AB 1232 Would Make Important Changes to California’s Administrative Procedure Act

Assembly Bill 1232, as amended March 28, 2025, is authored by Assembly Member Anamarie Avila Farias and principally co-authored by Assembly Member Jose Luis Solache to required  proposed state agency regulations to consider cost of living impacts on residents of the state.

The bill would amend Government Code Sections 11346.3, 11346.3, 11349, 11349.1, and 11349.3, which are contained in the Administrative Procedure Act (APA) sections of California’s Government Code. Generally, the APA governs the procedure for the adoption, amendment, or repeal of regulations by state agencies and for the review of those regulatory actions by the Office of Administrative Law (OAL).

Under current law, state agencies, departments, boards, commissions, and bureaus are required to assess the impact on California business enterprises and individuals and to adhere to specified requirements in making that assessment. AB 1232 would include among those requirements the assessment of potential adverse economic impact on the cost of living on residents of the state.

According to the bill’s authors: “While state agencies currently must consider economic impacts of their regulations, there is no real oversight of this process nor do those analyses require the consideration of the regulation on cost of living. AB 1232 helps achieve the state’s affordability goals by requiring state agencies to specifically examine what impacts their proposed regulation would have on the cost of living for Californians.

“AB 1232 requires agencies to ask: what impact does this regulation have on the cost of everyday essentials, such as food, water, energy, gas, and housing? In addition, it would require the Office of Administrative Law to add cost of living to its review of proposed regulations, empowering OAL to not only examine cost of living impacts independently, but also reject proposed regulations that significantly impact cost of living in favor of a more affordable alternative. Through this process, agencies must transparently consider the impacts of their regulations on Californians’ and must seek to find alternatives that reduce cost impacts”.

First, the bill would amend Section 11346.3 of the Government Code by adding subdivision (a)(3) to provide:

(3) The state agency, before submitting a proposal to adopt, amend, or repeal a regulation to the office, shall consider the proposal’s cost of living impacts on residents of the state.

The above provision would require any rulemaking entity to consider cost of living impacts prior to submitting the regulatory change to OAL.

Second, the bill would add subdivision (b)(1)(B) to provide:

(b) (1) A state agency proposing to adopt, amend, or repeal a regulation that is not a major regulation or that is a major regulation proposed before November 1, 2013, shall prepare an economic impact assessment that assesses whether and to what extent it will affect the following:

(A) The creation or elimination of jobs within the state.

(B) The cost of living impacts on residents of the state.

The above provision would impose for non – “major regulations” (i.e., those that are estimated to increase costs by $50 million or more) a requirement for the rulemaking entity to consider the cost of living impacts.

Third, the bill would add subdivision (c)(1)(B) to provide:

(c) (1) Each state agency proposing to adopt, amend, or repeal a major regulation on or after November 1, 2013, shall prepare a standardized regulatory impact analysis in the manner prescribed by the Department of Finance pursuant to Section 11346.36. The standardized regulatory impact analysis shall address all of the following:

(A) The creation or elimination of jobs within the state.

(B) The cost of living impacts on residents of the state.

The above provision would impose for “major regulations” the requirement that the rulemaking entity to consider the cost of living impacts as part of the SRIA process, which is considered by the DOF.

Fourth, the bill would add subdivisions (f) and (g) to provide:

(f) When a state agency determines that it needs to contract for outside services in order to perform the analyses in this section, the agency shall notify the office and the office shall select the contractor and oversee its work.

(g) The office shall adopt a standardized cost of living methodology for use by all agencies.

The above provisions first require the OAL to select a contractor doing a cost of living impact analysis if the rulemaking entity seeks outside contracting services. Second, the provisions above require the OAL to adopt a standard methodology for cost of living impact analysis that will be used by all rulemaking entities in the executive branch of government.

Fifth, the bill would amend Section 11349 of the Government Code by adding subdivision (g) to provide:

(g) “Cost of living impacts on residents of the state” means the cost of essentials and consumer staples, including, but not limited to, housing, transportation, food, taxes, and health care and the increase or decrease in these costs as a result of a proposed regulation in California both at the time of consideration and the foreseeable future.

The above provision defines the term “cost of living impacts on residents of the state.” 

Sixth, the bill would amend Section 11349.1 of the Government Code by adding subdivision (a)(7) to provide:

(7) Cost of living impacts on residents of the state.

The above provision adds a seventh statutory standard of review for OAL to use when it reviews proposed rulemaking projects. There are currently six standards: authority, consistency, clarity, necessity, reference, and nonduplication.

Seventh, the bill would add a new subdivision (c) to provide:

(c) In reviewing proposed regulations for the criteria in subdivision (a), the office shall conduct an independent analysis of the adequacy of an agency’s economic analyses prepared pursuant to Section 11346.3. The office shall also conduct its own analysis of the cost of living impacts on residents of the state of a proposed regulation. If the office finds that the cost of living impacts of a proposed regulation are significant, the office shall identify means by which the cost of the proposed regulation could be reduced.

The above provision requires OAL to independently review a rulemaking entity’s economic impact analyses, as well the entity’s cost of living impact analysis and whether those cost of living impacts are significant. If the impacts are significant, then OAL would be required to determine how those cost impacts could be reduced.

Eighth, the bill would add a subdivision (e)(6) to provide:

(6) The office has independently evaluated the cost of living impacts on residents of the state of the proposed regulation and found that the impacts are significant. For purposes of this paragraph, the office shall establish a methodology and threshold for use in determining when a cost of living impact becomes significant.

The above provision would require the OAL to independently review the cost of living impact analysis and make a separate determination of whether those impacts are “significant.”

Ninth, the bill would amend Section 11349.3 of the Government Code by amending subdivision (a) to provide 

The office shall either approve a regulation submitted to it for review and transmit it to the Secretary of State for filing or disapprove it within 30 working days after the regulation has been submitted to the office for review or 60 working days for major regulations.

The above provision retains the existing 30 working days for review by OAL of proposed rulemaking, but there provide 60 working days for OAL review of any “major regulation.”

Finally, the bill would add the following language to subdivision (b) to provide:

If one of the reasons for disapproval includes a significant cost of living impact, the office shall specify the means by which the costs of the proposed regulation could be reduced. The office shall then require the agency to pursue a less costly alternative or explain in detail why a less costly alternative is infeasible.

The above provision would require the OAL to specify how cost of living impacts could be reduced. And, OAL would then require the rulemaking entity to pursue a less costly alternative or explain in detail why that alternative is not possible.