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F I S C A L I M P A C T R E P O R T

SPONSOR HTRC

ORIGINAL DATE

LAST UPDATED

2/10/07

3/12/07 HB 685/HTRCS

SHORT TITLE Administrative Accountability Act

SB

ANALYST Ortiz

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 729

SOURCES OF INFORMATION

LFC Files

Responses Received From

General Services Department (GSD)

Department of Health (DOH)

Environment Department (NMED)

Human Services Department (HSD)

Gaming Control Board (GCB)

New Mexico Lottery Authority

Department of Transportation (DOT)

SUMMARY

Synopsis of Bill

House Bill 685, which is a House Taxation and Revenue Committee substitute would create the

“Administrative Accountability Act", and would require agencies to follow specified procedures

and create rights and duties when rulemaking, adjudicating, conducting inspections or issuing

sanctions, fees and licenses. Reports required by agencies under this Act would be subject to

public inspection.

Section 3 of the bill would establish a requirement that agencies create an annual report (a

“regulatory agenda") indicating what activities they have taken in the previous year and

anticipate taking with regard to rules, and what pending rulemaking remains for the agency,

House Bill 685/HTRCS – Page

2

including what privatization options are being considered. The report does not work as a ban to

action if plans are not included in the report.

Section 4 of the bill requires the creation of a timeframe appeals of an agency action for the

purpose of initiating adjudication and establishes deadlines for setting appeals timeframes. The

bill sets specific criteria which must be included in a final order, including a notice of a person’s

right to appeal or proceed directly to a court for judicial review if the agency failed to issue a

timely final order.

Section 5 requires that an agency set a timeframe for the issuance of sanctions unless one already

exists in law, and provides for a default timeframe if the agency does not create one. Section 5

also establishes the timeframe for issuance of any sanctions and information that must be

contained in the order. Section 5 also identifies circumstances in which a person may seek

judicial review of the sanction without first exhausting administrative remedies.

Section 6 provides requirements for agencies when licensing. Agencies would have to provide

individuals a list of steps required to obtain a license, the name and number of an agency contact

that could help them through the process, and the applicable timeframes for review.

Section 6 would create timeframes for administrative review, substantive review completion of

the process. Section 6 creates exceptions to the process for certain licensure procedures.

In the administrative review, the agency must provide a comprehensive list of any deficiencies to

the applicant and hold the application until it receives the complete application packet. If the

agency fails to notify the applicant of deficiencies in the application the application will be

considered administratively complete.

In the substantive review, the agency would be responsible for notifying the applicant if the

application is denied or granted and for requesting additional materials if needed. If an

application is denied, the applicant must be provided with a denial, a justification for the denial

and their appeal rights, including a contact person to assist with such an appeal.

If an agency fails to act, it must refund any fees and still continue to process the application.

Withdrawn from this substituted version of the bill is a requirement that would have imposed a

monetary penalty on agencies for not issuing a written decision on a license application within

the overall time frame.

Section 7 would provide processes and rules for inspections related to licensing, requiring the

agency to provide the regulated person with a statement of their rights, the name of number of a

contact person within the agency, who can assist with questions regarding the inspection process,

and their right to appeal.

The inspection has to yield a report that details any deficiencies noted and allows the regulated

person time to correct the deficiency unless the deficiencies are committed intentionally, are not

correctable within a reasonable period of time, evidence a pattern of non-compliance or are a risk

to a person or to the health, safety and welfare of the general public.

Section 8 would create reporting requirements, and Section 9 would allow for executive

exemptions to the rules in the Act.

House Bill 685/HTRCS – Page

3

FISCAL IMPLICATIONS

All agencies responding on this bill report that the bill imposes timeframes requiring agencies to

complete substantial requirements. As such, additional staff would be needed to meet the

deadlines set for licensing applications, adjudications and additional reporting requirements

regarding rulemaking.

SIGNIFICANT ISSUES

General Service Department notes the following issues regarding HB685.

•

It is contrary to the agency enabling statues because most agency enabling statutes

provide the secretary with rulemaking authority that this bill eliminates;

•

It duplicates existing reporting requirements;

•

It does not consider how it affects each agency in relation to existing statutes and rules;

•

Allowing a person to appeal to district court when an agency proposes to sanction that

person may be unconstitutional; and

•

It conflicts with the Rules of Civil Procedure, the Administrative Procedures Act, the

Uniform Licensing Act and other administrative procedures statutes and laws because

this bill allows persons to avoid agency adjudication and proceed directly to district court.

According to the Environment Department, accountability was identified in 2003 by NMED as

one of its three core principles. However, the bill does not address the intended purpose stated

by the proponents of HB 685, which was for operational and regulatory consistency among

defined agencies. In fact, this bill requires each agency to promulgate new sets of rules with no

reference to consistency for the rules to be established. Furthermore, at least three different

sections; Sections 4, 5 and 6 allow different rules for different time frames for different

adjudications, sanctions, and licenses.

1. NMED promulgation of new rules takes between 9 months and 2 years, because NMED

conducts negotiated rulemaking with interested stakeholders.

2. CS HB 685 would compromise all NMED programs. Adjudications would be taken to

state district court (instead of continuing through NMED), which is a more costly, less efficient,

and slower venue than before NMED. Sanctions for violation of environmental violations,

including flagrant and serious violations, would be barred. Permit applications not timely

processed would result in NMED foregoing permit fees,.

3. CS HB 685 provides only for the denial or granting of permits, and would not allow

NMED to place conditions in permits unless “specifically authorized by statute or rule." In

general, NMED receives permit applications that contain some, but not all of the conditions

necessary to meet environmental statutory and regulatory requirements. Many of these

conditions are not based on express or “specific" statutory or regulatory authority, but are

nonetheless necessary and appropriate to meet the statutory or regulatory requirements. In fact,

it is unrealistic to require each such condition have a “specific" statutory or regulatory citation

because the legislature and rulemaking agencies cannot be held to a standard by which all such

conditions can be anticipated. Permit conditions are dependent upon the geology, hydrology and

geography of each facility. Recently, in Phelps Dodge Tyrone, Inc. v. New Mexico Water

Quality Control, 2006 NMCA 115, 140 N.M. 464, 143 P.3d 502, the New Mexico Court of

House Bill 685/HTRCS – Page

4

Appeals found that Environment Department had statutory authority to impose reasonable

conditions on a company's discharge closeout permit.

NMED cures the permit applications’ deficiencies by issuing permits with conditions that ensure

environmental protection requirements are met. If NMED were prohibited from issuing permits

with reasonable conditions, NMED either (1) would have to deny permit applications, which

would prevent companies from operating and would result in many appeals, or (2) would have to

issue permits that are not protective of the environment. Neither scenario fulfills the legislative

goals of the state’s environmental programs.

4. CS HB 685’s limitations on the information that NMED may request during permit

evaluation are overly restrictive and would result in permits being issued without adequate

information or necessitate denial of permit applications. Under CS HB 685, the agency is only

allowed to obtain additional information one time for its administrative review and one time for

its substantive review (unless an applicant agrees otherwise but even in that case the time frame

can only be extended by 25% of the overall time frame). These limitations, especially for agency

substantive review, would not enable NMED to effectively and meaningfully review the more

complex permit applications. The Hazardous Waste Bureau, for example, operates under

extremely complex and voluminous regulations adopted from the federal regulations. Permit

review can take substantial time and resources and require more than one round of letters of

deficiency or letters requesting supplemental information in order to obtain the necessary

information to issue or condition a permit. Sometimes a response from an applicant will be

incomplete or will generate the need for additional information. NMED would not be able to

issue permits that meet environmental requirements if it did not have the ability to obtain the

information it needs and would thus be required to deny permit applications, which would result

in facilities not being permitted to operate and litigation.

5. “Sanction" is so broadly defined, see Synopsis above, that it encompasses a vast array of

agency decisions that are generally not considered “sanctions" but would then be subject to the

stringent requirements of CS HB 685. This could result in unreasonable burden on agencies as

they proceed with their normal business operations and in endless litigation over what is or is not

a “sanction."

PERFORMANCE IMPLICATIONS

Department of Transportation explains that Section 6 distinctly differentiates administrative and

substantive reviews. Administrative review is intended to be a review for completeness of the

application. However, to the extent completeness assumes adequacy of the application,

adequacy is an issue which often cannot be determined until during the substantive review. If

the inadequacy is not discovered until the substantive review process, the agency is limited to

one request for supplementation. While this process appears directed as expediting license

processing, the one supplement-request rule, with its inflexibility, may have the opposite effect.

Under the bill, the agency may deny an application due to inadequate information, seemingly

starting the process anew, rather than providing a more flexible information supplementation

process.

Gaming Control Board is concerned that the bill would create another layer of control over the

operations of GCB without necessarily providing increase accountability to the public served.

The cost of this would be lengthier process in promulgating final rules and increase staffing

costs.

House Bill 685/HTRCS – Page

5

According to the Environment Department Under existing funding and staffing levels, NMED’s

role in pollution prevention would be severely undermined and protection of human health and

the environment put at risk if the additional responsibilities without additional staff were

required under HB 685 and if certain of the limitations on agency action were required. In

addition, NMED's ability to meet legislatively mandated performance and accountability

measures to prevent pollution, and conduct compliance and enforcement actions would be

limited.

ADMINISTRATIVE IMPLICATIONS

GSD expressed concern that the timeframes could lead to dismissal of legitimate agency

enforcement actions and interfere with the ability of agencies to carry out their statutory duties.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to HB 729 which enacts the “Administrative Negotiated Rulemaking Act" which would

allow a state agency with rulemaking authority to establish a rulemaking committee to negotiate

and develop a proposed rule if the agency determines that the use of the negotiated rulemaking

procedure is in the public interest.

TECHNICAL ISSUES

Department of Transportation notes that Section 1, definitions, includes two definitions, one for

“license" and one for “sanctions," which are very broad. Application of these definitions may

require the NMDOT to promulgate regulations detailing the NMDOT’s processes, particularly in

the right-of-way area, because the definitions could be construed as including such activities and

their affect on adjoining property

OTHER SUBSTANTIVE ISSUES

The Lottery Authority was uncertain if this bill would apply to its infrastructure, since it was

created as a public body, politic and corporate, separate from the state. The bill would impact

how it operates as a sales and marketing business. The bill is not consistent with its mandate to

maximize revenue for it beneficiary program.

As a point of reference to the original bill, the substitute withdrew sections that would have

required agencies to consider the impact of any rules on small businesses and that would have

narrowly limited the scope of an agency’s authority to create rules that implement or interpret the

specific powers and duties granted by an enabling statute. This is notable, insofar as the latter

provision would evidently have contradicted applicable case law, which does not so limit

agencies’ powers. See Winston v. New Mexico State Police Board, 80 N.M. 310 (1969).

Also withdrawn from HB685 is a section that would have prevented an agency from charging a

fee or setting a rule regarding fees unless the fee for the specific activity was expressly

authorized by statute. Also withdrawn from this version of the bill is a requirement that an

annual report be assembled, detailing fees charged or received by an agency, along with the law

that allows it; the amount of each fee and the total amount collect from each fee; and a general

description of how each fee was distributed.

House Bill 685/HTRCS – Page

6

ALTERNATIVES

The Environment Department points out that the consequences imposed on agencies for not

meeting deadlines as proposed in this bill are unrealistic and would undermine NMED’s

statutory mandate to protect human health and the environment. The issue of an agency action

involving permitting and enforcement programs to identify the barriers and problems, such as

insufficient funding, and to address those issues on a program by program basis. It would

weaken environmental protection and have unintended negative consequences on business.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Agencies will continue to abide by the requirements set forth in their enabling statues and

promulgated rules.

EO/mt