Memorandum re: Governor's Regulatory Review Council

              ._'
Arizona House of Representatives
House Majority Research
MEMORANDUM
Carolyn Atwater
Legisktive Research Analyst
Govennnent Refonn and Govennnent
Finance Accountability Conunittee
To: JOINT LEGISLATIVE AUDIT COMMITTEE
Re: Governor's Regulatory Review Council
Date: December 21, 2006
1700 W. Washington
Phoenix, AZ 85007-2848
Office (602) 926-3535
FAX (602) 417-3181
Attached is the final report of the sunset review of the Governor's Regulatory Review Council,
which was conducted by the House of Representatives Government Reform and Government
Finance Accountability and Senate Government Accountability and Reform Committee of
Reference.
This report has been distributed to the following individuals and agencies:
Governor ofthe State ofArizona
The Honorable Janet Napolitano
President of the Senate
Senator Ken Bennett
Senate Members
Senator Jack Harper, Cochair
Senator Bob Bums
Senator Albert Hale
Senator Richard Miranda
Senator Thayer Verschoor
Speaker of the House of Representatives
Representative Jim Weiers
House Members
Representative Bill Konopnicki, Cochair
Representative Kirk Adams
Representative Ted Downing
Representative Phil Lopes
Representative John McComish
Governor's Regulatory Review Council
Department of Library, Archives & Public Records
Auditor General
Senate Republican Staff
Senate Research Staff
Senate Democratic Staff
Senate Resource Center
House Majority Staff
House Research Staff
House Democratic Staff
Chief Clerk
December 21,2006
COMMITTEE OF REFERENCE REPORT:
GOVERNOR'S REGULATORY REVIEW COUNCIL
Background
Pursuant to Section 41-2953, Arizona Revised Statutes, the Joint Legislative Audit
Committee (JLAC) assigned the sunset review of the Governor's Regulatory Review Council
(GRRC) to the House of Representatives Government Reform and Government Finance
Accountability and Senate Government Accountability and Reform Committee of Reference.
GRRC is a 7-member council that reviews and approves state agencies' 5-year rule
review reports. They receive and consider public appeals on proposed rules, and GRRC either
approves the rules as submitted, filing them with the Secretary of State's office, or sends their
comments back to the agency for further review. Most state agencies formulate their rules
through GRRC, except those with specific exemptions including the Arizona Board of Regents,
the Arizona Board of Education and certain programs at the Arizona Health Care Cost
Containment System.
Committee ofReference Sunset Review Procedures
The Committee of Reference held a public hearing on November 29,2006, to review
GRRC's response to the sunset factors as required by A.R.S. § 41-2954, subsection F, and to
receive public testimony (See Attachment 4). Testimony was received from Dale Chapman,
Performance Audit Manager, Office of the Auditor General and Alex Turner, Arizona
Department of Administration Ex-Officio Member/Chairman, Governor's Regulatory Review
Council.
Committee ofReference Reconunendations
The Committee of Reference recommended a ten-year continuation of the
Governor's Regulatory Review Council, and requested that staff research the possibility of
improving the information flow between the public comment portion of the process back to
the Legislature.
2
December 21,2006
SUNSET REPORT REQillREMENTS
Pursuant to Section 41-2954 subsection F, Arizona Revised Statutes
*** Note: Thefollowing answers are a summary ofthe information provided by GRRC. Please
see Attachment 2 for the complete response to the sunsetfactors required by A.R.S. § 41-2954,
subsection F.
I. The objective and purpose in establishing the agency.
GRRC was established by executive order in 1981 to "examine proposed
administrative rules" that had an economic impact on any state, county, city or town
agency. Still a part of the Arizona Department of Administration, GRRC was created in
statute in 1986 and given statutory authority to examine all proposed rules. In 1995, the
Legislature amended the role of GRRC, granting them "final approval authority over all
proposed administrative rules, except those that are exempted from the rulemaking
. process," and appropriating FTE's to assist in the rule review process. GRRC approves
rules in their final proposed form.
In addition to reviewing agency rules, GRRC also reviews 5-year reports, which
are submitted by state agencies "documenting their internal review oftheir administrative
rules," receives and hears appeals from members ofthe public and reports on certain
agency practices "regarding their compliance with specific statutory mandates."
II. The effectiveness with which the agency has met its objective and purpose and the
efficiency with which it has operated.
GRRC has generally met its objectives and purposes by reviewing and approving
agency rules, and reviewing and approving agency 5-year reports. These reviews and
approvals are completed within the statutory time frame, and agencies have been
generally satisfied with GRRC's performance.
III. The extent to which the agency has operated within the public interest.
GRRC's activities, including ensuring agencies address public comments on their
administrative rules, hearing appeals on specific agency actions and providing
information on agency rule making activity that only indirectly impacts the general
public.
IV. The extent to which rules adopted by the agency are consistent with the legislative
mandate.
GRRC has adopted rules that appear to be within its legislative mandate, and
updated their rules in December 2003. GRRC operates under 17 rules that cover
3
December 21,2006
practices which involve the general public, including scheduling public meetings, placing
a rule on GRRC's public meeting agenda and the receiving and hearing of appeals.
v. The extent to which the agency has encouraged input from the public before
adopting its rules and the extent to which it has informed the public as to its actions
and their expected impact on the public.
GRRC has followed all requirements of the administrative rulemaking process
when adopting their own rules, including soliciting and addressing public comments.
GRRC complies with the State's open meeting laws and follows procedures set forth by
the Secretary of State.
VI. The extent to which the agency has been able to investigate and resolve complaints
within its jurisdiction.
GRRC has no statutory authority to investigate and resolve complaints.
VII. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling legislation.
The Attorney General is not responsible for prosecuting actions under GRRC's
enabling legislation. Members of the public may file a civil suit, and the State Solicitor
General's Office would represent GRRC. To date, GRRC has not been the subject of any
civil action.
VIII. The extent to which the agency has addressed deficiencies in its enabling statutes
which prevent it from fulfIlling its statutory mandate.
Due to legislative changes in 2003, GRRC no longer is required to submit an
annual report to the Governor and members of the Legislature. Certain elements from the
annual report are published on the Web site and made available to the public upon
request.
There are two statutory changes that have been considered to streamline the
administrative rule making process. The first would amend ARS § 41-1055, which
currently requires agencies to submit an economic impact statement (ElS) with most
administrative rule packages. GRRC has considered a statutory change to allow agencies
to document that an administrative rule has no economic impact, rather than requiring an
£IS with every submittal. The second proposed change would amend ARS § 41-1056 to
allow agencies to forego review of rules that have been revised within the 5-year period.
IX. The extent to which changes are necessary in the agency's laws to adequately
comply with the factors listed in this subsection.
No legislative changes are necessary.
4
December 21,2006
X. The extent to which termination of the agency would significantly harm the public
health, safety or welfare.
Terminating GRRC would not have a direct impact on the general public's health,
safety or welfare, but some of GRRC's processes indirectly affect the general public.
GRRC receives public appeal and comment on agency practices and ensures that agency
rules incorporate public comment. They also review proposed administrative rule to
ensure statutory compliance and determine whether the probable benefits of the proposed
rule outweigh it's probably cost.
XI. The extent to which the level of regulation exercised by the agency is appropriate
and whether less stringent levels of regulation would be appropriate.
The current level of regulation is generally appropriate.
XII. The extent to which the agency has used private contractors in the performance of
its duties and how the effective use of private contractors could be accomplished.
GRRC does not use any private contractors. Audit work did not identify any
opportunities for GRRC to privately contract any of its responsibilities.
Additional Questions
I. Identification of the problem or the needs that the agency is intended to address.
GRRC is the final step in the rulemaking process, and reviews most draft agency
rules to ensure that they are necessary, to avoid duplication and protect the impact on the
public. It also reviews agency 5-year reports and receives and hears appeals regarding
agency practices.
II. A statement, to the extent practicable, in quantitative and qualitative terms, of the
objectives of the agency and its anticipated accomplishments.
Agencies submitted 115 rules packages for review and action by GRRC in 2005­2006.
GRRC repealed 326 rules, made 528 new rules, amended 610 existing rules and
renumbered 34 existing rules, totaling 1,508 rulemaking actions for the year. GRRC also
reviewed 36 5-year reports, summarizing a total of 956 rules.
III. An identification of any other agencies having similar, conflicting, or duplicate
objectives, and an explanation of the manner in which the agency avoids duplication
or conflict with other such agencies.
GRRC is not aware of another agency having similar, conflicting or duplicate
objectives.
IV. An assessment of the consequences of eliminating the agency.
5
December 21,2006
GRRC outlined their benefits and duties, stating that they can indirectly impact
and benefit the general public.
V. An assessment of the consequences of consolidating GRRC with another agency.
GRRC outlined their benefits and duties, stating that they can indirectly impact
and benefit the general public
Atfilchments
1. Letter from Rep. Bill Konopnicki to GRRC requesting information.
2. Sunset factors pursuant to A.R.S. § 41-2954, subsection F.
3. Meeting Notice.
4. Minutes of Committee of Reference Meeting.
6
BILL KONOPNICKI
1700 WEST WASHINGTON, SUITE H
PHOENIX, ARIZONA 85007-2844
CAPITOL PHONE: (602) 926-5409
CAPITOL FAX: (602) 417-3105
TOLL FREE: 1-800-352-8404
bkonopnicki@azleg.gov
DISTRICT 5
Mr. Alex Turner
100 North 15th Avenue, Suite 402
Phoenix, Arizona 85007
Mr. Turner,
August 16, 2006
COMMITIEES:
GOVERNMENT REFORM AND
GOVERNMENT FINANCE
ACCOUNTABILITY, CHAIRMAN
APPROPRIATIONS (B)
COMMERCE
The sunset review process prescribed in Title 41, Chapter 27, Arizona Revised Statutes,
provides a system for the Legislature to evaluate the need to continue the existence of
state agencies. During the sunset review process, an agency is reviewed by a legislative
Committee of Reference. On completion of the sunset review, the Committee
recommends to continue, revise, consolidate, or terminate the agency.
As you are aware, The Joint Legislative Audit Committee (JLAC) has directed the Office
of the Auditor General (OAG) to conduct the Governors Regulatory Review Council
audit and assigned the sunset review to the Committee of Reference comprised of
members of the House of Representatives Government Reform & Government Finance
Accountability Committee and the Senate Government Accountability and Refonn
Committee.
In addition to the OAG audit and the 12 sunset factors addressed in the OAG report, the
Committee of Reference is required to consider certain factors, pursuant to A.R.S. § 41­2954
(F), in deciding whether to recommend continuance, modification or termination of
the Council. Please provide your response to those factors as provided below:
1. An identification of the problem or the needs that the agency is intended to
address.
2. A statement, to the extent practicable, in quantitative and qualitative terms, of the
objectives of such agency and its anticipated accomplishments.
3. An identification of any other agencies having similar, conflicting or duplicate
objectives, and an explanation of the manner in which the agency avoids duplication
or conflict with other such agencies.
4. An assessment of the consequences of eliminating the agency or of consolidating
it with another agency.
In addition to responding to the factors in A.R.S. § 41-2954 F, please provide the
Committee of Reference with copies of minutes from your Council meetings during the
past year and your most recent annual report. Your response should be received by
October 13, 2006, so we may proceed with the sunset review and schedule the required
public hearing. Please submit the requested infonnation to:
Steven Moortel
Arizona House of Representatives
1700 West Washington Suite H
Phoenix, AZ 85007
Thank you for your time and cooperation. If you have any questions, please feel free to
contact me at (602) 926-5409 or Steven Moortel, Legislative Analyst at 602-926-5987.
Sincerely,
Bill Konopnicki
State Representative
Chair, Government Reform & Government
Finance Accountability Committee
t OffiCE Of THE
: AUDITOR
GENERAL
Statutes define the administrative
rulemaking process and specify the steps
agencies must undertake to adopt rules.
The process is lengthy-the time frames
outlined in statute for completing the
required steps total about 10 months. As
shown in the figure on page 2, agencies
are responsible for completing most of
the process. GRRC's role is near the end
of the process, when it provides a final
review and approval.
What does GRRC revieW?
GRRC reviews proposed agency rules to
ensure that:
• The agency has authority to make the rule
and that it does not conflict with existing
law;
• The wording is clear, concise, and
understandable;
• The rule contains a complete and accurate
economic impact statement and that the
probable benefits of the rule outweigh its
probable costs; and
• The agency addressed public comments.
In fiscal year 2005, GRRC approved
the adoption, repeal, amendment, or
renumbering of 1,183 administrative
rules submitted by 39 different state
agencies.
Reviews are done in a timely manner and
follow statute. For the ten rule packages
that auditors reviewed, GRRC's review of
Governor's Regulatory
Review Council
these rules was consistent with statute
and complied with the criteria established
to approve rules. In addition, GRRC
reviewed these rule packages within the
statutory time frame. GRRC has 90 days
from the time it receives an agency's rule
package to review and approve the finai
rules. or return them to the agency. In
fact, GRRC reviewed nine of the rule
packages in fewer than 60 days.
Other GRRC functions
At least once every 5 years, each agency
must review its rules to determine
whether the rules need amendment or
repeal. The agency develops a plan for
making needed revisions and submits a
report to GRRC for review and approval.
Although statutes do not specify a time
frame, auditors' review of five rule review
reports found that GRRC reviewed them
in 90 days or fewer.
GRRC may also hear appeals from the
public regarding certain agency
practices, including an agency's decision
to deny an individual's petition regarding
whether an existing agency practice or
policy constitutes a rule. In fiscal year
2005, GRRC received two appeals.
Administrative Rulemaking Process and GRRC's Specific Role in Process
Rulemaking docket-Provides
information about the rule's
subject, time frame for
administrative ruIemaking, and
the proposed rule's status,
Automatically terminates 1 year
after the notice is pUblished if
the agency does not proceed
with the process,
Economic impact statemenl­Describes
how the proposed
rule will affect the regulated
community, small businesses,
and consumers,
Agency Process
Agency determines an administrative rule is
needed,
Agency opens arulemaking docket and files a
notice with the Secretary of State, who then
pUblishes it in the Arizona Administrative
Register (Register),
Agency drafts proposed administrative rules
and economic impact statement and may
obtain informal public comment
Agency publishes draft of administrative rules
in the Register and opens formal public
comment period, Agency has 30 days to
receive formal written comments and may
hold apublic meeting to receive oral
comments, This step may occur more than
once if the comments result in substantial
changes to the rules,
Agency drafts final administrative rules and
addresses all formal public comments, Final
draft administrative rules must be submitted to
GRRC within 120 days after close of public
comment period,
If GRRC returns the rules and:
Minor revisions are required, the agency can
make GRRC's revisions and resubmit the
revised rules to GRRC,
Substantial revisions are required, the agency
must pUblish anotice of Supplemental
Rulemaking in the Register and allow for a
second public comment period, After making
revisions, the agency must then resubmit the
revised rules to GRRC,
Source: Arizona Rulemaking Manual, GRRC training materials, and A,RS, §41-1001 et seq,
GRRC Process
Performance Audit Division
Performance Audit and Sunset Review
Governor's Regulatory
Review Council
FEBRUARY • 2006
REPORT NO. 06 - 01
,(,-< ... ACeov,\-.>- W "
"'~.~WI3'iE'·i~':JI.t1I.I.~,'·llEn~.ll3t'i1I'·
/!' S OFFICE OF THE
: : AUDITOR
\, ~./" GENE RAl
lye- ... DIFf'E-~
Debra K. Davenport
Auditor General
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative Laura Knaperek, Chair
Representative Tom Boone
Representative Ted Downing
Representative Pete Rios
Representative Steve Yarbrough
Representative Jim Weiers (ex-officio)
Audit Staff
Melanie Chesney, Director
Dale Chapman, Manager and Contact Person
Danielle Mariano, Team Leader
Copies of the Auditor General's reports are free.
You may request them by contacting us at:
Senator Robert Blendu, Vice Chair
Senator Carolyn Allen
Senator John Huppenthal
Senator Richard Miranda
Senator Harry Mitchell
Senator Ken Bennett (ex-officio)
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
February 21 , 2006
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Alex Turner, Chairman
Governor's Regulatory Review Council
Transmitted herewith is a report of the Auditor General, A Performance Audit and Sunset Review
of the Governor's Regulatory Review Council (GRRC). This report is in response to a May 24,
2005, resolution of the Joint Legislative Audit Committee. The performance audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes §41-2951 et seq. I am
also transmitting with this report a copy of the Report Highlights for this audit to provide a quick
summary for your convenience.
Included with this report is a written response from the Governor's Regulatory Review Council.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on February 22, 2006.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
29'10 NORTH 44'th STREET - SUITE 4"10 _ PHOENIX. ARIZONA 850"18 - (602) 553-0333 - FAX (602) 553-005"1
PROGRAM FACT SHEET
Governor's Regulatory Review Council (GRRC)
Services:
The Govemor's Regulatory Review Council (GRRC) has the following responsibilities:
FY2005 FY2006 (est.)
19 Stale General Fund
FY2004
$505,900 (fiscal year 2006, estimated)
Program revenue:
$510,000 .,-----------------------,
$SOD,OOO -t-------------­$
490,000 -t--------------
$480,000 -t-------­$
470,000 +--------­$
460,000 +--------­$
450,000
$440,000
$430,000
$420,000
. I
Review proposed administrative rules to ensure that they meet specific statutory criteria.
In fiscal year 2005, GRRC received and approved the adoption, repeal, amendment, or
renumbering of 1,183 rules.
Maintain a list of agencies that need to conduct a 5-
year review of their administrative rules, as well as
review and approve agencies' reports on their
reviews.
Receive and consider public appeals regarding
three areas of agency practice, Including an
agency's decision to deny an individual's petition
regarding whether an existing agency practice or
policy constitutes an administrative rule. In fiscal
year 2005, GRRC received two appeals.
Compile reports on each agency's efforts to review
its rules, agency compliance with overall licensing
time frames, and whether agencies maintain a
directory summarizing all applicable rules and sub­stantive
policy statements.
•
•
•
•
Membership and staffing:
GRRC consists of six members appointed by the
Govemor and one ex-officio member representing the director of the Department of
Administration who also seNes as the GRRC chair. A.R.S. §41-1051(A) requires that GRRC be
composed of the following:
• At least one public interest member,
• At least one business community member,
• One member from a list of three nonlegislators recommended by the President of the
Senate,
• One member from a list of three nonlegislators recommended by the Speaker of the
House, and
• Two at-large members.
As of December 2005, GRRC had five staff members and two vacancies. The filled positions
included three attorney analysts, one economist, and an office manager.
-
Facilities and equipment:
The Govemor's Regulatory Review Council was established within and continues to be a part of
the Department of Administration (Department). It occupies a total of 1,968 square feet of office
space in the Department's building at 100 North 15th Avenue in Phoenix. The Department leas­es
this building under the PLTO (private lease-to-own) program and was scheduled to pay
approximately $2.6 million in rent for the entire bUilding during fiscal year 2005. GRRC's equip­ment
includes typical office equipment.
Mission:
GRRC's mission is "to assist the Govemor's Regulatory Review Council and agencies to fulfill
their rulemaking responsibilities under the Administrative Procedure Act."
Program goals:
•. "To 'deliver customer service that is second to none in the Governor's Regulatory
Review Council subprogram."
• "To aggressively pursue innovative solutions and/or opportunities in the Governor's
Regulatory Review Council subprogram."
Adequacy of performance measures:
GRRC has developed a number of performance measures that are in line with its goals, and
include quality, input, output, outcome, and efficiency measures. These include measures for
customer satisfaction with GRRC's services, the number of rules GRRC receives annually, the
percentage of administrative rules that the council acts upon in a way that is consistent with staff
recommendations, and the percentage of informal or courtesy reviews of agencies' proposed
rules that GRRC conducts in 2 months or less.
However, GRRC could benefit from additional performance measures that provide more infor­mation
on the efficiency of its activities. For example, while GRRC has measures for the number
of rules it receives annually, and the percentage ofthose rules that are approved in the initial coun­cil
hearing, it does not track the length of time it takes for a rule package to be approved. Adding
such a measure would help GRRC demonstrate how long it takes to complete its reviews and
whether it complies with its 9O-day statutory review and approval time frame.
Source: Auditor General staff compilation of unaudited information obtained from the Arizona Financiai Information System (AFIS) for the years
ended June 30, 2004 and 2005; Arizona Revised Statutes, Master List of Slate Government Programs; and other information proVided by
the Department, including revenue and expenditure estimates for the year ended June 30, 2006.
SUMMARY
The Office of the Auditor General has conducted a performance audit and sunset
review of the Governor's Regulatory Review Council (GRRC) pursuant to a May 24,
2005, resolution of the Joint Legislative Audit Committee. This audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
GRRC was established by executive order in 1981 to examine proposed
administrative rules that state agency directors determined would have an economic
impact on any state, county, city, or town agency; community college district; or
school district.1 In 1986, GRRC was created in statute and giveR alJthority to review'
aflproposed rules. In 1995, the Legislature made sweeping changes to the
rulemaking process that expanded GRRC's role, including giving GRRC final
approval authority over all proposed administrative rules, except those that are
exempted from the rulemaking process. GRRC consists of six members who are
appointed by the Governor and one ex-officio member representing the director of
the Department of Administration, who also serves as the GRRC chair.
GRRC's responsibility to review and approve rules comes at the end of a lengthy
rulemaking process, Before SUbmitting proposed rules to GRRC for their review and
approval, agencies must have already gone through several steps, including
determining whether an administrative rule is needed, opening and publishing a
rulemaking docket or public record, drafting the proposed rule and analyzing the
costs and benefits associated with the rule, soliciting public comment, and drafting
proposed final rules that incorporate or otherwise address any public comments
received. After these steps have been completed, agencies must submit their
proposed final administrative rules to GRRC for review. According to A.R.S. §41­1052,
GRRC must then review proposed rules against several statutory criteria, which
require that:
• The language of the administrative rule must be clear, concise, and
understandable,
• The agency has statutory authority to make the administrative rule, including
authority for new or increased fees and for requests that a rule become effective
immediately,
The Governor's Regulatory Review Council was established within and continues to be a part of the Department of
Administration. However, GRRC has its own sunset date, - pagei
-pageii
• The administrative rule does not conflict with existing law,
• The probable benefits of the administrative rule outweigh its probable costs,
• The administrative rule contains a generally accurate economic impact
statement,
• The economic impact statement describes the probable costs or benefits of the
administrative rule,
• The economic impact statement includes statements on the administrative
rule's probable effects on small businesses and state revenues, and
• The agency adequately addressed public comments on the administrative rule.
GRRC has 90 days from the date it receives an agency's rule package to approve or
return an agency's final rules. In fiscal year 2004, GRRC reported that it approved the
adoption, repeal, amendment, or renumbering of 1,330 individual rules and returned
3 rules. In fiscal year 2005, GRRC reported that it approved the adoption, repeal,
a!TIendcnent or renur1lb~ring qf all 1,183 individual rules it reviewed.
In addition to its responsibilities within the administrative rulemaking process, GRRC
performs several other duties. These include reviewing and approving agencies' 5­year
reviews of their administrative rules; receiving and considering appeals from the
public regarding certain agency practices; and reporting on agencies' efforts to
make necessary changes to administrative rules, compliance with licensing time
frames, and whether each agency maintains a directory summarizing the subject
matter of all current applicable rules and substantive policy statements, and that the
directory, rules, and substantive policy statements are available to the public.
Sunset Factors (see pages 13 through 22)
GRRC has generally met its objectives and purposes by effectively reviewing and
approving agency rules and by reviewing and approving agency 5-year rule review
reports. Specifically:
• GRRC's review of administrative rules consistent with statute-GRRC has
established various policies, procedures, and mechanisms to help ensure that
its required review and approval of proposed administrative rules complies with
statutory criteria and time frames. Auditors reviewed a random sample of ten
proposed administrative rule packages submitted to GRRC between
September 2004 and August 2005. This review showed that GRRC met its
various statutory requirements with regard to such matters as ensuring that the
language of the proposed rule was clear, concise, and understandable; that the
agency has the statutory authority to adopt the administrative rule; and that the
probable benefits of the proposed rule outweighed its probable costs. Although
GRRC reports that it does not determine the timeliness of its reviews, GRRC
completed its review of the random sample of 10 rule packages within the 90­day
time frame reqUired by A.R.S. §41-1 052(8). Additionally, comments from six
agency rule-writers who auditors interviewed showed general satisfaction with
GRRC's performance. To help ensure the timely review of rule packages, GRRC
has established a yearly schedule with monthly due dates for the submission of
rule packages and corresponding public meeting dates. If agencies submit their
rule packages on or before the indicated submission date, the rule package
should be ready for GRRC member consideration on the corresponding pUblic
meeting date. GRRC's adoption of a standardized process for reviewing
administrative rules also contributes to its ability to meet the statutory time frame
requirement.
• GRRC's analysis of 5-year review reports follows established process-GRRC
also follows specific policies and procedures to ensure that the reports agencies
produce documenting their internal analysis of their own rules every 5 years
comply with statutory requirements. According .to A.R.S. §41-1 056(A), at least
on.c~ every 5 years,'each agency" must review its administrative rules to
determine if any rules need to be amended or repealed and then, as necessary,
develop a plan for making needed revisions to its rules. Agencies must prepare
a report documenting their review and submit it to GRRC. GRRC must then
review these reports for compliance with various statutory criteria, such as
whether the report includes an analysis of any written criticisms an agency's
administrative rules received during the previous 5 years. Based on auditors'
review of a random sample of five rule review reports that GRRC received in
fiscal year 2005, GRRC's review of these reports conformed to its policies.
Additionally, although GRRC does not have a statutorily required time frame for
completing its review of these reports, based on auditors' review of the random
sample of five rule review reports, it took GRRC 90 days or fewer to review and
approve all five of these reports. Finally, while GRRC cannot require agencies to
proceed with the plans they develop for making needed revisions to their rules,
it has taken steps to encourage agencies to do so.
- page iii
TABLE OF CONTENTS
Introduction & Background
Sunset Factors
Agency Response
Figure:
Administrative Rulemaking Process and
GRRC's Specific Role in Process
Table:
Governor's Regulatory Review Council
Schedule of Revenues and Expenditures
Years Ended or Ending June 30,2004,2005, and 2006
(Unaudited)
1
13
4
10
- page V
The Governor's Regulatory Review Council was established within and continues to be a part of the Department of
Administration, However, GRRC has its own sunset date, - page 1
INTRODUCTION
& BACKGROUND
The Office of the Auditor General has conducted a performance audit and sunset
review of the Governor's Regulatory Review Council (GRRC) pursuant to a May 24,
2005, resolution of the Joint Legislative Audit Committee. This audit was conducted
as part of the sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
History and composition
GRRC was established by executive order in 1981 to examine proposed administrative
rules that state agency directors determined would have an economic impact on any
state, county, city, or town agency; community college district; or school district.1
Administrative rules are agency statements of general applicability that implement,
interpret, or prescribe law or policy, or describe the agency's procedure or practice
requirements. In 1986, GRRC was created in statute and given statutory authority to
examine all proposed rules. In 1995, the Legislature made sweeping changes to the
rulemaking process that significantly expanded GRRC's role. First, it received final
approval authority over all proposed administrative rules, except those that are
exempted from the rulemaking process. Second, GRRC was provided with staff to
assist in its enhanced rule review function. Lastly, the Legislature moved GRRC's review
and approval to the end of the administrative rulemaking process so that it could
approve rules in their final form. Currently, GRRC defines its mission as assisting
agencies in fulfilling their rulemaking responsibilities under statute.
GRRC consists of six members who are appointed by the Governor and one ex­officio
member representing the director of the Department of Administration, who
also seNes as the GRRC chair. A.R.S. §41-1051 (A) requires that GRRC be
composed of the following:
• At least one public interest member,
• At least one business community member,
• One member from a list of three nonlegislators recommended by the President
of the Senate,
GRRC has final
approval authority for
proposed administrative
rules, except for those
exempted from the
rulemaking process,
• One member from a list of three nonlegislators recommended by the Speaker
of the House, and
• Two at-large members.
Additionally, AR.S. §41-1 051 (A) requires that at least one of the GRRC members be
a licensed Arizona attorney. Members serve staggered 3-year terms.
Importance of administrative rules
According to the Office of the Secretary of State's Arizona Rulemaking Manual,
administrative rules are a necessary part of the legislative process for several
reasons:
In fiscal year 2005,
GRRC approved the
adoption, repeal,
amendment, or
renumbering of 1,183
administrative rules from
39 agencies. -",g,2
• Implementing legislative policy-Administrative rules help agencies implement
the broad public policy prescribed in statute. Specifically, statute can direct state
agencies to provide services or perform specific regulatory functions, while
administr?!iye rules detail the requirements or proc~sses for doing so. For
example, AR.S. §32-" 606(8) directs the Board of Nursing to license
professional and practical nurses. Administrative rules adopted by the Board of
Nursing explain the specific requirements for licensure, such as how to apply for
a license.
• Communicating with the public-Administrative rules allow agencies to
communicate statutory requirements to the public. For example, AR.S. §36-594
gives the Department of Economic Seourity (DES) the authority to revoke or
suspend the license of a home for developmentally disabled adults. However,
DES administrative rules explain under what circumstances this can occur and
the process a home must take to appeal this action.
• Setting standards and limits-Administrative rules set standards and limits for
government. For example, DES administrative rules identify the information that
its Adult Protective Services Division (APS) must request from the person or
entity reporting neglect and/or abuse of a vulnerable adult. As a result, all APS
staff have clear guidelines for the information they need to collect regarding
allegations of abuse or neglect.
The factors listed above not only make administrative rules necessary, but common.
Arizona's state agencies issue hundreds of administrative rules each year to achieve
goals such as ensuring that the public has safe food, clean air, and licensed health
care providers. For example, GRRC reports that for fiscal year 2005, it approved the
adoption, repeal, amendment, or renumbering of 1,183 administrative rules from 39
state agencies, including the Departments of Agriculture and Environmental Quality
and the Board of Nursing.
Administrative rulemaking process
The administrative rulemaking process is statutorily defined and specifies the steps
agencies must undertake to adopt rules, as well as certain exceptions to this process.
State agencies have several responsibilities in the administrative rulemaking process
before GRRC becomes involved, such as determining if an administrative rule is
needed, drafting the administrative rule, and soliciting public comment regarding the
proposed rule. After agencies have completed all of these steps, GRRC is required
to review an agency's proposed administrative rules to ensure they conform to
several statutory criteria, such as whether the administrative rule is clear and concise
and in compliance with the agency's legislative mandate. Additionally, statute
provides for certain exceptions to the administrative rulemaking process.
Agencies' rulemaking responsibilities-state agencies have several
responsibilities in the formal administrative rulemaking process, which can be time­consuming
to complete. For example, once an agency has drafted its rules, the time
frames specified in statute to complete the required reviews and public notice
requirements total approximately 10 months.These include maximum time frames for
some steps that could be. completed more quickly than the indicated time frame.
Additionally, there are many factors that can influence the overall amount of time It
fakes for agencies to complete this process, including the complexity of the
proposed rules and the amount of time and resources an agency can devote to the
administrative rulemaking process.
As illustrated in Figure 1 (see page 4), the steps an agency must complete within the
administrative rulemaking process, including statutory time frames for these steps,
are as follows:
• Determining if an administrative rule is needed-Before an agency begins the
administrative rulemaking process, it must determine whether an administrative
rule is needed. For example, statute requires agencies to adopt administrative
rules in order to set licensing time frames, establish licensing requirements, and
collect administrative fees. In other instances statute may permit, but not require,
an agency to write a rule. For example, A.R.S. §36-502(C) indicates that the
Department of Health Services, Division of Behavioral Health may adopt rules
concerning leaves, visits, and absences of patients from evaluation agencies
and mental health treatment agencies. However, no state agency has been
charged with the responsibility to ensure that agencies have adopted all the
administrative rules required by statute or necessary to carry out their legislative
mandates.
• Opening a rulemaking docket-State agencies begin the formal administrative
rulemaking process by opening a docket. Agencies maintain a docket or public
record to provide information to the public about the rule's SUbject, the time
Time frames in statute
require approximately
10 months to complete
the administrative
rulemaking pro~ss.
- J'lge3
Figure 1: Administrative Rulemaking Process and
GRRC's Specific Role in Process
Rulemaking docket-Provides
information about the rule's
subject, time frame tor
administrative rulemaking, and
the proposed rule's status.
Automatically terminates 1
year after the notice is
published it the agency does
not proceed with the process.
Agency Process
t
GRRC Process
Economic impact statement­Describes
how the proposed
rule will affect the regulated
community, small businesses,
and consumers.
-page 4
Source: Arizona Rufemaking Manual, GRRC training materials, and A.R.S. §41-1 001 et seq.
frame for the administrative rulemaking process, and the
rule's status. When an agency opens a docket, it must file a
notice with the Office of the Secretary of State, which then
publishes an announcement in the Arizona Administrative
Register (Register). An administrative rulemaking docket
automatically terminates 1 year after the notice is published if
an agency does not proceed with the administrative
rulemaking process. Once the agency opens a docket, it can
begin to draft its proposed rules, which should include a draft
of the rule's economic impact statement.1
• Soliciting public comment-After opening an administrative
rulemaking docket, the agency solicits public comment on its
proposed administrative rules. This occurs in two phases.
First, while drafting its administrative rules, an agency may
meet informally with stakeholders to solicit feedback on
suggested language and subject matter. Then, once it
completes its draft of the proposed administrative rules and
publishes this draft, also known as the Notice of Proposed
Rulemaking, in the Register, it has 30 days to receive formal
Written comments on the proposed administrative rules. If an
agency receives a written request for a public meeting during
this 30-day period, it must hold a meeting to receive oral comments from
interested parties. This meeting cannot be held less than 30 days after its
location and time are published in the Register. Although an agency does not
have to hold a public meeting unless requested, GRRC recommends that
agencies routinely hold such meetings and include the dates in their Notice of
Proposed Rulemaking. This provides the public with a forum to provide
comments regarding the proposed rules and avoids delays in the process if a
meeting is requested. An agency would have to go through the public comment
period a second time if the first comment period resulted in substantial changes
to the rules published in the Notice of Proposed RUlemaking.
• Drafting final rules-Following the close of the administrative rulemaking record,
which is the last date on which the agency will receive public comment, it can
begin drafting its final administrative rules. In doing so, it must address all
comments provided during the formal public comment period by either
modifying the administrative rule or preparing an explanation as to why the
administrative rule was not changed. Within 120 days of closing its public
comment period, an agency must submit its final administrative rules to GRRC
for review.
According to A.R.S. §41-1055(D). agencies are not required to prepare an economic impact statement for certain
proposed rules. including when the proposed rule decreases monitoring. recordkeeping, or reporting burdens on
agencies. political subdivisions. businesses, or persons, unless the agency determines that increased costs of
implementation or enforcement may equal or exceed the reduction in burdens. - page 5
GRRC has 90 days from
the date it receives an
agency's rule package.
to review and approve
or return an agency's
final rules.
-pag,6
GRRC's rulemaking-related responsibilities-Within the administrative
rulemaking process, GRRC has a specific responsibility to ensure that proposed
rules satisfy several statutory criteria before they can be approved. Thus, GRRC is
required to review proposed rules against statutory criteria, including criteria which
require that:
• The language of the administrative rule must be clear, concise, and
understandable,
• The agency has statutory authority to make the administrative rule, including
authority for new or increased fees and for requests that a rule become effective
immediately,
• The administrative rule does not conflict with existing law,
• The probable benefits of the administrative rule outweigh its probable costs,
• The administrative rule contains a generally accurate economic impact
statement,
• ·:The econo/Tlle lm'pact statement describes the probabie costs or benefits of tne
administrative rule,
• The economic impact statement includes statements on the administrative
rule's probable effects on small businesses and state revenues, and
• The agency adequately addressed public comments on the administrative rule.
GRRC has 90 days from the date it receives an agency's rule package to review and
approve or return an agency's final rules. During that time, GRRC staff works with the
agency to revise the administrative rules so that they conform to the statutory criteria.
As part of its monthly public meetings, GRRC members vote on whether to approve
the administrative rules or return them to the agency for further changes. If the rules
are returned, the agency can make GRRC's indicated revisions and resubmit the
revised rules to GRRC. However, if the returned rules require substantial changes, the
agency must publish a Notice of Supplemental Rulemaking in the Register and allow
for a second public comment period. After it addresses any additional public
comments and makes the necessary revisions to the rules, the agency must then
resubmit them to GRRC.
According to GRRC, in fiscal year 2004 it approved the adoption, repeal,
amendment, or renumbering of 1,330 individual rules and only returned 3 individual
rules to their respective agencies. Agencies later resubmitted 2 of the 3 rules for
GRRC approval in that fiscal year. In fiscal year 2005, GRRC approved the adoption,
repeal, amendment, or renumbering of all 1,183 of the rules it reviewed. If GRRC
approves the rules, GRRC staff file a final copy with the Office of the Secretary of
State. The administrative rules become effective 60 days after this filing. If an agency
requests and demonstrates the need, a rule can become effective immediately if two­thirds
of the GRRC voting quorum present approve the rule.
Alternative administrative rulemaking procedures-while most agencies
must follow the statutorily required administrative rulemaking process to adopt rules,
statute provides for exceptions to this process. As specified below, these exceptions
mayor may not require GRRC's review and approval of the proposed rules.
• Exemptions-An agency with an exemption may adopt administrative rules
without following any of the steps in the administrative rulemaking process, other
than submitting the final administrative rule to the Office of the Secretary of State
for publication in the Register. Through statute, the Legislature has permanently
exempted several agencies in full or in part from the regular administrative
rulemaking process, including agencies such as the Arizona Board of Regents,
the Arizona State Board of Education, the Arizona Corporation Commission, and
agencies headed by a single elected official. However, the Arizona Board of
Regents and the Arizona State Board of Education are statutorily required to
receive public comment on their proposed rules, and the .ArizonaCorporation
Commission must adopt rules underasu'bstantiallysimilar rulemaking process.
The rules of agencies headed by a single elected official and the Arizona
Corporation Commission are reviewed and approved by the Attorney General.
Additionally, statute permanently exempts administrative rules that cover certain
SUbjects from the regular administrative rulemaking process, including the
regulation of motor vehicle operation and the use of public works, including
streets and highways.
State agencies can also receive specific exemptions from the administrative
rulemaking process. For example, in 2004, the Legislature granted the Arizona
Healthcare Cost Containment System (AHCCCS) a year-long exemption from
the rulemaking process for the purpose of drafting rules related to the agency's
ability to qualify trusts created pursuant to the Federal Social Security Act.
According to a GRRC official, agencies might request exemptions from the full
process or part of the process to more quickly adopt rules. The Attorney
General's Office is responsible for reviewing and approving rules that are
exempted under A.R.S. §41-1057, including rules adopted by agencies headed
by a single elected official and the Arizona Corporation Commission. However,
rules made under other exemptions are not reviewed for appropriateness by an
outside agency.
• Summary administrative rulemaking-In addition to exemptions, A.R.S. §41­1027
provides for a summary administrative rulemaking process that allows
Agencies can receive
specific exemptions
tram the administrative
ruJemaking process.
- page 7
-page 8
state agencies to repeal obsolete administrative rules and/or administrative rules
that repeat statute verbatim. This process significantly shortens the
administrative rulemaking process, but still requires that GRRC review and
approve rules that an agency is proposing to repeal. Summary administrative
rules temporarily take effect after the agency has a proposed summary
administrative rulemaking published in the Register. The agency then has 90
days to receive informal public comment and submit the final summary
administrative rules to GRRC for review and approval. According to a GRRC
official, since this process is typically used to repeal rules where the agency no
longer has the authority for the rule, public comment is usually not provided.
GRRC can then either hold a hearing on the administrative rules or approve
them through a consent agenda at its monthly public meetings. Consent
agendas are typically used as a time-saving device and include agency items
that are minor or unlikely to generate controversy. Typically, one vote is taken to
approve or disapprove all of the items on a consent agenda. After GRRC
approves the administrative rules, it files a final summary administrative rule
package with the Office of the Secretary of State. This process cannot be used
by agencies to adopt new rules.
• Emergency administrative rulemaking-If an agency determines that one of
seyeraiemergencysituations'8xists, AR.S.§41-1026 allows it to undertake an
emergency administrative rulemaking. Instances when agencies may adopt
emergency rules include those that involve the protection of the public's health,
safety, or welfare, and to avoid violating federal law. By using this process to
adopt an administrative rule, an agency forgoes the formal public comment
period and GRRC's review and approval. Instead, the Attorney General reviews
and approves the emergency administrative rules and then submits them to the
Office of the Secretary of State for pUblication in the Register. However, an
agency cannot receive approval for an emergency administrative rule if the
emergency situation is the result of its own delay or inaction. Emergency rules
expire after 180 days and may only be renewed for one additional 180-day
period. An official with the Office of the Secretary of State reported that between
January 2000 and December 2005, agencies have filed 33 emergency rules.
GRRC's additional duties
In addition to its responsibilities within the administrative rulemaking process, GRRC
has the following responsibilities:
• Approving agencies' 5-year reviews of their administrative rules-GRRC is
responsible for maintaining a list of agencies that need to conduct a 5-year
review of their administrative rules, as well as reviewing and approving agencies'
reports on their reviews. According to A.R.S. §41-1056(A), at least once every 5
years, each agency must review its administrative rules to determine if any rules
need to be amended or repealed and then as necessary, develop a plan for
making needed revisions. Agencies must prepare a report documenting their
review and submit it to GRRC, which ensures that the agency's assessment
complies with statute. GRRC then approves or returns the report to the agency
for changes. If an agency has substantially revised an administrative rule within
2 years of its scheduled 5-year review, it does not have to complete an analysis
of that rule.
• Hearing appeals on certain agency practices-A.R.S. §§41-1033, 41-1056.01,
and 41-1081 require GRRC to receive and consider hearing appeals on three
areas of agency practice. The first type of appeal may occur after an agency
denies an individual's petition regarding an existing agency practice or policy
that the individual believes constitutes an administrative rule. The second type
of appeal may occur after an agency denies an individual's petition that the
economic impact statement accompanying a rule either did not estimate or did
not adequately estimate the economic impact. Finally, the public may also
submit appeals to GRRC regarding an agency's decision to enter a delegation
agreement, which allows for the delegation of an agency function to a political
subdivision. For example, the Department of Envir9nmental Quality (DEQ) has
de!egatedspecificwaterquailtymanagement responsibilities to Apache Gounty..
Appeals must be submitted to GRRC within a specified period of time following
the agency's decision.
Once an appeal has been received, GRRC then decides whether it will consider
the appeal at a public meeting. GRRC does not have to hear all of the appeals
it receives. In fact, an appeal can be put on GRRC's monthly public meeting
agenda only if within 2 weeks of its receipt, three or more GRRC members
indicate that it should be heard. In fiscal year 2005, GRRC reported receiving
only two appeals, each concerning different agency policies that were not
reflected in administrative rule, but which members of the pUblic felt constituted
an administrative rule. One of these appeals involved an AHCCCS policy
regarding changes to an administrative overhead allowance calculation that a
healthcare organization thought should be reflected in administrative rule.
GRRC heard and denied this appeal. While GRRC placed the second appeal on
its public meeting agenda, which concerned DEQ not following one of its
administrative rules, GRRC dismissed the appeal as it lacked jurisdiction to hear
it.
• Preparing compliance reports-GRRC compiles reports based on information it
annually receives from agencies regarding their compliance with specific
statutory mandates. First, GRRC receives annual updates and compiles a report
on the status of agency efforts to revise their rules under the 5-year review
process. GRRC then must list the agencies that report a lack of progress on
revising their rules on its Web site. Second, any agency that issues a license
- page 9
must provide GRRC with information on its compliance with its overall licensing
time frames. The Governor, the President of the Senate, and the Speaker of the
House of Representatives receive copies of GRRC's report summarizing this
information. Third, all agency heads must certify to GRRC that the agency is in
compliance with statute by maintaining a directory summarizing the subject
matter of all current applicable rules and substantive policy statements, and that
the directory, rules, and substantive policy statements are available to the public.
GRRC must then note the agencies that are not in compliance with this
requirement on its Web site. Finally, GRRC includes all of this information in its
annual report.
Staffing and budget
In order to fulfill its responsibilities, GRRC has seven full-time staff positions, two of
which were vacant as of December 2005. The positions include an administrator
responsible for overseeing the agency's day-to-day operations; four staff attorney
analysts who assist in the review of administrative rules; an economist responsible
for assessing each administrative ruli:J's economic impact; and an office manager
who-D\\ersees GRRC'sflJes; meeting agenGJHs, and otner administrative actiVities. .
GRRC does not have a line-item in the state budget. Instead, it receives monies from
the State General Fund through an appropriation made to the Department of
Administration. Table 1 illustrates GRRC's actual revenues and expenditures for fiscal
years 2004 and 2005, and the estimated revenues and expenditures for fiscal year
Table 1: Governor's Regulatory Review Council
Schedule of Revenues and Expenditures
Years Ended or Ending June 30, 2004, 2005, and 2006
(Unaudited)
-page 10
2004 2005 2006
(Actual) (Actual) (Estimated)
Revenues:
State General Fund appropriations $454.160 $480,800 $505,900
Expenditures:
Personal services and employee related 411,138 441,624 462,325
Professional and outside services 2,813 2,884 3,000
Other operating 32,295 36,035 40,575
Equipment ~
Total expenditures 446.246 480,732 505,900
Excess of revenues over expenditures $ 7,914 $ 68 $ -0-
Source: Auditor General staff analysis of financial information provided by the Department of Administration from its
Arizona Financial Information System for the years ended June 30, 2004 and 2005, and department-prepared
estimates for the year ending June 30, 2006.
2006. For fiscal years 2004 and 2005, GRRC spent approximately 91 percent of its
budget on staff salaries and related employee expenditures. This trend is expected
to continue for fiscal year 2006. In fiscal year 2006, both revenues and expenditures
are estimated to be approximately $506,000.
Audit scope and methodology
This performance audit focused on GRRC's responsibilities within the administrative
rulemaking process and its process for reviewing and approving agency reports
related to 5-year rule reviews. GRRC's performance was also analyzed in
accordance with the 12 statutory sunset factors. This report presents information on
the administrative rulemaking process, as well as GRRC's performance relative to its
responsibilities within the responses to the 12 statutory sunset factors.
Auditors used a variety of methods to study the issues addressed in this report.
These methods included inteNiewing GRRC members, its former administrator, and
staff; and reviewing statutes; GRRC's monthly meeting minutes from fiscal year
2005; the Secretary of State's Arizona Rulemaking Manual; and GRRC's policies and.. ~I
i procedures. .
In addition, to evaluate GRRC's timeliness in reviewing rule packages and the
agency's 5-year rule review reports, the consistency with which it applies its policies
and procedures, and the customer seNice it provides, auditors reviewed and
conducted an analysis of a random sample of 10 of the 97 administrative rulemaking
packages GRRC received between September 2004 and August 2005 and a random
sample of 5 of the twenty-four 5-year agency reports submitted to GRRC between
July 2004 and June 2005. Auditors also inteNiewed rule-writers from 6 state agencies
and reviewed all 78 of GRRC's customer seNice sUNeys returned in fiscal year
2005.1
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to GRRC's members, former
administrator, and staff for their cooperation and assistance throughout the audit.
Auditors interviewed rule-writers from the Department of Agriculture, the Arizona Health Care Cost Containment System,
the Board of Nursing, the Department of Insurance, the Lottery Commission, and the Radiation Regulatory Agency. These
agencies were selected based on their varying sizes and the differing complexity of their administrative rules. - page 11
SUNSET FACTORS
In accordance with A.R.S. §41-2954, the Legislature should consider the following 12
factors in determining whether the Governor's Regulatory Review Council (GRRC)
should be continued or terminated.
1. The objective and purpose in establishing GRRC.
GRRC was established by executive order in 1981 to examine proposed
administrative rules that state agency directors determined would have an
economic impact on any state, county, city, or town agency; community college
distr~et; or school. district. Adr0inj~trative rules are agency statements of genera!
applicability that implement, interpret, or prescribe law or policy, or describe an
agency's procedure or practice requirements. In 1986, GRRC was established
in statute and given authority to review all proposed rules. In 1995, the
Legislature made sweeping changes to the rulemaking process that significantly
expanded GRRC's role. First, it received final approval authority over all
proposed administrative rules, except those that are exempted from the
rulemaking process. Second, GRRC was provided with staff to assist in its
enhanced rule review function. Lastly, the Legislature moved GRRC's review and
approval to the end of the administrative rulemaking process so that it could
approve rules in their final form. Currently, GRRC defines its mission as assisting
agencies in fUlfilling their rulemaking responsibilities under statute.
AR.S. §41-1052 requires GRRC to ensure that no agency rule becomes
effective unless:
• The language of the rule is clear, concise, and understandable,
• The agency has statutory authority to make the rule, including authority for
new or increased fees and for requests that a rule become effective
immediately,
• The rule does not conflict with existing law,
• The probable benefits of the rule outweigh its probable costs,
In 1995, the Legislature
significantly expanded
GRRC's role Within the
rulemaking process.
- page 13
-page 14
• The rule contains a generally accurate economic impact statement,
• The economic impact statement describes the probable costs or benefits
of the rule and its probable effects on small businesses and state revenues,
and
• The agency adequately addressed public comments on the rule.
In addition to reviewing agency rules, GRRC has the following three statutory
responsibilities:
• Reviewing 5-year reports-AR.S. §41-1056(B) requires GRRC to review
and approve or return the reports that agencies submit documenting their
internal review of their administrative rules. AR.S. §41-1 056(A) requires that
agencies complete reviews of their administrative rules every 5 years to
determine if any rules need to be amended or repealed and to develop a
plan for making the identified revisions.
• Receiving and hearing appeals-GRRC also receives and considers
.... aPl2eals. fromm.~r:nbers ()f the public ()n various agency practices, incluqing
·an agency's decision to deny an indIvidual's petition regarding whether an
existing agency practice or policy constitutes a rule.
• Reporting on certain agency practices-GRRC must annually prepare
reports based on information it receives from agencies regarding their
compliance with specific statutory mandates. These mandates include
requiring agencies to update GRRC on their progress in completing the
administrative rule revision plan they included in their 5-year review report;
requiring agencies that issue licenses to provide GRRC with information on
their compliance with licensing time frames, which GRRC compiles in a
report and sends to the Legislature and Governor's Office; and requiring
that all agencies certify to GRRC that they maintain a directory summarizing
the subject matter of all current applicable rules and substantive policy
statements, and that the directory, rules, and substantive policy statements
are available to the public.
2. The effectiveness with which GRRC has met its objectives and purpose and the
efficiency with which it has operated.
GRRC has generally met its objectives and purposes by effectively reviewing
and approving agency rules and by reviewing and approving agency 5-year rule
review reports. Specifically:
- pag,15
• GRRC's review of administrative rules consistent with statute--GRRC has
established various policies, procedures, and mechanisms to help ensure
that its required review and approval of proposed administrative rules
complies with statutory criteria and time frames. According to AR.S. §41­1052,
GRRC must review proposed administrative rules submitted by state
agencies for compliance with various statutory criteria. As previously
mentioned, some of these include whether the language of the
administrative rule is clear and concise, whether the agency has the
statutory authority to adopt the administrative rule, and whether the benefits
of the administrative rule outweigh its costs. GRRC has established various
policies and procedures to help ensure that its review of proposed
administrative rules appropriately encompasses these criteria. For
example, GRRC analysts must prepare memos that document their
analysis of each proposed administrative rule and complete a checklist that
documents their response to several questions regarding whether the
proposed administrative rule complies with the criteria. Based on auditors'
review of a random sample of ten proposed administrative rules submitted
to GRRC between September 2004 and August 2005, GRRC's review of
these proposed administrative rules conformed to its policies and
_p!ocedures..
.. --" _.~-.- .. -'...
• GRRC reviews and approves rules within statutory time frame--According
to A.R.S. §41-1052(B), GRRC has 90 days to review and approve or return
an agency's proposed administrative rules. To assess the timeliness of
GRRC's review, auditors reviewed a random sample of ten proposed
administrative rule packages submitted to GRRC between September 2004
and August 2005. Although GRRC reports that it does not determine the
timeliness of its reviews, GRRC completed its review of the random sample
of ten rule packages within the gO-day time frame required by statute. In
fact, GRRC completed its review and approval of nine of these rule
packages in fewer than 60 days.
To help ensure the timely review of rule packages, GRRC has established
a yearly schedule with monthly due dates for the submission of rule
packages and corresponding public meeting dates. If agencies submit
their rule packages on or before the indicated submission date, the rule
package should be ready for GRRC member consideration on the
corresponding public meeting date. For example, according to GRRC's
2005 schedule, if an agency wanted to have a rule package reviewed at the
December 6, 2005, public meeting, it had to submit its proposed rules to
GRRC staff by October 24, 2005. Likewise, if the agency had to make
revisions to the proposed rules after GRRC staff reviewed them, it had to
forward the revised rules to GRRC by November 16, 2005. GRRC's
adoption of a standardized process for reviewing administrative rules also
contributes to its ability to meet the statutory time frame requirement.
GRRC must review
administrative rules for
compliance with
statutory criteria,
inclUding whether the
rule is ciear and
concise.
GRRC staff work with
agencies to make any
necessary revisions
before the package is
sent to GRRC for formal
review and approval.
-page 16
•
While GRRC completed its review of the ten sample rule packages within
the gO-day time frame, in some cases this time period does not include the
time a rule package may be back with an agency for needed revisions. After
an agency submits a package to GRRC, GRRC staff will work with the
agency to make any necessary revisions before the package is sent to
GRRC for formal review and approval. If a package is returned to an
agency, GRRC does not count agaihst the gO-day requirement the time the
package is back with the agency. For example, it took a total of 141 days
to approve one rule package in the sample of ten rule packages that
auditors reviewed. This was because the agency required additional time to
make the revisions that GRRC staff suggested. This process of GRRC staff
working with the agencies to revise their rule packages can shorten the
review process by helping prevent instances in which GRRC formally
returns a rule package, requiring the agency to resubmit it and wait for
GRRC staff to review it again.
GRRC's analysis of 5-year review reports follows established process­GRRC
also follows specific policies and procedures to ensure that the
reports that agencies produce documenting their internal analysis of their
own rules every 5 years comply with statutory requirements. If all aqsncy's
analysis determines that any of their rules require revision, the report must
also include a plan with a target date for completing these revisions.
According to A.R.S. §41-1 056(B), GRRC must review these reports for
compliance with various statutory criteria, such as whether the report
includes an analysis of any written criticisms an agency's administrative
rules received during the previous 5 years. Similar to its review of
administrative rule packages, GRRC analysts must prepare memos that
document their analysis of each report and complete a checklist that
documents their response to several questions regarding whether the
report complies with the statutory requirements. Based on auditors' review
of a random sample of five rule review reports that GRRC received in fiscal
year 2005, GRRC's review of these reports conformed to its policies and
procedures.
Additionally, while GRRC cannot require agencies to proceed with the plans
they develop for making needed revisions to their rules, it has taken steps
to encourage agencies to do so. GRRC indicated that some agencies
resubmit their previous 5-year report without having taken any of the
planned actions outlined in its previous report. However, GRRC has taken
steps to attempt to reform this behavior by requiring an agency that
resubmits the same report from the previous 5 years to provide GRRC with
a monthly oral progress report on its efforts to update its rules. Additionally,
in some cases, GRRC's chairman has written a formal letter to an agency
director expressing concern with the status of the agency's rule revisions.
Further, A.R.S. §41-1056(C) allows GRRC to decline giving its approval to a
duplicate report and instead require the agency to submit a new report in 1
year. However, GRRC indicates that it has not used this option and instead
has required the monthly oral progress reports.
• GRRC conducts review of 5-year rule review reports in a timely manner­Although
GRRC does not have a statutorily required time frame for
completing its review of these reports, GRRC also tries to complete them
within 90 days. Based on auditors' review of a random sample of five rule
review reports that GRRC received in fiscal year 2005, it took GRRC 90 days
or less to review and approve all five of these reports.
• State agencies generally satisfied with GRRC's performance-State
agencies generally report satisfaction regarding GRRC's review and
approval of proposed administrative rules and 5-year review reports and
the assistance that GRRC provided to agencies during these processes.
Auditors inteNiewed six agency rule-writers to assess their satisfaction with
GRRC. Four of these six agency rule-writers rated GRRC's overall
performance between a seven and a nine on a scale of one to ten, with ten
being the highest. One of the two remaining agency rule-writers rated
GRRC's overall performanQe at a five ,()n the same scale, while the other
rule-writer rated the performance of GRRCstaff at between a seven and an
eight and its members at a five. 1 In addition, all six of the rule-writers
reported that GRRC's analysts were generally easy to contact, while five of
the six indicated that GRRC was responsive to their questions. Further, four
of the six rule-writers indicated that they found GRRC's feedback
constructive, although two reported that GRRC's proposed revisions to ­their
administrative rules sometimes changed the administrative rule's
meaning. However, both of these rule-writers indicated that an agreement
could usually be reached with the GRRC analyst regarding appropriate
revisions. Likewise, while three of the six rule-writers indicated that they
would like quicker feedback from GRRC's analysts, two of these three rule­writers
indicated that they recognized that the delays were due to GRRC's
workload.
Similarly, GRRC has received favorable feedback from the customer
seNice sUNey forms it requests agencies that go through the GRRC
process to complete. The sUNey asks respondents to rate GRRC in seven
areas such as the GRRC staff's professionalism and their overall
satisfaction with GRRC. Seventy-eight of these sUNey forms were returned
in fiscal year 2005 for a response rate of approximately 62 percent. Fifty­nine
of the respondents gave GRRC the maximum score in all sUNey areas
rated.
While the interviewed rule-writers were not asked to rate GRRC staff and members separately, one rule-writer provided
separate ratings.
Over 75 percent of the
customer service
surveys that GRRC
received in fiscal year
2005 gave GRRC the
maximum score in all
survey areas rated.
- page 17
3. The extent to which GRRC has operated in the public interest.
Although GRRC's operations primarily affect state agencies, some of its
activities, such as ensuring that agencies address public comments on their
administrative rules, hearing appeals regarding specific agency actions, and
providing required information on agency rulemaking activities, can indirectly
impact the general public. Specifically:
• GRRC ensures public comments addressed-AR.S. §41-1 052(C) requires
GRRC to ensure that comments from members of the public regarding
agencies' proposed administrative rules are adequately addressed. Based
on auditor review of a random sample of ten proposed administrative rule
packages submitted to GRRC between September 2004 and August 2005,
for all ten rule packages, GRRC determined and noted whether the agency
addressed all public comments.
• GRRC hears public appeals-AR.S. §§41-1033, 41-1056.01, and 41-1081
also require GRRC to receive and hear appeals on three areas of agency
practice, including an agency's decision to deny an individual's petition
". regarding whether an existing agency practice or poli~y.constitutes.a rule"_
'As "prBviously discussed, GRRG reported receiving two appeals in fisc.::;!
" year 2005, each concerning different agency policies that were not
reflected in adrninistrative rule, but which members of the public felt
constituted an administrative rule. GRRC heard and denied the first appeal.
However, although GRRC placed the second appeal on its public meeting
agenda, which concerned an agency that was not following one of its
administrative rules, GRRC dismissed the appeal because it lacked
jurisdiction to hear it.
GRRC conducts training
seminars nearly every
month on the
administrative
rulemaking process and
other rulemaking topics
for agency rule-writers.
-pag,18
• GRRC provides required information-GRRC provides information within
its annual report and on its Web site regarding agency rulemaking activities.
Specifically, GRRC reports on the number of agency administrative rules
approved or returned, agencies that do not certify compliance with the
requirement that they maintain a directory summarizing the subject matter
of all current applicable rules and substantive policy statements, and
agencies that have reported a lack of progress toward addressing needed
revisions to their administrative rules.
Additionally, GRRC assists state agencies with the administrative rulemaking
process by conducting training seminars and informal courtesy reviews of
proposed administrative rules. Specifically, nearly every month, GRRC staff
provide training seminars on the administrative rulemaking process and various
administrative rulemaking topics to state agency rule-writers. These seminars
cover topics including methods for successfully navigating the administrative
rulemaking process and guidelines for preparing the 5-year rule review report.
Additionally, when time permits, GRRC staff review an agency's proposed rules
before the agency formally submits them to GRRC for review and approval
within the gO-day time frame. Although this is not a statutory requirement, it
allows agency rule-writers to receive feedback from GRRC staff on their
proposed administrative rules and make suggested revisions prior to the formal
submission of the proposed administrative rules to GRRC. If its workload
permits, GRRC tries to complete these reviews in 2 months or less.
4. The extent to which rules adopted by GRRC are consistent with the legislative
mandate.
GRRC has adopted rules that appear to be within its legislative mandate. A.R.S.
§41-1 051 (E) grants GRRC the authority to make rules. GRRC last made
substantial changes to its rules in December 2003. The 17 rules GRRC has
adopted cover several of its practices that involve the public, including the
scheduling of its public meetings, placing a rule on GRRC's public meeting
agenda, and the receiving and hearing of appeals. Audit work did not identify
the need for any additional rules.
5. The extent to which GRRC .has encouraged input from the public before
adopting its rules, and the extent to which it has informed the pUblic as to its
actions and their expected impact on the public.
GRRC has followed all the requirements of the administrative rulemaking
process when adopting its own rules, including opening a docket for proposed
rulemaking, publishing a Notice of Proposed Rulemaking in the Arizona
Administrative Register, and soliciting and addressing pUblic comments.
Because its operations primarily affect state agencies, GRRC officials reported
that the agency took several steps to ensure it received feedback from agency
rule-writers regarding its own administrative rules, including holding discussions
with agency rule-writers before drafting administrative rules, requesting that
several agency rule-writers review the draft administrative rules, posting the draft
administrative rules on its Web site, sending an e-mail to all rule-writers informing
them of the posting and inviting their comments, and discussing the rules at a
regular public meeting, which was conducted in accordance with open meeting
laws.
GRRC has also complied with the State's open meeting laws. GRRC has posted
pUblic meeting notices at least 24 hours in advance at the required location,
made agendas available to the public, maintained meeting minutes, and filed
the required statement of where meeting notices will be posted with the
Secretary of State.
- page 19
GRRC is considering
two statutory changes
that could result in
greater efficiency within
the administrative
rulemaking and the 5­year
review process.
-page 20
6. The extent to which GRRC has been able to investigate and resolve complaints
that are within its jurisdiction.
GRRC does not have authority to investigate and resolve complaints.
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling
legislation.
GRRC's actions are limited to reviewing and approving adopted and existing
rules established by state agencies. As a result, the Attorney General's Office is
not responsible for prosecuting actions under GRRC's enabling legislation.
However, members of the public can file civil litigation if they believe a rule was
not made in substantial compliance with statute, or if they question the
interpretation or application of rule. While the State Solicitor General's Office
would represent GRRC in such cases, GRRC reports that it has not been the
subject of any civil action.
8. The extent to Which GRRC i1as addressed deficiencies in its enabHrtg statutes
that prevent it from fulfilling its statutory mandate.
The Legislature last enacted laws that affected GRRC in 2003 when it revised
AR.S. §41-1051 so that GRRC no longer had to submit its annual report to the
Governor and al/ members of the Legislature. Instead, the revised version of the
statute requires GRRC to publish certain elements from its annual report on its
Web site and make it available to the public upon request. This information
includes a list of agency rules approved or returned by GRRC, and a list of
agencies that report a lack of progress implementing the plan described in their
5-year review report for making needed revisions to their rules.
According to a GRRC official, GRRC and the Department of Administration have
considered two statutory changes that should streamline the administrative
rulemaking process. The first of these is a change to AR.S. §41-1055, which
requires agencies to submit an economic impact statement (EIS) with most
administrative rule packages. In the EIS, each agency must provide an
assessment as to whether the probable benefits from the proposed
administrative rule outweigh its probable costs. However, according to GRRC
officials, almost half of the administrative rule packages it reviews have no
economic impact beyond the cost of writing the administrative rule.
Consequently, GRRC has considered a statutory change that would allow
agencies to document that an administrative rule has no economic impact,
rather than requiring them to prepare an entire EIS. However, as part of the
proposal, if a member of the public disagrees with the agency's assessment,
the agency would be required to complete an EIS.
GRRC is also considering a change to A.R.S. §41-1056, which requires state
agencies to conduct a review and analysis of their administrative rules every 5
years, identify needed changes to their administrative rules, and provide a report
to GRRC on this review and analysis as well as a plan for addressing the needed
changes. Currently, statute allows agencies to forgo reviews of administrative
rules they have revised in the previous 2 years. However, GRRC is proposing
that agencies not be required to include in their 5-year review and report
administrative rules that have been revised within the previous 5-year period.
This proposed change would limit the number of rules that need to be included
in an agency's 5-year reviews and, according to GRRC, improve the efficiency
of this process.
Although GRRC is considering these changes, it does not anticipate proposing
any changes for consideration during the 2006 legislative session.
9 The extent to which changes are necessary in the laws of GRRC to adeqLJately
"comply'Vvith the factors Iisied in this subsection.
Audit work did not identify any necessary statutory changes.
10. The extent to which the termination of GRRC would significantly harm the
public's health, safety, or welfare.
Terminating GRRC would not directly harm pUblic health, safety, or welfare.
However, as previously discussed, some of GRRC's processes indirectly affect
the general public. For example, GRRC helps ensure that agency rules
incorporate public comment and GRRC receives and hears appeals on agency
practices that potentially should be reflected in rule, but are not. Additionally,
GRRC reviews agencies' proposed administrative rules to ensure that they
comply with statutory criteria, including whether the agency has authority to write
the rule and whether the probable benefits of the proposed rule outweigh its
probable costs.
11. The extent to which the level of regulation exercised by GRRC is appropriate and
whether less or more stringent levels of regulation would be appropriate.
The audit found that the current level of regulation exercised by GRRC is
generally appropriate.
- page 21
-page 22
12. The extent to which GRRC has used private contractors in the performance of
its duties and how effective use of private contractors could be accomplished.
GRRC does not use any private contractors in the performance of its duties.
Additionally, audit work did not identify any opportunities for GRRC to contract
any of its responsibilities.
AGENCY RESPONSE
,- <- ,-. ~ • • - - ."--
-
Janet Napolitano
Governor
William Bell
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
GOVERNOR'S REGULATORY REVIEW COUNCIL
100 North 15th Avenue. ROOM 402
PHOENIX, ARIZONA 85007
(602) 542-2058
February 15, 2006
Debra K. Davenport, CPA
Auditor General
2910 No1hA4th Street, Suite 410
Phoenix, Arizona 85016--
Dear Ms. Davenport:
We have reviewed the February 8, 2006 final draft of the sunset audit report of the
Governor's Regulatory Review Council. I would like to express the sincere appreciation
of the Council for the hard work and professionalism of your staff in performing the
audit.
As there are no findings or recommendations in the final draft, this letter serves as the
Council's written response in accordance with Joint Legislative Audit Committee
procedures.
Again, thank you for your work in accomplishing the sunset audit of the Governor's
Regulatory Review Council.
Sincerely,
Graham Alex Turner
Chairman
Performance Audit Division reports issued within the last 24 months
04-03 Behavioral Health Services' 05-02 Department of Administration-
HB2003 Funding for Adults Financial Services Division
with Serious Mental Illness 05-03 Government Information
04-04 Department of Emergency and Technology Agency (GITA) &
Military Affairs and Information Technology
State Emergency Council Authorization Committee (ITAG)
04-05 Department of Environmental 05-04 Department of Economic
Quality-Water Quality Division Security-Information Security
04-06 Department of Environmental 05-05 Department of Economic
Quality-Waste Programs Security-Service Integration
Division Initiative
04-07 Department of Environmental 05-06 Department of Revenue-Audit
Quality-Air Quality Division Division
04-08 Department of Environmental 05-07 Department of Economic
Quality-Sunset Factors Security-Division of
04-09 Arizona Department of Developmental Disabilities
Transportation, Motor Vehicle 05-08 Deaprtment of Economic
Division- State Revenue Security-Sunset Factors
Collection Functions 05-09 Arizona State Retirement
System
04-10 Arizona Department of 05-10 Foster Care Review Board
Transportation, Motor Vehicle 05-11 Department of Administration-
Division-Information Security Information Services Division
and E-government Services and Telecommunications
04-11 Arizona Department of Program Office
Transportation, Motor Vehicle 05-12 Department of Administration-
Division-Sunset Factors Human Resources Division
04-12 Board of Examiners of Nursing 05-13 Department of Administration-
Care Institution Administrators Sunset Factors
and Assisted Living Facility 05-14 Department of Revenue-
Managers Collections Division
05-L1 Letter Report-Department 05-15 Department of Revenue-of
Health Services- Business Reengineering/
Ultrasound Reviews Integrated Tax System
05-01 Department of Economic 05-16 Department of Revenue-
Security-Division of Sunset Factors
Employment and
Rehabilitation Services-
Unemployment Insurance
Program
Future Performance Audit Division reports
Arizona Health Care Cost Containment System-Healthcare Group
Janet Napolitano
Governor
William Bell
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
GOVERNOR'S REGULATORY REVIEW COUNCIL
100 North 15th Avenue. ROOM 402
PHOENIX, ARIZONA 85007
(602) 542·2058
October 12, 2006
Steven Moortel
Arizona House of Representatives
1700 West Washington Street, Suite H
Phoenix, Arizona 85007
Re: Sunset Review - Governor's Regulatory Review Council
Dear Mr. Moortel,
This is in response to Representative Konopnicki's letter of August 16, 2006, in which
he requested we provide you with information regarding the recent sunset review of the
Governor's Regulatory Review Council ("GRRC"). We are happy to provide you with
the information needed to fulfill the requirements of A.R.S. § 41-2954(F).
Factor 1: An identification of the problem or the needs that the agency is intended
to address.
For most agencies, review by GRRC is the final step in the rulemaking process. GRRC
reviews most draft agency rules to ensure that they are necessary, and to avoid
duplication and adverse impact on the public. GRRC assesses whether a rule is clear,
concise, and understandable; legal, consistent with legislative intent and within the
agency's statutory authority; and whether the benefits of a rule outweigh the cost of
compliance. GRRC also reviews whether the agency solicited and adequately
considered public comment. If a rule does not meet these criteria, GRRC returns it to
the agency for further consideration.
Further, A.R.S. § 41-1056 requires each agency to review all of its rules at least once
every five years to determine whether any rule should be amended or repealed, and to
summarize its findings in a report to GRRC. The statute also requires agencies to
Steven Moortel
October 12, 2006
Page Two
annually report to GRRC on their progress toward completing the courses of action
established in their Five Year Review Reports.
In addition, agencies are annually required to report to GRRC compliance with their
iime-frame rules. GRRC also receives and hears appeals regarding agency practices
or substantive policy statements that a member of the public contends must be in rule.
Factor 2: A statement, to the extent practicable, in quantitative and qualitative
terms, of the objectives of such agency and its anticipated accomplishments.
In 2005-2006, agencies submitted 115 rule packages for review and action by GRRC.
In these packages, the agencies repealed 336 rules, made 528 new rules, amended
610 existing rules, and renumbered 34 existing rules, for a total of 1,508 rulemaking
actions.
Also during 2005-2006, GRRC received and approved 36 Five Year Review Reports.
The reports summarized reviews of 956 rules.
A copy of GRRC's 2006 annual report, as well copies of GRRC's Monthly Performance
Measures for July 2005 through September 2006, are enclosed.
Factor 3: An identification of any other agencies having similar, conflicting or
duplicate objectives, and an explanation of the manner in which the agency avoids
duplication or conflict with other such agencies.
GRRC is not aware of another agency having similar, conflicting or duplicate objectives.
Factor 4: An assessment of the consequences of eliminating the agency or of
consolidating it with another agency.
GRRC ensures that agency rules are properly developed and consistent with statute;
clear, concise and understandable; that the benefits of the rules outweigh the cost; and
that public comment is sought and considered. While these responsibilities primarily
affect state agencies, they indirectly impact and benefit the general public.
As requested, I have also enclosed copies of GRRC's Minutes for the past year, as well
as a copy of GRRC's 2006 Annual Report.
Steven Moortel
October 12, 2006
Page Three
I appreciate the opportunity to provide this information. If you require any further
information or assistance, please feel free to contract me.
Sincerely,
~~ t:l~"1 · -J
~aham Alex Turner
Chair, Governor's Regulatory Review Council
1"' onnat uocument Page 1 of2
Interim agendas can be obtained via the Internet at http://www.azleg.state.az.us/lnterimCommittees.asp
ARIZONA STATE LEGISLATURE
INTERIM MEETING NOTICE
OPEN TO THE PUBLIC
SENATE GOVERNMENT ACCOUNTABILITY AND REFORM AND HOUSE GOVERNMENT
REFORM AND GOVERNMENT FINANCE ACCOUNTABILITY COMMITTEE OF
REFERENCE FOR THE SUNSET HEARING OF
GOVERNORS REGULATORY REVIEW COUNCIL
Date:
Time:
Place:
Wednesday, November 29, 2006
9:05 a.m.. or upon adjournment of the Committee on Government Reform and
Government Finance Accountability
HHR3
AGENDA
1. Call to Order
2 Opening Remarks
3. Auditor General Report on the Regulatory Review Council
4. Presentation by the Director of Governors Regulatory Review Council
5. Public Testimony
6. Discussion
7. Recommendations by the Committee of Reference
8. Adjourn
Members:
Senator Jack Harper, Co-Chair
Senator Robert Burns
Senator Albert Hale
Senator Richard Miranda
Senator Thayer Verschoor
11/28/06
br
Representative Bill Konopnicki, Co-Chair
Representative Cheryl Chase
Representative Phil Lopes
Representative John McComish
Representative John Nelson
http://www.azleg.gOYIFormatDocument.asp?format=print&inDoc=/iagenda/house/112906+house+QT.._ 1,)J? 1/?OOf\
Yorrnat Document Page 2 of2
People with disabilities may request reasonable accommodations such as interpreters, alternativ
formats, or assistance with physical accessibility. If you require accommodations, please contact th
Chief Clerk's Office at (602) 926-3032, TOO (602) 926-3241.
http://www.azleg.goviForrnatDocument.asp?forrnat=print&inDoc=/iagenda/house/112906+house+gr... 12/21/2006
Format Document
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ARIZONA STATE LEGISLATURE
Forty-seventh Legislature - Second Regular Session
SENATE GOVERNMENT ACCOUNTABILITY AND REFORM AND HOUSE
GOVERNMENT REFORM AND GOVERNMENT FINANCE ACCOUNTABILITY
COMMITTEE OF REFERENCE FOR THE SUNSET HEARING OF
GOVERNOR'S REGULATORY REVIEW COUNCIL
Minutes of Meeting
Wednesday, November 29,2006
House Hearing Room 3 -- 9:05 a.m. or upon adjournment of the
Committee on Government Reform and Government Finance Accountability
Page 1 of6
Chairman Konopnicki called the meeting to order at 9:17 a.m. and attendance was noted by the secretary.
Members Present
Senator Bums
Senator Verschoor
Senator Jack Harper, Cochair
Senator Hale
Senator Miranda
Representative Downing
Representative Lopes
Representative McComish
Representative Adams
Representative Konopnicki, Cochair
Members Absent
Speakers Present
Dale Chapman, Performance Audit Manager, Office of the Auditor General
Alex Turner, Arizona Department of Administration Ex-Officio Member/Chairman, Governor's Regulatory Revie,
Council
OPENING REMARKS
Senator Bums opined that the function performed by the Governor's Regulatory Review Council (GRRC) i
important, but having been in the regulated community for a number of years, he would like to share som
observations. The fact that a Governor's council reviews rules and regulations is basically wrong, bl
unfortunately, the Legislature delegated all kinds of responsibility to agencies in the form of rules and regulation
-rr ...n._~ ..~~~+ .,C'n');nnr\('=/iminllfelHouseI112906+COR+SUNSET+GOV... 12/21/2006
Format Document Page 2 of6
over the years, which have the effect of law on the people that are regulated. The Executive branch is allowed t
'write, enforce and review rules through GRRC, so the "fox is watching the henhouse." A better system would be t
have the Legislature conduct the review, and if an agency is getting out of hand as far as overburdening rules an
regulations, there would be a much better chance of reeling that in; however, the separation of powers issue ha
arisen in that regard when attempts were made to establish a regulatory review committee at the legislative level i
the past. When the policing agency writes and enforces the rules and regulations, the rules and regulations are ofte
written for the convenience of the enforcer and not to protect the people as the top priority.
AUDITOR GENERAL REPORT ON THE GOVERNOR'S REGULATORY REVIEW COUNCIL
Dale Chapman, Performance Audit Manager, Office of the Auditor General, gave a slide presentation regarding th
audit performed on GRRC including the following findings (Attachment 1):
• Review of rules consistent with statute.
• Reviews completed within statutory time frames.
• Review of five-year reports consistent with statute.
• State agencies generally satisfied with GRRC.
Senator Burns stated that he is concerned with the public comment portion of the process because he has bee
involvedjn sessions where hundreds "of people showed up\-vith thevastmajorit~rinoppositionto the-prepose
rules, but the agency adopted the rules anyway. There is a strong communication link between the agency an
GRRC, but he questioned what kind of communication is available to the public, especially the regulate
community that has to comply with the rules and regulations being developed, and in some cases, lose thei
business by not being able to comply.
Mr. Chapman responded that a few comment periods were identified during the audit where the public has a
opportunity to provide input on the proposed rules. First, there is an informal public comment period when a
agency is drafting the rules where the agency can notify stakeholders of the process and solicit informal comments
Once an agency publishes the draft rules in the Arizona Administrative Register, there is a 30-day formal publi
comment period where an agency is required to receive and address all public comments received. Also, if th
agency receives a request to hold a formal hearing regarding the draft rules during that time, the agency must d
so.
Senator Bums said the agency is required to listen, but questioned what kind of requirements are in place to tak
action based upon public comments. Mr. Chapman replied that agencies are required to address formal commen1
received during the formal comment period through revision to the proposed rules, or note why it is not possible t
revise the rules. Once the rules go to GRRC, one item reviewed is whether public comments were appropriatel"
addressed.
Senator Harper asked if GRRC approval of a rule change submitted by an agency to give grants to an exclusivel
gay or lesbian organization would be considered consistent or allowable with state statutes or the Constitution. MJ
Chapman replied that the audit was limited to reviewing GRRC's compliance with the statute and did not includ
review of any specific rules or topics.
Mr. Chapman indicated to Mr. Downing that while drafting proposed rules the agency is responsible for drafting a
economic impact statement, which GRRC reviews to ensure that it is generally accurate, describes the probable co~
or benefits of the rule and the probable effect on small business, state revenue and a few other items. The audit di
1 "'1/"'11 1"'If\f\L
Fonnat Document Page 3 of6
not include a review of the specific economic impact statements the agencies prepared, but did include a review c
GRRC's review of those statements. GRRC retains an economist to review the statements and the reviews wer
found to be consistent with GRRC's statutory mandate.
In response to Mr. Downing, Mr. Chapman said he did not hear any comments from consumers or others that th
statements may not reflect the full scope of the impact of a rule nor is he familiar with any attempt to change th
composition of the seven-member council to reflect appointments by the Legislature and the Governor.
Mr. Chapman advised Mr. Adams that GRRC's customer feedback referenced in the audit refers to agencies the
submit rules to GRRC for review. As far as he knows, no survey is done with the regulated community to solie
opinions on GRRC's rule-making process.
PRESENTATION BY THE CHAIRMAN OF GOVERNOR'S REGULATORY REVIEW COUNCIL
Alex Turner, Arizona Department of Administration (ADOA) Ex-Officio Member/Chairman, Governor'
Regulatory Review Council, noted that of the six appointed members, two are legislative appointees. There is on
ex-officio member, an ADOA representative, who acts as chairman. There are legislative appointees, on
appointed by the Speaker of the House, currently the Vice-Chairman, who is Stan Barnes. The second member i
appointed by the President of the Senate, which is Marc Osborn. A small business advocate is appointed by th
~6v~rnor,which is Yvonne Hunter. In addition,. fr..ree public m~mbersfu:e:-appoiRted·bythe·Governof,·Chu(>
Blanchard, Sam Coppersmith and Chris Thomas. He clarified that the ex-officio chairman is automatically th
director or assistant director ofADOA.
Mr. Turner related to Mr. Downing that most GRRC members recuse themselves in situations where there would b
a statutory conflict or an appearance of impropriety. For example, he would not vote on anything relating t
ADOA regardless of whether or not he is involved. He advised Senator Verschoor that the terms of the counc:
members are staggered. The two legislative appointees are on holdover as their terms expired in January 2006, an
two gubernatorial appointees expire in January 2007. The terms are for three years.
Senator Verschoor asked if all state agencies formulate rules through GRRC. Mr. Turner said all agencies ne
included in the list of exemptions are subject to rule review by GRRC. Some agencies exempted include th
Arizona Board of Regents, the Arizona Department of Education and certain agencies are given exemptions for
specific period of time. For example, the School Facilities Board received a two-year exemption when it wa
created, and subsequent to the two years, must go through the GRRC process. Other agencies have specifi
programs that are exempted, such as certain programs at the Arizona Health Care Cost Containment System. Th
only review exempt agencies would be subject to would be if a member of the public requests a superior GOW
reVIew.
Senator Burns remarked that he misspoke in his opening comments when he said the Legislature does not conduct
review. There is a joint Regulatory Reform and Enforcement Study Committee that reviews, but can only report c
suggest, and has no authority to make changes.
Senator Verschoor asked if any agencies, other than those that are exempt, do not go through GRRC. Mr. Turm
responded that there is a mechanism in statute so if a member of the public believes an agency is ignoring its rule
making responsibilities or attempting to administer a particular program by means of policy when the policy shaul
be in rule and subject to the GRRC process and public comment, that person can write a letter to the agency directc
who has a statutory time period in which to respond. If the member of the public is dissatisfied with th
Fonnat Document Page 4 of6
determination, it can be appealed to GRRC, which would ultimately decide if the agency's actions should b
subject to rule-making.
When Senator Verschoor asked about the Game and Fish Department and the National Guard, Mr. Turner said h
does not know off hand if Game and Fish has any exemptions, but a large number of the agency's rules go throug
GRRC. As to the National Guard, military affairs have a certain number of exemptions. He believes a review wa
conducted indicating there may be a collision between the National Guard making rules and following mandate
rules by the
U.S. Department of Defense.
Senator Burns noted that Mr. Turner said a member is appointed to the council by the Speaker and a member i
appointed by the President, but according to the web page for the council, the President and Speaker submit a list c
three people from which the Governor chooses, so the Governor actually appoints all six members. The web pag
also says the members serve at the pleasure of the Governor, so even if those members are chosen from the li~
provided by the President and Speaker, the Governor can remove the members.
Mr. Downing asked if there have been any complaints that the economic impact studies do not sufficiently cove
the impact on affected parties and how improvements can be made.
Mr. Turner said that has occurred. If a problem is found with an economic impact statement, the agency is give
'..- ··,:{1}e~chelce.x,:,rcorrectlngltb~f6repotenilan);. beIng":shutde~Nn-in-a.,public:--m:eetlngor going fonvardand taidng ..­chance.
There is a lot of back and foith discussion in the 90-day period that GRRC staff utilizes to addres
deficiencies or questions that come up in the rules, the analysis of the public comment or the economic impac
statement, which is reviewed by an economist on staff. The economist writes a fonnal memo for the official recor
as to whether or not the agency statement adequately addresses the statutory requirements, which is primarily th
impact on small business and whether the value of the rule outweighs the impact.
Mr. Downing asked if there is a mechanism to provide feedback to the Legislature if an ambiguity is discovered i
statutory language during discussions with an agency. Mr. Turner responded that it depends on how serious th
ambiguity is. If the agency has the ability to make the rule, he does not believe there is any communication to th
Legislature, but if it is serious enough to call into question, GRRC would communicate to the agency that the rul
cannot be made or the agency is taking a chance because GRRC will have a problem with it. If attorneys on GRR(
staff address the ambiguity as minor, the attorneys will point it out in a memo that is placed in the official recor
stating the issue for the council, and the council must address whether or not the agency has the statutory authorit
to go forward with the rule.
Mr. Downing indicated that he agrees with Senator Bums that public input is a concern and asked hm.
improvements can be made. Mr. Turner replied that the Council tends to bend over backwards to hear publi
concerns and on numerous occasions asked an agency to discuss certain issues brought up in council meetings b
members of the regulated community. The council has the ability to postpone consideration ofa rules package unt
the next meeting. In fact, at the last regularly scheduled council meeting, concerns were raised by the public abol
a fairly significant environmental rule relating to air quality, so the rule package was pulled off the regular meetin
agenda and GRRC held a special meeting to negotiate with industry members. Four of the five major stakeholder
provided input while the fifth stakeholder remained neutral. GRRC tries to facilitate that, if possible, bl
ultimately, it reviews rules for compliance to the statute and does not review policy decisions behind the rule~
therefore, GRRC is obligated to go with whatever policy the agency makes as long as the agency obeyed th
statutes. Ifthe agency makes a mistake, an amendment to the rule will be presented to GRRC later.
,..
Format Document Page 5 of6
As far as making improvements, he added that he does not know how any legislative change could require a
agency to pay more attention to public comment. The issue would be how to handle an instance where the agenc
disagrees with a segment of the regulated public, which is a very difficult problem he does not know how t
resolve.
Senator Verschoor asked ifGRRC ever repeals rules from agencies. Mr. Turner answered that is the purpose ofth
five-year review whereby the agency reviews its rules and decides which are archaic or need to be changed c
repealed; in fact, a significant portion of the 1,183 rules in the last fiscal year were repeals.
DISCUSSIONIRECOMMENDATIONS
Senator Burns remarked that although the system is flawed, self-imposed by the legislative body, GRRC has a
important function, so he supports continuing the agency because it shines some light on the process and gives th
public an opportunity to point out problems within the process. There is also the Regulatory Reform an
Enforcement Study Committee, and he has had some contact from the regulated community about requests thf
may go before that committee in the future. The Members need to keep their eyes and ears open as to how th
GRRC process could be improved based on input from the regulated community through that particular committe(
. - ·~~.J'.D6Wrliftg:~sfu'ini'Sed· that part of the:reiisoB.,forde±egating·tothe -agencies:·is·beeausetr& Legislators- are in slich··· ..,
hurry making legislation,so GRRC is essentially the quality control section. He recommended finding som
mechanism so that in instances where there is disagreement between an agency and the public, information can b
provided to the Legislature, perhaps through the regulatory committee Senator Burns mentioned, so Legislators d
not have to hear about issues from a disgruntled constituent.
Senator Burns recommended that some mechanism be put in place to alert the Legislature, especially 0
controversial issues that come up in the middle of the process, i.e., the public comment portion.
Chairman Konopnicki opined that this has been a healthy discussion that pointed out some things that need to b
addressed, but does not negate moving forward with 10-year continuation of the agency. Excellent suggestion
were made.
Senator Harper moved that the Committee of Reference recommend a
lO-year continuation of the Governor's Regulatory Review Council.
Senator Bums stated that based on the discussion relative to feedback of public comment, the motion shpul
include direction to staff to research the possibility of improving the information flow between the public commer
portion of the process back to the Legislature.
Senator Harper added that the motion should include Senator Burns' suggestion to direct staff
to research the possibility of improving the information flow between the public comment
portion of the process back to the Legislature. The motion carried.
Without objection, the meeting adjourned at 10:13 a.m.
Format Document
Linda Taylor, Committee Secretary
December 1, 2006
(Original minutes, attachments, and tape are on file in the Office of the Chief Clerk.)
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SENATE GAR AND HOUSE GRGFA
COR SUNSET OF THE GOVERNOR'S
REGULATORY REVIEW COUNCIL
2
November 29, 2006
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