Regulatory Tax Limits ACA 21 (Brulte)

SUMMARY:

ACA 21 would add a constitutional amendment that requires a two-thirds vote of the Legislature on any bill that imposes a significant annual direct cost to California businesses and individuals. The vote requirement for such bills could be a simple majority if the bill contains an offsetting repeal of existing mandates costing the same amount.

BACKGROUND:

Currently, the cost of regulation is generally measured only by the fiscal costs to be expended by the agencies in the implementation of the program. The cost burden shifted off-budget to regulated facilities is rarely considered in any objective manner. In recent years, Governor Pete Wilson has signed several laws expanding the type of economic impact information that must be considered:

• State agencies must now consider the economic impact on all business, not just small business.
• Cal/EPA agencies can adopt regulations that differ from comparable federal requirements only when authorized by state law or when the added cost is justified by the benefits.
• Cal/EPA agencies must analyze the impact of new regulations on the state's business climate and competitiveness.
• Cal/EPA agencies must consider the marginal costs - - and not just the average costs - - of new regulations, and to analyze less costly alternatives.
• Proposed Cal/EPA major regulations must be submitted to the Trade and Commerce Agency for comment on the cost impacts.

These new requirements have greatly improved the regulatory process through a fuller consideration of the true impacts of new government regulation on California. However, these new requirements do not address several factors. Only the cost of new regulations are considered in light of existing regulations. Most new regulations are also mandated by legislation. California needs to more carefully consider the economic impacts of state legislation, and its impact of businesses and local governments. Evaluating the costs after the mandate leaves no discretion in whether to adopt ther regulations after these costs are known. Finally, these requirements apply mostly to environmental regulations, and not the extensive body of non-environmental regulations.

PROBLEM:

Currently in California - - as for the U.S. as a whole - - the cost of regulation is generally measured only by the fiscal costs to be expended by the agencies in the implementation of the program. The cost burden shifted off-budget to regulated facilities is rarely considered in any objective manner. The legislative process evaluates new regulatory requirements based primarily on the fiscal costs to state and local agencies. Economic impacts for compliance generally are raised as bills move through, but not in an objective or cumulative manner.

Recent legislation signed and supported by Governor Wilson requires implementing state agencies to analyze the compliance costs of new regulations. These requirements are prospective only and no formal balancing in the regulatory decision process has been established. Analyzing the compliance cost at the regulatory stage is also greatly after the fact, as the basic compliance burden is set at the legislative stage that mandates the regulations. Although the focus in these bills has tended to concentrate on environmental regulations, a true regulatory budget concept considers the total compliance burden on business, local governments, and consumers in California.

ANALYSIS:

ACA 21 would:

1. Amend the California Constitution to require consideration of off-budget compliance costs (local government and private sector) associated with new legislation;
2. Amend the California Constitution to specify that any new legislation imposing new compliance costs, much the same as measures to increase taxes, requiring a 2/3 vote for passage; and
3. Authorize if the new legislation contains an offsetting repeal of existing mandates costing the same amount, a simple majority vote for passage as presently needed.

CONTACT PERSON:

Carolyn M. Badenhausen, Legislative Director, Cal/EPA (916) 322-7315