Frequently Asked Questions about Economic Impact Analysis Under the APA

Does each executive branch rulemaking require an economic analysis to be done? Yes, all regulations are required to have an analysis of the potential economic impact of the regulation pursuant to Government Code Section 11346.3.

What is required for this analysis? Aa state entity proposing to adopt, amend, or repeal any regulation must assess the potential for adverse economic impact on California business enterprises and individuals.

What must the rulemaking agencies try to avoid? These rulemaking entities must avoid the imposition of unnecessary or unreasonable regulations or reporting, recordkeeping, or compliance requirements.

What must the rulemaking agencies consider and when? The state entity, prior to submitting its proposed regulatory action to the Office of Administrative Law to begin the formal rulemaking process (i.e., part of the “initial statement of reasons”), must consider the proposal’s impact on business, with consideration of industries affected including the ability of California businesses to compete with businesses in other states. The state entity must even consider information supplied by interested parties.

What does this economic assessment include? The state entity must assess whether and to what extent it will affect the following: (1) The creation or elimination of jobs within the state. (2) The creation of new businesses or the elimination of existing businesses within the state. (3) The expansion of businesses currently doing business within the state. (4) The benefits of the regulation to the health and welfare of California residents, worker safety, and the state’s environment.

What are the three phases of the economic assessment? Under the APA, an economic impact assessment of a proposed regulation has three phases: first, the agency makes an initial, provisional determination of whether the proposed rule will have a significant adverse economic impact on businesses; second, during the public comment period, affected parties may comment on the agency’s initial determination and supply additional information relevant to the issue; and, third, when the agency issues its final decision and statement of reasons, it must respond to the public comments and either change its proposal in response to the comments or explain why it has not.

What happens if the agency determines there is an adverse business impact? A regulation is not necessarily invalid under the APA even if it has a significant adverse economic impact on business.