Law fights regulation with regulation

SACRAMENTO, Calif Fri Oct 7, 2011 4:18pm EDT

California Governor Jerry Brown speaks after vetoing the budget passed the day before by state legislators in Los Angeles, California June 16, 2011. REUTERS/Lucy Nicholson

California Governor Jerry Brown speaks after vetoing the budget passed the day before by state legislators in Los Angeles, California June 16, 2011.

Credit: Reuters/Lucy Nicholson

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SACRAMENTO, Calif (Reuters) - In an odd twist, California business groups applauded Governor Jerry Brown for signing legislation on Thursday to create a new layer of government regulation they say will lessen the burdens imposed by future regulations.

The measure orders the Democratic governor's Department of Finance to establish a uniform method of measuring the economic consequences of regulations put forward by other state agencies.

Starting in 2013, those agencies will be required to consider the job gains or losses, advantages or disadvantages to various businesses, and investment increases or declines projected as a result of any proposed regulation with an economic impact of more than $50 million.

The Department of Finance will create guidelines for other agencies to follow in conducting those impact assessments.

"This new law creates a standard yardstick everyone is measured against -- both the regulatory agency and those who offer alternatives that they say are more cost-effective," California Chamber of Commerce President Allan Zaremberg told Reuters.

"It ensures the state follows an accepted practice of doing an economic impact analysis, takes any stakeholder recommendations for what is the most cost-effective approach and -- if the agency doesn't adopt the most cost-effective approach -- it must explain why."

The chamber and other business groups, including the California Manufacturing and Technology Association, hailed the legislation as a victory because they say for the first time the state is required to assess the potential harm new regulations impose on the state's economy.

"Our legislation will ensure that businesses spend fewer dollars on regulation compliance and more on innovation and expansion," said state Senator Ron Calderon, who authored the bill along with fellow Democratic Senator Fran Pavley.

The genesis of the bill is in part a reaction to the regulations created by the state Air Resources Board implementing the state's landmark greenhouse gas measure.

Business groups still complain over what they consider a lack of concern about compliance costs shown by the board in its economic analysis of the law, which demands a 20 percent cut in emissions of heat-trapping air pollutants by 2020.

The board rejected arguments by critics that the true price tag of implementing the law was far higher than estimated, generating short-term job losses and higher energy costs. Instead, the board insisted its plan would be a net economic gain for California.

There are some potentially major loopholes in the regulation measure signed by Brown.

Each state agency decides whether a proposed regulation will generate the $50 million in economic impacts set as a trigger for the new law's provisions. And the densely worded 20-page measure contains no criteria for such a determination.

(Editing by Steve Gorman)

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