SF 1438

Introduction - 94th Legislature (2025 - 2026)

Posted on 02/18/2025 09:17 a.m.

A bill for an act
relating to state government; requiring cost-benefit analysis for proposed
administrative rules; prohibiting the adoption of certain rules; requiring notice to
the legislature upon adoption of certain exempt rules; amending Minnesota Statutes
2024, sections 14.002; 14.02, by adding subdivisions; 14.131; 14.14, subdivision
2; 14.15, subdivisions 3, 4; 14.386; 14.388, subdivision 2; 14.389, subdivision 2;
14.44; 14.45; proposing coding for new law in Minnesota Statutes, chapter 14.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 14.002, is amended to read:

14.002 STATE REGULATORY POLICY.

The legislature recognizes the important and sensitive role for administrative rules in
implementing policies and programs created by the legislature. However, the legislature
finds that some regulatory rules and programs have become overly prescriptive and inflexible,
thereby increasing costs to the state, local governments, and the regulated community and
decreasing the effectiveness of the regulatory program. Therefore, new text begin state agencies may only
adopt rules for which benefits exceed costs and, new text end whenever feasible, state agencies must
develop rules and regulatory programs that emphasize superior achievement in meeting the
agency's regulatory objectives and maximum flexibility for the regulated party and the
agency in meeting those goals.

Sec. 2.

Minnesota Statutes 2024, section 14.02, is amended by adding a subdivision to
read:

new text begin Subd. 2a. new text end

new text begin Benefit. new text end

new text begin "Benefit" means any direct or indirect value gain projected to result
from a rule, as expressed in dollars.
new text end

Sec. 3.

Minnesota Statutes 2024, section 14.02, is amended by adding a subdivision to
read:

new text begin Subd. 2b. new text end

new text begin Best practices. new text end

new text begin "Best practices" means theoretically and empirically justified
methods that are state-of-the-art and widely used within a given scientific discipline such
as statistics or economics.
new text end

Sec. 4.

Minnesota Statutes 2024, section 14.02, is amended by adding a subdivision to
read:

new text begin Subd. 3a. new text end

new text begin Cost. new text end

new text begin "Cost" means any direct or indirect value loss projected to result from
a rule, as expressed in dollars.
new text end

Sec. 5.

Minnesota Statutes 2024, section 14.02, is amended by adding a subdivision to
read:

new text begin Subd. 5. new text end

new text begin Stakeholder. new text end

new text begin "Stakeholder" means an individual, group, or entity subject to a
rule, including but not limited to consumers, citizens, small businesses, and large businesses.
new text end

Sec. 6.

new text begin [14.051] COST-BENEFIT ANALYSIS REQUIRED.
new text end

new text begin Subdivision 1. new text end

new text begin Demonstration of net benefits required. new text end

new text begin (a) Except as provided in
subdivision 4, an agency must not adopt or amend a rule under this chapter unless the agency
prepares a cost-benefit analysis that clearly demonstrates that total projected benefits of the
rule will exceed total projected costs. The analysis must identify projected costs and benefits
for all relevant parties, including but not limited to classes of stakeholders, local units of
government, and the state and its agencies. The agency must consult with the commissioner
of management and budget to identify projected costs and benefits for local units of
government.
new text end

new text begin (b) An agency must include a preliminary cost-benefit analysis when publishing a notice
of proposed rules and a final cost-benefit analysis when publishing a notice of adoption in
the State Register. The final cost-benefit analysis must explain:
new text end

new text begin (1) any significant difference between the preliminary and final cost-benefit analyses;
and
new text end

new text begin (2) any decision by the agency to modify or not modify the preliminary cost-benefit
analysis in response to public comments.
new text end

new text begin Subd. 2. new text end

new text begin Methods; transparency. new text end

new text begin (a) The agency must apply standardized analytic
methods and metrics to all rules. The standards must be developed and updated by the Office
of Administrative Hearings to conform with the latest best practices.
new text end

new text begin (b) The agency must determine projected costs and benefits for the five-year period
beginning on the anticipated date of rule adoption, unless the agency justifies a longer period.
If the agency incorporates discount rates in the cost-benefit analysis, the agency must justify
its chosen rate and compare its results to those calculated with alternative reasonable rates.
The agency must report and explain all significant uncertainties. The agency must not
express unquantifiable, qualitative factors of life in dollar terms.
new text end

new text begin (c) The agency must publish all documentation, assumptions, methods, and data for the
cost-benefit analysis on an easily accessible public website and, where relevant, in a
machine-readable format, including sufficient supporting calculations, documents, and data
for replication.
new text end

new text begin Subd. 3. new text end

new text begin Deficient analysis. new text end

new text begin A final cost-benefit analysis is significantly deficient if the
agency's analysis:
new text end

new text begin (1) fails to consider a relevant and significant cost or benefit;
new text end

new text begin (2) significantly underestimates costs or significantly overestimates benefits in a manner
that affects the outcome of the analysis; or
new text end

new text begin (3) fails to adequately justify any modification of the preliminary cost-benefit analysis.
new text end

new text begin Subd. 4. new text end

new text begin Exemption. new text end

new text begin This section does not apply to exempt rules under section 14.386,
good cause rules under section 14.388, or expedited rules under section 14.389.
new text end

Sec. 7.

Minnesota Statutes 2024, section 14.131, is amended to read:

14.131 STATEMENT OF NEED AND REASONABLENESS.

By the date of the section 14.14, subdivision 1a, notice, the agency must prepare, review,
and make available for public review a statement of the need for and reasonableness of the
rule. The statement of need and reasonableness must be prepared under rules adopted by
the chief administrative law judge and must include the following to the extent the agency,
through reasonable effort, can ascertain this information:

(1) a description of the classes of deleted text begin persons deleted text end new text begin stakeholders new text end who probably will be affected
by the proposed rule, including classes that will bear the costs of the proposed rule and
classes that will benefit from the proposed rule;

deleted text begin (2) the probable costs to the agency and to any other agency of the implementation and
enforcement of the proposed rule and any anticipated effect on state revenues;
deleted text end

deleted text begin (3) deleted text end new text begin (2) new text end a determination of whether there are less costly methods or less intrusive methods
for achieving the purpose of the proposed rule;

deleted text begin (4) deleted text end new text begin (3) new text end a description of any alternative methods for achieving the purpose of the proposed
rule that were seriously considered by the agency and the reasons why they were rejected
in favor of the proposed rule;

deleted text begin (5) the probable costs of complying with the proposed rule, including the portion of the
total costs that will be borne by identifiable categories of affected parties, such as separate
classes of governmental units, businesses, or individuals;
deleted text end

deleted text begin (6) the probable costs or consequences of not adopting the proposed rule, including those
costs or consequences borne by identifiable categories of affected parties, such as separate
classes of government units, businesses, or individuals;
deleted text end

deleted text begin (7) deleted text end new text begin (4) new text end an assessment of any differences between the proposed rule and existing federal
regulations and a specific analysis of the need for and reasonableness of each difference;
and

deleted text begin (8) deleted text end new text begin (5) new text end an assessment of the cumulative effect of the rule with other federal and state
regulations related to the specific purpose of the rule.

The statement must describe how the agency, in developing the rules, considered and
implemented the legislative policy supporting performance-based regulatory systems set
forth in section 14.002.

For purposes of clause deleted text begin (8) deleted text end new text begin (5) new text end , "cumulative effect" means the impact that results from
incremental impact of the proposed rule in addition to other rules, regardless of what state
or federal agency has adopted the other rules. Cumulative effects can result from individually
minor but collectively significant rules adopted over a period of time.

The statement must new text begin include the cost-benefit analysis required under section 14.051 and
new text end also describe the agency's efforts to provide additional notification under section 14.14,
subdivision 1a, to persons or classes of deleted text begin persons deleted text end new text begin stakeholders new text end who may be affected by the
proposed rule or must explain why these efforts were not made.

deleted text begin The agency must consult with the commissioner of management and budget to help
evaluate the fiscal impact and fiscal benefits of the proposed rule on units of local
government. deleted text end The agency must send a copy of the statement of need and reasonableness to
the Legislative Reference Library when the notice of hearing is mailed under section 14.14,
subdivision 1a.

Sec. 8.

Minnesota Statutes 2024, section 14.14, subdivision 2, is amended to read:

Subd. 2.

Establishment of need and reasonableness of rule.

At the public hearing the
agency shall make an affirmative presentation of facts establishing the need for and
reasonableness of the proposed rule new text begin , including the cost-benefit analysis performed under
section 14.051, new text end and fulfilling any relevant substantive or procedural requirements imposed
on the agency by law or rule. The agency may, in addition to its affirmative presentation,
rely upon facts presented by others on the record during the rule proceeding to support the
rule adopted.

Sec. 9.

Minnesota Statutes 2024, section 14.15, subdivision 3, is amended to read:

Subd. 3.

Finding of substantial difference.

If the report contains a finding that a rule
has been modified in a way which makes it substantially different, as determined under
section 14.05, subdivision 2, from that which was originally proposed, or that the agency
has not met the requirements of deleted text begin sections deleted text end new text begin section 14.051 or new text end 14.131 to 14.18, it shall be
submitted to the chief administrative law judge for approval. If the chief administrative law
judge approves the finding of the administrative law judge, the chief administrative law
judge shall advise the agency and the revisor of statutes of actions which will correct the
defects. The agency shall not adopt the rule until the chief administrative law judge
determines that the defects have been corrected or, if applicable, that the agency has satisfied
the rule requirements for the adoption of a substantially different rule.

Sec. 10.

Minnesota Statutes 2024, section 14.15, subdivision 4, is amended to read:

Subd. 4.

Need deleted text begin or deleted text end new text begin , new text end reasonableness new text begin , or net benefits new text end not established.

If the chief
administrative law judge determines that the need for or reasonableness of the rule has not
been established pursuant to section 14.14, subdivision 2, new text begin or net benefits have not been
adequately established pursuant to section 14.051, new text end and if the agency does not elect to follow
the suggested actions of the chief administrative law judge to correct that defect, then the
agency shall submit the proposed rule to the Legislative Coordinating Commission and to
the house of representatives and senate policy committees with primary jurisdiction over
state governmental operations for advice and comment. The agency may not adopt the rule
until it has received and considered the advice of the commission and committees. However,
the agency is not required to wait for advice for more than 60 days after the commission
and committees have received the agency's submission.

Sec. 11.

Minnesota Statutes 2024, section 14.386, is amended to read:

14.386 PROCEDURE FOR ADOPTING EXEMPT RULES; DURATION.

(a) A rule adopted, amended, or repealed by an agency, under a statute enacted after
January 1, 1997, authorizing or requiring rules to be adopted but excluded from the
rulemaking provisions of chapter 14 or from the definition of a rule, has the force and effect
of law only if:

(1) the revisor of statutes approves the form of the rule by certificate;

(2) the person authorized to adopt the rule on behalf of the agency signs an order adopting
the rule;

(3) the Office of Administrative Hearings approves the rule as to its legality within 14
days after the agency submits it for approval and files an electronic copy of the adopted
rule with the revisor's certificate in the Office of the Secretary of State; deleted text begin and
deleted text end

(4) a copy is published by the agency in the State Register new text begin ; and
new text end

new text begin (5) the agency notifies by email the chairs and ranking minority members of the legislative
committees with jurisdiction over the agency's operating budget new text end .

The secretary of state shall forward one copy of the rule to the governor.

A statute enacted after January 1, 1997, authorizing or requiring rules to be adopted but
excluded from the rulemaking provisions of chapter 14 or from the definition of a rule does
not excuse compliance with this section unless it makes specific reference to this section.

(b) A rule adopted under this section is effective for a period of two years from the date
of publication of the rule in the State Register. The authority for the rule expires at the end
of this two-year period.

(c) The chief administrative law judge shall adopt rules relating to the rule approval
duties imposed by this section and section 14.388, including rules establishing standards
for review.

(d) This section does not apply to:

(1) any group or rule listed in section 14.03, subdivisions 1 and 3, except as otherwise
provided by law;

(2) game and fish rules of the commissioner of natural resources adopted under section
84.027, subdivision 13, or sections 97A.0451 to 97A.0459;

(3) experimental and special management waters designated by the commissioner of
natural resources under sections 97C.001 and 97C.005;

(4) game refuges designated by the commissioner of natural resources under section
97A.085; or

(5) transaction fees established by the commissioner of natural resources for electronic
or telephone sales of licenses, stamps, permits, registrations, or transfers under section
84.027, subdivision 15, paragraph (a), clause (2).

(e) If a statute provides that a rule is exempt from chapter 14, and section 14.386 does
not apply to the rule, the rule has the force of law unless the context of the statute delegating
the rulemaking authority makes clear that the rule does not have force of law.

Sec. 12.

Minnesota Statutes 2024, section 14.388, subdivision 2, is amended to read:

Subd. 2.

Notice.

An agency proposing to adopt, amend, or repeal a rule under this section
must give electronic notice of its intent in accordance with section 16E.07, subdivision 3,
deleted text begin and deleted text end notice by United States mail or deleted text begin electronic mail deleted text end new text begin email new text end to persons who have registered
their names with the agency under section 14.14, subdivision 1a new text begin , and notice by email to the
chairs and ranking minority members of the legislative committees with jurisdiction over
the agency's operating budget new text end . The notice must be given no later than the date the agency
submits the proposed rule to the Office of Administrative Hearings for review of its legality
and must include:

(1) the proposed rule, amendment, or repeal;

(2) an explanation of why the rule meets the requirements of the good cause exemption
under subdivision 1; and

(3) a statement that interested parties have five working days after the date of the notice
to submit comments to the Office of Administrative Hearings.

Sec. 13.

Minnesota Statutes 2024, section 14.389, subdivision 2, is amended to read:

Subd. 2.

Notice and comment.

The agency must publish notice of the proposed rule in
the State Register deleted text begin and must deleted text end new text begin , new text end mail the notice by United States mail or deleted text begin electronic mail deleted text end new text begin email new text end
to persons who have registered with the agency to receive mailed notices new text begin , and provide notice
by email to the chairs and ranking minority members of the legislative committees with
jurisdiction over the agency's operating budget new text end . The mailed notice must include either a
copy of the proposed rule or a description of the nature and effect of the proposed rule and
a statement that a free copy is available from the agency upon request. The notice in the
State Register new text begin and the notice to legislators new text end must include the proposed rule or the amended
rule in the form required by the revisor under section 14.07, an easily readable and
understandable summary of the overall nature and effect of the proposed rule, and a citation
to the most specific statutory authority for the rule, including authority for the rule to be
adopted under the process in this section. The agency must allow 30 days after publication
in the State Register for comment on the rule.

Sec. 14.

Minnesota Statutes 2024, section 14.44, is amended to read:

14.44 DETERMINATION OF VALIDITY OF RULE.

The validity of any rule may be determined upon the petition for a declaratory judgment
thereon, addressed to the court of appeals, when it appears that new text begin (1) new text end the rule, or its threatened
application, interferes with or impairs, or threatens to interfere with or impair the legal rights
or privileges of the petitioner new text begin , or (2) the final cost-benefit analysis supporting the rule is
significantly deficient under section 14.051, subdivision 3 new text end . The agency shall be made a
party to the proceeding. The declaratory judgment may be rendered whether or not the
petitioner has first requested the agency to pass upon the validity of the rule in question,
and whether or not the agency has commenced an action against the petitioner to enforce
the rule.

Sec. 15.

Minnesota Statutes 2024, section 14.45, is amended to read:

14.45 RULE DECLARED INVALID.

In proceedings under section 14.44, the court shall declare the rule invalid if it finds that
it violates constitutional provisions deleted text begin or deleted text end new text begin , new text end exceeds the statutory authority of the agency deleted text begin or deleted text end new text begin , new text end was
adopted without compliance with statutory rulemaking procedures new text begin , or is supported by a
significantly deficient final cost-benefit analysis new text end . Any party to proceedings under section
14.44, including the agency, may appeal an adverse decision of the court of appeals to the
supreme court as in other civil cases.

Sec. 16. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective the day following final enactment and applies to rules adopted or
amended on or after that date.
new text end