Business Retention and Attraction Strategies: Improving the Regulatory Rule Making Process
THE ISSUE: IMPROVING THE REGULATORY RULE MAKING PROCESS
If we are to attract new businesses to California; grow existing businesses, and create needed jobs and investment, regulatory reform is key. Over-regulation in our state is the nemesis that is driving new businesses to locate elsewhere; stifling job creation and negatively impacting existing small and medium-sized businesses that are struggling to survive, nonetheless grow. Many regulations have proven ineffective, overly burdensome, duplicative and inconsistent.
In 2011, SB 617, with the support of Senate President pro Tempore Steinberg and Assembly Speaker Pérez and the hard work of Senators Calderon and Pavley, was signed into law, changing the regulatory environment within state agencies. This bill requires state agencies to more rigorously assess the economic impacts of major regulations before they are adopted. In the past, departments that promulgate regulations were required to assess economic impacts. However, what constitutes adequate review was never determined. With a few exceptions, state agencies were not required to follow any particular protocol for making the economic assessments, although some departments have done so. There were no uniform standards of analysis. The new law requires that each state agency, proposing to adopt, amend or repeal a major regulation, proposed on or after November 1, 2013, must prepare a standardized regulatory fiscal impact analysis. “Major regulation” means an action that will have an economic impact on California business enterprises and individuals of over $50 million. The Department of Finance will have the responsibility of developing the standardized fiscal analysis and accompanying methodology and the rules for conducting the analysis which must be accomplished prior to the 2013 date. The Act also sets forth stipulations for economic assessment of projects that are not “major”.
The Act is considered by many, including the acclaimed Little Hoover Commission, as being an important first step in regulatory reform, but much is left to be done. A report titled “Better Regulation: Improving California’s Rule Making Process” issued by the Commission in October 2011 lays out a number of recommendations including: a) a greater use of cost-effective assessments of alternatives that meet the goals of the legislation the regulation is trying to implement, resulting in the selection of the alternative that best provides the benefit intended, but is least burdensome to regulated stakeholders and the people of California; b) requiring peer-review of economic impact assessments by a panel of anonymous outside experts; and c) revising regulations “in the event of unintended consequences that create unexpected harm, the emergence of new technology that makes an existing regulation obsolete or a fundamental change in the economy that, in a new context, creates an unforeseen regulatory burden” – among several other recommendations to improve the rulemaking process. Many of these ideas could be distilled for applicability to local agencies.
The Southern California Leadership Council supports improvements to California’s regulatory process that protect Californians and, at the same time, advances the economic well being of its people.
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