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House | February 6, 2013 | Committee Room | Regulation Reform

Full MP3 Audio File

I'd like to welcome all of you to the Committee on Regulatory Reform. Today our House Sergeant of Arms are Fred Hines, Reggie Seals, John Brandon. Where are you, John? Behind me? There you go. And Michael Clampett. Our Pages today, if you would stand when I call your name. Jeff Woodard from Wake County. Representative Murry sponsored him. Sarah Jackson from Vance, Representative Baskerville. Sarah Horn from Haywood, Representative Ramsey. Garrett Weiz from Cleveland, sponsored by Representative Moore. Isabelle Hines from Wake, sponsored by Representative Fulghum. And Destiny Reid from Alamance, sponsored by Representative Riddell. I'd like to welcome you to the Body this week, and I certainly hope that you'll learn something at today's meeting. Members, the Committee on Regulatory Reform could perhaps be one of the most important committees that you'll serve on in this biennium session. All of us have suffered under the rules that have been promulgated as well as our state agencies. And we've also benefited from the rules that have been promulgated here as well as our state agencies. The goal of this committee is really two-fold. We will address regulatory reform in a one-or two-up manner. What I mean by that is, there are a number of members that have come to me already with bills seeking to address one or two trees in the landscape or the forest of the regulatory environment. And we will address those trees. We will decide whether to feed them, whether to prune them, or whether to cut them down. But we also want to take a look at the forest. We want to look at the Administrative Procedures Act, and we want to make sure that rule making in the state of North Caroline is done in the most transparent, rigorous, fully-vetting way that our citizens expect. Because any rule or regulation puts at threat our property and our liberty. And it's something that we cannot take lightly. I expect us to work hard. We'll work many hours. But I expect the outcome to be something that the business community will appreciate, and more importantly, our citizens of our state. I look forward to working with you. Today let me introduce our staff. We have Karen Cochran-Brown, who is pretty much seen as the resident expert when it comes to regulatory conform. One thing that you'll learn today is that there are a lot of semantics. There are rules and there are regulations. Because of the way North Carolina is structured, we refer to regulations as rules. But they are not necessarily interchangeable. When we say rules we could be meaning regulations, and when we're saying regulations we could be meaning rules. I beg your indulgence on the semantic part, because it's something that you will learn to differentiate as you do your work with this Committee. We also have Jeff Hudson and Harrison Moore. Our Committee Clerk will be Lisa Kennedy. We have a couple of interns that will be helping us as well. Kyle Turbo is an intern from NC State. Again, I'd like to welcome you to the Committee and I look forward to working with you. Today's full Committee meeting is really to educate the new members as well as the existing members about regulatory reform and what that actually means. I'd like to turn the meeting over to Ms. Cochran-Brown. We'll follow your lead. You have the floor. [SPEAKER CHANGES] Thank you, Mr. Chair. Good morning, members of the Committee. My name is Karen Cochran-Brown. I'm a research attorney in the Research Division of the General Assembly. I've worked in the area of Administrative Law for about 20 years now. And I've staffed the Joint Legislative Administrative Procedure Oversight Committee, which is the legislative body that reviews administrative law issues, and has done so since 1996. As I go through the presentation this morning, I'm going to give a sort of 30,000 mile overview of the process of rule making in North Carolina. In front of you, you should all have a

one of these red documents. This is a much more detailed version of the rule making process that was originally prepared for the Joint Legislative Administrative Oversight Procedure Committee. And I'll ask that you all can refer to that if you have further questions about the process after this meeting. Certainly please feel free to contact me at any time if you have any questions about any of the things that we're covering today or any issues with administrative law. I'll do my best to provide the answers to whatever questions you may have. Some of you may have heard this presentation before. There are a few members here that either were on the Joint Regulatory Reform Committee in the last bianium or on APO this year the Administrative Procedure Oversight Committee this year. Our Co-Chair is a member of this committee as well, Representative Murry. So you may have heard this before and I apologize for being repetitive for some folks but hopefully this will be helpful to most of you. Let us start this morning with an outline of what we're gonna talk about. So first we're gonna, I'm gonna try and go a little into the quagmire that the Chair alluded to about the definitions of what we're talking about. And I'm not sure that necessarily we'll come out of this a lot clearer than we start with but hopefully we can shed a little light on it and explain that a little. Then we're gonna talk about, a little bit about the different kinds of regulatory authority which is part of why the definition is so confusing. And much of, most of this presentation will deal with state administrative agency regulations so we'll talk about the source of their authority for that regulation. We'll talk a little about the purpose of the APA the Administrative Procedure Act that governs the process. And we'll go step by step through the process for adopting permanent rules so you can sort of understand how this all works. Finally we'll talk about some potential future actions that this committee or the General Assembly might look at in further efforts towards regulatory reform. And then we'll conclude the presentation. So I would hope that with the Chair's indulgence if you have any questions please feel free to interrupt me. So we'll start. To begin with what is regulation? My Co-Counsel Jeff Hudson and I have sort of had a debate over the last week or so about whether all rules are regulations or all regulations are rules or basically how that would work. So basically we went to the dictionary to try and find an all purpose general definition of the term. The verb to regulate basically means to govern direct according to rule to bring under the control of law or constituted authority. So and regulation the definition of regulation is a little bit closer to what we sort of think of an authoritative rule dealing with details or procedure having the force of law and issued by an executive authority of government. That may not help a whole lot but part of the difficulty is when most people think of regulation they essentially think of things that government does that they generally often don't like. That its either limiting rights or creating duties or imposing burdens or doing certain things. That regulation can come from any number of sources. It isn't always administrative agencies. Many of the laws that you all enact are regulation. They fit within that broad definition of what is to regulate. State rules administrative agency rules are a different thing and that's more likely, but that's a different kind of regulation. So both the state and federal government can do both statutes and rules or regulations. Both the state and they do both statutes and rules. Local governments can enact ordinances. That's a different kind of regulation. They also regulate. It's outside of the preview of what generally we talk about here. But they can do that. Additionally judicial made law can impose regulations by court order or decisions of courts essentially they can set parameters or requirements in the law. And that's a different form of regulation. This presentation is gonna deal primarily with the regulations created by state agencies. And I will say to clarity just a little bit

The term in North Carolina, the defined term, is rule. And we'll get a little bit into that in a little while, the specific definition of the term rule, but generally when we're talking about things that administrative agencies adopt in North Carolina they are called rules. In the federal system there is a code of federal regulations. So the defined term in the federal system is regulation. They're the same sorts of things, they are things that are adopted by administrative agencies to implement laws but they're called by those different names. So essentially the terms are really interchangeable. For purposes of North Carolina, more often than not, they'll be called rules because that's our defined term. I hope that helps just a little bit in that bit of a quagmire. So let's talk a little bit about the sources of the Executive Branch regulatory authority. The North Carolina Constitution vest all of the legislative power, that is the power to make law, in the General Assembly. The General Assembly is authorized to prescribe the functions, powers, and duties of all administrative agencies. The Constitution doesn't really give the Executive Branch any particular power in this regard. The Governor is charged with ensuring that the laws are faithfully executed and to that extent there's some debate over whether that implies some inherent authority to interpret the law but, basically, the courts in North Carolina have found generally that the General Assembly has to specifically delegate the power to make rules to an administrative agency and it has to define that power specifically enough so that the agency knows what it's supposed to do and how it's supposed to implement the law. So bottom line on that is that the power of the administrative agency to create rules, or regulation in this case, is entirely dependent on the General Assembly. The General Assembly never has to delegate that power to an agency in any instance. If you all wanted, any time you pass a law you could specifically go into, you could call in the experts you needed, you could define all of the specific details of how that was to be implemented and basically remove the need for agencies to have to ever adopt rules by being specific in the legislation. As you know, lawmaking can be a very difficult process and it can often be very difficult for you all to amass all of the technical expertise necessary to make all those detailed interpretations and that's why the courts have interpreted the constitution that the General Assembly has the power, essentially, to delegate a portion of its lawmaking power, it's called quasi-legislative power, to executive branch agencies. That's the source of their power. One of the concerns about this is that once that power is given, once you make that delegation to an executive branch agency, because of their constitutional charge to make sure that the laws are faithfully executed, it becomes to some extend within their purview and separation of powers may be implicated if the General Assembly then attempts to insert itself too far into the exact rule-making process of the agency. Once you've given them the power to do it and passed the law and given them guidance on how you expect them to implement the law it's in their power to do so. And if you don't like how they've done it after the fact you can come back and change certain things. You can change their authority, you can take away the power from them and give it to someone else, you can more clearly define, by statute, what the intent of the legislature was in creating that program to begin with. But what's much more questionable is whether the General Assembly can actually go into the administrative code, which is the body of law that holds all of the rules, and change the words in a rule by itself. You can direct the agency to do it but it's problematic, I think, under separation of powers for the legislature actually to go in the code and change rules itself. So the General Assembly retains all the power in this whole process, really, it's just that you have to exercise that, sometimes, a little more carefully in some instances. I'd also like to add that not all regulation is a bad thing. It's problematic in many instances, there certainly are cases where it is a problem, but many regulations are

Necessary. There are regulations that define procedure such as the rule that provides for the method of the procedure to be used in changing your best beneficiary in the retirement system. It would be useful to know how to do that. The retirement system can't make it up as they go along. They've adopted the rule, essentially, that says what the procedure is that you have to follow to accomplish that goal and that's a necessary rule. Similarly, some rules authorize the provision of benefits such as division of health services rule that authorizes local government, local health departments, to provide children with vaccinations within their jurisdiction. Similarly, there are rules that limit the regulator. The APA includes a requirement that all agencies adopt a rule for how people can petition for rule making. A citizen essentially believes that a rule should be adopted in a particular way but don't like the rule that the agency adopted and thinks it should be done differently. There is a procedure for a citizen to petition that agency to adopt a particular rule. The procedure isn't spelled out in the APA but the APA directs each agency to adopt a rule saying what that procedure would be. So that's a limitation on the regulator, on the agency in that case. In the best of circumstances regulations can clarify ambiguity, promote fairness and enhance efficiency and that's the goal, basically, to create a process that moves in that direction most of the time. So now let's move to the administrative procedure act and this is the process by which rules are created in North Carolina. The APA was enacted in North Carolina in the first one in the late 70's and it was advised in Chapter 150B in the general statutes in the 80's. There have been amendments to the APA almost every year that I've worked in the General Assembly. This is always a work in progress and it's always moving towards the goal of attempting to balance the needs of agencies for some flexibility in interpreting the laws that they're charged with administering and with the needs of the public to know and have input in that process. Though the APA's stated purpose says in section 1 of the APA that it was enacted to establish a uniform system of administrative rule making and a judicatory procedure for state agencies. We're not going to talk about the judicatory procedure today but basically the idea was to create a single system by which all agencies would operate. One of the things that happened very soon there after however was that the legislature almost immediately began creating exemptions and when you look in the red pamphlet there it sort of lists all of the exemptions that over the years they've grown considerably. One of the things that happens when the rule making process, when agencies feel that it's ?? is that they come to the General Assembly and seek an exemption from all or some part of the APA in order for them to accomplish the task that the General Assembly has set to them. So that's one of the things that you all might want to look at is the exemptions that have been enacted in the past whether they're still necessary or valid. Another primary although unstated purpose of the APA is to ensure due process to citizens and this really is sort of the framework the underpinning of what it really - why this process exists. When you all enact laws, the Constitution says that you have to read them 3 times, that they have to be publicly presented. Basically it's done in the daylight so that the public knows when you all are passing laws, what the law is. They have an opportunity to contact you and have input on that. Similarly, when you delegate that law-making power to an administrative agency, there needs to be a process where by the public can have notice of what they're doing and have an opportunity to be heard. The APA creates that general process for rule making and for any agency that is subject to the APA, and that really is most of them, that's the process that they have to follow. It's important to know that the APA does not apply to the legislature, it does not apply to the judiciary or to local government. The APA is strictly a method of governing the rule making procedure for state executive branch agencies. One of the most important

Definition. The AK contains a number of definitions, but one of the most definitions is the term rule, and you’ll see up there part of the definition from the APA overrule and this is important because this is how you know whether or not the agency has to go through this process or not. If what they are doing, if whatever action or pronouncement the agency makes fits within that definition. It needs to be adopted as a rule. Now what’s not on the slide, but is within your red pamphlet is, there’s a list in the APA of things that are not a rule, and many of those are essentially things that don’t affect people outside the agency. Well they might affect them indirectly, but don’t affect people directly outside the agency. Statements of internal management are not required to be adopted as rules. Budgetary documents are not necessarily required to be adopted as rule there’s a whole list of things, specific scientific design things that are not required to be adopted as rules But basically any statement that they make, that’s going to affect people outside the agency implementing or interpreting a law has to be adopted as a rule. So let’s talk about how we adopt a rule in North Carolina and what I’m going to go through now is basically the process for permanent rule making. I’ll start out by saying that the APA is a very flexible law and there are two other kinds of rule making temporary and emergency. I won’t go through those, they are in that pamphlet. But basically those are more expedited ways that an agency can get a rule in to affect and in under certain circumstances the general assembly has found it’s appropriate for agencies to have that flexibility but for the most part, if a rule is going to stay in effect indefinitely, it has to be adopted as a permanent rule, and this is the process for that. So the first step in the process is that the agency determines that a rule is needed. This step actually is something that was added in the last biennium in the regulatory reform act, much of it comes from what was executive order 70 at that point in time, but it basically creates the standard that the agency should hold itself to when it’s actually developing and drafting the rule, before they actually formally begin the rule making process. There is in the APA a list of regulatory principles that the agency should follow in terms of how they approach it. That they should attempt to seek the least burdensome way for doing them. That they should comply with to make sure the rule complies with the latest scientific and technological standards available. That they should not adopt rules that basically are unnecessary. If cumulatively all the rules that they already have, say add up to whatever they think they need to adopt as new rule then they don’t need to adopt that rule. Those are principles that agencies are advised to follow now. They are also required to post this information on the website as they go along, any changes in the rule making process they have to follow. Second step in the process, is that the agency has to prepare federal certification. Whenever a proposed rule is necessary to implement or comply with federal law. This is something that’s used later on in the process to make sure that they’re not adopting rule unnecessarily. This is being brought on by federal law as opposed to something specifically in state law they have to include a certification. That also has to be posted on the website. The third step is probably one of the most important steps in the process, and that is the preparation of fiscal notes. Under North Carolina law, there are four kinds of fiscal analysis that agencies might be required to go through. They have to determine whether or not state funds are implicated in the rule. If it’s an environmental project that would affect a transportation issue, the board of transportation basically if they find that the problematic, can send a letter to the rules review commission, and basically that rule can’t go into effect until the rule comes back to the legislature, and I’ll discuss that a little more later on. Agencies have also to determine when or whether the rule will have a local government fiscal impact or not.

And finally, the agencies have to determine whether or not the rule will have a substantial economic impact. Now, that’s a defined term in the APA; it basically means that it will have an impact on all persons affected, an aggregate impact of all persons affected of $500,000 or more in a 12 month period. If that is so they basically have to include some information about how that was determined and who that would affect but there is a specific format for substantial economic impact fiscal notes and they can be done either by the agency or the Office of State Budget and Management and they’re reviewed by the Office of State Budget and Management has to sign off on them. The accuracy of this or the existence of this doesn’t affect the agency’s ability to adopt the rule or implement it; it basically is just something that they have to go through as an information, and it should guide their; it’s basically intended to guide their rulemaking process. If there’s a way to make the, yes, sir? [SPEAKER CHANGES] Yes, thank you. If an agency does the economic impact what’s the level of qualifications that that person has to have to do that? [SPEAKER CHANGES] The statute doesn’t indicate it as I said they have to be signed off by the Office of State Budget and Management and the people that do it there are economists. [SPEAKER CHANGES] But the local agency doesn’t have to use an economist? [SPEAKER CHANGES] They probably should or OSBM may or may not. Often if the agency doesn’t feel that it has the expertise it will defer to the Office of State Budget and Management and allow them to do it, which is an alternative under the APA. [SPEAKER CHANGES] And how many economists do we have? [SPEAKER CHANGES] I can’t answer that. OK. The next step, the publication of the notice of text, this is the beginning of the formal rule making process. This is the point at which it moves outside of the agency and goes to the Office of Administrative Hearings which basically is charged with codification and review of rules. So, at this point the agency submits a notice of text which includes the language of the proposed rule. It includes the date on which they will hold a public hearing if they’re having one. It includes the name of the person that the public can contact if they have questions about the rule. It includes a statement about how someone who objects to the rule can seek legislative review of the rule. There are a number of things in the statute that are required to be within in the notice of text and this is the point when that’s done. They send the notice of text to the Office of Administrative Hearings and the codifier of rules publishes that in the North Carolina register. Next step is the public hearing and comment period. From the time of the publication of the notice of text, the agency cannot move forward for at least 60 days; they have to accept public comment on both the proposed rule and the fiscal note for the rule because it’s been published with the notice of text for at least 60 days. Although, the statute doesn’t specifically require that all agencies have to have a public hearing, it does say that if someone requests a public hearing then they have to have it. So, agencies routinely just schedule a public hearing so that it won’t be delayed in the process by not having done so. So finally after the public comment period has elapsed the agency can formally adopt the rule. Up until this point it’s been a proposed rule; it’s been potentially subject to change. Hopefully, the agency has taken to heart any public comment that it’s received, any concerns by people that would be regulated by the rule, and if necessary make changes to the rule to comply with that. The agency can’t adopt the rule until at least the public comment period has elapsed and they also can’t adopt it if more than 12 months elapsed since the end of the public comment period. So, if they just leave the rule laying out there for a year past the comment period they have to start all over again, they can’t just pick that rule back up after that. They also can’t adopt a rule that differs substantially from what was in the proposed text to the published rule and substantially differing actually is defined in the APA and it basically means that if it’s going to affect people that didn’t think they were going to be affected under the proposed

Or if it's going to effect people in a different way than they expected. If the rule is changed enough so that it's going to have a different impact than the people anticipated from the proposed language then they have to go back and republish them. ?? It essentially has to start the process over again, give those people an opportunity to respond to it. So the next stage. Now it's out of the agency's hand, essentially, once the agency adopts it they've done what they can do to the rules. It the goes to a body called the rules review commission. The rules review commission is housed in the office of administrative hearings. It is a 10 member body that's appointed by, 5 members by the speaker and 5 members by the president pro tempore. They are public members who serve on this. The rules review commission meets monthly and they review any rules that have been submitted to them by the 20th of the month preceding their meeting and they review the rules for very specific things. The statute provides a set of 4 standards that the rules review commission applies. First of all they have to determine whether or not the agency had statutory authority to adopt the rule. This is the most important probably function that the rules commission provides. This is sort of the quality assurance check and it's the check on agencies exceeding their authority. Basically the agency has to demonstrate to the rules review commission that the General Assembly gave them the power to do this rule, and if they don't do that then the rules review commission can and will object the rule. They also review the rules for clearness and unambiguousness, basically they want people to understand what it is that the rule says. They determine whether the rule was reasonably necessary, whether or not the cumulative effect of all the rules that they have out there would have said the same thing or whether the statute says the same thing. If it's unnecessary they can object to the rule on that basis and they also determine whether or not the rule's been adopted in accordance with the process in the APA. That they've gone through all the steps that the law requires them to have gone through. If the rules review commission approves the rule then we go on to the effective date. Rules generally become effective on the first day of the month following the month that the rules review commission approves the rule. That's the general rule so if the agencies adopted, it's gotten approved by the rules review commission it can go into effect the first of that next month unless, and this is the big unless, if the rules review commission receives 10 letter from anyone in the world objecting to that rule and seeking legislative review then the rule does not go into effect. The rule then essentially goes into a different basket and that basket is all the rules that are held until the next legislative session and the process here is intended to catch controversial rules. This is the method by which if there really is a rule that the agency has adopted even though they have the authority to adopt it if there is some feeling that this was not what the legislature intended or it was going to create consequences that might not have been foreseen by the legislature then the appropriate place to deal with that problem is the legislature, so if there are 10 letters these rules wait until the legislature comes back into session. When the legislature comes back into session any member, any of you, any member of the General Assembly can introduce a bill to disapprove that bill and if a bill is introduced to disapprove that rule, that rule can't go into effect until some action is taken on that bill. Now if nobody introduces a bill to disapprove the rule, if no legislature introduces a bill, then that rule can go into effect on the 31st legislative day, so we routinely count, the agencies count. If there are 10 letters, they count and wait until the 31st legislative day. If there's no bill, the rule goes into effect. [SPEAKER CHANGES] Representative ??. [SPEAKER CHANGES] Mr. Chair. [SPEAKER CHANGES] Representative ??. [SPEAKER CHANGES] So just a question, if the legislature is not in session at the wait and what happens if the bill is just filed and is not heard. Well, just filing continues the delay process, so if it's filed and nothing happens and the legislature adjourns the rule goes into effect the day after adjournment, but it basically has to stay there once a bill is filed. OK, so that's the legislative review process. That essentially really is the permanent rule making process.

Once it's gone through all of these hoops it'll either go into effect on the day after it's approved by the rules review commission or if it gets 10 letters it gets held up until the next session. It can then either go into effect on the 31st legislative day if it doesn't get a bill. If a bill is introduced it goes into effect either when some action is taken on the bill or the session adjourns without any action being taken on the bill. As I said there are 2 other kinds of rule making, temporary rule making and emergency rule making. I'm not going to go through those, they are abbreviated versions of this process and I will say both temporary and emergency rules are very limited. They can only stay in effect for a certain period of time without the agency going forward with permanent rule making. They can stay in effect for a little longer if the agency has proceeded to a certain point with permanent rule making, but essentially they are not intended as an alternative to permanent rule making. Permanent rule making is the basic way that you adopt rules in North Carolina. There are some other requirements that agencies have relating to rules that are in the APA that are a little unique that I thought I'd talk about. One of the other things that was done in the last biannuum was to create the rule modification improvement program which is a process for the annual review of existing rules. Under this process agencies are directed each year to review their existing rules and to determine whether they continue to be necessary or whether they comply with the rule making principles that were adopted also and to repeal any rules that fail that test, so agencies are supposed to do a sort of self monitoring assisted by the office of state budget and management. In addition the office of state budget and management has a public website that collects comments from the public on rules, on regulation essentially. They receive a number of comments from the public about regulatory concerns. They have a process whereby they send those comments to the affected agency and ask the agency basically to tell them what's been done about it. OSBM makes an analysis of that and complies all that information into a report, so annually for the last 2 years, OSBM has done a report on what these agencies have done in response to their, to the concerns that have been raised by the public and their review of their existing rules. The other thing that was done in the last biannuum was to include a limitation on certain environmental rules and this basically was a provision that said certain agencies are prohibited from adopting environmental rules that are more restrictive than an analogous federal rule unless the rule is necessary to respond to an emergency, a specific change in the law or budget policy or a court order, and the specific agencies that are subject to this limitation are set forth in your brochure. It's not all agencies, it's a specified set of agencies that often adopt rules related to environmental issues. Some of the things that this committee might choose to look at in the future with regard to possible further improvements in the regulatory process, one of them is a bill that was recommended by the joint legislative administrative procedure oversight committee from this last biannuum. The received, ATO received a recommendation from the rules review commission that basically would institute a sort of sunset process that would provide for a review of existing rules spread out over a period of time and basically make those agencies go through the rule making process again and if they don't go through the process again those rules would expire automatically. This is something that you all maybe considered. The bill was filed and sponsored by Representative Murry who is co-chair of APO. Another idea that's been raised a couple of times that might improve the process is to simplify the process for the repeal of rules. Currently a repeal is treated the same as an adoption or an amendment of a rule. It has to go through the same process as if it were a new rule and some folks have suggested that it might be a good idea to make it easier to repeal rules, so that's something that this committee might want to look at. Another option is possibly strengthening the existing rules review process, that process

LSBM does now annually, of seeking updates from the agencies; it's sort of a self-monitoring process neither LSBM nor anyone else has any sort of clout to enforce that, so this committee may want to look at ways to enforce agencies actually going through that process and carrying it through. Finally, the most important thing... I understand this is a long and boring presentation and I understand more than anybody how boring rule-making can be, I enjoy it, but I understand that most people don't. The most important thing I would hope you all would be able to take away from this is the legislature has ultimate authority over agency regulation. They can't adopt any rules that you all don't give them the authority to adopt, so keeping that in mind in all the bills that you enact. Every time you enact a bill, consider whether or not this is going to require that an agency adopt some rules as a a result of it, and perhaps giving them more close guidelines in what you expect from them when they do adopt rules. It's also really important to distinguish between the concerns with process and the concerns with the underlying policy. The process, as I said, is designed to create uniformity and ensure due process. The process probably does a pretty good job at those goals, even though the process is alright however that doesn't necessarily mean you're going to like the outcome. I can give you an example of a situation I've seen fairly recently. The Board of Cosmetics Arts Examiners has the authority to set sanitation requirements for hair salons. Over the years a number of people have had the idea that it would be a great idea to have mobile hair salons that could go around to disabled people and invalid people and provide those services to them on a mobile basis. The Board of Cosmetic Arts Examiners has adopted a rule that says you can't do that. And that rule is based on their interpretation of the sanitation requirement. They have determined that maintaining the required sanitation standards in a mobile context would be too difficult for them to be able to monitor and that it would potentially create a danger to the public. That is a perfectly appropriate rule under the authority that the General Assembly gave that board...to adopt that rule. You may not agree with it, and that might not be the policy the General Assembly wants to enact. So certainly the General Assembly could come in and clarify to basically authorize mobile hair salons, it could give the Board of Cosmetic Arts Examiners further guidelines in terms of how strictly you want them to construe that authorization. That illustrates the difference...the process wasn't the problem in that place, it was the underlying policy. And that's always within the purview of the General Assembly. So I'd hope you'll keep that in mind, the process can't necessarily solve those problems all the time if it's a policy issue that reasonable people could differ on, you all have the authority to make that decision but when you delegated it broadly to the agency there is the possibility they'll interpret it in a way that you don't necessarily agree with. Also, sometimes, people think it's the agency that's done it and it turns out it wasn't the agency that did it, it was in the law all along. An example of that is last year there was a concern about food trucks and whether or not food trucks could basically be self contained. There was a perception that there was a rule that food trucks had to have a home base that was a restaurant or a commissary. Well it turned out that wasn't in the rule, it was in the law in the statute, that was something you all specifically set a limitation on...on mobile food units being able to do that. So it's really important to always know the difference between whether it's a policy issue or a process issue. Over the past few years, the process for new rules has really been strengthened a lot. It may be, as we discussed, that there is some room for improvement over the review process for existing rules. But I hope that you all will now have a better understanding of how this whole process works and what we're talking about when we talk about regulatory reform. And with that, Mr. Chair I'd be glad to accept any questions. [SPEAKER CHANGES] Thank you, Ms. Cochran-Brown, on be half of the chair...

Excellent job on a less than riveting topic. If the members would wake up and if you have any questions please direct those to the Chair. I believe Representative Brody had a question. [SPEAKER CHANGES] Thank you Mr. Chairman. Actually I'm real interested in this subject so I stayed awake the whole way through. I'm glad your first and your very last slide had an important part that the old legislature is the ultimate authority on this and as I listened through all the process I've just come to the conclusion, and first being relatively new maybe mistakenly come to the conclusion, but that ?? only have a veto power over the proposed legislation because when it comes right down to the end comes out of the regulatory review commission and somebody objects we actually have to go through a bill process, a complete bill process in order to change it. And it seems like, and once again my own opinion, that maybe streamlining that whole process to say you have rules, bring them to the legislature and let the legislature submit them to committee and the committee then in turn decides one way or the other. It's interesting you brought up the hair salon and how much danger or how much controversy would come from something that an agency just determines and creates this controversy then we have to go back to the legislature and adjust it. Maybe in this process of initially submitting it to the legislature maybe we could work through a lot of those things and never really come to that because we probably have a lot of ideas on those things and I thank you for your presentation. [SPEAKER CHANGES] Was there question for Representative Brody? [SPEAKER CHANGES] Well my first speaking in the committee here and - [SPEAKER CHANGES] You've done an excellent job. [SPEAKER CHANGES] Question being, I guess is there any process by which we can actually streamline the process itself because what I was just explaining is more of a process situation than a policy. [SPEAKER CHANGES] Thank you Representative Brody. I'm not sure that what I think you were proposing actually would streamline it, I think it actually would lengthen the process. If we required all rules to come to the legislature before they actually adopted. You all are not in session at all times and agencies have to keep administering the law during all of that time so that would delay a lot of their processing so it isn't necessarily streamlining. It might be streamlining for those controversial those rules where there is a difference in terms of what approach the agencies should take about it. That really - in 2003 the process for the 10 letters basically was an act of that and that was the goal in 2003 to basically try and find a fairly simple way to identify the problematic rules that people had concerns with and there was some difference in terms of what policy intent actually was so that was the process that was developed to do that. I will tell you that there are a fairly small number of rules - small categories of rules that are subject to that. Right now for this session there are a group of rules that were adopted by the industrial commission that are subject to legislative review and there are a group of rules that were adopted by the wildlife resource commission that are subject to legislative rule. Out of the thousands of rules that were adopted and proved by the rules review commission over since the last session, those are the only categories of rules that got the 10 letters. So it sort of seems for new rules at least that process does provide a way to get the one rules that you want to hear about over here. I know that helps. [SPEAKER CHANGES] Representative Avila. [SPEAKER CHANGES] Thank you Mr. Chairman. My question goes back to the original publishing of the rule. The register and all these wonderful little things that are hidden around and you've got to know exactly where they are to get to them. The general public isn't that knowledgeable

And are quite aware of all the little hidey holes. Is there any, has there been any study of how to make this a little bit more public in terms of when these rules are out there because I know they are interest groups and there are people who have a direct impact and they study these the way lawyers read the ads in the paper that nobody else reads and I was wondering is there some way or has there been discussion of making it a more public process so that the general public who may at some point down the road be impacted by the rule know what's going on? [SPEAKER CHANGES] One of the things that you did in the last biannuum was require that the agency continued to publish on its website and pretty much every agency has a website now, any rule making that they're doing. The register is online. I'll also say that the APA contains a provision that requires each agency to maintain an interested persons' mailing list so that if you think that you might be interested in a rule that a particular agency might ever adopt, you can get your name on that list so that then that agency is required to notify you when they commence rule making, so the APA does contain a provision to try and give people an opportunity to be notified when rules are being adopted, but beyond that I'm not sure that there really has been. That has been a concern, it has been discussed in the past, there's just not a clear way to do it. [SPEAKER CHANGES] Representative Hardister. [SPEAKER CHANGES] Thank you, Mr. Chairman. Thank you for the presentation. I was wondering if you could reiterate how the rules review commission is configured. [SPEAKER CHANGES] The rules review commission is a 10 member body. 5 of its members are appointed by the speaker and 5 of its members are appointed by the president pro tempore. They are all public members. [SPEAKER CHANGES] Representative Fulghum. [SPEAKER CHANGES] I assume the rules review commission was created by the general assembly for a purpose and the purpose seems to be perhaps a poor size agency where you filter these rules for a reason and the general assembly assigned the task but is prevented from considering the quality or the efficacy of the rule. My question is, and I know it's been restricted to the reviewing the statutory standards, is that fulfilling the actual intent of the general assembly as to why the rules review commission was created? [SPEAKER CHANGES] Well, I think it was, that language was added by the general assembly as well, I think in 2003, about limiting what they can do. The idea is that the rules review commission even though they are appointed by the legislative leaders is still performing an executive branch function and I think that the idea was that the rules review commission was not created to substitute their judgment for that of the agencies but basically to review that agencies had actually complied with what the law required, so that certainly is something that the general assembly can revisit but I think that was part of the basis for including that language in there. [SPEAKER CHANGES] Representative Blackwell. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Representative Bumgardner. [SPEAKER CHANGES] Did I hear you say that the legislative review committee was created 2 years ago? [SPEAKER CHANGES] Well, this is sort of a complicated, convoluted history, but I'll try to explain it. I'm not sure what I said specifically, but the legislative administrative procedure oversight committee was originally created in 1995. In 2011 it was briefly repealed and there was a joint legislative reform committee for the 2011 biannuum and that committee performed a similar function to what the oversight committee had done. Last summer the APO was reestablished and functioned during this interim as well, but for a brief period the APO went out and reg reform came in and now APO is back. Does that help? [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Yes, I have a follow up. What did we do before that? You said we started this in the '70's and then we had a review committee in '95, what happened before that? [SPEAKER CHANGES] Well, there wasn't a formal legislative oversight committee. Clearly the general assembly continued to oversee the process. The APA was amended a number of times during that interim. I will say there was briefly in the '80's

Was a legislative version of the rules review commission, but in 1982, I believe, the Supreme Court decided the bone decision, which basically is our seminal case on powers. If there was a concern, this was actually legislators reviewing rules, was a potential violation of separation of powers clause. So, that's when that was changed and the rules review commission, as it now exists was created in the late 80s. There's been a lot changes over the years in this. I'll be glad to go through the history, as you like, but it isn't necessarily a very clear linear process in this. There have been lots of attempts. [SPEAKER CHANGE] Thank you, Representative Moore. [SPEAKER CHANGE] Works just like the ones they have at the school board, thanks. Thank you, Mr. Chairman and Thank you, Miss Brown for your comments. Its a great presentation, I'd like to get a copy of that, but I wanted to follow up on what Representative Brody was talking about because he spoke directly to something I was concerned about. I think a lot of people in here are. In fact, I think it was before Floydd and it was a lot of conversation about, what eventually became Fog out of ??. I think it was HB1066, I don't remember in 03' or 04'. I don't remember the time frame, I was on the county board at that time. I was involved in putting that together and in the end we lost a couple of business in Lake Forest because of it. I'm glad to see that we have a rules review committee, and I'm glad that its processes are doing what intended to do, but I really think this is something that should be looked at again. I would love to see some of these rules not go to a sub-committee, I don't know. But, I think that's something to look at because we want to make sure that although it was a great idea and I supported it that we look for flexibilities, and it is what we want it to do. We don't want people to assume that we're creating rules and regulations by people that aren't elected and that the people who are elected are the ones who are saying yes, that we're for that. So, thank you. [SPEAKER CHANGE] Representative ??. [SPEAKER CHANGE] Thank you, Mr. Chairman and I just wanted to comment and then a question. My experience is there's always someone who doesn't like a rule and so the rule review committee submitter sort of stop ?? measure for reviewing one more time. But, the question I have is and I apologize for coming in late, some of us were in another committee, did you discuss the time frame and the ability of a legislator to file a bill and stop a rule before it goes into effect. [SPEAKER CHANGE] Yes, thank you. Thank you. [SPEAKER CHANGE] Representative Riddell? [SPEAKER CHANGE] Thank you, Mr. Chairman. Moving back to the rules on the review commission. You've spoken in regards of who appoints them, are there any type of expertise or qualifications that are specified in order to be a member of the rules review commission? [SPEAKER CHANGE] No. [SPEAKER CHANGE] Representative ??. [SPEAKER CHANGE] Thank you, Mr. Chairman. Does the rules and review commission, does the general public have an address for them? [SPEAKER CHANGE] Yes. [SPEAKER CHANGE] And, that is what? [SPEAKER CHANGE] They are here now. They are located out on New Hope Church Road, but they are actually housed in the Office of Administrative Hearings. There are folks here that are from the office, that are both from rules of commission and the . . . I can get you their address specifically. [SPEAKER CHANGE] Is is on the website? [SPEAKER CHANGE] Yes, Mam, it is. [SPEAKER CHANGE] Thank you. [SPEAKER CHANGE] Are there any additional questions for members of the committee? Representative Murray. [SPEAKER CHANGE] I'll just kind of wrap this up. The APO committee, there was a couple of things that came up during the administrative procedure oversight committee during the interium and that was, one there are rules that exist that might not be tied to a statute. There's an issue there that bears addressing. There are policies that exist under administrative agencies that haven't gone through the rule making process. Those are two major issues where regulation is occuring, but the process hasn't had a chance to go through. The two issues haven't havd a chance to go through the process. I think those are a couple of things we're concerned about are rules that are not based on statute and rules, policies that haven't gone through the rule making process. So, those are another couple layers.

The amount of work that the roles for review commission does with the level of staffing and funding they receive is dramatically incredible and if we want them to do the kind of work that we think that should be able to do , we are going to be need to incorporate that in to our budget process. Especially if we are going to ask them to look at every role and determine whether they need to stay, go or sunset and that’s a big job and we need to appropriate the appropriate funding for them to be able to that as well [Speaker Changes] Thank you Rep Murray. The chair agrees. Any additional questions from the members of the committee. Rep Stevens [Speaker Changes] Thank you. And I know we probably are going to have a big task particularly in vide of what Rep Murray had said. We discovered in the APA oversight committee that the department of public construction has never submitted a role for review. Never. And their web site is full of roles what they say are roles that are promulgated which they have done by policies but not a single one has been to the roles commission in twelve years. I am hoping we are going to take a good strong look at that. Is that in your plan, Rep Moffet. [Speaker Changes] It would be [Speaker Changes] Thank you Rep Stevens. Rep Holley [Speaker Changes] Yes. we were just discussing whether or not the agencies that have executive people to head them, are they included in the oversight process like the labor, agriculture, DPI, are they included or we only talking about the state agencies like administration, health and human services deaner [Speaker Changes] Rep Holley. All executive branch agencies that includes the council of state agencies and the governor’s office, they are all subjected to administrative procedures act. [Speaker Changes] Thank you. Any additional questions from the members of the committee. [Speaker Changes] Mr Chair. Thank you Mr Chair. I just wondered I actually get an email from the RRC before they meet so that I can look at the rules they are looking at their agenda. Would it be appropriate for the members of this committee to be able to get the same thing. it’s very interesting. you see something that you are really interested in. you could actually see the rules. I think that might be helpful to all the committee members here. [Speaker Changes] That’s a good suggestion. Thank you. Any additional questions. All right for freshmen of this committee, there would be a part quiz on this 10 minutes before next week’s meeting. Before we adjourn and we do have a little housekeeping to take care of. Today on the floor we would be debating house adopting the permanent house rules and within those rules it does provide room for this committee to constitute a sub committee. Those three sub committees would be business and labor chaired by Rep Murray, environment chaired by Rep Catlin and local government chaired by Rep William Brawley. If Rep Murray could go ahead and announce your vice chairs and members of the committee. These would be officially part of the record once they are read in on the floor and the sub committees once the permanent rules are adopted will be official. But I thought in anticipation of next week’s meeting, we go ahead and get that out of the way. Rep Murray. [Speaker Changes] Vice chair is going to be Rep Setzer and Rep Tine. Members of the committee include Rep Blackwell, Rep Avila, Rep Baskerville, Rep Brian Brown, Rep Conrad, Rep FairCloth, Rep Farmer-Butterfield, Rep Burt Jones, Rep Lambert, Rep Malone, Rep Martin Susan Martin, Rep Pierce, Rep Queen, Rep Ross, Rep Schaffer, Rep Shepperd, Rep Waddel, Rep Ray. [Speaker Changes] Thank You Rep Murray. Rep Catlin [Speaker Changes] Thank you Mr Chairman. Vice chairs would be Pat McElraft Rep McElraft, Rep Edward Hanes. Members would be Rep Adams, Rep Brawley, Rep Bumgardner, Rep Cunningham, Rep Dickson, Rep Foushee if I didn’t say that right, I apologize, Rep Hager, Rep Hardister, Rep Harrison, Rep Iler, Rep Insko, Rep Milis, rep Steinberg, Rep Stames, Rep Stevens, Rep Richardson, Rep Whitmire and Rep Wells. [Speaker Changes] Thank you Rep Catlin, Rep Crawley [Speaker Changes] Thank you Mr Chair. My Co-chair

... will be representative William Brisson, and representative David Lewis. Members will be representative Larry Bell, representative Marcus Brandon, representative Mark Brody, representative Rayne Brown, representative Rob Bryan, representative Josh Dobson, representative Nelson Dollar, representative Jeffrey Elmore, representative Jim Fulghum, representative Yvonne Holley, representative Craig Horn, representative Jonathan Jordan, representative Marvin Lucas, representative Deb McManus, representative Michele Presnell, representative Nathan Ramsey, representative Michael Speciale, and representative Evelyn Terry. [Speaker Changes] Thank you representative Brawley. As I had stated, the subcommittees will be adopted once the permit rules are adopted by the house, representative Horn? We have local government chaired by representative William Brawley, or Bill Brawley. We have business and labor chaired by representative Tom Murry, and we have environmental which is chaired by representative Rick Catlin. Once the permit rules are adopted these names will be read in on the floor to make official part of the record, and that should happen either later this week or some time at the beginning of next week. In preparation for next Wednesday's meeting we'll cover what has happened in the last couple of years as well as some additional information regarding the APO efforts that were undertaken during the interim. We'll also hear from Judge Mann with the Office of Administrative Hearings, and we will also hear from someone from Rules Review Commission. I look forward to seeing you next week. We stand adjourned.