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Calculator and American money A rulemaking agency must assess the impact of proposed regulatory actions on California businesses and individuals. This general requirement encompasses numerous specific legal and administrative requirements. As discussed in the following sections, those requirements include:

 

  • Disclosing all known cost impacts,
  • Preparing an impact assessment,
  • Putting the assessment results in the notice of proposed action (Notice),
  • Placing supporting evidence in the initial statement of reasons (ISOR),
  • Assessing any impacts on housing costs, and
  • Completing an Economic and Fiscal Impact Statement (STD. 399 Form).

It is important that affected and interested parties request and review all such information, since agencies may not know all the potential impacts of their proposals. Some agencies explicitly state that they welcome public comments on impact issues.

Disclosure of All Known Impacts

Perhaps the most important and comprehensive requirement on agencies became effective on January 1, 2001. It requires an agency to disclose all the cost impacts of which it is aware:

“(a) The notice of proposed adoption, amendment, or repeal of a regulation shall include the following:

(9) A description of all cost impacts, known to the agency at the time the notice of proposed action is submitted to the office [Office of Administrative Law], that a representative private person or business would necessarily incur in reasonable compliance with the proposed action. If no cost impacts are known to the agency, it shall state the following: 'The agency is not aware of any cost impacts that a representative private person or business would necessarily incur in reasonable compliance with the proposed action.'” [Government Code section (GC section) 11346.5(a)(9)]

The Impact Assessment

“(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.” [GC section 11346.3(a)]

The subsections of GC section 11346.3 describe the following types of impacts that regulatory agencies must assess during the rulemaking process:

“(a)(2) ... the impact on business, with consideration of industries affected ....
(b)(1)
(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.”

Impact Assessment in the Notice

Rulemaking agencies are required to include in the Notice, “A statement of the results of the assessment required by subdivision (b) of Section 11346.3.” [GC section 11346.5(a)(10)]

Also required is “A description of all cost impacts, known to the agency at the time the notice of proposed action is submitted to the office, that a representative private person or business would necessarily incur in reasonable compliance with the proposed action.” [GC section 11346.5(a)(9)]

If an agency determines that its “action will not have a significant, statewide adverse economic impact directly affecting business, including the ability of California businesses to compete with businesses in other states, it shall make a declaration to that effect in the notice of proposed action.” [GC section 11346.5(a)(8)]

Agencies that make this declaration, and include the above language in their Notice, are subject to additional requirements in the same code section: “In making this declaration, the agency shall provide in the record facts, evidence, documents, testimony, or other evidence upon which the agency relies to support its initial determination.”

[Note: It may not be clear from the rulemaking record what the agency considers “significant.” If so, the public may want to discuss this issue with the agency.]

If a rulemaking agency makes an initial determination that the action may have a significant, statewide impact directly affecting business, including the ability of California businesses to compete with business in other states, it must include the following information in the notice of proposed action:

“(A) Identification of the types of businesses that would be affected.
(B) A description of the projected reporting, recordkeeping, and other compliance requirements that would result from the proposed action.
(C) The following statement: 'The (name of agency) has made an initial determination that the (adoption/amendment/repeal) of this regulation may have a significant adverse economic impact on businesses, including the ability of California businesses to compete with businesses in other states. The (name of agency)(has/has not) considered proposed alternatives that would lessen any adverse economic impact on business and invites you to submit proposals. Submissions may include the following considerations:
(i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to businesses.
(ii) Consolidation or simplification of compliance and reporting requirements for businesses.
(iii) The use of performance standards rather than prescriptive standards.
(iv) Exemption or partial exemption from the regulatory requirements for businesses.' ” [GC section 11346.5(a)(7)]

Supporting Information in the ISOR

The ISOR must contain “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.” [GC section 11346.2(b)(4)]

Housing Cost Impacts

The notice of proposed action must include “A statement that the action would have a significant effect on housing costs, if a state agency, in adopting, amending, or repealing any administrative regulation, makes an initial determination that the action would have that effect.” [GC section 11346.5(a)(12)]

The same code section also imposes the following requirement on agencies: “In addition, the agency officer designated in paragraph (14), shall make available to the public, upon request, the agency's evaluation, if any, of the effect of the proposed regulatory action on housing costs.” The public can request the evaluation for review, or discuss with the agency how the determination of housing cost impacts was made.

The Economic and Fiscal Impact Statement (STD. 399 Form)

All state agencies are required by State Administrative Manual (SAM) section 6680 to complete the STD. 399 Form (rev. 2/98) for all proposed regulations submitted to the Office of Administrative Law for publication in the California Regulatory Notice Register. The form summarizes the economic and fiscal impacts of the proposal, and may contain information that is contained in other agency rulemaking documents.

A copy of the form can be obtained from the link below. Also listed is a link to the Economic Impact Statement Guidelines originally prepared for state agencies.

Economic Impact Statement Guidelines

STD. 399 Form