House Bill 162 - Amend Administrative Procedure Law

Governance

This bill prohibits agencies from implementing rules that cost $100 million or more over a 5-year period, and limits the ability for agencies to implement rules that cost more than $10 million

Read the full bill text on the NCGA website

Quick overview:

State and federal agencies are designated with creating rules that carry out the mission of the agency. These rules can come with a cost. For example, the National Highway Traffic Safety Administration requires that all car manufacturers include specific safety features, such as seat belts. These rules come at a cost to the car manufacturer, but also result in the added safety feature of reducing injury and death in car accidents by about 50%.

This bill prohibits state agencies from implementing rules that would cost more than $100 million over a 5-year period.

  • In North Carolina, there are six rules that cost over $100 million for a 5-year period. These rules include the 911 emergency operating system, immunizations, education programs for elementary schools, the Falls Lake and Jordan Lake rules, and electronic filing rules.
  • Eliminating the ability for agencies to implement these rules could result in health and safety issues, and could conflict with federal mandates

This bill would require approval of a supermajority of the rule making commission in order to approve rules that fall into the range of $10 million - $99 million.

  • Some rules have a high cost, but also create benefits in excess of every dollar spent on the program. These rules include the 911 operating system, rules for immunizations, and adult care homes licensing and inspections.
  • 23 rules fall into this category. Some of these rules include address wastewater, child day care centers, sheriff's education and training, training for the NC Department of Justice, emissions rules for power plants, and rules governing X-rays.

In a scenario where agencies need to create and implement rules to deal with a public safety, health or economic issue, rules could be delayed or not adopted altogether, exacerbating current issues or creating additional issues.

Vote No: H162, Amend Administrative Procedure Laws

This bill would sharply undercut the ability of agencies and commissions to adopt common-sense, much needed rules. 

It would entirely prohibit an agency from adopting a rule or rule set that would have an aggregate five-year financial impact of $100 million or more, and would require approval by a supermajority of the rulemaking commission for rules with an aggregate financial impact over five years of $10 million-$99 million.

  • Does not consider the cost-benefit analysis of rules: The provision doesn’t distinguish between a rule that would impose a small cost on a large number of people versus a rule that imposes a substantial economic burden on a small number of regulated people or businesses. The provision does not take into consideration cost-benefit analysis (the rule would be barred even if the benefits would be substantially greater), health effects, federal requirements or any other factor.  Aggregate financial impact is interpreted as cost plus benefit to all parties affected by Office of State Budget and Management staff. Therefore, if a rule package creates $90,000,000 in estimated benefits and $10,000,000 in estimated costs, it would be prohibited under Section 4 of this bill.
  • Several critical rules would be eliminated: This provision would require the elimination of any rule going through the periodic rules review process that exceeds the $100 million aggregate five-year impact threshold. According to an Office of State Budget and Management presentation to the Joint Legislative Administrative Procedures Oversight committee in April 2016, this would include rules relating to Immunizations and vaccinations, Read to Achieve educational program, Electronic Billing, and 911 Board Rules among many others. It would also include the Falls and Jordan Lake Rules.
  • Low-cost rules (per person) would still be delayed or forbidden: Since the $100 million/five year cap represents aggregated costs, a rule or rule set that has widespread impact may bump up against the cap even though the rule does not impose an unreasonable cost on any one entity. The issue will arise even more frequently with the $10 million/5 year aggregated cost threshold that triggers supermajority approval of a rule.
  • H162 bill does not include any exceptions (i.e., for rules required to meet a federal mandate, comply with a court order, or to address a significant threat to public health and safety). This increases the odds of a train wreck scenario where federal law requires adoption of a major state rule, but the commission can’t muster a supermajority. That is a recipe for getting state delegated programs crosswise with EPA, which will be terrible for NC businesses who need new, modified, or renewed permits.
  • There are already laws meant to slow down or stop rules: The Administrative Procedures Act now only delays a rule’s effective date for legislative review if the Rules Review Commission receives 10 letters of objection. H162 would automatically delay a rule for legislative review if the fiscal note indicated a 5-year aggregated cost of $10 million or more even if no one objected to the rule. The automatic legislative review for major rules substantially reduces the incentive of stakeholders to negotiate in the rulemaking process. As it stands, every stakeholder already has to decide whether they can seal a better deal in the rulemaking process or the legislature – but it they really go for the best deal, part of that includes an agreement not to seek legislative review, and to help deflect review if it happens. This change makes that review virtually inevitable, which will end up driving most of the negotiation into the legislative arena.

Section 6 - An existing law, G.S. 150B19.3, already limits adoption of state environmental rules that are more stringent than a corresponding federal rule except in specific circumstances. H162 would apply the new cost cap and requirement for supermajority approval from Section 4 to environmental rules that fall into the first category listed above (serious and unforeseen threat).

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