First Regular Session Seventieth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 15-0297.01 Debbie Haskins x2045 HOUSE BILL 15-1139 HOUSE SPONSORSHIP Carver, SENATE SPONSORSHIP (None), House Committees Senate Committees State, Veterans, & Military Affairs A BILL FOR AN ACT Concerning regulatory review of state agency rules, and, in connection therewith, enacting methods to reduce the regulatory burden on small businesses from administrative rules and requiring legislative oversight of existing rules of state agencies. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The "State Administrative Procedure Act" (APA) currently defines a small business as a business with fewer than 500 employees. The bill redefines "small business", for purposes of the APA, to mean a business entity, including its affiliates, that: Is independently owned and operated and employs fewer than 500 employees; or Has gross annual sales of less than $6 million. The existing provision in the APA on forming representative groups to give input on proposed rules is amended to require any agency proposing rules that are likely to have an impact on small businesses to invite and actively solicit representatives of small businesses to participate in the representative group and in the rule-making hearing for the rules. The executive director of each of the principal departments of the state shall designate a person who is a member of the existing staff to serve as an ombudsman for that particular principal department. The bill outlines the role of the person serving as an ombudsman. The bill requires a state agency (agency) to prepare an economic impact statement before adopting any rule that may adversely impact a small business. The economic impact statement must include: An identification and estimate of the number of small businesses subject to the proposed rule; The projected reporting, record-keeping, and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record; A statement of the probable effect on the impacted small businesses; and A description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed rule. Prior to adopting rules, an agency is required to prepare a regulatory flexibility analysis in which the agency considers using regulatory methods that will accomplish the objectives of applicable statutes while minimizing adverse impact on small businesses. The agency shall consider methods to reduce the impact on small businesses, such as: Establishing less stringent compliance or reporting requirements; Establishing less stringent schedules or deadlines for compliance or reporting; Consolidating or simplifying compliance or reporting requirements; Establishing different performance standards; and Exemptions for small businesses. Prior to adopting a rule that may have an adverse impact on small businesses, the agency is required to notify the office of policy, research, and regulatory reforms in the department of regulatory agencies of its intent to adopt the proposed rule. The office of policy, research, and regulatory reforms shall advise and assist agencies in complying with this statutory requirement. A small business that is adversely affected or aggrieved by any final agency action taken by an agency in adopting a rule that impacts a small business is entitled to judicial review of agency compliance with the regulatory flexibility analysis requirements. A small business is adversely affected or aggrieved if the agency fails to analyze the proposed rules using the regulatory flexibility analysis criteria. The bill amends the existing statute on the mandatory review conducted by the agencies of their existing rules to add that each agency must evaluate: Whether the agency's rule has an economic impact on small businesses, whether the rule minimizes economic impact on small businesses in a manner consistent with the stated objectives of applicable statutes, and whether less intrusive or less costly alternative methods could be used to achieve those objectives; and Whether regulatory flexibility methods could be used to reduce the impact of the rule on small businesses, including consideration of the criteria that the agency uses in preparing a regulatory flexibility analysis of proposed rules. The bill creates a schedule for the legislative review of all existing rules by the principal departments of the state to determine whether the rules conflict with statute or are no longer authorized by statute or whether the agency lacks statutory authority for those rules. The office of legislative legal services and the committee on legal services will conduct such review and will introduce separate legislation for each principal department that repeals any rules that are found to conflict with statute or that lack statutory authority. After the passage of a bill repealing the rules of an agency pursuant to this legislative review process, the office of legislative legal services will inform the secretary of state of any rules that were repealed as the result of the passage of a bill. The secretary of state is required to remove any expired rules from the code of Colorado regulations (CCR) and to include notations in the CCR regarding any rules removed from the CCR as a result of this review process. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 24-4-102, amend (18); and add (5.7) and (13.5) as follows: 24-4-102. Definitions. As used in this article, unless the context otherwise requires: (5.7) "Economic impact statement" means the written statement prepared by an agency pursuant to section 24-4-103 (2.6) that analyzes the impact of proposed rules on a small business. (13.5) "Regulatory flexibility analysis" means the written analysis prepared by an agency pursuant to section 24-4-103 (4.7) that considers methods of reducing the impact of a proposed rule on a small business. (18) "Small business" means a business with entity, including its affiliates, that: (a) Is independently owned and operated and employs fewer than five hundred employees; or (b) Has gross annual sales of less than six million dollars. SECTION 2. In Colorado Revised Statutes, 24-4-103, amend (2), (4) (a), (8) (c) (I), and (11) (d) (II); and add (2.4), (2.6) and (4.7) as follows: 24-4-103. Rule-making - procedure - definitions - repeal. (2) When rule-making is contemplated, public announcement thereof may be made at such time and in such manner as the agency determines. The agency shall establish a representative group of participants with an interest in the subject of the rule-making to submit views or otherwise participate informally in conferences on the proposals under consideration or to participate in the public rule-making proceedings on the proposed rules. In establishing the representative group, the agency shall make diligent attempts to solicit input from representatives of each of the various stakeholder interests that may be affected positively or negatively by the proposed rules. If the agency convenes a representative group prior to issuing a notice of proposed rule-making as provided in paragraph (a) of subsection (3) of this section, the agency shall add those persons who participated in the representative group to the list of persons who receive notification of proposed rule-making as provided in paragraph (b) of subsection (3) of this section. If the agency is proposing rules that are likely to have an impact on small businesses, the agency shall invite and actively solicit representatives of small businesses to participate in the representative group and to participate in the rule-making hearing for the rules. (2.4) The executive director of each of the principal departments of the state shall designate a person who is a member of the existing staff of that principal department to serve as an ombudsman for that department. The staff person's role as an ombudsman is to: (a) Work with existing staff to remind them of the importance of streamlining rules and to analyze the impact of rules on small businesses; (b) Provide direct outreach to and actively solicit input from small businesses to participate in stakeholder groups and give input to the agency on proposed rule-making from the perspective of small businesses; and (c) Assist the agency in communicating with stakeholders and small businesses about proposed rule-making. (2.6) Prior to the adoption of any rule that may have an adverse impact on small businesses, each agency shall prepare, and file with the proposed rule under consideration, an economic impact statement that includes the following: (a) An identification and estimate of the number of small businesses subject to the proposed rule; (b) The projected reporting, record-keeping, and other administrative costs required for compliance with the proposed rule, including the type of professional skills necessary for preparation of the report or record; (c) A statement of the probable effect on the impacted small businesses; and (d) A description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed rule. (4) (a) At the place and time stated in the notice, the agency shall hold a public hearing at which it shall afford interested persons an opportunity to submit written data, views, or arguments and to present the same orally unless the agency deems it unnecessary. The agency shall consider all such submissions. Any proposed rule or revised proposed rule by an agency which is to be considered at the public hearing, together with a proposed statement of basis, specific statutory authority, purpose, and the regulatory analysis required in subsection (4.5) of this section, the economic impact statement analyzing impact on small businesses, if one was prepared pursuant to subsection (2.6) of this section, and the regulatory flexibility analysis required in subsection (4.7) of this section, shall be made available to any person at least five days prior to said hearing. The rules promulgated by the agency shall be based on the record, which shall consist of proposed rules, evidence, exhibits, and other matters presented or considered, matters officially noticed, rulings on exceptions, any findings of fact and conclusions of law proposed by any party, and any written comments or briefs filed. (4.7) (a) Prior to the adoption of any rule, an agency shall prepare a regulatory flexibility analysis in which the agency shall consider using regulatory methods that will accomplish the objectives of applicable statutes while minimizing adverse impact on small businesses. The agency shall consider, without limitation, each of the following methods of reducing the impact of the proposed regulation on small businesses: (I) The establishment of less stringent compliance or reporting requirements for small businesses; (II) The establishment of less stringent schedules or deadlines for compliance or reporting requirements for small businesses; (III) The consolidation of or simplification of compliance or reporting requirements for small businesses; (IV) The establishment of performance standards for small businesses to replace design or operational standards required in the proposed rule; and (V) The exemption of small businesses from all or any part of the requirements contained in the proposed rule. (b) Prior to the adoption of any rule that may have an adverse impact on small businesses, each agency shall notify the office of policy, research, and regulatory reforms, or any successor office, in the department of regulatory agencies of its intent to adopt the proposed rule. The office of policy, research, and regulatory reforms shall advise and assist agencies in complying with the provisions of this subsection (4.7). (c) For purposes of judicial review under section 24-4-106, the agency's adoption of a permanent rule constitutes final agency action. A small business that is adversely affected or aggrieved by the action of an agency in adopting a permanent rule that is subject to this subsection (4.7) is entitled to judicial review of the agency's compliance with the requirements of this subsection (4.7). For purposes of this subsection (4.7), a small business is adversely affected or aggrieved by the action of the agency if the agency fails to address the required criteria in paragraph (a) of this subsection (4.7), including a statement of why the agency found that the agency did not need to take particular action under subparagraphs (I) to (V) of paragraph (a) of this subsection (4.7). (8) (c) (I) Notwithstanding any other provision of law to the contrary and the provisions of section sections 24-4-107 and 24-4-109, all rules adopted or amended on or after January 1, 1993, and before November 1, 1993, shall expire at 11:59 p.m. on May 15 of the year following their adoption unless the general assembly by bill acts to postpone the expiration of a specific rule, and commencing with rules adopted or amended on or after November 1, 1993, all rules adopted or amended during any one-year period that begins each November 1 and continues through the following October 31 shall expire at 11:59 p.m. on the May 15 that follows such one-year period unless the general assembly by bill acts to postpone the expiration of a specific rule; except that a rule adopted pursuant to section 25.5-4-402.3 (5) (b) (III), C.R.S., shall expire expires at 11:59 p.m. on the May 15 following the adoption of the rule unless the general assembly acts by bill to postpone the expiration of a specific rule. The general assembly, in its discretion, may postpone such expiration, in which case, the provisions of section 24-4-108 or 24-34-104 shall apply, and the rules shall expire or be are subject to review as provided in said sections. The postponement of the expiration of a rule shall not constitute legislative approval of the rule nor be admissible in any court as evidence of legislative intent. The postponement of the expiration date of a specific rule shall not prohibit any action by the general assembly pursuant to the provisions of paragraph (d) of this subsection (8) with respect to such rule. (11) (d) (II) Each rule adopted, together with the attorney general's opinion rendered in connection therewith, shall must be filed pursuant to subsection (12) of this section within twenty days after adoption with the secretary of state for publication in the Colorado register. Upon written request of an agency, the secretary of state shall correct typographical and other nonsubstantive errors appearing in the rules as filed by such agency that occur after final adoption of the rules by the agency during the preparation of such rules for publication in order to conform the published rules with the adopted rules. Notices of rule-making proceedings pursuant to subsection (3) of this section shall must also be filed with the secretary of state in sufficient time for publication pursuant to subsection (5) of this section in the register. Rules revised to conform with action taken by the general assembly shall must be filed with the secretary of state for publication in the register and in the code of Colorado regulations. The legal services committee of the general assembly shall notify the secretary of state whenever a rule published in the code is rescinded or a portion thereof is deleted by the general assembly, and whenever a rule or a portion thereof is allowed to expire in accordance with section 24-4-108 or with subparagraph (I) of paragraph (c) of subsection (8) of this section, and whenever a rule is repealed in accordance with section 24-4-109, and the secretary of state shall direct the removal from the code of material so deleted, rescinded, or allowed to expire, or repealed. SECTION 3. In Colorado Revised Statutes, amend 24-4-103.3 (1) as follows: 24-4-103.3. Mandatory review of rules by agencies - review of impact on small businesses - report on results of review in departmental regulatory agendas. (1) The department of regulatory agencies shall establish a schedule, in consultation with each principal department, for the review of all of the rules for each principal department. Each principal department shall conduct a review of all of its rules to assess the continuing need for and the appropriateness and cost-effectiveness of its rules to determine if they should be continued in their current form, modified, or repealed. The applicable rule-making agency or official in the principal department shall consider the following: (a) Whether the rule is necessary; (b) Whether the rule overlaps or duplicates other rules of the agency or with other federal, state, or local government rules; (c) Whether the rule is written in plain language and is easy to understand; (d) Whether the rule has achieved the desired intent and whether more or less regulation is necessary; (e) Whether the rule can be amended to give more flexibility, reduce regulatory burdens, or reduce unnecessary paperwork or steps while maintaining its benefits; (f) Whether the rule is implemented in an efficient and effective manner, including the requirements for the issuance of permits and licenses; (g) Whether a cost-benefit analysis was performed by the applicable rule-making agency or official in the principal department pursuant to section 24-4-103 (2.5); and (h) Whether the rule is adequate for the protection of the safety, health, and welfare of the state or its residents; (i) Whether the rule has an economic impact on small businesses, whether the rule minimizes economic impact on small businesses in a manner consistent with the stated objectives of applicable statutes, and whether less intrusive or less costly alternative methods could be used to achieve those objectives; and (j) Whether regulatory flexibility methods could be used to reduce the impact of the rule on small businesses, including consideration of the criteria that the agency uses in preparing a regulatory flexibility analysis of proposed rules, as outlined in section 24-4-103 (4.7). SECTION 4. In Colorado Revised Statutes, add 24-4-109 as follows: 24-4-109. Legislative review of existing rules in the code of Colorado regulations - schedule for review - repeal of rules. (1) The staff of the committee on legal services shall review the existing rules of the agencies to determine whether the rules are within the agency's rule-making authority and for later review by the committee on legal services for its opinion as to whether the rules conform with section 24-4-103 (8) (a). The staff and the committee on legal services shall review the rules of the agencies pursuant to the schedule set forth in subsections (3) to (6) of this section. The staff shall present its findings to the committee on legal services at a public meeting held after timely notice to the public and affected agencies. The committee on legal services shall determine whether any rules of the affected agencies should be repealed because the rules do not conform with section 24-4-103 (8) (a). If the committee on legal services votes to repeal any rules, the committee shall propose legislation to repeal the rules of each agency by separate bill at the next regular session of the general assembly. The committee on legal services is the committee of reference for any bill introduced pursuant to this subsection (1). A bill introduced pursuant to this section shall not count against a legislator's individual bill limits. (2) Only that portion of any rule specifically repealed by bill is no longer effective, and that portion of the rule that remains after deletion of a portion thereof retains its character as an administrative rule. The secretary of state shall remove those rules that are repealed after the enactment of the bill as provided in section 24-4-103 (11). Each agency shall revise its rules to conform with the action taken by the general assembly. A rule that has been repealed by action of the general assembly pursuant to this section must not be repromulgated by an agency unless the authority to promulgate such rule has been granted to such agency by a statutory amendment, by the state constitution, or by a judicial determination that statutory or constitutional authority exists. Any rule so repromulgated is void. Passage of a bill repealing a rule does not result in revival of a predecessor rule. (3) The rules of the following principal departments and agencies adopted prior to November 1, 2014, must be reviewed and addressed in a separate bill for each agency during the 2016 legislative session: (a) The department of agriculture; (b) The department of education; (c) The department of human services; (d) The department of personnel; (e) The department of state. (4) The rules of the following principal departments and agencies adopted prior to November 1, 2015, must be reviewed and addressed in a separate bill for each agency during the 2017 legislative session: (a) The department of corrections; (b) The department of health care policy and financing; (c) The department of labor and employment; (d) The department of law; (e) The department of natural resources; (f) The department of revenue. (5) The rules of the following principal departments and agencies adopted prior to November 1, 2016, must be reviewed and addressed in a separate bill for each agency during the 2018 legislative session: (a) The department of local affairs; (b) The department of public health and environment. (6) The rules of the following principal departments and agencies adopted prior to November 1, 2017, must be reviewed and addressed in a separate bill for each agency during the 2019 legislative session: (a) The department of higher education; (b) The department of military and veterans affairs; (c) The department of public safety; (d) The department of regulatory agencies; (e) The department of the treasury. (7) This section does not apply to rules of agency organization or general statements of policy that are not meant to be binding as rules. SECTION 5. Effective date. This act takes effect July 1, 2015. SECTION 6. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.