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

SPONSOR Foley

ORIGINAL DATE

LAST UPDATED

02/01/08

HB 614

SHORT TITLE Study & Legislative Approval of Rules

SB

ANALYST Escudero

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

$150.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

Energy, Minerals & Natural

Resources Department (EMNRD)

Public Education Department (PED)

SUMMARY

Synopsis of Bill

House Bill 614 would appropriate $150.0 from the general fund to the Board of Regents of the

University of New Mexico (UNM) Bureau of Business and Economic Research (BBER) for

FY09 to conduct economic impact studies of proposed agency rules and would also impose

rulemaking prerequisites. It further specifies review of proposed rules by the Legislative Finance

Committee and presiding officers of the House of Representatives and Senate

FISCAL IMPLICATIONS

The appropriation of $$150.0 contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY09 shall revert to the

general fund.

This request was not submitted to the New Mexico Higher Education Department for review and

is not included in the Departments legislative recommendation for FY09.

House Bill 614 – Page

2

According to EMNRD, House Bill 614 will have fiscal implications in addition to the

appropriation provided, because agencies that have no expertise in economic analysis will be

required to conduct economic studies. In order to comply with the requirement, affected

agencies would need to have additional FTEs who could provide the required expertise, or they

would have to employ consultants by contract. No estimate of agency compliance costs can be

made at this time because the bill's requirements are unclear, and it is unknown what rules will

be proposed in future years that will require study

SIGNIFICANT ISSUES

The New Mexico Higher Education Departments analysis of this bill focuses on the higher

education implications of the proposed legislation. Additional insight may be obtained from

other departments analyses.

According to HED, House Bill 614 would require that, prior to a state agency adopting or

amending administrative rules, a study would be conducted which would include the following:

•

the need for the rule,

•

who would be impacted by the rule,

•

the cost to comply with the rule,

•

the benefits derived from the rule,

•

comments and complaints from the public about the rule,

•

the complexity of the rule,

•

any overlap, duplication or conflict with other federal, state or local government rules.

The operational definition of agency within HB614 includes every department, agency, board,

commission, committee or institution of the executive branch of state government. However,

rules relating to educational institutions are not included in this proposed change in rule process.

The $150,000 appropriation contained in this act would fund staff from the UNM/BBER to

conduct economic impact studies in cooperation with agencies proposing rule changes or

amendments. UNM/BBER would be consulted to provide objective economic evaluations and

analyses. According to a spokesperson at the bureau, this type of work can be complex and time

consuming. The studies would require working with each agency to understand what specifically

would need to be evaluated and moreover would be dependent on the quality of information

provided by the agencies. In addition, the volume of regulations requiring analysis and the work

expectations of BBER are not made clear in this bill. Therefore it is difficult to determine if the

appropriation is a suitable amount.

PERFORMANCE IMPLICATIONS

According to HED, House Bill 614 would require agencies to conduct and review studies of the

economic impact of a proposed rule. If the impact to the general fund is $20 million or more,

either in revenue or expenditures, further review by the Legislative Finance Committee and the

House and Senate leaders are also required. Referral to standing committees of the legislature is

the final step in the proposed review process. The review process must be completed ninety days

before filing of the rule.

House Bill 614 – Page

3

According to PED, the bill adds additional bureaucracy to the already lengthy rulemaking

process, resulting in an even lengthier and more cumbersome process. Requiring such an

extensive analysis (see synopsis above) of every rulemaking action would be extremely

burdensome and render state agencies unable to engage in any rulemaking action in an

expeditious manner. Also, it is not clear in the Act who will actually conduct the analyses. The

bill states that the agencies shall conduct and review, yet the appropriation goes to the University

of New Mexico to perform this function.

This Act is also inconsistent with the Executive Reorganization Act, which authorizes cabinet

secretaries to “…make and adopt such reasonable and procedural rules and regulations as may be

necessary to carry out the duties of the department and its divisions." Moreover, the Act

implicates Article III, Section 1 of the New Mexico Constitution relative to the separation of

powers between the executive, judicial and legislative branches of government. Essentially, the

proposed amendment would permit the Legislature to “micromanage" a portion of the

rulemaking authority of the state’s executive agencies. Rules that have an annual negative fiscal

impact of $20,000.0 or more could not be adopted without prior legislative review. Such a

scheme is inefficient.

See e.g. I.N.S. v. Chadha, 462 U.S. 919, 954 (1983)(providing that executive action under

legislatively delegated authority that might resemble “legislative" action in some respects is not

subject to the approval of the Houses of Congress and the President).

This bill also implicates Article IV, Section 16 of the New Mexico Constitution requiring clarity

in bill titles, in that the title simply says “Making an Appropriation," and the substance and

object of that appropriation is not indicated in the title and the object of the appropriation (the

University of New Mexico) is nowhere mentioned in the text of the bill.

ADMINISTRATIVE IMPLICATIONS

According to HED, UNM would be responsible for the administering these funds.

The rule process would be lengthened by at least ninety days, increasing the burden on agency

staff to comply with requirements for additional study.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

According to NMNRD, House Bill 14 conflicts with HB 310 which requires agencies proposing

rule amendments to prepare a "regulatory impact statement" in a particular format. It is also

related in subject matter to SB 505, which provides for legislative oversight of the Oil

Conservation Division, including legislative review of rules that division proposes.

TECHNICAL ISSUES

According to HED, HB614 definition of “rules" does not include:

•

Rules made relating to the management of any particular educational institution

•

Rules relating to admissions, discipline, supervision, expulsion or graduation of

studentsfrom educational institutions

House Bill 614 – Page

4

HB614 does not specify the conditions that would require or call for an external study to be

conducted by UNM/BBER.

OTHER SUBSTANTIVE ISSUES

According to EMNRD, the requirements of HB 614 are unclear in at least the following respects:

•

The bill does not state what effect the failure to conduct the required study, or alleged

deficiencies in the study, will have on the validity of any rule the agency adopts. Since

the bill does not otherwise provide, it would seem that this issue could be raised in a

judicial challenge to a rule. The agency would have to make a record of its compliance

with the bill's requirements, so that there would be a basis for judicial review. The

procedures and assumptions employed by the agency in conducting the required study,

and the agency's conclusions, would likely be challenged in any appeal from a rule

adoption or amendment. The bill provides no standards by which a court could measure

sufficiency of the agency's compliance.

•

There is no provision in the bill regarding who will determine whether a proposed rule

will, or will not, have a $20,000,000 impact on the general fund, thereby triggering the

requirement of legislative committee review, or how that determination will be made.

Without such provisions, it would seem that the validity of a rule could be attacked on

appeal, if legislative review were not done, on the ground that it would, in fact, have a

$20,000,000 impact. Likely the legislative finance committee and the legislature will

receive numerous requests to conduct legislative review from agencies wishing to

preclude a challenge on this basis.

•

The nature of the review of a proposed rule by the legislative finance committee is

wholly unclear. Subsection 1.B provides that a proposed rule that has a $20,000,000

impact must be reviewed "by the legislative finance committee, and then by the

legislature pursuant to Subsection C." Apparently the review by the legislative finance

committee is something different from, and preliminary to, the review by a designated

legislative standing committee under Subsection C. Since "pursuant to Subsection C"

qualifies only "review by the legislature," and not review by the "legislative finance

committee," this sentence leaves blanks as to the nature of the review to be conducted by

the legislative finance committee, and the effect of that review on the rulemaking

process. It may have been intended that the legislative finance committee's review is

only for the purpose of determining whether the rule meets the $20,000,000 fiscal impact

requirement, but that is not clear from the bill's language.

•

The intent of Subsection 1.C would seem to be that legislative review is merely an

opportunity, for ninety days, for the designated legislative committee to make an

admonitory statement of support or opposition, as described in that Subsection. The

implication would seem to be that the legislative committee does not have any power to

veto, change or delay implementation of the rule (other than for the ninety-day period

provided for its review). That, however is not clearly stated, leaving opportunities for

rules to be challenged on the basis of adverse legislative committee action or inaction.

The bill requires agencies to conduct economic studies that many rulemaking agencies, including

Energy, Minerals and Natural Resources Department (EMNRD), do not have the necessary

House Bill 614 – Page

5

resources to conduct. Economic analyses require the expertise of economists, and most agencies

do not have economists of staff nor funding to engage them as consultants.

The requirement to conduct an economic study applies to all rule changes, including technical

amendments and changes that are not the subject of any controversy or changes mandated by

federal programs.

According to PED, this bill conflicts with SJR 5, SJR 7 and HJR 12, which would submit to the

public a proposed amendment to Article IV of the New Mexico Constitution which if approved,

would allow the Legislature to prohibit rules proposed by an agency or officer of the executive

branch from taking effect until the proposed rules were reviewed and approved by the

appropriate interim or standing committees of the legislature.

It also relates to/conflicts with HB 310, which would amend the State Rules Act by adding a

requirement that agencies prepare a regulatory impact statement if a proposed rule has an

economic impact of more than $25.0.

According to a UNM/BBER official, HB614 significant issues include:

•

Specification of fiscal as well as economic impact studies;

•

Challenges in the estimate of duration and cost of these studies; and

•

The need to review other states regulations regarding impact studies of proposed rule

changes.

PME/nt