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ARIZONA STATE LEGISLATURE
Forty-seventh Legislature – Second Regular Session
SENATE GOVERNMENT ACCOUNTABILITY AND REFORM AND HOUSE
GOVERNMENT REFORM AND GOVERNMENT FINANCE ACCOUNTABILITY
COMMITTEE OF REFERENCE FOR THE SUNSET HEARING OF
GOVERNOR’S REGULATORY REVIEW COUNCIL
Minutes of Meeting
House Hearing Room 3 -- 9:05 a.m. or upon adjournment of the
Committee on Government Reform and Government Finance Accountability
Chairman Konopnicki called the meeting to order at 9:17 a.m. and attendance was noted by the secretary.
Senator Burns Representative Downing
Senator Verschoor Representative Lopes
Senator Jack Harper, Cochair Representative McComish
Representative Adams
Representative Konopnicki, Cochair
Members Absent
Senator Hale
Senator Miranda
Speakers Present
Dale Chapman, Performance Audit Manager, Office of the Auditor General
Alex Turner, Arizona Department of Administration Ex-Officio Member/Chairman, Governor’s Regulatory Review Council
OPENING REMARKS
Senator Burns opined that the function performed by the Governor’s Regulatory Review Council (GRRC) is important, but having been in the regulated community for a number of years, he would like to share some observations. The fact that a Governor’s council reviews rules and regulations is basically wrong, but unfortunately, the Legislature delegated all kinds of responsibility to agencies in the form of rules and regulations over the years, which have the effect of law on the people that are regulated. The Executive branch is allowed to write, enforce and review rules through GRRC, so the “fox is watching the henhouse.” A better system would be to have the Legislature conduct the review, and if an agency is getting out of hand as far as overburdening rules and regulations, there would be a much better chance of reeling that in; however, the separation of powers issue has arisen in that regard when attempts were made to establish a regulatory review committee at the legislative level in the past. When the policing agency writes and enforces the rules and regulations, the rules and regulations are often written for the convenience of the enforcer and not to protect the people as the top priority.
AUDITOR GENERAL REPORT ON THE GOVERNOR’S REGULATORY REVIEW COUNCIL
Dale Chapman, Performance Audit Manager, Office of the Auditor General, gave a slide presentation regarding the audit performed on GRRC including the following findings (Attachment 1):
Senator Burns stated that he is concerned with the public comment portion of the process because he has been involved in sessions where hundreds of people showed up with the vast majority in opposition to the proposed rules, but the agency adopted the rules anyway. There is a strong communication link between the agency and GRRC, but he questioned what kind of communication is available to the public, especially the regulated community that has to comply with the rules and regulations being developed, and in some cases, lose their business by not being able to comply.
Mr. Chapman responded that a few comment periods were identified during the audit where the public has an opportunity to provide input on the proposed rules. First, there is an informal public comment period when an agency is drafting the rules where the agency can notify stakeholders of the process and solicit informal comments. Once an agency publishes the draft rules in the Arizona Administrative Register, there is a 30-day formal public comment period where an agency is required to receive and address all public comments received. Also, if the agency receives a request to hold a formal hearing regarding the draft rules during that time, the agency must do so.
Senator Burns said the agency is required to listen, but questioned what kind of requirements are in place to take action based upon public comments. Mr. Chapman replied that agencies are required to address formal comments received during the formal comment period through revision to the proposed rules, or note why it is not possible to revise the rules. Once the rules go to GRRC, one item reviewed is whether public comments were appropriately addressed.
Senator Harper asked if GRRC approval of a rule change submitted by an agency to give grants to an exclusively gay or lesbian organization would be considered consistent or allowable with state statutes or the Constitution. Mr. Chapman replied that the audit was limited to reviewing GRRC’s compliance with the statute and did not include review of any specific rules or topics.
Mr. Chapman indicated to Mr. Downing that while drafting proposed rules the agency is responsible for drafting an economic impact statement, which GRRC reviews to ensure that it is generally accurate, describes the probable cost or benefits of the rule and the probable effect on small business, state revenue and a few other items. The audit did not include a review of the specific economic impact statements the agencies prepared, but did include a review of GRRC’s review of those statements. GRRC retains an economist to review the statements and the reviews were found to be consistent with GRRC’s statutory mandate.
In response to Mr. Downing, Mr. Chapman said he did not hear any comments from consumers or others that the statements may not reflect the full scope of the impact of a rule nor is he familiar with any attempt to change the composition of the seven-member council to reflect appointments by the Legislature and the Governor.
Mr. Chapman advised Mr. Adams that GRRC’s customer feedback referenced in the audit refers to agencies that submit rules to GRRC for review. As far as he knows, no survey is done with the regulated community to solicit opinions on GRRC’s rule-making process.
PRESENTATION BY THE CHAIRMAN OF GOVERNOR’S REGULATORY REVIEW COUNCIL
Alex Turner, Arizona Department of Administration (ADOA) Ex-Officio Member/Chairman, Governor’s Regulatory Review Council, noted that of the six appointed members, two are legislative appointees. There is one ex-officio member, an ADOA representative, who acts as chairman. There are legislative appointees, one appointed by the Speaker of the House, currently the Vice-Chairman, who is Stan Barnes. The second member is appointed by the President of the Senate, which is Marc Osborn. A small business advocate is appointed by the Governor, which is Yvonne Hunter. In addition, three public members are appointed by the Governor, Chuck Blanchard, Sam Coppersmith and Chris Thomas. He clarified that the ex-officio chairman is automatically the director or assistant director of ADOA.
Mr. Turner related to Mr. Downing that most GRRC members recuse themselves in situations where there would be a statutory conflict or an appearance of impropriety. For example, he would not vote on anything relating to ADOA regardless of whether or not he is involved. He advised Senator Verschoor that the terms of the council members are staggered. The two legislative appointees are on holdover as their terms expired in January 2006, and two gubernatorial appointees expire in January 2007. The terms are for three years.
Senator Verschoor asked if all state agencies formulate rules through GRRC. Mr. Turner said all agencies not included in the list of exemptions are subject to rule review by GRRC. Some agencies exempted include the Arizona Board of Regents, the Arizona Department of Education and certain agencies are given exemptions for a specific period of time. For example, the School Facilities Board received a two-year exemption when it was created, and subsequent to the two years, must go through the GRRC process. Other agencies have specific programs that are exempted, such as certain programs at the Arizona Health Care Cost Containment System. The only review exempt agencies would be subject to would be if a member of the public requests a superior court review.
Senator Burns remarked that he misspoke in his opening comments when he said the Legislature does not conduct a review. There is a joint Regulatory Reform and Enforcement Study Committee that reviews, but can only report or suggest, and has no authority to make changes.
Senator Verschoor asked if any agencies, other than those that are exempt, do not go through GRRC. Mr. Turner responded that there is a mechanism in statute so if a member of the public believes an agency is ignoring its rule-making responsibilities or attempting to administer a particular program by means of policy when the policy should be in rule and subject to the GRRC process and public comment, that person can write a letter to the agency director who has a statutory time period in which to respond. If the member of the public is dissatisfied with the determination, it can be appealed to GRRC, which would ultimately decide if the agency’s actions should be subject to rule-making.
When Senator Verschoor asked
about the Game and Fish Department and the National Guard, Mr. Turner said he does
not know off hand if Game and Fish has any exemptions, but a large number of
the agency’s rules go through GRRC. As to the National Guard, military affairs
have a certain number of exemptions. He believes a review was conducted
indicating there may be a collision between the National Guard making rules and
following mandated rules by the
U.S. Department of Defense.
Senator Burns noted that Mr. Turner said a member is appointed to the council by the Speaker and a member is appointed by the President, but according to the web page for the council, the President and Speaker submit a list of three people from which the Governor chooses, so the Governor actually appoints all six members. The web page also says the members serve at the pleasure of the Governor, so even if those members are chosen from the list provided by the President and Speaker, the Governor can remove the members.
Mr. Downing asked if there have
been any complaints that the economic impact studies do not sufficiently cover the
impact on affected parties and how improvements can be made.
Mr. Turner said that has occurred. If a problem is found with an economic
impact statement, the agency is given the choice of correcting it before
potentially being shut down in a public meeting or going forward and taking a
chance. There is a lot of back and forth discussion in the 90-day period that GRRC
staff utilizes to address deficiencies or questions that come up in the rules, the
analysis of the public comment or the economic impact statement, which is
reviewed by an economist on staff. The economist writes a formal memo for the
official record as to whether or not the agency statement adequately addresses the
statutory requirements, which is primarily the impact on small business and
whether the value of the rule outweighs the impact.
Mr. Downing asked if there is a mechanism to provide feedback to the Legislature if an ambiguity is discovered in statutory language during discussions with an agency. Mr. Turner responded that it depends on how serious the ambiguity is. If the agency has the ability to make the rule, he does not believe there is any communication to the Legislature, but if it is serious enough to call into question, GRRC would communicate to the agency that the rule cannot be made or the agency is taking a chance because GRRC will have a problem with it. If attorneys on GRRC staff address the ambiguity as minor, the attorneys will point it out in a memo that is placed in the official record stating the issue for the council, and the council must address whether or not the agency has the statutory authority to go forward with the rule.
Mr. Downing indicated that he agrees with Senator Burns that public input is a concern and asked how improvements can be made. Mr. Turner replied that the Council tends to bend over backwards to hear public concerns and on numerous occasions asked an agency to discuss certain issues brought up in council meetings by members of the regulated community. The council has the ability to postpone consideration of a rules package until the next meeting. In fact, at the last regularly scheduled council meeting, concerns were raised by the public about a fairly significant environmental rule relating to air quality, so the rule package was pulled off the regular meeting agenda and GRRC held a special meeting to negotiate with industry members. Four of the five major stakeholders provided input while the fifth stakeholder remained neutral. GRRC tries to facilitate that, if possible, but ultimately, it reviews rules for compliance to the statute and does not review policy decisions behind the rules; therefore, GRRC is obligated to go with whatever policy the agency makes as long as the agency obeyed the statutes. If the agency makes a mistake, an amendment to the rule will be presented to GRRC later.
As far as making improvements, he added that he does not know how any legislative change could require an agency to pay more attention to public comment. The issue would be how to handle an instance where the agency disagrees with a segment of the regulated public, which is a very difficult problem he does not know how to resolve.
Senator Verschoor asked if GRRC ever repeals rules from agencies. Mr. Turner answered that is the purpose of the five-year review whereby the agency reviews its rules and decides which are archaic or need to be changed or repealed; in fact, a significant portion of the 1,183 rules in the last fiscal year were repeals.
DISCUSSION/RECOMMENDATIONS
Senator Burns remarked that although the system is flawed, self-imposed by the legislative body, GRRC has an important function, so he supports continuing the agency because it shines some light on the process and gives the public an opportunity to point out problems within the process. There is also the Regulatory Reform and Enforcement Study Committee, and he has had some contact from the regulated community about requests that may go before that committee in the future. The Members need to keep their eyes and ears open as to how the GRRC process could be improved based on input from the regulated community through that particular committee.
Mr. Downing surmised that part of the reason for delegating to the agencies is because the Legislators are in such a hurry making legislation, so GRRC is essentially the quality control section. He recommended finding some mechanism so that in instances where there is disagreement between an agency and the public, information can be provided to the Legislature, perhaps through the regulatory committee Senator Burns mentioned, so Legislators do not have to hear about issues from a disgruntled constituent.
Senator Burns recommended that some mechanism be put in place to alert the Legislature, especially on controversial issues that come up in the middle of the process, i.e., the public comment portion.
Chairman Konopnicki opined that this has been a healthy discussion that pointed out some things that need to be addressed, but does not negate moving forward with 10-year continuation of the agency. Excellent suggestions were made.
Senator Harper
moved that the Committee of Reference recommend a
10-year continuation of the Governor’s Regulatory Review Council.
Senator Burns stated that based on the discussion relative to feedback of public comment, the motion should include direction to staff to research the possibility of improving the information flow between the public comment portion of the process back to the Legislature.
Senator Harper added that the motion should include Senator Burns’ suggestion to direct staff to research the possibility of improving the information flow between the public comment portion of the process back to the Legislature. The motion carried.
Without objection, the meeting adjourned at 10:13 a.m.
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Linda Taylor, Committee Secretary
December 1, 2006
(Original minutes, attachments, and tape are on file in the Office of the Chief Clerk.)
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SENATE GAR AND HOUSE GRGFA
COR SUNSET OF THE GOVERNOR’S
REGULATORY REVIEW COUNCIL
2
November 29, 2006
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