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                       ENGROSSED SUBSTITUTE HOUSE BILL 1010

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State of Washington              54th Legislature             1995 Regular Session

By House Committee on Government Operations (originally sponsored by Representatives Reams, Horn, Lisk, Cairnes, Dyer, Van Luven, Ballasiotes, Buck, Casada, D. Schmidt, B. Thomas, Chandler, L. Thomas, Brumsickle, Sehlin, Sherstad, Carlson, Benton, Skinner, Kremen, Hargrove, Cooke, Delvin, Schoesler, Johnson, Thompson, Beeksma, Goldsmith, Radcliff, Hickel, Backlund, Crouse, Elliot, Pennington, Mastin, Carrell, Mitchell, K. Schmidt, Chappell, Basich, Grant, Smith, Robertson, Foreman, Honeyford, Pelesky, Blanton, Koster, Lambert, Mulliken, Boldt, McMorris, Clements, Fuhrman, Campbell, Sheldon, Huff, Mielke, Talcott, Silver, McMahan, Stevens, Morris and Hymes)

Read first time 01/20/95. 

Implementing regulatory reform.

     AN ACT Relating to regulatory reform; amending RCW 43.70.040, 82.01.060, 46.01.110, 50.12.010, 76.09.040, 77.04.090, 48.02.060, 34.05.570, 34.05.310, 34.05.313, 34.05.370, 34.05.380, 34.05.330, 19.85.030, 34.05.010, 34.05.320, 34.05.350, 34.05.610, 34.05.620, 34.05.630, 34.05.640, 34.05.650, 34.05.660, 42.40.010, 42.40.020, 42.40.030, 43.31.086, and 43.180.110; adding a new section to chapter 43.12 RCW; adding new sections to chapter 43.20A RCW; adding a new section to chapter 43.23 RCW; adding new sections to chapter 43.21A RCW; adding new sections to chapter 43.22 RCW; adding new sections to chapter 43.24 RCW; adding a new section to chapter 50.12 RCW; adding new sections to chapter 34.05 RCW; adding a new section to chapter 19.85 RCW; adding a new section to chapter 43.30 RCW; adding a new section to chapter 43.70 RCW; adding a new section to chapter 43.300 RCW; adding a new section to chapter 48.02 RCW; adding a new section to chapter 50.08 RCW; adding a new section to chapter 76.09 RCW; adding a new section to chapter 82.01 RCW; adding new sections to chapter 4.84 RCW; adding a new section to chapter 43.88 RCW; adding a new chapter to Title 44 RCW; creating new sections; recodifying RCW 34.05.610, 34.05.620, 34.05.630, 34.05.640, 34.05.650, and 34.05.660; repealing RCW 43.21A.080, 50.12.040, and 19.85.060; prescribing penalties; and providing for submission of this act to a vote of the people.

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

                                      PART 1

                          GRANTS OF RULE-MAKING AUTHORITY

NEW SECTION. Sec. 101.  (1) The legislature recognizes that clear and specific grants of rule-making authority are necessary for accountability in decision making by governmental agencies, and that an agency should exercise jurisdiction and adopt rules over a subject matter only if it has obvious and explicit rule-making authority to do so.  It is therefore the legislature's purpose to ensure that future rules exist only pursuant to clear and appropriate rule-making authority.

     (2) The legislature further finds that state agencies have adopted administrative rules without clear authority to do so from the legislature, relying on general grants of authority rather than specific legislative policy direction.  This has resulted in agency-initiated policy that has been adopted without the benefit of the public dialogue and accountability inherent to the legislative process.  It is therefore the intent of the legislature to eliminate reliance on general grants of authority, limit certain agency rule making to those matters specifically authorized by the legislature, and that grants of rule-making authority be narrowly construed.

NEW SECTION. Sec. 102.  A new section is added to chapter 43.12 RCW to read as follows:

     The commissioner of public lands may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

NEW SECTION. Sec. 103.  A new section is added to chapter 43.20A RCW to read as follows:

     The secretary may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

NEW SECTION. Sec. 104.  A new section is added to chapter 43.23 RCW to read as follows:

     The director of agriculture may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

     Sec. 105.  RCW 43.70.040 and 1989 1st ex.s. c 9 s 106 are each amended to read as follows:

     In addition to any other powers granted the secretary, the secretary may:

     (1) Adopt, in accordance with chapter 34.05 RCW, rules ((necessary to carry out the provisions of this act)) or policy statements, other than emergency rules, only:

(a) As specifically required, and only to the extent specifically required, by federal law; or

(b) As specifically authorized, and only to the extent specifically authorized, by the legislature;

     (2) Appoint such advisory committees as may be necessary to carry out the provisions of ((this act)) chapter 9, Laws of 1989 1st ex. sess.  Members of such advisory committees are authorized to receive travel expenses in accordance with RCW 43.03.050 and 43.03.060.  The secretary and the board of health shall review each advisory committee within their jurisdiction and each statutory advisory committee on a biennial basis to determine if such advisory committee is needed.  The criteria specified in RCW 43.131.070 shall be used to determine whether or not each advisory committee shall be continued;

     (3) Undertake studies, research, and analysis necessary to carry out the provisions of ((this act)) chapter 9, Laws of 1989 1st ex. sess. in accordance with RCW 43.70.050;

     (4) Delegate powers, duties, and functions of the department to employees of the department as the secretary deems necessary to carry out the provisions of ((this act)) chapter 9, Laws of 1989 1st ex. sess.;

     (5) Enter into contracts on behalf of the department to carry out the purposes of ((this act)) chapter 9, Laws of 1989 1st ex. sess.;

     (6) Act for the state in the initiation of, or the participation in, any intergovernmental program to the purposes of ((this act)) chapter 9, Laws of 1989 1st ex. sess.; or

     (7) Accept gifts, grants, or other funds.

     Sec. 106.  RCW 82.01.060 and 1977 c 75 s 92 are each amended to read as follows:

     The director of revenue, hereinafter in ((this 1967 amendatory act)) chapter 26, Laws of 1967 ex. sess. referred to as the director, through the department of revenue, hereinafter in ((this 1967 amendatory act)) chapter 26, Laws of 1967 ex. sess. referred to as the department, shall:

     (1) Assess and collect all taxes and administer all programs relating to taxes which are the responsibility of the tax commission at the time ((this 1967 amendatory act)) chapter 26, Laws of 1967 ex. sess. takes effect or which the legislature may hereafter make the responsibility of the director or of the department;

     (2) ((Make, adopt and publish such rules and regulations as he may deem necessary or desirable to carry out the powers and duties imposed upon him or the department by the legislature:   PROVIDED, That)) The director of revenue may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

(a) As specifically required by federal law, and only to the extent specifically required; or

(b) As specifically authorized, and only to the extent specifically authorized, by the legislature;

(3) Rules ((and regulations)) adopted by the tax commission prior to the effective date of this ((1967 amendatory)) 1995 act shall remain in force until such time as they may be revised or rescinded by the director;

     (((3))) (4) Provide by general ((regulations)) rules for an adequate system of departmental review of the actions of the department or of its officers and employees in the assessment or collection of taxes;

     (((4))) (5) Maintain a tax research section with sufficient technical, clerical and other employees to conduct constant observation and investigation of the effectiveness and adequacy of the revenue laws of this state and of the sister states in order to assist the governor, the legislature and the director in estimation of revenue, analysis of tax measures, and determination of the administrative feasibility of proposed tax legislation and allied problems;

     (((5))) (6) Recommend to the governor such amendments, changes in, and modifications of the revenue laws as seem proper and requisite to remedy injustice and irregularities in taxation, and to facilitate the assessment and collection of taxes in the most economical manner.

NEW SECTION. Sec. 107.  A new section is added to chapter 43.21A RCW to read as follows:

     The director of the department of ecology may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

NEW SECTION. Sec. 108.  A new section is added to chapter 43.22 RCW to read as follows:

     The director of the department of labor and industries may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

NEW SECTION. Sec. 109.  A new section is added to chapter 43.24 RCW to read as follows:

     The director of the department of licensing may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

     Sec. 110.  RCW 46.01.110 and 1979 c 158 s 120 are each amended to read as follows:

     The director of licensing is hereby authorized to adopt ((and enforce such reasonable rules and regulations as may be consistent with and)), in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

(1) As specifically required by federal law, and only to the extent specifically required; or

(2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

The rules shall be necessary to carry out the provisions relating to vehicle licenses, certificates of ownership and license registration and drivers' licenses not in conflict with the provisions of Title 46 RCW.

     Sec. 111.  RCW 50.12.010 and 1977 c 75 s 75 are each amended to read as follows:

     The commissioner shall administer this title.  He or she shall have the power and authority to ((adopt, amend, or rescind such rules and regulations, to)) employ ((such)) persons, make ((such)) expenditures, require ((such)) reports, make ((such)) investigations, and take ((such)) other actions, not including the adoption, amendment, or rescission of rules or policy statements other than emergency rules, as he or she deems necessary or suitable to that end.  ((Such rules and regulations shall be effective upon publication and in the manner, not inconsistent with the provisions of this title, which the commissioner shall prescribe.))  The commissioner, in accordance with the provisions of this title, shall determine the organization and methods of procedure of the divisions referred to in this title, and shall have an official seal which shall be judicially noticed.  The commissioner shall submit to the governor a report covering the administration and operation of this title during the preceding fiscal year, July 1 through June 30, and shall make ((such)) recommendations for amendments to this title as he or she deems proper.  ((Such)) The report shall include a balance sheet of the moneys in the fund in which there shall be provided, if possible, a reserve against the liability in future years to pay benefits in excess of the then current contributions, which reserve shall be set up by the commissioner in accordance with accepted actuarial principles on the basis of statistics of employment, business activity, and other relevant factors for the longest possible period.  Whenever the commissioner believes that a change in contribution or benefit rates will become necessary to protect the solvency of the fund, he or she shall promptly ((so)) inform the governor and legislature and make recommendations with respect thereto.

NEW SECTION. Sec. 112.  A new section is added to chapter 50.12 RCW to read as follows:

     The commissioner of the employment security department may adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

     (1) As specifically required by federal law, and only to the extent specifically required; or

     (2) As specifically authorized, and only to the extent specifically authorized, by the legislature.

     Sec. 113.  RCW 76.09.040 and 1994 c 264 s 48 are each amended to read as follows:

     (1) ((Where necessary to accomplish the purposes and policies stated in RCW 76.09.010, and to implement the provisions of this chapter,)) The board shall ((promulgate)) adopt forest practices ((regulations)) rules or policy statements, other than emergency rules, pursuant to chapter 34.05 RCW and in accordance with the procedures enumerated in this section:

(a) As specifically required by federal law, and only to the extent specifically required; or

(b) As specifically authorized, and only to the extent specifically authorized, by the legislature.

(2) The board shall adopt rules that:

     (a) Establish minimum standards for forest practices;

     (b) Provide procedures for the voluntary development of resource management plans which may be adopted as an alternative to the minimum standards in (a) of this subsection if the plan is consistent with the purposes and policies stated in RCW 76.09.010 and the plan meets or exceeds the objectives of the minimum standards;

     (c) Set forth necessary administrative provisions; and

     (d) Establish procedures for the collection and administration of forest practice fees as set forth by this chapter.

     Forest practices ((regulations)) rules pertaining to water quality protection shall be ((promulgated)) adopted individually by the board and by the department of ecology after they have reached agreement with respect thereto.  All other forest practices ((regulations)) rules shall be ((promulgated)) adopted by the board.

     Forest practices regulations shall be administered and enforced by the department except as otherwise provided in this chapter.  Such regulations shall be promulgated and administered so as to give consideration to all purposes and policies set forth in RCW 76.09.010.

     (((2))) (3) The board shall prepare proposed forest practices ((regulations)) rules.  In addition to any forest practices ((regulations)) rules relating to water quality protection proposed by the board, the department of ecology shall prepare proposed forest practices ((regulations)) rules relating to water quality protection.

     Prior to initiating the rule making process, the proposed ((regulations)) rules shall be submitted for review and comments to the department of fish and wildlife and to the counties of the state.  After receipt of the proposed forest practices ((regulations)) rules, the department of fish and wildlife and the counties of the state shall have thirty days in which to review and submit comments to the board, and to the department of ecology with respect to its proposed ((regulations)) rules relating to water quality protection.  After the expiration of such thirty day period the board and the department of ecology shall jointly hold one or more hearings on the proposed ((regulations)) rules pursuant to chapter 34.05 RCW.  At such hearing(s) any county may propose specific forest practices ((regulations)) rules relating to problems existing within such county.  The board and the department of ecology may adopt such proposals if they find the proposals are consistent with the purposes and policies of this chapter.

     Sec. 114.  RCW 77.04.090 and 1984 c 240 s 1 are each amended to read as follows:

     The commission shall adopt ((permanent rules and amendments to or repeals of existing rules)), in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

(1) As specifically required by federal law, and only to the extent specifically required; or

(2) As specifically authorized, and only to the extent specifically authorized, by the legislature, by approval of four members by resolution, entered and recorded in the minutes of the commission.  The commission shall adopt emergency rules by approval of four members.  The commission or the director, when adopting emergency rules under RCW 77.12.150, shall adopt rules in conformance with chapter 34.05 RCW.  Judicial notice shall be taken of the rules filed and published as provided in RCW 34.05.380 and 34.05.210.

      A copy of an emergency rule, certified as a true copy by a member of the commission, the director, or by a person authorized in writing by the director to make the certification, is admissible in court as prima facie evidence of the adoption and validity of the rule.

NEW SECTION. Sec. 115.  The following acts or parts of acts are each repealed:

(1) RCW 43.21A.080 and 1970 ex.s. c 62 s 8; and

(2) RCW 50.12.040 and 1973 1st ex.s. c 158 s 3 & 1945 c 35 s 43.

     Sec. 116.  RCW 48.02.060 and 1947 c 79 s .02.06 are each amended to read as follows:

     (1) The commissioner shall have the authority expressly conferred upon him or her by or reasonably implied from the provisions of this code.

     (2) The commissioner shall execute his or her duties and shall enforce the provisions of this code.

     (3) The commissioner may:

     (a) ((Make reasonable rules and regulations for effectuating any provision of this code, except those relating to his election, qualifications, or compensation.  No such rules and regulations shall be effective prior to their being filed for public inspection in the commissioner's office)) Adopt, in accordance with chapter 34.05 RCW, rules or policy statements, other than emergency rules, only:

(i) As specifically required by federal law, and only to the extent specifically required; or

(ii) As specifically authorized, and only to the extent specifically authorized, by the legislature.

     (b) Conduct investigations to determine whether any person has violated any provision of this code.

     (c) Conduct examinations, investigations, hearings, in addition to those specifically provided for, useful and proper for the efficient administration of any provision of this code.

     Sec. 117.  RCW 34.05.570 and 1989 c 175 s 27 are each amended to read as follows:

     (1) Generally.  Except to the extent that this chapter or another statute provides otherwise:

     (a) The burden of demonstrating the invalidity of agency action is on the party asserting invalidity;

     (b) The validity of agency action shall be determined in accordance with the standards of review provided in this section, as applied to the agency action at the time it was taken;

     (c) The court shall make a separate and distinct ruling on each material issue on which the court's decision is based; and

     (d) The court shall grant relief only if it determines that a person seeking judicial relief has been substantially prejudiced by the action complained of.

     (2) Review of rules.  (a) A rule may be reviewed by petition for declaratory judgment filed pursuant to this subsection or in the context of any other review proceeding under this section.  In an action challenging the validity of a rule, the agency shall be made a party to the proceeding.

     (b) The validity of any rule may be determined upon petition for a declaratory judgment addressed to the superior court of Thurston county, when it appears that the rule, or its threatened application, interferes with or impairs or immediately threatens to interfere with or impair the legal rights or privileges of the petitioner.  The declaratory judgment order may be entered whether or not the petitioner has first requested the agency to pass upon the validity of the rule in question.

     (c) In a proceeding involving review of a rule, the court shall declare the rule invalid only if it finds that:  ((it)) The rule violates constitutional provisions((,)); the rule exceeds the statutory authority of the agency((,)); the rule was adopted without compliance with statutory rule-making procedures((, or could not conceivably have been the product of a rational decision-maker)); the factual basis for the rule under RCW 34.05.370(2)(i) is not supported by substantial evidence; or the rule is arbitrary or capricious.  Grants of rule-making authority to an agency by the legislature shall be narrowly construed.

     (3) Review of agency orders in adjudicative proceedings.  The court shall grant relief from an agency order in an adjudicative proceeding only if it determines that:

     (a) The order, or the statute or rule on which the order is based, is in violation of constitutional provisions on its face or as applied;

     (b) The order is outside the statutory authority or jurisdiction of the agency conferred by any provision of law;

     (c) The agency has engaged in unlawful procedure or decision-making process, or has failed to follow a prescribed procedure;

     (d) The agency has erroneously interpreted or applied the law;

     (e) The order is not supported by evidence that is substantial when viewed in light of the whole record before the court, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this chapter;

     (f) The agency has not decided all issues requiring resolution by the agency;

     (g) A motion for disqualification under RCW 34.05.425 or 34.12.050 was made and was improperly denied or, if no motion was made, facts are shown to support the grant of such a motion that were not known and were not reasonably discoverable by the challenging party at the appropriate time for making such a motion;

     (h) The order is inconsistent with a rule of the agency unless the agency explains the inconsistency by stating facts and reasons to demonstrate a rational basis for inconsistency; or

     (i) The order is arbitrary or capricious.

     (4) Review of other agency action.

     (a) All agency action not reviewable under subsection (2) or (3) of this section shall be reviewed under this subsection.

     (b) A person whose rights are violated by an agency's failure to perform a duty that is required by law to be performed may file a petition for review pursuant to RCW 34.05.514, seeking an order pursuant to this subsection requiring performance.  Within twenty days after service of the petition for review, the agency shall file and serve an answer to the petition, made in the same manner as an answer to a complaint in a civil action.  The court may hear evidence, pursuant to RCW 34.05.562, on material issues of fact raised by the petition and answer.

     (c) Relief for persons aggrieved by the performance of an agency action, including the exercise of discretion, or an action under (b) of this subsection can be granted only if the court determines that the action is:

     (i) Unconstitutional;

     (ii) Outside the statutory authority of the agency or the authority conferred by a provision of law;

     (iii) Arbitrary or capricious; or

     (iv) Taken by persons who were not properly constituted as agency officials lawfully entitled to take such action.

                                      PART 2

                             RULE-MAKING REQUIREMENTS

     Sec. 201.  RCW 34.05.310 and 1994 c 249 s 1 are each amended to read as follows:

     (1) To meet the intent of providing greater public access to administrative rule making and to promote consensus among interested parties, agencies shall solicit comments from the public on a subject of possible rule making before publication of a notice of proposed rule adoption under RCW 34.05.320.  The agency shall prepare a statement of intent that:

     (a) States the specific statutory authority for the new rule;

     (b) Identifies the reasons the new rule is needed;

     (c) Identifies the goals of the new rule;

     (d) Identifies other agencies that have rule-making authority over the activity or subject matter of the new rule, and describes the process for coordination with those agencies;

(e) Describes the process by which the rule will be developed, including, but not limited to, negotiated rule making, pilot rule making, or agency study; and

     (((e))) (f) Specifies the process by which interested parties can effectively participate in the formulation of the new rule.

     The statement of intent shall be filed with the code reviser for publication in the state register and shall be sent to any party that has requested receipt of the agency's statements of intent.

     (2) Agencies are encouraged to develop and use new procedures for reaching agreement among interested parties before publication of notice and the adoption hearing on a proposed rule.  Examples of new procedures include, but are not limited to:

     (a) Negotiated rule making which includes:

     (i) Identifying individuals and organizations that have a recognized interest in or will be significantly affected by the adoption of the proposed rule;

     (ii) Soliciting participation by persons who are capable, willing, and appropriately authorized to enter into such negotiations;

     (iii) Assuring that participants fully recognize the consequences of not participating in the process, are committed to negotiate in good faith, and recognize the alternatives available to other parties;

     (iv) Establishing guidelines to encourage consideration of all pertinent issues, to set reasonable completion deadlines, and to provide fair and objective settlement of disputes that may arise;

     (v) Agreeing on a reasonable time period during which the agency will be bound to the rule resulting from the negotiations without substantive amendment; and

     (vi) Providing a mechanism by which one or more parties may withdraw from the process or the negotiations may be terminated if it appears that consensus cannot be reached on a draft rule that accommodates the needs of the agency, interested parties, and the general public and conforms to the legislative intent of the statute that the rule is intended to implement; and

     (b) Pilot rule making which includes testing the draft of a proposed rule through the use of volunteer pilot study groups in various areas and circumstances.

     (3)(a) An agency must make a determination whether negotiated rule making, pilot rule making, or another process for generating participation from interested parties prior to development of the rule is appropriate.

     (b) An agency must include a written justification in the rule-making file if an opportunity for interested parties to participate in the rule-making process prior to publication of the proposed rule has not been provided.

     Sec. 202.  RCW 34.05.313 and 1993 c 202 s 4 are each amended to read as follows:

     ((If,)) (1) During the development of a rule or after its adoption, an agency ((determines that implementation may produce unreasonable economic, procedural, or technical burdens, agencies are encouraged to)) may develop methods for measuring or testing the feasibility of ((compliance)) complying with or administering the rule((, including the use of voluntary pilot study groups)) and for identifying simple, efficient, and economical alternatives for achieving the goal of the rule.  ((Measuring and testing methods should emphasize)) A pilot project shall include public notice, participation by ((persons who have a recognized interest in or are significantly affected by the adoption of the proposed rule)) volunteers who are or will be subject to the rule, a high level of involvement from agency management, ((consensus on issues and procedures among participants in the pilot group, assurance of fairness, and)) reasonable completion dates, and a process by which one or more parties may withdraw from the process or the process may be terminated ((if consensus cannot be reached on the rule)).  Volunteers who agree to test a rule and attempt to meet the requirements of the draft rule, to report periodically to the proposing agency on the extent of their ability to meet the requirements of the draft rule, and to make recommendations for improving the draft rule shall not be obligated to comply fully with the rule being tested nor be subject to any enforcement action or other sanction for failing to comply with the requirements of the draft rule.

(2) An agency conducting a pilot rule project authorized under subsection (1) of this section may waive one or more provisions of agency rules otherwise applicable to participants in such a pilot project if the agency first determines that such a waiver is in the public interest and necessary to conduct the project.  Such a waiver may be only for a stated period of time, not to exceed the duration of the project.

(3) The findings of the pilot project should be widely shared and, where appropriate, adopted as amendments to the rule.

(4) If an agency conducts a pilot rule project in lieu of meeting the requirements of the regulatory fairness act, chapter 19.85 RCW, the agency shall ensure the following conditions are met:

(a) If over ten small businesses are affected, there shall be at least ten small businesses in the test group and at least one-half of the volunteers participating in the pilot test group shall be small businesses.

(b)(i) If there are at least one hundred businesses affected, the participation by small businesses in the test group shall be as follows:

(A) Not less than twenty percent of the small businesses must employ twenty-six to fifty employees;

(B) Not less than twenty percent of the small businesses must employ eleven to twenty-six employees; and

(C) Not less than twenty percent of the small businesses must employ zero to ten employees.

(ii) If there do not exist a sufficient number of small businesses in each size category set forth in (b)(i) of this subsection willing to participate in the pilot project to meet the minimum requirements of that subsection, then the agency must comply with this section to the maximum extent practicable.

(c) The agency may not terminate the pilot project before completion.

(d) Before filing the notice of proposed rule making pursuant to RCW 34.05.320, the agency must prepare a report of the pilot rule project that includes:

(i) A description of the difficulties small businesses had in complying with the pilot rule;

(ii) A list of the recommended revisions to the rule to make compliance with the rule easier or to reduce the cost of compliance with the rule by the small businesses participating in the pilot rule project; and

(iii) A written statement explaining the options it considered to resolve each of the difficulties described and a statement explaining its reasons for not including a recommendation by the pilot test group to revise the rule.

     Sec. 203.  RCW 34.05.370 and 1994 c 249 s 2 are each amended to read as follows:

     (1) Each agency shall maintain an official rule-making file for each rule that it (a) proposes by publication in the state register, or (b) adopts.  The file and materials incorporated by reference shall be available for public inspection.

     (2) The agency rule-making file shall contain all of the following:

     (a) Copies of all publications in the state register with respect to the rule or the proceeding upon which the rule is based;

     (b) Copies of any portions of the agency's public rule-making docket containing entries relating to the rule or the proceeding on which the rule is based;

     (c) All written petitions, requests, submissions, and comments received by the agency and all other written material regarded by the agency as important to adoption of the rule or the proceeding on which the rule is based;

     (d) Any official transcript of oral presentations made in the proceeding on which the rule is based or, if not transcribed, any tape recording or stenographic record of them, and any memorandum prepared by a presiding official summarizing the contents of those presentations;

     (e) The concise explanatory statement required by RCW 34.05.355;

     (f) All petitions for exceptions to, amendment of, or repeal or suspension of, the rule;

     (g) Citations to data, factual information, studies, or reports on which the agency relies in the adoption of the rule, indicating where such data, factual information, studies, or reports are available for review by the public;

     (h) The written summary and response required by RCW 34.05.325(6); ((and))

     (i) Evidence that the rule is:  Authorized or required, citing statutory authority; necessary; cost-effective; consistent with, and not duplicated by, other federal, state, or local laws; enforceable; targeted; measurable, quantifying intended results; the least burdensome alternative; and not in excess of federal law as it existed on January 1, 1995, unless authorized by state statute; and

(j) Any other material placed in the file by the agency.

     (3) Internal agency documents are exempt from inclusion in the rule-making file under subsection (2) of this section to the extent they constitute preliminary drafts, notes, recommendations, and intra-agency memoranda in which opinions are expressed or policies formulated or recommended, except that a specific document is not exempt from inclusion when it is publicly cited by an agency in connection with its decision.

     (4) Upon judicial review, the file required by this section constitutes the official agency rule-making file with respect to that rule.  ((Unless otherwise required by another provision of law,)) The official agency rule-making file ((need not be)) is the exclusive basis for agency action on that rule.

NEW SECTION. Sec. 204.  A new section is added to chapter 34.05 RCW to read as follows:

     (1) Upon adoption of a rule, an agency shall: (a) Inform and educate affected persons about the rule; and (b) promote voluntary compliance.

     (2) Upon the adoption of a rule regulating the same activity or subject matter as another provision of federal, state, or local law, an agency shall do all of the following:

     (a) Provide to the business assistance center a list citing by reference the other federal, state, and local laws that regulate the same activity or subject matter;

     (b) Coordinate implementation and enforcement of the rule with the other federal, state, and local entities regulating the same activity or subject matter by doing one or more of the following: (i) Deferring to the other entity; (ii) designating a lead agency; or (iii) entering into an agreement with the other entities specifying how the agency and entities will coordinate implementation and enforcement.  If the agency is unable to meet this requirement, the agency shall report to the legislature pursuant to (c) of this subsection;

     (c) Report to the chief clerk of the house of representatives and the secretary of the senate regarding legislation that may be necessary to eliminate or mitigate the adverse effects of any overlap or duplication or difference from federal law, and to facilitate coordination with appropriate governmental entities.

     Sec. 205.  RCW 34.05.380 and 1989 c 175 s 11 are each amended to read as follows:

     (1) Each agency shall file in the office of the code reviser a certified copy of all rules it adopts, except for rules contained in tariffs filed with or published by the Washington utilities and transportation commission.  The code reviser shall place upon each rule a notation of the time and date of filing and shall keep a permanent register of filed rules open to public inspection.  In filing a rule, each agency shall use the standard form prescribed for this purpose by the code reviser.

     (2) Emergency rules adopted under RCW 34.05.350 become effective upon filing unless a later date is specified in the order of adoption.  All other rules become effective upon the expiration of thirty days after the date of filing, unless a later date is required by statute or specified in the order of adoption.

     (3) A rule may become effective immediately upon its filing with the code reviser or on any subsequent date earlier than that established by subsection (2) of this section, if the agency establishes that effective date in the adopting order and finds that:

     (a) Such action is required by the state or federal Constitution, a statute, or court order;

     (b) The rule only delays the effective date of another rule that is not yet effective; or

     (c) The earlier effective date is necessary because of imminent peril to the public health, safety, or welfare.

     The finding and a brief statement of the reasons therefor required by this subsection shall be made a part of the order adopting the rule.

     (4) With respect to a rule made effective pursuant to subsection (3) of this section, each agency shall make reasonable efforts to make the effective date known to persons who may be affected by it.

(5) No rule, adopted by any of the following agencies, is effective for more than seven years after its adoption or seven years after the effective date of this section, whichever is later:  Department of ecology, employment security department, department of labor and industries, department of revenue, department of licensing, department of health, department of fish and wildlife, forest practices board, commissioner of public lands, department of social and health services, or the office of the insurance commissioner.  A rule made ineffective under this subsection may be readopted according to the procedures established in this chapter.

NEW SECTION. Sec. 206.  A new section is added to chapter 34.05 RCW to read as follows:

     The department of ecology, employment security department, department of labor and industries, department of revenue, department of licensing, department of health, department of fish and wildlife, forest practices board, commissioner of public lands, department of social and health services, department of agriculture, and the office of the insurance commissioner shall review their respective rules as follows:

     (1) Fifty percent of their rules existing on the effective date of this section shall be reviewed within three years of the effective date of this section;

     (2) Eighty percent of their rules existing on the effective date of this section shall be reviewed within five years of the effective date of this section; and

     (3) One hundred percent of their rules existing on the effective date of this section shall be reviewed within seven years of the effective date of this section.

     Sec. 207.  RCW 34.05.330 and 1988 c 288 s 305 are each amended to read as follows:

(1) Any person may petition an agency requesting the adoption, amendment, or repeal of any rule.  Each agency may prescribe by rule the form for such petitions and the procedure for their submission, consideration, and disposition.  Within sixty days after submission of a petition, the agency shall (((1))) (a) either deny the petition in writing, stating its reasons for the denial, or (((2))) (b) initiate rule-making proceedings in accordance with this chapter.

(2) If any agency named in RCW 43.17.010 denies a petition to repeal or amend a rule submitted under subsection (1) of this section, the petitioner may appeal the denial to the governor.  The petitioner may file notice of the appeal with the code reviser for publication in the Washington State Register.  Within sixty days after receiving the appeal, the governor shall either reject the appeal in writing, stating his or her reasons for the rejection, or order the agency to initiate rule-making proceedings in accordance with this chapter.  In ruling on the appeal, the governor shall consider:

(a) Whether the rule was adopted in compliance with RCW 34.05.370(2)(i);

(b) Whether the agency has established an adequate internal rules review process, allowing public participation, and has subjected the rule to that review;

(c) The nature of complaints and other comments received from the public concerning the rule;

(d) Whether the rule exceeds specific federal requirements or specific legislative authority, or conflicts with, overlaps, or duplicates any other provision of federal, state, or local law and, if so, whether the agency has taken steps to mitigate any adverse effects of the excess, conflict, overlap, or duplication;

(e) The extent to which technology, social or economic conditions, or other relevant factors have changed since the rule was adopted, and whether, given those changes, the rule continues to be necessary and appropriate;

(f) Whether the statute that the rule implements has been amended or repealed by the legislature, or ruled invalid by a court.

(3) The governor shall file a copy of the rejection or order in subsection (2) of this section with the regulatory oversight committee and with the code reviser for publication in the Washington State Register.

                                      PART 3

                                REGULATORY FAIRNESS

     Sec. 301.  RCW 19.85.030 and 1994 c 249 s 11 are each amended to read as follows:

     (1) ((In the adoption of any rule pursuant to RCW 34.05.320 that will impose more than minor costs on more than twenty percent of all industries, or more than ten percent of any one industry, the adopting agency:

     (a) Shall reduce the economic impact of the rule on small business by doing one or more of the following when it is legal and feasible in meeting the stated objective of the statutes which are the basis of the proposed rule:

     (i) Establish differing compliance or reporting requirements or timetables for small businesses;

     (ii) Clarify, consolidate, or simplify the compliance and reporting requirements under the rule for small businesses;

     (iii) Establish performance rather than design standards;

     (iv) Exempt small businesses from any or all requirements of the rule;

     (v) Reduce or modify fine schedules for noncompliance; and

     (vi) Other mitigation techniques;

     (b) Before filing notice of a proposed rule, shall prepare a small business economic impact statement in accordance with RCW 19.85.040 and file notice of how the person can obtain the statement with the code reviser as part of the notice required under RCW 34.05.320.

     (2) If requested to do so by a majority vote of the joint administrative rules review committee within thirty days after notice of the proposed rule is published in the state register, an agency shall prepare a small business economic impact statement on the proposed rule before adoption of the rule.  Upon completion, an agency shall provide a copy of the small business economic impact statement to any person requesting it.

     (3))) In the adoption of a rule under RCW 34.05.320, an agency shall prepare a small business economic impact statement:  (a) If the proposed rule will impose more than minor costs on businesses in an industry; or (b) if requested to do so by a majority vote of the legislative regulatory oversight committee within thirty days after notice of the proposed rule is published in the state register.  However, if the agency has completed the pilot rule process as defined by RCW 34.05.313 before filing the notice of a proposed rule, the agency is not required to prepare a small business economic impact statement.

An agency shall prepare the small business economic impact statement in accordance with RCW 19.85.040, and file it with the code reviser along with the notice required under RCW 34.05.320.  An agency shall file a statement prepared at the request of the legislative regulatory oversight committee with the code reviser upon its completion before the adoption of the rule.  An agency shall provide a copy of the small business economic impact statement to any person requesting it.

     An agency may request assistance from the business assistance center in the preparation of the small business economic impact statement.

     (((4) The business assistance center shall develop guidelines to assist agencies in determining whether a proposed rule will impose more than minor costs on businesses in an industry and therefore require preparation of a small business economic impact statement.  The business assistance center may review an agency determination that a proposed rule will not impose such costs, and shall advise the joint administrative rules review committee on disputes involving agency determinations under this section.))

(2) A proposed rule will impose more than minor costs on businesses in an industry when the costs imposed will equal or exceed 0.1 percent of the average yearly profit for businesses in that industry.  The business assistance center shall develop guidelines to assist agencies in determining whether a proposed rule will impose such costs.  The business assistance center may review an agency determination that a proposed rule will not impose such costs, and shall advise the legislative regulatory oversight committee on disputes involving agency determinations under this section.

(3) Based upon the extent of disproportionate impact on small business identified in the statement prepared under RCW 19.85.040, the agency shall,  if legal and possible to do so, reduce the costs imposed by the rule on small businesses.  Methods to reduce the costs on small businesses may include, but are not limited to:

(a) Reducing, modifying, or eliminating substantive regulatory requirements;

(b) Simplifying, reducing, or eliminating recordkeeping and reporting requirements;

(c) Reducing the frequency of inspections;

(d) Delaying compliance timetables;

(e) Reducing or modifying fine schedules for noncompliance; or

(f) Any other mitigation techniques.

NEW SECTION. Sec. 302.  A new section is added to chapter 19.85 RCW to read as follows:

     Unless so requested by a majority vote of the legislative regulatory oversight committee under RCW 19.85.030, an agency is not required to comply with this chapter when adopting any rule solely for the purpose of conformity or compliance, or both, with federal law or regulations.  In lieu of the statement required under RCW 19.85.030, the agency shall file a statement citing, with specificity, the federal law or regulation with which the rule is being adopted to conform or comply, and describing the consequences to the state if the rule is not adopted.

NEW SECTION. Sec. 303.  RCW 19.85.060 and 1989 c 374 s 5 are each repealed.

                                      PART 4

                            LEGISLATIVE REVIEW OF RULES

     Sec. 401.  RCW 34.05.010 and 1992 c 44 s 10 are each amended to read as follows:

     The definitions set forth in this section shall apply throughout this chapter, unless the context clearly requires otherwise.

     (1) "Adjudicative proceeding" means a proceeding before an agency in which an opportunity for hearing before that agency is required by statute or constitutional right before or after the entry of an order by the agency.  Adjudicative proceedings also include all cases of licensing and rate making in which an application for a license or rate change is denied except as limited by RCW 66.08.150, or a license is revoked, suspended, or modified, or in which the granting of an application is contested by a person having standing to contest under the law.

     (2) "Agency" means any state board, commission, department, institution of higher education, or officer, authorized by law to make rules or to conduct adjudicative proceedings, except those in the legislative or judicial branches, the governor, or the attorney general except to the extent otherwise required by law and any local governmental entity that may request the appointment of an administrative law judge under chapter 42.41 RCW.

     (3) "Agency action" means licensing, the implementation or enforcement of a statute, the adoption or application of an agency rule or order, the imposition of sanctions, or the granting or withholding of benefits.

     Agency action does not include an agency decision regarding (a) contracting or procurement of goods, services, public works, and the purchase, lease, or acquisition by any other means, including eminent domain, of real estate, as well as all activities necessarily related to those functions, or (b) determinations as to the sufficiency of a showing of interest filed in support of a representation petition, or mediation or conciliation of labor disputes or arbitration of labor disputes under a collective bargaining law or similar statute, or (c) any sale, lease, contract, or other proprietary decision in the management of public lands or real property interests, or (d) the granting of a license, franchise, or permission for the use of trademarks, symbols, and similar property owned or controlled by the agency.

     (4) "Agency head" means the individual or body of individuals in whom the ultimate legal authority of the agency is vested by any provision of law.  If the agency head is a body of individuals, a majority of those individuals constitutes the agency head.

     (5) "Entry" of an order means the signing of the order by all persons who are to sign the order, as an official act indicating that the order is to be effective.

     (6) "Filing" of a document that is required to be filed with an agency means delivery of the document to a place designated by the agency by rule for receipt of official documents, or in the absence of such designation, at the office of the agency head.

     (7) "Institutions of higher education" are the University of Washington, Washington State University, Central Washington University, Eastern Washington University, Western Washington University, The Evergreen State College, the various community colleges, and the governing boards of each of the above, and the various colleges, divisions, departments, or offices authorized by the governing board of the institution involved to act for the institution, all of which are sometimes referred to in this chapter as "institutions."

     (8) "Interpretive statement" means a written expression of the opinion of an agency, entitled an interpretive statement by the agency head or its designee, as to the meaning of a statute or other provision of law, of a court decision, or of an agency order.

     (9)(a) "License" means a franchise, permit, certification, approval, registration, charter, or similar form of authorization required by law, but does not include (i) a license required solely for revenue purposes, or (ii) a certification of an exclusive bargaining representative, or similar status, under a collective bargaining law or similar statute, or (iii) a license, franchise, or permission for use of trademarks, symbols, and similar property owned or controlled by the agency.

     (b) "Licensing" includes the agency process respecting the issuance, denial, revocation, suspension, or modification of a license.

     (10)(a) "Order," without further qualification, means a written statement of particular applicability that finally determines the legal rights, duties, privileges, immunities, or other legal interests of a specific person or persons.

     (b) "Order of adoption" means the official written statement by which an agency adopts, amends, or repeals a rule.

     (11) "Party to agency proceedings," or "party" in a context so indicating, means:

     (a) A person to whom the agency action is specifically directed; or

     (b) A person named as a party to the agency proceeding or allowed to intervene or participate as a party in the agency proceeding.

     (12) "Party to judicial review or civil enforcement proceedings," or "party" in a context so indicating, means:

     (a) A person who files a petition for a judicial review or civil enforcement proceeding; or

     (b) A person named as a party in a judicial review or civil enforcement proceeding, or allowed to participate as a party in a judicial review or civil enforcement proceeding.

     (13) "Person" means any individual, partnership, corporation, association, governmental subdivision or unit thereof, or public or private organization or entity of any character, and includes another agency.

     (14) "Policy statement" means a written description of the current approach of an agency, entitled a policy statement by the agency head or its designee, to implementation of a statute or other provision of law, of a court decision, or of an agency order, including where appropriate the agency's current practice, procedure, or method of action based upon that approach.

     (15) "Regulatory oversight committee" or "committee" means the legislative regulatory oversight committee created in RCW 34.05.610 (as recodified by this act) for the purposes of selectively reviewing existing and proposed rules of state agencies.

(16) "Rule" means any agency order, directive, or regulation of general applicability (a) the violation of which subjects a person to a penalty or administrative sanction; (b) which establishes, alters, or revokes any procedure, practice, or requirement relating to agency hearings; (c) which establishes, alters, or revokes any qualification or requirement relating to the enjoyment of benefits or privileges conferred by law; (d) which establishes, alters, or revokes any qualifications or standards for the issuance, suspension, or revocation of licenses to pursue any commercial activity, trade, or profession; or (e) which establishes, alters, or revokes any mandatory standards for any product or material which must be met before distribution or sale.  The term includes the amendment or repeal of a prior rule, but does not include (i) statements concerning only the internal management of an agency and not affecting private rights or procedures available to the public, (ii) declaratory rulings issued pursuant to RCW 34.05.240, (iii) traffic restrictions for motor vehicles, bicyclists, and pedestrians established by the secretary of transportation or his designee where notice of such restrictions is given by official traffic control devices, or (iv) rules of institutions of higher education involving standards of admission, academic advancement, academic credit, graduation and the granting of degrees, employment relationships, or fiscal processes.

     (((16) "Rules review committee" or "committee" means the joint administrative rules review committee created pursuant to RCW 34.05.610 for the purpose of selectively reviewing existing and proposed rules of state agencies.))

     (17) "Rule making" means the process for formulation and adoption of a rule.

     (18) "Service," except as otherwise provided in this chapter, means posting in the United States mail, properly addressed, postage prepaid, or personal service.  Service by mail is complete upon deposit in the United States mail.  Agencies may, by rule, authorize service by electronic telefacsimile transmission, where copies are mailed simultaneously, or by commercial parcel delivery company.

     Sec. 402.  RCW 34.05.320 and 1994 c 249 s 14 are each amended to read as follows:

     (1) At least twenty days before the rule-making hearing at which the agency receives public comment regarding adoption of a rule, the agency shall cause notice of the hearing to be published in the state register.  The publication constitutes the proposal of a rule.  The notice shall include all of the following:

     (a) A title, a description of the rule's purpose, and any other information which may be of assistance in identifying the rule or its purpose;

     (b) Citations of the statutory authority for adopting the rule and the specific statute the rule is intended to implement;

     (c) A summary of the rule and a statement of the reasons supporting the proposed action;

     (d) The agency personnel, with their office location and telephone number, who are responsible for the drafting, implementation, and enforcement of the rule;

     (e) The name of the person or organization, whether private, public, or governmental, proposing the rule;

     (f) Agency comments or recommendations, if any, regarding statutory language, implementation, enforcement, and fiscal matters pertaining to the rule;

     (g) Whether the rule is necessary as the result of federal law or federal or state court action, and if so, a copy of such law or court decision shall be attached to the purpose statement;

     (h) When, where, and how persons may present their views on the proposed rule;

     (i) The date on which the agency intends to adopt the rule;

     (j) A short explanation of the rule, its purpose, and anticipated effects, including in the case of a proposal that would modify existing rules, a short description of the changes the proposal would make; and

     (k) A statement indicating how a person can obtain a copy of the small business economic impact statement prepared under chapter 19.85 RCW, or an explanation for why the agency did not prepare the statement.

     (2) Upon filing notice of the proposed rule with the code reviser, the adopting agency shall have copies of the notice on file and available for public inspection and shall forward three copies of the notice to the ((rules review)) regulatory oversight committee.  The adopting agency shall also forward to the regulatory oversight committee three copies of the proposed rule and the evidence required under RCW 34.05.370(2)(i).

     (3) No later than three days after its publication in the state register, the agency shall cause a copy of the notice of proposed rule adoption to be mailed to each person who has made a request to the agency for a mailed copy of such notices.  An agency may charge for the actual cost of providing individual mailed copies of these notices.

     (4) In addition to the notice required by subsections (1) and (2) of this section, an institution of higher education shall cause the notice to be published in the campus or standard newspaper of the institution at least seven days before the rule-making hearing.

NEW SECTION. Sec. 403.  The regulatory oversight committee shall not render a decision on a rule unless a quorum is present.  A quorum shall consist of at least five members of the committee.  Once a quorum is established, a majority of the quorum may render any decision except a suspension recommendation.  A recommendation to suspend a rule under RCW 34.05.640 shall require a majority vote of the entire membership of the regulatory oversight committee.

NEW SECTION. Sec. 404.  Upon receipt of a proposed rule under RCW 34.05.320(2) and upon the review of an existing rule under RCW 34.05.630 (as recodified by this act), the regulatory oversight committee shall forward the rule to the appropriate standing committee of the legislature for initial review.  The standing committee shall make a recommendation on the rule within sixty days of the referral by the regulatory oversight committee and forward that recommendation to the regulatory oversight committee.

NEW SECTION. Sec. 405.  (1) Any person potentially impacted by a proposed rule or currently impacted by an existing rule may petition the regulatory oversight committee for a review of that rule.  Within thirty days of the receipt of the petition, the regulatory oversight committee shall acknowledge receipt of the petition and describe the initial action taken.  If the regulatory oversight committee rejects the petition, a written statement of the reasons for rejection shall be included.

     (2) Within ninety days of receipt of the petition, the regulatory oversight committee shall make a final decision on the rule.

NEW SECTION. Sec. 406.  Any individual employed or holding office in any department or agency of state government may submit rules warranting review to the regulatory oversight committee.  Any such state employee is protected under chapter 42.40 RCW.

     Sec. 407.  RCW 34.05.350 and 1994 c 249 s 3 are each amended to read as follows:

     (1) If an agency for good cause finds:

     (a) That immediate adoption, amendment, or repeal of a rule is necessary for the preservation of the public health, safety, or general welfare, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest; or

     (b) That state or federal law or federal rule or a federal deadline for state receipt of federal funds requires immediate adoption of a rule,

the agency may dispense with those requirements and adopt, amend, or repeal the rule on an emergency basis.  The agency's finding and a concise statement of the reasons for its finding shall be incorporated in the order for adoption of the emergency rule or amendment filed with the office of the code reviser under RCW 34.05.380 and with the ((rules review)) regulatory oversight committee.

     (2) An emergency rule adopted under this section takes effect upon filing with the code reviser, unless a later date is specified in the order of adoption, and may not remain in effect for longer than one hundred twenty days after filing.  Identical or substantially similar emergency rules may not be adopted in sequence unless conditions have changed or the agency has filed notice of its intent to adopt the rule as a permanent rule, and is actively undertaking the appropriate procedures to adopt the rule as a permanent rule.  This section does not relieve any agency from compliance with any law requiring that its permanent rules be approved by designated persons or bodies before they become effective.

     (3) Within seven days after the rule is adopted, any person may petition the governor requesting the immediate repeal of a rule adopted on an emergency basis by any department listed in RCW 43.17.010.  Within seven days after submission of the petition, the governor shall either deny the petition in writing, stating his or her reasons for the denial, or order the immediate repeal of the rule.  In ruling on the petition, the governor shall consider only whether the conditions in subsection (1) of this section were met such that adoption of the rule on an emergency basis was necessary.  If the governor orders the repeal of the emergency rule, any sanction imposed based on that rule is void.  This subsection shall not be construed to prohibit adoption of any rule as a permanent rule.

     (4) ((In adopting an emergency rule, the agency shall comply with section 4 of this act or provide a written explanation for its failure to do so.))  Prior to adopting an emergency rule, an agency shall comply with the requirements of RCW 34.05.370(2)(i) or provide in writing a reasonable justification for failing to do so.  The written justification shall be incorporated into the order of adoption.

NEW SECTION. Sec. 408.  Unless the context clearly requires otherwise, the definitions in RCW 34.05.010 apply throughout this chapter.

     Sec. 409.  RCW 34.05.610 and 1988 c 288 s 601 are each amended to read as follows:

     (1) There is hereby created a ((joint administrative rules review)) regulatory oversight committee which shall be a bipartisan committee consisting of four senators and four representatives from the state legislature.  The senate members of the committee shall be appointed by the president of the senate, and the house members of the committee shall be appointed by the speaker of the house.  Not more than two members from each house may be from the same political party.  All appointments to the committee are subject to approval by the caucuses to which the appointed members belong.

     (2) Members shall be appointed as soon as possible after the legislature convenes in regular session in an odd-numbered year, and their terms shall extend until their successors are appointed and qualified at the next regular session of the legislature in an odd-numbered year or until such members no longer serve in the legislature, whichever occurs first.  Members may be reappointed to a committee.

     (3) The president of the senate shall appoint the chairperson in even-numbered years and the vice chairperson in odd-numbered years from among committee membership.  The speaker of the house shall appoint the chairperson in odd-numbered years and the vice chairperson in even-numbered years from among committee membership.  Such appointments shall be made in January of each year as soon as possible after a legislative session convenes.

     (4) A vacancy on the committee shall be filled by appointment of a legislator from the same political party as the original appointment.  The appropriate appointing authority shall make the appointment within thirty days of the vacancy occurring.

     Sec. 410.  RCW 34.05.620 and 1994 c 249 s 17 are each amended to read as follows:

     Whenever ((a majority of the members of)) the ((rules review)) regulatory oversight committee determines that a proposed rule is not within the intent of the legislature as expressed in the statute which the rule implements, or that an agency may not be adopting a proposed rule in accordance with all applicable provisions of law, including ((section 4 of this act and)) chapter 19.85 RCW, the committee shall give the affected agency written notice of its decision.  The notice shall be given at least seven days prior to any hearing scheduled for consideration of or adoption of the proposed rule pursuant to RCW 34.05.320.  The notice shall include a statement of the ((review)) committee's findings and the reasons therefor.  When the agency holds a hearing on the proposed rule, the agency shall consider the ((review)) committee's decision.

     Sec. 411.  RCW 34.05.630 and 1994 c 249 s 18 are each amended to read as follows:

     (1) All rules required to be filed pursuant to RCW 34.05.380, and emergency rules adopted pursuant to RCW 34.05.350, are subject to selective review by the legislature.

     (2) The ((rules review)) regulatory oversight committee may review an agency's use of policy statements, guidelines, and issuances that are of general applicability, or their equivalents to determine whether or not an agency has failed to adopt a rule or whether they are within the intent of the legislature as expressed by the governing statute.

     (3) If the ((rules review)) regulatory oversight committee finds ((by a majority vote of its members)):  (a) That an existing rule is not within the intent of the legislature as expressed by the statute which the rule implements, (b) that the rule has not been adopted in accordance with all applicable provisions of law, including ((section 4 of this act if the rule was adopted after the effective date of section 4 of this act and)) chapter 19.85 RCW, (c) that an agency is using a policy statement, guideline, or issuance in place of a rule, or (d) that the policy statement, guideline, or issuance is outside of legislative intent, the agency affected shall be notified of such finding and the reasons therefor.  Within thirty days of the receipt of the ((rules review)) regulatory oversight committee's notice, the agency shall file notice of a hearing on the ((rules review)) regulatory oversight committee's finding with the code reviser and mail notice to all persons who have made timely request of the agency for advance notice of its rule-making proceedings as provided in RCW 34.05.320.  The agency's notice shall include the ((rules review)) regulatory oversight committee's findings and reasons therefor, and shall be published in the Washington state register in accordance with the provisions of chapter 34.08 RCW.

     (4) The agency shall consider fully all written and oral submissions regarding (a) whether the rule in question is within the intent of the legislature as expressed by the statute which the rule implements, (b) whether the rule was adopted in accordance with all applicable provisions of law, including ((section 4 of this act if the rule was adopted after the effective date of section 4 of this act and)) chapter 19.85 RCW, (c) whether the agency is using a policy statement, guideline, or issuance in place of a rule, or (d) whether the policy statement, guideline, or issuance is within the legislative intent.

     Sec. 412.  RCW 34.05.640 and 1994 c 249 s 19 are each amended to read as follows:

     (1) Within seven days of an agency hearing held after notification of the agency by the ((rules review)) regulatory oversight committee pursuant to RCW 34.05.620 or 34.05.630 (each as recodified by this act), the affected agency shall notify the committee of its action on a proposed or existing rule to which the committee objected or on a committee finding of the agency's failure to adopt rules.  If the ((rules review)) regulatory oversight committee determines((, by a majority vote of its members,)) that the agency has failed to provide for the required hearings or notice of its action to the committee, the committee may file notice of its objections, together with a concise statement of the reasons therefor, with the code reviser within thirty days of such determination.

     (2) If the ((rules review)) regulatory oversight committee finds((, by a majority vote of its members)):  (a) That the proposed or existing rule in question has not been modified, amended, withdrawn, or repealed by the agency so as to conform with the intent of the legislature, or (b) that an existing rule was not adopted in accordance with all applicable provisions of law, including ((section 4 of this act if the rule was adopted after the effective date of section 4 of this act and)) chapter 19.85 RCW, or (c) that the agency is using a policy statement, guideline, or issuance in place of a rule, or that the policy statement, guideline, or issuance is outside of the legislative intent, the ((rules review)) regulatory oversight committee may, within thirty days from notification by the agency of its action, file with the code reviser notice of its objections together with a concise statement of the reasons therefor.  Such notice and statement shall also be provided to the agency by the ((rules review)) regulatory oversight committee.

     (3) If the ((rules review)) regulatory oversight committee makes an adverse finding under subsection (2) of this section, the committee may, by a majority vote of its members, recommend suspension of an existing rule.  Within seven days of such vote the committee shall transmit to the appropriate standing committees of the legislature, the governor, the code reviser, and the agency written notice of its objection and recommended suspension and the concise reasons therefor.  Within thirty days of receipt of the notice, the governor shall transmit to the committee, the code reviser, and the agency written approval or disapproval of the recommended suspension.  If the suspension is approved by the governor, it is effective from the date of that approval and continues until ninety days after the expiration of the next regular legislative session.

     (4) If the governor disapproves the recommendation of the ((rules review)) regulatory oversight committee to suspend the rule, the transmittal of such decision, along with the findings of the ((rules review)) regulatory oversight committee, shall be treated by the agency as a petition by the ((rules review)) regulatory oversight committee to repeal the rule under RCW 34.05.330.

     (5) The code reviser shall publish transmittals from the ((rules review)) regulatory oversight committee or the governor issued pursuant to subsection (1), (2), or (3) of this section in the Washington state register and shall publish in the next supplement and compilation of the Washington Administrative Code a reference to the committee's objection or recommended suspension and the governor's action on it and to the issue of the Washington state register in which the full text thereof appears.

     (6) The reference shall be removed from a rule published in the Washington Administrative Code if a subsequent adjudicatory proceeding determines that the rule is within the intent of the legislature or was adopted in accordance with all applicable laws, whichever was the objection of the ((rules review)) regulatory oversight committee.

     Sec. 413.  RCW 34.05.650 and 1988 c 288 s 605 are each amended to read as follows:

     The ((rules review)) regulatory oversight committee may recommend to the legislature that the original enabling legislation serving as authority for the adoption of any rule reviewed by the committee be amended or repealed in such manner as the committee deems advisable.  The committee may submit its recommendation in the form of request legislation.

     Sec. 414.  RCW 34.05.660 and 1988 c 288 s 606 are each amended to read as follows:

(1) Except as provided in subsection (2) of this section, it is the express policy of the legislature that establishment of procedures for review of administrative rules by the legislature and the notice of objection required by RCW 34.05.630(2) and 34.05.640(2) (each as recodified by this act) in no way serves to establish a presumption as to the legality or constitutionality of a rule in any subsequent judicial proceedings interpreting such rules.

(2) An election by the regulatory oversight committee to recommend suspension of a rule, whether or not the suspension is approved by the governor, establishes a presumption in any subsequent judicial review of the rule that the rule is invalid.  The burden of demonstrating the rule's validity is then on the adopting agency.

NEW SECTION. Sec. 415.  (1) The regulatory oversight committee may make reports from time to time to the members of the legislature and to the public with respect to any of its findings or recommendations.  The committee shall keep complete minutes of its meetings.

     (2) The committee may establish ad hoc advisory boards, including but not limited to, ad hoc economics or science advisory boards to assist the committee in its rules review functions.

     (3) The committee may hire staff as needed to perform functions under this chapter.

NEW SECTION. Sec. 416.  In the discharge of any duty imposed under this chapter, the regulatory oversight committee may examine and inspect all properties, equipment, facilities, files, records, and accounts of any state office, department, institution, board, committee, commission, or agency, and administer oaths, issue subpoenas, compel the attendance of witnesses and the production of any papers, books, accounts, documents, and testimony, and cause the deposition of witnesses, either residing within or without the state, to be taken in the manner prescribed by law for taking depositions in civil actions in the superior courts.

NEW SECTION. Sec. 417.  In case of the failure on the part of any person to comply with any subpoena issued in behalf of the regulatory oversight committee, or on the refusal of any witness to testify to any matters regarding which he or she may be lawfully interrogated, it is the duty of the superior court of any county, or of the judge thereof, on application of the committee, to compel obedience by proceedings for contempt, as in the case of disobedience of the requirements of a subpoena issued from the court or a refusal to testify in the court.

     Sec. 418.  RCW 42.40.010 and 1982 c 208 s 1 are each amended to read as follows:

     It is the policy of the legislature that employees should be encouraged to disclose, to the extent not expressly prohibited by law, improper governmental actions, and it is the intent of the legislature to protect the rights of state employees making these disclosures.  It is also the policy of the legislature that employees should be encouraged to identify rules warranting review or provide information to the legislative regulatory oversight committee, and it is the intent of the legislature to protect the rights of these employees.

     Sec. 419.  RCW 42.40.020 and 1992 c 118 s 1 are each amended to read as follows:

     As used in this chapter, the terms defined in this section shall have the meanings indicated unless the context clearly requires otherwise.

     (1) "Auditor" means the office of the state auditor.

     (2) "Employee" means any individual employed or holding office in any department or agency of state government.

     (3)(a) "Improper governmental action" means any action by an employee:

     (i) Which is undertaken in the performance of the employee's official duties, whether or not the action is within the scope of the employee's employment; and

     (ii) Which is in violation of any state law or rule, is an abuse of authority, is of substantial and specific danger to the public health or safety, or is a gross waste of public funds.

     (b) "Improper governmental action" does not include personnel actions including but not limited to employee grievances, complaints, appointments, promotions, transfers, assignments, reassignments, reinstatements, restorations, reemployments, performance evaluations, reductions in pay, dismissals, suspensions, demotions, violations of the state civil service law, alleged labor agreement violations, reprimands, or any action which may be taken under chapter 41.06 ((or 28B.16)) RCW, or other disciplinary action except as provided in RCW 42.40.030.

     (4) "Use of official authority or influence" includes taking, directing others to take, recommending, processing, or approving any personnel action such as an appointment, promotion, transfer, assignment, reassignment, reinstatement, restoration, reemployment, performance evaluation, or any adverse action under chapter 41.06 ((or 28B.16)) RCW, or other disciplinary action.

     (5) "Whistleblower" means an employee who in good faith reports alleged improper governmental action to the auditor, initiating an investigation under RCW 42.40.040.  For purposes of the provisions of this chapter and chapter 49.60 RCW relating to reprisals and retaliatory action, the term "whistleblower" also means:  (a) An employee who in good faith provides information to the auditor in connection with an investigation under RCW 42.40.040 and an employee who is believed to have reported alleged improper governmental action to the auditor or to have provided information to the auditor in connection with an investigation under RCW 42.40.040 but who, in fact, has not reported such action or provided such information; or (b) an employee who in good faith identifies rules warranting review or provides information to the legislative regulatory oversight committee, and an employee who is believed to have identified rules warranting review or provided information to the legislative regulatory oversight committee but who, in fact, has not done so.

     Sec. 420.  RCW 42.40.030 and 1989 c 284 s 2 are each amended to read as follows:

     (1) An employee shall not directly or indirectly use or attempt to use the employee's official authority or influence for the purpose of intimidating, threatening, coercing, commanding, influencing, or attempting to intimidate, threaten, coerce, command, or influence any individual for the purpose of interfering with the right of the individual to:  (a) Disclose to the auditor (or representative thereof) information concerning improper governmental action; or (b) identify rules warranting review or provide information to the legislative regulatory oversight committee.

     (2) Nothing in this section authorizes an individual to disclose information otherwise prohibited by law.

     Sec. 421.  RCW 43.31.086 and 1994 c 249 s 15 are each amended to read as follows:

     To assist state agencies in reducing regulatory costs to small business and to promote greater public participation in the rule-making process, the business assistance center shall:

     (1) Develop agency guidelines for the preparation of a small business economic impact statement and compliance with chapter 19.85 RCW;

     (2) Review and provide comments to agencies on draft or final small business economic impact statements;

     (3) Advise the ((joint administrative rules review)) legislative regulatory oversight committee on whether an agency reasonably assessed the costs of a proposed rule and reduced the costs for small business as required by chapter 19.85 RCW; and

     (4) Organize and chair a state rules coordinating committee, consisting of agency rules coordinators and interested members of the public, to develop an education and training program that includes, among other components, a component that addresses voluntary compliance, for agency personnel responsible for rule development and implementation.  The business assistance center shall submit recommendations to the department of personnel for an administrative procedures training program that is based on the sharing of interagency resources.

     Sec. 422.  RCW 43.180.110 and 1983 c 161 s 11 are each amended to read as follows:

     The commission shall submit the initial policies adopted under RCW 43.180.090 and 43.180.100 to the chief clerk of the house and the secretary of the senate for transmittal to and review by the appropriate standing committees and the ((joint administrative rules review)) legislative regulatory oversight committee.  By January 1, 1984, the commission shall have adopted policies in the form of rules ((and regulations)) under chapter 34.05 RCW.  Such rules ((and regulations)) may only be changed or revised in accordance with chapter 34.05 RCW.

                                      PART 5

                               TECHNICAL ASSISTANCE

NEW SECTION. Sec. 501.  A new section is added to chapter 34.05 RCW to read as follows:

     (1) An agency listed in subsection (6) of this section may immediately impose a penalty otherwise provided for by law for a violation of an administrative rule only if the entity on which the penalty will be imposed has willfully violated the rule.  Where a penalty is otherwise provided, but may not be imposed under this subsection, the agency shall issue a statement of deficiency.

     (2) A statement of deficiency shall specify: (a) The particular rule violated; (b) suggestions on actions the entity may take to comply with the rule; (c) agency personnel designated by the agency to provide technical assistance regarding compliance with the rule; and (d) a negotiated date when the entity will be revisited by technical assistance personnel.  At the revisit, technical assistance personnel shall assess compliance, make further recommendations for action, and set a date for compliance.  The date specified shall provide a reasonable period of time for the entity to comply with the rule, considering the size of the entity, its available resources, and the threat posed by the violation.  If the entity fails to comply with the rule by the date specified, it shall be subject to the penalty otherwise provided in law.

     (3) Subsection (1) of this section shall not apply to any violation that places a person in danger of death or substantial bodily harm, is causing or is likely to cause significant environmental harm, or has caused or is likely to cause physical damage to the property of others in an amount exceeding one thousand dollars.

     (4) The state, the agency, and officers or employees of the state shall not be liable for damages to any person to the extent that liability is asserted to arise from the technical assistance provided under this section, or if liability is asserted to arise from the failure of the agency to supply technical assistance.

     (5) Where a state agency has been delegated authority to enforce federal laws and regulations, the agency shall submit a written petition to the appropriate federal agency for authorization to comply with this section for all inspections while retaining the state's federal delegation.  If the federal agency fails to provide the authorization, the agency shall comply with this section in all inspections except the minimum number of inspections required by the federal government for the program delegated to the state of Washington for enforcement.

     (6) This section shall apply to the departments of health, agriculture, labor and industries, ecology, revenue, licensing, social and health services, natural resources when enforcing chapter 76.09 RCW and rules of the commissioner of public lands, and fish and wildlife, the employment security department, and the office of insurance commissioner.

     (7) Technical assistance personnel in the departments of health, agriculture, labor and industries, ecology, revenue, licensing, social and health services, natural resources enforcing chapter 76.09 RCW and rules of the commissioner of public lands, and fish and wildlife, the employment security department, and the office of insurance commissioner are authorized to impose a penalty for the violation of an administrative rule when:  (a) A determination is made that the violation was willful or meets one of the criteria listed in subsection (3) of this section; or (b) on or after the compliance date provided for under subsection (2) of this section.

     (8) As used in subsections (1) and (7) of this section, an entity acts "willfully" when the owner or operator:  (a) Is aware of a fact, facts, or circumstances or result described by a rule defining a violation; or (b) has information which would lead a reasonable person to believe that facts exist which facts are described by a rule defining a violation.

NEW SECTION. Sec. 502.  A new section is added to chapter 43.20A RCW to read as follows:

     (1) All enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 503.  A new section is added to chapter 43.21A RCW to read as follows:

     (1) All enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 504.  A new section is added to chapter 43.22 RCW to read as follows:

     (1) All enforcement personnel positions in the department of labor and industries shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 505.  A new section is added to chapter 43.24 RCW to read as follows:

     (1) All enforcement personnel positions in the department of licensing shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 506.  A new section is added to chapter 43.30 RCW to read as follows:

     (1) All enforcement personnel positions in the department that pertain to the enforcement of rules adopted by the commissioner of public lands shall be abolished.  These positions shall be converted to technical assistance positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 507.  A new section is added to chapter 43.70 RCW to read as follows:

     (1) All enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 508.  A new section is added to chapter 43.300 RCW to read as follows:

     (1) All enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 509.  A new section is added to chapter 48.02 RCW to read as follows:

     (1) All enforcement personnel positions in the office of the insurance commissioner shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 510.  A new section is added to chapter 50.08 RCW to read as follows:

     (1) All enforcement personnel positions in the employment security department shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 511.  A new section is added to chapter 76.09 RCW to read as follows:

     (1) All forest practices enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

NEW SECTION. Sec. 512.  A new section is added to chapter 82.01 RCW to read as follows:

     (1) All enforcement personnel positions in the department shall be abolished.  These positions shall be converted to technical assistance personnel positions.

     (2) This section shall not apply where enforcement personnel are required to maintain state authority to administer a federally delegated program.

                                      PART 6

                                 FEES AND EXPENSES

NEW SECTION. Sec. 601.  A new section is added to chapter 4.84 RCW to read as follows:

     Unless the context clearly requires otherwise, the definitions in this section apply throughout this section and sections 602 through 604 of this act.

     (1) "Agency" means agency as defined by chapter 34.05 RCW.

     (2) "Fees and other expenses" includes the reasonable expenses of expert witnesses, the reasonable cost of a study, analysis, engineering report, test, or project that is found by the court to be necessary for the preparation of the party's case, and reasonable attorneys' fees.  Reasonable attorneys' fees shall be based on the prevailing market rates for the kind and quality of services furnished, except that (a) no expert witness may be compensated at a rate in excess of the highest rates of compensation for expert witnesses paid by the state of Washington, and (b) attorneys' fees shall not be awarded in excess of one hundred fifty dollars per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.

     (3) "Judicial review" means a judicial review as defined by chapter 34.05 RCW.

     (4) "Qualified party" means (a) an individual whose net worth did not exceed one million dollars at the time the initial petition for judicial review was filed; (b) a sole owner of an unincorporated business, or a partnership, corporation, association, or organization whose net worth did not exceed five million dollars at the time the initial petition for judicial review was filed, except that an organization described in section 501(c)(3) of the federal internal revenue code of 1954 as exempt from taxation under section 501(a) of the code and a cooperative association as defined in section 15(a) of the agricultural marketing act (12 U.S.C. Sec. 1141J(a)), may be a party regardless of the net worth of such organization or cooperative association; or (c) a sole owner of an unincorporated business, or a partnership, corporation, association, or organization, having not more than one hundred employees at the time the initial petition for judicial review was filed.

     (5) "Rule" means a rule as defined by chapter 34.05 RCW.

NEW SECTION. Sec. 602.  A new section is added to chapter 4.84 RCW to read as follows:

     If upon judicial review a rule is declared invalid and the party that challenged the rule is a qualified party, the party shall be awarded fees and other expenses not to exceed ten thousand dollars.

NEW SECTION. Sec. 603.  A new section is added to chapter 4.84 RCW to read as follows:

     Fees and other expenses awarded under section 602 of this act shall be paid by the agency that adopted the invalid rule from operating funds appropriated to the agency within sixty days.  Agencies paying fees and other expenses pursuant to section 602 of this act shall report all payments to the office of financial management within five days of paying the fees and other expenses.  Fees and other expenses awarded by the court shall be subject to chapter 39.76 RCW and shall be deemed payable on the date the court announces the award.

NEW SECTION. Sec. 604.  A new section is added to chapter 43.88 RCW to read as follows:

     The office of financial management shall report annually to the legislature on the amount of fees and other expenses awarded during the preceding fiscal year under section 602 of this act.  The report shall describe the number, nature, and amount of the awards, the claims involved in the controversy, and other relevant information that may aid the legislature in evaluating the scope and impact of the awards.

                                      PART 7

                                   MISCELLANEOUS

NEW SECTION. Sec. 701.  (1) The following sections are each recodified as a new chapter in Title 44 RCW:

     RCW 34.05.610

     RCW 34.05.620

     RCW 34.05.630

     RCW 34.05.640

     RCW 34.05.650

     RCW 34.05.660

     (2) Sections 403 through 406, 408, and 415 through 417 of this act are each added to the chapter created in this section.

NEW SECTION. Sec. 702.  This act shall apply prospectively only and not retroactively.  Rules adopted and filed with the code reviser prior to the effective date of this act shall be subject to judicial review under the statutory authority and statutory rule-making procedures existing at the time the rule was adopted.

NEW SECTION. Sec. 703.  If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 704.  This act shall be submitted to the people for their adoption and ratification, or rejection, at the next succeeding general election to be held in this state, in accordance with Article II, section 1 of the state Constitution, as amended, and the laws adopted to facilitate the operation thereof.

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