HF 1261

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 04/13/2015 04:28pm

A bill for an act
relating to state government; regulating rulemaking by state agencies; providing
process requirements for rules that have substantial economic impact; amending
Minnesota Statutes 2014, sections 14.02, by adding a subdivision; 14.05,
subdivisions 1, 2; 14.116; 14.127; 14.131; 14.388, subdivision 2; 14.389,
subdivision 2; 14.44; 14.45.

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

Section 1.

Minnesota Statutes 2014, section 14.02, is amended by adding a subdivision
to read:

new text begin Subd. 5. new text end

new text begin Substantial economic impact. new text end

new text begin A rule has a "substantial economic impact"
if the rule would result in, or likely result in:
new text end

new text begin (1) an adverse effect or impact on the private-sector economy of the state of
Minnesota of $5,000,000 or more in a single year;
new text end

new text begin (2) a significant increase in costs or prices for consumers, individual private-sector
industries, state agencies, local governments, individuals, or private-sector enterprises
within certain geographic regions inside the state of Minnesota;
new text end

new text begin (3) significant adverse impacts on the competitiveness of private-sector
Minnesota-based enterprises or on private-sector employment, investment, productivity,
or innovation within the state of Minnesota; or
new text end

new text begin (4) compliance costs, in the first year after the rule takes effect, of more than $25,000
for any one business that has less than 50 full-time employees, or for any one statutory or
home rule charter city that has less than ten full-time employees.
new text end

Sec. 2.

Minnesota Statutes 2014, section 14.05, subdivision 1, is amended to read:

Subdivision 1.

Authority to adopt original rules restricted.

new text begin (a) new text end Each agency shall
adopt, amend, suspend, or repeal its rules new text begin : (1) new text end in accordance with the procedures specified
in sections 14.001 to 14.69 deleted text begin , and deleted text end new text begin ; (2) new text end only pursuant to authority delegated by new text begin state or
federal new text end law new text begin ; new text end and new text begin (3) new text end in full compliance with its duties and obligations.

new text begin (b) new text end If a law authorizing rules is repealed, the rules adopted pursuant to that law are
automatically repealed on the effective date of the law's repeal unless there is another
law authorizing the rules.

new text begin (c) new text end Except as provided in section 14.06, sections 14.001 to 14.69 shall not be
authority for an agency to adopt, amend, suspend, or repeal rules.

Sec. 3.

Minnesota Statutes 2014, section 14.05, subdivision 2, is amended to read:

Subd. 2.

Authority to modify proposed rule.

(a) An agency may modify a
proposed rule in accordance with the procedures of the Administrative Procedure Act.
However, an agency may not modify a proposed rule so that it is substantially different
from the proposed rule in the notice of intent to adopt rules or notice of hearing.

(b) A modification does not make a proposed rule substantially different if:

(1) the differences are within the scope of the matter announced in the notice of
intent to adopt or notice of hearing and are in character with the issues raised in that notice;

(2) the differences are a logical outgrowth of the contents of the notice of intent to
adopt or notice of hearing and the comments submitted in response to the notice; and

(3) the notice of intent to adopt or notice of hearing provided fair warning that the
outcome of that rulemaking proceeding could be the rule in question.

(c) In determining whether the notice of intent to adopt or notice of hearing provided
fair warning that the outcome of that rulemaking proceeding could be the rule in question
the following factors must be considered:

(1) the extent to which persons who will be affected by the rule should have
understood that the rulemaking proceeding on which it is based could affect their interests;

(2) the extent to which the subject matter of the rule or issues determined by the
rule are different from the subject matter or issues contained in the notice of intent to
adopt or notice of hearing; and

(3) the extent to which the effects of the rule differ from the effects of the proposed
rule contained in the notice of intent to adopt or notice of hearing.

new text begin (d) A modification makes a proposed rule substantially different if the modification
causes a rule that did not previously have a substantial economic impact to have a
substantial economic impact.
new text end

Sec. 4.

Minnesota Statutes 2014, section 14.116, is amended to read:

14.116 NOTICE TO LEGISLATURE.

(a) By January 15 each year, each agency must submit its rulemaking docket
maintained under section 14.366, and the official rulemaking record required under section
14.365 for any rule adopted during the preceding calendar year, to the chairs and ranking
minority members of the legislative policy and budget committees with jurisdiction over
the subject matter of the proposed rule new text begin and to the Legislative Coordinating Commission.
Each agency must post a link to its rulemaking docket on the agency Web site home page new text end .

(b) When an agency mails notice of intent to adopt rules under section 14.14 or
14.22, the agency must send a copy of the same notice and a copy of the statement of need
and reasonableness to the chairs and ranking minority party members of the legislative
policy and budget committees with jurisdiction over the subject matter of the proposed
rules and to the Legislative Coordinating Commission.

(c) In addition, if the mailing of the notice is within two years of the effective date
of the law granting the agency authority to adopt the proposed rules, the agency shall
make reasonable efforts to send a copy of the notice and the statement to all sitting
legislators who were chief house of representatives and senate authors of the bill granting
the rulemaking authority. If the bill was amended to include this rulemaking authority,
the agency shall make reasonable efforts to send the notice and the statement to the chief
house of representatives and senate authors of the amendment granting rulemaking
authority, rather than to the chief authors of the bill.

Sec. 5.

Minnesota Statutes 2014, section 14.127, is amended to read:

14.127 LEGISLATIVE APPROVAL REQUIRED.

Subdivision 1.

deleted text begin Cost thresholds deleted text end new text begin Substantial economic impact new text end .

An agency must
determine if deleted text begin the cost of complying with deleted text end a proposed rule deleted text begin in the first year after the rule
takes effect will exceed $25,000 for: (1) any one business that has less than 50 full-time
employees; or (2) any one statutory or home rule charter city that has less than ten
full-time employees. For purposes of this section, "business" means a business entity
organized for profit or as a nonprofit, and includes an individual, partnership, corporation,
joint venture, association, or cooperative deleted text end new text begin has a substantial economic impact, as defined
in section 14.02, subdivision 5 new text end .

Subd. 2.

Agency determination.

An agency must make the determination required
by subdivision 1 before the deleted text begin close of the hearing record, or before the agency submits the
record to the administrative law judge if there is no hearing deleted text end new text begin agency gives notice under
section 14.14, 14.22, 14.225, or 14.389 new text end . deleted text begin The administrative law judge must review and
deleted text end deleted text begin approve or disapprove the agency determination under this section.
deleted text end

Subd. 3.

Legislative approval required.

new text begin (a) If the agency determines that a
proposed rule has a substantial economic impact, the agency must request the legislative
auditor to convene a five-person peer review advisory panel to conduct an impact analysis
of the proposed rule. Within 30 days of receipt of the agency's request, the legislative
auditor shall convene a peer review advisory panel. The advisory panel must be made up
of individuals who have not directly or indirectly been involved in the work conducted or
contracted by the agency and who are not employed by the agency. The agency must pay
each panel member for the costs of the person's service on the panel, as determined by
the legislative auditor. The agency shall transfer an amount from the agency's operating
budget to the legislative auditor to pay for costs for convening the peer review advisory
panel process. The panel may receive written and oral comments from the public during
its review. The panel must submit its report within 60 days of being convened. The
agency must receive a final report from the panel before the agency conducts a public
hearing on a proposed rule or, if no hearing is held, before the rule is submitted to the
administrative law judge. The panel's report must include its conclusions on the extent to
which the proposed rule:
new text end

new text begin (1) is based on sound, reasonably available scientific, technical, economic, or other
information or rationale; and
new text end

new text begin (2) is more restrictive than a standard, limitation, or requirement imposed by federal
law or rule pertaining to the same subject matter.
new text end

new text begin (b) If the agency determines that a rule does not have a substantial economic impact,
the administrative law judge must review this determination. If the administrative law
judge determines that a rule may have a substantial economic impact, the agency must
have the legislative auditor arrange for the analysis required by paragraph (a), and the
agency must give new notice of intent to adopt the proposed rule after receiving this
analysis. The administrative law judge may make this determination as part of the
administrative law judge's report on the proposed rule, or at any earlier time after the
administrative law judge is assigned to the rule proceeding.
new text end

new text begin (c) new text end If the agency determines that the deleted text begin cost exceeds the threshold in subdivision 1 deleted text end new text begin
proposed rule has a substantial economic impact new text end , or if the administrative law judge
disapproves the agency's determination that the deleted text begin cost does deleted text end new text begin rule does new text end not deleted text begin exceed the threshold
in subdivision 1, any business that has less than 50 full-time employees or any statutory
or home rule charter city that has less than ten full-time employees may file a written
statement with the agency claiming a temporary exemption from the rules. Upon filing of
such a statement with the agency, the rules do not apply to that business or that city until the
rules are deleted text end new text begin have a substantial economic impact, the agency or the administrative law judge
shall deliver the determination and peer review advisory panel report to the Legislative
Coordinating Commission and to the chairs and ranking minority members of the house
of representatives and senate committees and divisions with jurisdiction over the subject
matter of the rule, and the proposed rule does not take effect until the rule is new text end approved by a
law enacted after the agency determination or administrative law judge disapproval.

Subd. 4.

Exceptions.

(a) deleted text begin Subdivision 3 does not apply if the administrative law
judge approves an agency's determination that the legislature has appropriated money to
sufficiently fund the expected cost of the rule upon the business or city proposed to be
regulated by the rule.
deleted text end

deleted text begin (b) deleted text end Subdivision 3 does not apply if the administrative law judge approves an
agency's determination that the rule has been proposed pursuant to a specific federal
statutory or regulatory mandate.

deleted text begin (c) deleted text end new text begin (b) new text end This section does not apply if the rule is adopted under section 14.388 or
under another law specifying that the rulemaking procedures of this chapter do not apply.

deleted text begin (d) deleted text end new text begin (c) new text end This section does not apply to a rule adopted by the Public Utilities
Commission.

deleted text begin (e) Subdivision 3 does not apply if the governor waives application of subdivision 3.
The governor may issue a waiver at any time, either before or after the rule would take
effect, but for the requirement of legislative approval. As soon as possible after issuing a
waiver under this paragraph, the governor must send notice of the waiver to the speaker of
the house and the president of the senate and must publish notice of this determination in
the State Register.
deleted text end

Subd. 5.

Severability.

If an administrative law judge determines that part of a
proposed rule deleted text begin exceeds the threshold specified in subdivision 1 deleted text end new text begin has a substantial economic
impact new text end , but that a severable portion of a proposed rule does not deleted text begin exceed the threshold in
subdivision 1 deleted text end new text begin have a substantial economic impact new text end , the administrative law judge may
provide that the severable portion of the rule that does not deleted text begin exceed the threshold deleted text end new text begin have a
substantial economic impact new text end may take effect without legislative approval.

Sec. 6.

Minnesota Statutes 2014, section 14.131, is amended to read:

14.131 STATEMENT OF NEED AND REASONABLENESS.

By the date of the section 14.14, subdivision 1a, new text begin 14.22, or 14.225, new text end 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 persons 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;

(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;

(3) a determination of whether there are less costly methods or less intrusive
methods for achieving the purpose of the proposed rule;

(4) 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;

(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;

(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;

(7) 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; deleted text begin and
deleted text end

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

new text begin (9) the agency's findings and conclusions that support its determination that the
proposed rule does or does not have a substantial economic impact.
new text end

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 new text begin in a cost-effective and timely manner new text end .

For purposes of clause (8), "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.

new text begin The statement must describe, with reasonable particularity, the scientific, technical,
economic, or other information and rationale that supports the proposed rule.
new text end

The statement must also describe the agency's efforts to provide additional
notification under section 14.14, subdivision 1a, to persons or classes of persons who may
be affected by the proposed rule or must explain why these efforts were not made.

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. 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. 7.

Minnesota Statutes 2014, 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 new text begin notice to the chairs and ranking minority members of the legislative
policy and budget committees with jurisdiction over the subject matter of the proposed
rules and to the Legislative Coordinating Commission, must give new text end electronic notice of its
intent in accordance with section 16E.07, subdivision 3, and new text begin must give new text end notice by United
States mail or electronic mail to persons who have registered their names with the agency
under section 14.14, subdivision 1a. 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 business days after the date of the
notice to submit comments to the Office of Administrative Hearings.

Sec. 8.

Minnesota Statutes 2014, 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 deleted text end new text begin , new text end must mail the notice by United States mail or electronic
mail to persons who have registered with the agency to receive mailed notices new text begin , and must
give notice to the chairs and ranking minority members of the legislative policy and
budget committees with jurisdiction over the subject matter of the proposed rules and to
the Legislative Coordinating Commission new text end . The mailed notice new text begin and the notice to legislators
new text end 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 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. 9.

Minnesota Statutes 2014, section 14.44, is amended to read:

14.44 DETERMINATION OF VALIDITY OF RULE.

new text begin (a) new text end The validity of any rule new text begin , or the validity of any agency policy, guideline, bulletin,
criterion, manual standard, or similar pronouncement that the petitioner believes is a
rule as defined in section 14.02, subdivision 4, new text end may be determined upon the petition
for a declaratory judgment thereon, addressed to the Court of Appeals, when it appears
that the rule new text begin or pronouncement new text end , or its threatened application, interferes with or impairs,
or threatens to interfere with or impair the legal rights or privileges of the petitioner.
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, new text begin whether or not the petitioner has petitioned the Office
of Administrative Hearings under section 14.381, new text end and whether or not the agency has
commenced an action against the petitioner to enforce the rule.

new text begin (b) If the subject of the petition is an agency policy, guideline, bulletin, criterion,
manual standard, or similar pronouncement, the agency must cease enforcement of the
pronouncement upon filing of the petition until the Court of Appeals rules on the matter.
The agency is liable for all costs associated with review of the petition. If the Court of
Appeals rules in favor of the agency, the agency may recover all or a portion of the cost
from the petitioner unless the petitioner is entitled to proceed in forma pauperis under
section 563.01, or the court determines that the petition was brought in good faith or the
assessment of the costs would constitute an undue hardship for the petitioner.
new text end

Sec. 10.

Minnesota Statutes 2014, section 14.45, is amended to read:

14.45 RULE DECLARED INVALID.

In proceedings under section 14.44, the court shall declare the rule new text begin or agency
pronouncement new text end invalid if it finds that it violates constitutional provisions or exceeds the
statutory authority of the agency or new text begin if the rule new text end was adopted new text begin or the pronouncement was
improperly implemented new text end without compliance with statutory rulemaking procedures. 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.