate the use of
specific technologies or equipment, a statement of the reasons why
the agency believes these mandates or prescriptive standards are
required.
   (2) An identification of each technical, theoretical, and
empirical study, report, or similar document, if any, upon which the
agency relies in proposing the adoption, amendment, or repeal of a
regulation.
   (3) (A) A description of reasonable alternatives to the regulation
and the agency's reasons for rejecting those alternatives. In the
case of a regulation that would mandate the use of specific
technologies or equipment or prescribe specific actions or
procedures, the imposition of performance standards shall be
considered as an alternative.
   (B) A description of reasonable alternatives to the regulation
that would lessen any adverse impact on small business and the agency'
s reasons for rejecting those alternatives.
   (C) Notwithstanding subparagraph (A) or (B), an agency is not
required to artificially construct alternatives  , describe
unreasonable alternatives, or justify why it has not described
alternatives  .  The agency shall document why no
alternatives were developed and shall list any alternatives that were
submitted to the agency by the public and determined to be
unreasonable. 
   (4) Facts, evidence, documents, testimony, or other evidence on
which the agency relies to support an initial determination that the
action will not have a significant adverse economic impact on
business.
   (5) A department, board, or commission within the Environmental
Protection Agency, the Resources Agency, or the Office of the State
Fire Marshal shall describe its efforts, in connection with a
proposed rulemaking action, to avoid unnecessary duplication or
conflicts with federal regulations contained in the Code of Federal
Regulations addressing the same issues. These agencies may adopt
regulations different from federal regulations contained in the Code
of Federal Regulations addressing the same issues upon a finding of
one or more of the following justifications:
   (A) The differing state regulations are authorized by law.
   (B) The cost of differing state regulations is justified by the
benefit to human health, public safety, public welfare, or the
environment.
   (c) A state agency that adopts or amends a regulation mandated by
federal law or regulations, the provisions of which are identical to
a previously adopted or amended federal regulation, shall be deemed
to have complied with subdivision (b) if a statement to the effect
that a federally mandated regulation or amendment to a regulation is
being proposed, together with a citation to where an explanation of
the provisions of the regulation can be found, is included in the
notice of proposed adoption or amendment prepared pursuant to Section
11346.5. However, the agency shall comply fully with this chapter
with respect to any provisions in the regulation that the agency
proposes to adopt or amend that are different from the corresponding
provisions of the federal regulation.
   (d) This section shall be inoperative from January 1, 2012, until
January 1, 2014.
  SEC. 4.  Section 11346.2 of the Government Code, as added by
Section 2 of Chapter 398 of the Statutes of 2010, is amended to read:

   11346.2.  Every agency subject to this chapter shall prepare,
submit to the office with the notice of the proposed action as
described in Section 11346.5, and make available to the public upon
request, all of the following:
   (a) A copy of the express terms of the proposed regulation.
   (1) The agency shall draft the regulation in plain,
straightforward language, avoiding technical terms as much as
possible, and using a coherent and easily readable style. The agency
shall draft the regulation in plain English.
   (2) The agency shall include a notation following the express
terms of each California Code of Regulations section, listing the
specific statutes or other provisions of law authorizing the adoption
of the regulation and listing the specific statutes or other
provisions of law being implemented, interpreted, or made specific by
that section in the California Code of Regulations.
   (3) The agency shall use underline or italics to indicate
additions to, and strikeout to indicate deletions from, the
California Code of Regulations.
   (b) An initial statement of reasons for proposing the adoption,
amendment, or repeal of a regulation. This statement of reasons shall
include, but not be limited to, all of the following:
   (1) A statement of the specific purpose of each adoption,
amendment, or repeal and the rationale for the determination by the
agency that each adoption, amendment, or repeal is reasonably
necessary to carry out the purpose for which it is proposed.
   (2) An identification of each technical, theoretical, and
empirical study, report, or similar document, if any, upon which the
agency relies in proposing the adoption, amendment, or repeal of a
regulation.
   (3) Where the adoption or amendment of a regulation would mandate
the use of specific technologies or equipment, a statement of the
reasons why the agency believes these mandates or prescriptive
standards are required.
   (4) (A) A description of reasonable alternatives to the regulation
and the agency's reasons for rejecting those alternatives.
   (B) A description of any performance standard that was considered
as an alternative. In the case of a regulation that would mandate the
use of specific technologies or equipment or prescribe specific
actions or procedures, the imposition of performance standards shall
be considered as an alternative.
   (C) A description of reasonable alternatives to the regulation
that would lessen any adverse impact on small business and the agency'
s reasons for rejecting those alternatives.
   (D) Notwithstanding subparagraph (A), (B), or (C), an agency is
not required to artificially construct alternatives  ,
describe unreasonable alternatives, or justify why it has not
described alternatives  .  The agency shall document why
no alternatives were developed and shall list any alternatives that
were submitted to the agency by the public and determined to be
unreasonable. 
   (5) Facts, evidence, documents, testimony, or other evidence on
which the agency relies to support an initial determination that the
action will not have a significant adverse economic impact on
business.
   (6) A department, board, or commission within the Environmental
Protection Agency, the Resources Agency, or the Office of the State
Fire Marshal shall describe its efforts, in connection with a
proposed rulemaking action, to avoid unnecessary duplication or
conflicts with federal regulations contained in the Code of Federal
Regulations addressing the same issues. These agencies may adopt
regulations different from federal regulations contained in the Code
of Federal Regulations addressing the same issues upon a finding of
one or more of the following justifications:
   (A) The differing state regulations are authorized by law.
   (B) The cost of differing state regulations is justified by the
benefit to human health, public safety, public welfare, or the
environment.
   (c) A state agency that adopts or amends a regulation mandated by
federal law or regulations, the provisions of which are identical to
a previously adopted or amended federal regulation, shall be deemed
to have complied with subdivision (b) if a statement to the effect
that a federally mandated regulation or amendment to a regulation is
being proposed, together with a citation to where an explanation of
the provisions of the regulation can be found, is included in the
notice of proposed adoption or amendment prepared pursuant to Section
11346.5. However, the agency shall comply fully with this chapter
with respect to any provisions in the regulation that the agency
proposes to adopt or amend that are different from the corresponding
provisions of the federal regulation.
   (d) This section shall become operative on January 1, 2012.
   (e) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
  SEC. 5.  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 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.
   It is not the intent of this section to impose additional criteria
on agencies, above that which exists in current law, in assessing
adverse economic impact on California business enterprises, but only
to  assure   ensure  that the assessment is
made early in the process of initiation and development of a
proposed adoption, amendment, or repeal of a regulation  , and
that the assessment is based on sound economic theory and practice
that is gener   ally accepted within the related
professional fields  .
   (b) (1) All state agencies proposing to adopt, amend, or repeal
any administrative regulations shall assess whether and to what
extent it will affect the following:
   (A) The creation or elimination of jobs within the State of
California.
   (B) The creation of new businesses or the elimination of existing
businesses within the State of California.
   (C) The expansion of businesses currently doing business within
the State of California. 
   (2) All state agencies proposing to adopt, amend, or repeal any
administrative regulations shall also assess whether there is a
similar or related regulation that has been adopted by any other
regulatory agency.  
   (2) 
    (3)  This subdivision does not apply to the University
of California, the Hastings College of the Law, or the Fair Political
Practices Commission. 
   (3) 
    (4)  Information required from state agencies for the
purpose of completing the assessment may come from  reasonably
current existing state publications.
   (c) No administrative regulation adopted on or after January 1,
1993, that requires a report shall apply to businesses, unless the
state agency adopting the regulation makes a finding  , 
 based on substantial evidence in the administrative record,
 that it is necessary for the health, safety, or welfare of the
people of the state that the regulation apply to businesses. 
   (d) The agency shall, in undertaking the assessment required by
this section, seek assistance from relevant persons or organizations
to identify and develop alternatives for consideration by the agency
during the regulation adoption process.  
   (e)  The assessment required by this section shall be conducted
prior to issuing the notice of proposed action described in Section
11346.5 and again, if the agency ultimately adopts the regulation, in
the manner required by Section 11349.95. 
  SEC. 6.  Section 11346.8 of the Government Code is amended to read:

   11346.8.  (a) If a public hearing is held, both oral and written
statements, arguments, or contentions, shall be permitted. The agency
may impose reasonable limitations on oral presentations. If a public
hearing is not scheduled, the state agency shall, consistent with
Section 11346.4, afford any interested person or his or her duly
authorized representative, the opportunity to present statements,
arguments or contentions in writing. In addition, a public hearing
shall be held if, no later than 15 days prior to the close of the
written comment period, an interested person or his or her duly
authorized representative submits in writing to the state agency, a
request to hold a public hearing. The state agency shall, to the
extent practicable, provide notice of the time, date, and place of
the hearing by mailing the notice to every person who has filed a
request for notice thereby with the state agency. The state agency
shall consider all relevant matter presented to it before adopting,
amending, or repealing any regulation.
   (b) In any hearing under this section, the state agency or its
duly authorized representative shall have authority to administer
oaths or affirmations. An agency may continue or postpone a hearing
from time to time to the time and at the place as it determines. If a
hearing is continued or postponed, the state agency shall provide
notice to the public as to when it will be resumed or rescheduled.
   (c) No state agency may adopt, amend, or repeal a regulation which
has been changed from that which was originally made available to
the public pursuant to Section 11346.5, unless the change is (1)
nonsubstantial or solely grammatical in nature, or (2) sufficiently
related to the original text that the public was adequately placed on
notice that the change could result from the originally proposed
regulatory action. If a sufficiently related change is made, the full
text of the resulting adoption, amendment, or repeal, with the
change clearly indicated, shall be made available to the public for
at least 15 days before the agency adopts, amends, or repeals the
resulting regulation. Any written comments received regarding the
change must be responded to in the final statement of reasons
required by Section 11346.9.
   (d) No state agency shall add any material to the record of the
rulemaking proceeding after the close of the public hearing or
comment period, unless the agency complies with Section 11347.1. This
subdivision does not apply to material prepared pursuant to Section
11346.9.
   (e) If a comment made at a public hearing raises a new issue
concerning a proposed regulation  , including, but not limited
to, the cumulative impact of the regulation,  and a member of
the public requests additional time to respond to the new issue
before the state agency takes final action, it is the intent of the
Legislature that rulemaking agencies consider granting the request
for additional time if, under the circumstances, granting the request
is practical and does not unduly delay action on the regulation.
  SEC. 7.  Section 11346.9 of the Government Code is amended to read:

   11346.9.  Every agency subject to this chapter shall do the
following:
   (a) Prepare and submit to the office with the adopted regulation a
final statement of reasons that shall include all of the following:
   (1) An update of the information contained in the initial
statement of reasons. If the update identifies any data or any
technical, theoretical or empirical study, report, or similar
document on which the agency is relying in proposing the adoption,
amendment, or repeal of a regulation that was not identified in the
initial statement of reasons, or which was otherwise not identified
or made available for public review prior to the close of the public
comment period, the agency shall comply with Section 11347.1.
   (2) A determination as to whether adoption, amendment, or repeal
of the regulation imposes a mandate on local agencies or school
districts. If the determination is that adoption, amendment, or
repeal of the regulation would impose a local mandate, the agency
shall state whether the mandate is reimbursable pursuant to Part 7
(commencing with Section 17500) of Division 4. If the agency finds
that the mandate is not reimbursable, it shall state the reasons for
that finding.
   (3) A summary of each objection or recommendation made regarding
the specific adoption, amendment, or repeal proposed, together with
an explanation of how the proposed action has been changed to
accommodate each objection or recommendation, or the reasons for
making no change. This requirement applies only to objections or
recommendations specifically directed at the agency's proposed action
or to the procedures followed by the agency in proposing or adopting
the action. The agency may aggregate and summarize repetitive or
irrelevant comments as a group, and may respond to repetitive
comments or summarily dismiss irrelevant comments as a group. For the
purposes of this paragraph, a comment is "irrelevant" if it is not
specifically directed at the agency's proposed action or to the
procedures followed by the agency in proposing or adopting the
action.
   (4) A determination with supporting information that no
alternative considered by the agency would be  equally or 
more effective in carrying out the purpose for which the regulation
is proposed or would be as effective and less burdensome to affected
private persons than the adopted regulation.
   (5) An explanation setting forth the reasons for rejecting any
proposed alternatives that would lessen the adverse economic impact
on small businesses. 
   (6) A determination whether opportunities for cooperation exist
with another state or federal agency that is implementing a similar
regulation in order to reduce the cumulative negative impact of the
regulation on small businesses. 
   (b) Prepare and submit to the office with the adopted regulation
an updated informative digest containing a clear and concise summary
of the immediately preceding laws and regulations, if any, relating
directly to the adopted, amended, or repealed regulation and the
effect of the adopted, amended, or repealed regulation. The
informative digest shall be drafted in a format similar to the
Legislative Counsel's Digest on legislative bills.
   (c) A state agency that adopts or amends a regulation mandated by
federal law or regulations, the provisions of which are identical to
a previously adopted or amended federal regulation, shall be deemed
to have complied with this section if a statement to the effect that
a federally mandated regulation or amendment to a regulation is being
proposed, together with a citation to where an explanation of the
provisions of the regulation can be found, is included in the notice
of proposed adoption or amendment prepared pursuant to Section
11346.5. However, the agency shall comply fully with this chapter
with respect to any provisions in the regulation which the agency
proposes to adopt or amend that are different from the corresponding
provisions of the federal regulation.
   (d) If an agency determines that a requirement of this section can
be satisfied by reference to an agency statement made pursuant to
Sections 11346.2 to 11346.5, inclusive, the agency may satisfy the
requirement by incorporating the relevant statement by reference.
  SEC. 8.  Section 11349.95 is added to the Government Code, to read:

   11349.95.  (a) Five years after the adoption of a regulation, the
adopting agency shall again perform the assessment described in
Section 11346.3 for the purpose of determining whether the initial
assessments and projected impacts on small businesses were accurate
and whether the regulation can be modified to further reduce the
negative impact of the regulation on businesses. The agency shall
post the results of the revised assessment on its Internet Web site.
   (b) If the agency determines that a regulation can be modified to
reduce the negative impact of the regulation on businesses, then the
agency shall consider undertaking the process to amend the regulation
in that manner.