AN ACT Relating to regulatory reform; amending RCW 76.09.010, 76.09.040, 48.02.060, 48.44.050, 48.46.200, 82.32.300, 48.30.010, 34.05.350, 34.05.328, 34.05.010, 34.05.230, 82.32.410, 34.05.325, 34.05.354, 19.85.025, 34.05.570, 34.05.534, 48.04.010, 34.12.040, 34.05.630, 34.05.640, 34.05.655, 34.05.660, 4.84.350, 4.84.360, 4.84.340, and 43.41.110; adding a new section to chapter 43.22 RCW; adding new sections to chapter 34.05 RCW; adding a new section to chapter 43.17 RCW; adding a new section to chapter 43.05 RCW; adding a new chapter to Title 43 RCW; creating a new section; and providing an expiration date.

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

PART I

GRANTS OF RULE-MAKING AUTHORITY

Sec. 101. RCW 76.09.010 and 1993 c 443 s 1 are each amended to read as follows:

(1) The legislature hereby finds and declares that the forest land resources are among the most valuable of all resources in the state; that a viable forest products industry is of prime importance to the state's economy; that it is in the public interest for public and private commercial forest lands to be managed consistent with sound policies of natural resource protection; that coincident with maintenance of a viable forest products industry, it is important to afford protection to forest soils, fisheries, wildlife, water quantity and quality, air quality, recreation, and scenic beauty.

(2) The legislature further finds and declares it to be in the public interest of this state to create and maintain through the adoption of this chapter a comprehensive state-wide system of laws and forest practices regulations which will achieve the following purposes and policies:

(a) Afford protection to, promote, foster and encourage timber growth, and require such minimum reforestation of commercial tree species on forest lands as will reasonably utilize the timber growing capacity of the soil following current timber harvest;

(b) Afford protection to forest soils and public resources by utilizing all reasonable methods of technology in conducting forest practices;

(d) Promote efficiency by permitting maximum operating freedom consistent with the other purposes and policies stated herein;

(e) Provide for regulation of forest practices so as to avoid unnecessary duplication in such regulation;

(f) Provide for interagency input and intergovernmental and tribal coordination and cooperation;

(g) Achieve compliance with all applicable requirements of federal and state law with respect to nonpoint sources of water pollution from forest practices;

(h) To consider reasonable land use planning goals and concepts contained in local comprehensive plans and zoning regulations; and

(i) Foster cooperation among managers of public resources, forest landowners, Indian tribes and the citizens of the state.

The authority of the board to adopt forest practices rules is prescribed by this subsection (2) and RCW 76.09.040. After the effective date of this section, the board may not adopt forest practices rules based solely on any other section of law stating a statute's intent or purpose, on the enabling provisions of the statute establishing the agency, or on any combination of such provisions.

(3) The legislature further finds and declares that it is also in the public interest of the state to encourage forest landowners to undertake corrective and remedial action to reduce the impact of mass earth movements and fluvial processes.

(4) The legislature further finds and declares that it is in the public interest that the applicants for state forest practice permits should assist in paying for the cost of review and permitting necessary for the environmental protection of these resources.

Sec. 102. 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 specifically stated in RCW 76.09.010(2), and to implement the provisions of this chapter, the board shall ((~~promulgate~~)) adopt forest practices ((~~regulations~~)) rules pursuant to chapter 34.05 RCW and in accordance with the procedures enumerated in this section 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 specifically stated in RCW 76.09.010(2) and the plan meets or exceeds the objectives of the minimum standards;

(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~~)) rules shall be administered and enforced by the department except as otherwise provided in this chapter. Such ((~~regulations~~)) rules shall be ((~~promulgated~~)) adopted and administered so as to give consideration to all purposes and policies specifically set forth in RCW 76.09.010(2).

(2) 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.

NEW SECTION. Sec. 103. A new section is added to chapter 43.22 RCW to read as follows:

For rules adopted after the effective date of this section, the director of the department of labor and industries may not rely solely on a statute's statement of intent or purpose, on the enabling provisions of the statute establishing the agency, or on any combination of such provisions, for statutory authority to adopt any rule: PROVIDED, That this section shall not apply to rules adopted pursuant to chapter 39.12 RCW.

Sec. 104. 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 or her election, qualifications, or compensation: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this statute, or on a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute. No such rules and regulations shall be effective prior to their being filed for public inspection in the commissioner's office.

(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. 105. RCW 48.44.050 and 1947 c 268 s 5 are each amended to read as follows:

The insurance commissioner shall make reasonable regulations in aid of the administration of this chapter which may include, but shall not be limited to regulations concerning the maintenance of adequate insurance, bonds, or cash deposits, information required of registrants, and methods of expediting speedy and fair payments to claimants: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this section, a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute.

Sec. 106. RCW 48.46.200 and 1975 1st ex.s. c 290 s 21 are each amended to read as follows:

The commissioner may adopt, in accordance with the provisions of the administrative procedure act, chapter 34.05 RCW, ((~~promulgate~~)) rules and regulations as necessary or proper to carry out the provisions of this chapter: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this section, a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute. Nothing in this chapter shall be construed to prohibit the commissioner from requiring changes in procedures previously approved by ((~~him~~)) the commissioner.

Sec. 107. RCW 82.32.300 and 1983 c 3 s 222 are each amended to read as follows:

The administration of this and chapters 82.04 through 82.27 RCW of this title is vested in the department of revenue which shall prescribe forms and rules of procedure for the determination of the taxable status of any person, for the making of returns and for the ascertainment, assessment and collection of taxes and penalties imposed thereunder.

The department of revenue shall make and publish procedural rules and regulations, not inconsistent therewith, necessary to enforce their provisions, which shall have the same force and effect as if specifically included therein, unless declared invalid by the judgment of a court of record not appealed from.

The department may employ such clerks, specialists, and other assistants as are necessary. Salaries and compensation of such employees shall be fixed by the department and shall be charged to the proper appropriation for the department.

The department shall exercise general supervision of the collection of taxes and, in the discharge of such duty, may institute and prosecute such suits or proceedings in the courts as may be necessary and proper.

Sec. 108. RCW 48.30.010 and 1985 c 264 s 13 are each amended to read as follows:

(1) No person engaged in the business of insurance shall engage in unfair methods of competition or in unfair or deceptive acts or practices in the conduct of such business as such methods, acts, or practices are defined pursuant to subsection (2) of this section.

(2) In addition to such unfair methods and unfair or deceptive acts or practices as are expressly defined and prohibited by this code, the commissioner may from time to time by regulation promulgated pursuant to chapter 34.05 RCW, define other methods of competition and other acts and practices in the conduct of such business ((~~reasonably~~)) found by the commissioner to be unfair or deceptive by a preponderance of the facts submitted.

(3) In defining other methods of competition and other acts and practices in the conduct of such business to be unfair and deceptive, the commissioner shall set forth in detail all facts upon which he or she relies in making the definition. After the hearing the commissioner shall review all the material submitted and affirm or deny the definition based upon a preponderance of facts submitted. Upon appeal the superior court shall review the findings of fact upon which the regulation is based de novo on the record.

(4) No such regulation shall be made effective prior to the expiration of thirty days after the date of the order by which it is promulgated.

((~~(4)~~)) (5) If the commissioner has cause to believe that any person is violating any such regulation, the commissioner may order such person to cease and desist therefrom. The commissioner shall deliver such order to such person direct or mail it to the person by registered mail with return receipt requested. If the person violates the order after expiration of ten days after the cease and desist order has been received by him or her, he or she may be fined by the commissioner a sum not to exceed two hundred and fifty dollars for each violation committed thereafter.

((~~(5)~~)) (6) If any such regulation is violated, the commissioner may take such other or additional action as is permitted under the insurance code for violation of a regulation.

PART II

RULE-MAKING REQUIREMENTS

Sec. 201. 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((,)) or 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: PROVIDED, That the department of agriculture may adopt an emergency rule if the failure to adopt the rule on an emergency basis would result in substantial reduction of commodity value or substantial economic detriment and the department of fish and wildlife may adopt emergency rules governing seasons and harvest limits for recreational and commercial fishing and recreational hunting; 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 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.

Sec. 202. RCW 34.05.328 and 1995 c 403 s 201 are each amended to read as follows:

(1) Before adopting a rule described in subsection (5) of this section, an agency shall:

(a) Clearly state in detail the general goals and specific objectives of the statute that the rule implements;

(b) Determine that the rule is needed to achieve the general goals and specific objectives stated under (a) of this subsection, and analyze alternatives to rule making and the consequences of not adopting the rule;

(c) Determine that the probable benefits of the rule are greater than its probable costs, taking into account both the qualitative and quantitative benefits and costs and the specific directives of the statute being implemented;

(d) Determine, after considering alternative versions of the rule and the analysis required under (b) and (c) of this subsection, that the rule being adopted is the least burdensome alternative for those required to comply with it that will achieve the general goals and specific objectives stated under (a) of this subsection;

(e) Determine that the rule does not require those to whom it applies to take an action that violates requirements of another federal or state law;

(f) Determine that the rule does not impose more stringent performance requirements on private entities than on public entities unless required to do so by federal or state law;

(g) Determine if the rule differs from any federal regulation or statute applicable to the same activity or subject matter and, if so, determine that the difference is justified by the following:

(i) A state statute that explicitly allows the agency to differ from federal standards; or

(ii) Substantial evidence that the difference is necessary to achieve the general goals and specific objectives stated under (a) of this subsection; and

(h) Coordinate the rule, to the maximum extent practicable, with other federal, state, and local laws applicable to the same activity or subject matter.

(2) In making its determinations pursuant to subsection (1)(b) through (g) of this section, the agency shall place in the rule-making file documentation of sufficient quantity and quality so as to persuade a reasonable person that the determinations are justified.

(3) Before adopting rules described in subsection (5) of this section, an agency shall place in the rule-making file a rule implementation plan for rules filed under each adopting order. The plan shall describe how the agency intends to:

(a) Implement and enforce the rule, including a description of the resources the agency intends to use;

(b) Inform and educate affected persons about the rule;

(d) Evaluate whether the rule achieves the purpose for which it was adopted, including, to the maximum extent practicable, the use of interim milestones to assess progress and the use of objectively measurable outcomes.

(4) After adopting a rule described in subsection (5) of this section regulating the same activity or subject matter as another provision of federal or state law, an agency shall do all of the following:

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

(b) Coordinate implementation and enforcement of the rule with the other federal and state entities regulating the same activity or subject matter by making every effort to do 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 comply with this subsection (4)(b), the agency shall report to the legislature pursuant to (c) of this subsection;

(i) The existence of any overlap or duplication of other federal or state laws, any differences from federal law, and any known overlap, duplication, or conflict with local laws; and

(ii) Make recommendations for any legislation that may be necessary to eliminate or mitigate any adverse effects of such overlap, duplication, or difference.

(5)(a) Except as provided in (b) of this subsection, this section applies to:

(i) Significant legislative rules of the departments of ecology, labor and industries, health, social and health services, revenue, and natural resources, the employment security department, the forest practices board, the office of the insurance commissioner, and to the legislative rules of the department of fish and wildlife implementing chapter 75.20 RCW; and

(ii) Any rule of any agency, if this section is voluntarily made applicable to the rule by the agency, or is made applicable to the rule by a majority vote of the joint administrative rules review committee within forty-five days of receiving the notice of proposed rule making under RCW 34.05.320.

(b) This section does not apply to:

(i) Emergency rules adopted under RCW 34.05.350;

(ii) Rules relating only to internal governmental operations that are not subject to violation by a nongovernment party;

(iii) Rules adopting or incorporating by reference without material change federal statutes or regulations, Washington state statutes, rules of other Washington state agencies, shoreline master programs other than those programs governing shorelines of state-wide significance, or, as referenced by Washington state law, national consensus codes that generally establish industry standards, if the material adopted or incorporated regulates the same subject matter and conduct as the adopting or incorporating rule;

(iv) Rules that only correct typographical errors, make address or name changes, or clarify language of a rule without changing its effect;

(v) Rules the content of which is explicitly and specifically dictated by statute; or

(vi) Rules that set or adjust fees or rates pursuant to legislative standards.

(i) A "procedural rule" is a rule that adopts, amends, or repeals (A) any procedure, practice, or requirement relating to any agency hearings; (B) any filing or related process requirement for making application to an agency for a license or permit; or (C) any policy statement pertaining to the consistent internal operations of an agency.

(ii) An "interpretive rule" is a rule, the violation of which does not subject a person to a penalty or sanction, that sets forth the agency’s interpretation of statutory provisions it administers.

(iii) A "significant legislative rule" is a rule other than a procedural or interpretive rule that (A) adopts substantive provisions of law pursuant to delegated legislative authority, the violation of which subjects a violator of such rule to a penalty or sanction; (B) establishes, alters, or revokes any qualification or standard for the issuance, suspension, or revocation of a license or permit; or (C) adopts a new, or makes significant amendments to, a policy or regulatory program.

(d) In the notice of proposed rule making under RCW 34.05.320, an agency shall state whether this section applies to the proposed rule pursuant to (a)(i) of this subsection, or if the agency will apply this section voluntarily.

(6) By January 31, 1996, and by January 31st of each even-numbered year thereafter, the office of financial management, after consulting with state agencies, counties, and cities, and business, labor, and environmental organizations, shall report to the governor and the legislature regarding the effects of this section on the regulatory system in this state. The report shall document:

(a) The rules proposed to which this section applied and to the extent possible, how compliance with this section affected the substance of the rule, if any, that the agency ultimately adopted;

(b) The costs incurred by state agencies in complying with this section;

(c) Any legal action maintained based upon the alleged failure of any agency to comply with this section, the costs to the state of such action, and the result;

(d) The extent to which this section has adversely affected the capacity of agencies to fulfill their legislatively prescribed mission;

(e) The extent to which this section has improved the acceptability of state rules to those regulated; and

(f) Any other information considered by the office of financial management to be useful in evaluating the effect of this section.

NEW SECTION. Sec. 203. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

(1) No rule, adopted by an agency before the effective date of this section, is effective for more than seven years after the effective date of this section, unless it has been reviewed under the procedures established in this chapter.

(2) Each agency shall review its rules existing on the effective date of this section as follows:

(a) Fifty percent of the rules shall be reviewed within three years of the effective date of this section;

(b) Eighty percent of the rules shall be reviewed within five years of the effective date of this section;

(3) In reviewing a rule, the agency shall determine whether the rule is:

(a) Unclear or difficult to understand;

(b) Written or being implemented in a way that does not conform with the intent of the legislature as expressed by the statute which the rule implements;

(d) Excessively costly or outdated in the methods prescribed;

(e) Unauthorized because the authorizing statute has since been repealed or amended; and

(f) No longer necessary to meet the purposes of the statute which it implements.

(4) The agency shall place in a rules review file documentation sufficient to show that the agency considered the criteria in subsection (3) of this section in reviewing a rule. If the documentation shows that the rule meets the criteria, the agency may retain the rule. If the rule does not meet the criteria, the agency shall amend the rule to meet the criteria or repeal the rule. The agency may use the expedited procedures under this chapter to amend or repeal the rule. If the criteria are not met and the agency has not amended the rule to meet the criteria, the agency may not rely on the rule for any agency action beginning seven years after the effective date of this section.

(5) No rule, adopted by an agency after the effective date of this section, is effective for more than seven years after the rule is adopted, unless the rule has been reviewed under the procedure in this subsection. An agency shall review a rule to evaluate:

(a) Achievement of the goals and objectives of the rule;

(b) Technological changes that impact the implementation of or compliance with the rule;

(d) The outcome of any court challenges to the validity of the rule or its authority to draft the rule;

(e) Actual costs or changes undergone by the regulated community; and

(f) Laws or other rules passed since the rule was adopted that are in conflict, impact its implementation, or render the rule obsolete.

The agency shall place in a rules review file documentation sufficient to show that the agency conducted the review under this section.

(6) For purposes of this section, "agency" means the department of ecology, employment security department, department of labor and industries, department of revenue, department of licensing, department of health, department of social and health services, department of fish and wildlife, and the office of the insurance commissioner.

NEW SECTION. Sec. 204. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

Each state agency shall prepare a semiannual agenda for rules under development. The agency shall file the agenda with the code reviser for publication in the state register not later than January 31st and July 31st of each year. Not later than three days after its publication in the state register, the agency shall send a copy of the agenda to each person who has requested receipt of a copy of the agenda. The agency shall also submit the agenda to the director of financial management, the rules review committee, and any other state agency that may reasonably be expected to have an interest in the subject of rules that will be developed.

NEW SECTION. Sec. 205. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

Any agency having rules that postpone full compliance with their requirements beyond ninety days after the effective date of this section shall prepare a small business economic impact statement, as defined in RCW 19.85.020(2), on such rules before requiring full compliance with the rules.

NEW SECTION. Sec. 206. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

(1) An agency may file notice for the expedited adoption of rules in accordance with the procedures set forth in this section for rules meeting any one of the following criteria:

(a) The proposed rules previously existed in the form of interpretive statements or policy statements by the agency;

(b) The proposed rules relate only to internal governmental operations that are not subject to violation by a person;

(c) The proposed rules adopt or incorporate by reference without material change federal statutes or regulations, Washington state statutes, rules of other Washington state agencies, shoreline master programs other than those programs governing shorelines of state-wide significance, or, as referenced by Washington state law, national consensus codes that generally establish industry standards, if the material adopted or incorporated regulates the same subject matter and conduct as the adopting or incorporating rule;

(d) The proposed rules only correct typographical errors, make address or name changes, or clarify language of a rule without changing its effect;

(e) The content of the proposed rules is explicitly and specifically dictated by statute;

(f) The proposed rules have been the subject of negotiated rule making, pilot rule making, or some other process that involved substantial participation by interested parties before the development of the proposed rule; or

(g) The proposed rule is being amended following a review under section 203 of this act.

(2) The expedited rule-making process must follow the requirements for rule making set forth in RCW 34.05.320, except that the agency is not required to prepare a small business economic impact statement, a statement indicating whether the rule constitutes a significant legislative rule under RCW 34.05.328(5)(c)(iii), or a significant legislative rule analysis under RCW 34.05.328. An agency is not required to prepare statements of inquiry under RCW 34.05.310 or conduct a hearing for the expedited adoption of rules. The notice for the expedited adoption of rules must contain a statement which is substantially in the following form:

NOTICE

THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE RECEIVED BY (INSERT DATE) AND SENT TO (INSERT NAME AND ADDRESS).

(3) The agency shall send a copy of the notice of the proposed expedited rule making to any person who has requested notification of proposals for the expedited adoption of rules or of agency rule making, as well as the joint administrative rules review committee, within three days after its publication in the Washington State Register. An agency may charge for the actual cost of providing a requesting party mailed copies of these notices. The notice of the proposed expedited rule making shall include a statement that any person who objects to the adoption of the rule must file a written objection to the adoption of the rule within forty-five days after the notice has been published. The notice shall also include an explanation of the reasons the agency believes the expedited adoption of the rule is appropriate.

(4) The code reviser shall publish the text of all rules proposed for expedited adoption along with the notice required in this section in a separate section of the Washington State Register. Once the text of the proposed rules has been published in the Washington State Register, the only changes that an agency may make in the text of these proposed rules before their final adoption are to correct typographical errors.

(5) Any person may file a written objection to the expedited adoption of a rule. The objection shall be filed with the agency rules coordinator within forty-five days after the notice of the proposed expedited rule making has been published in the Washington State Register. A person who has filed a written objection to the expedited adoption of a rule may withdraw the objection.

(6) If no written objections to the expedited adoption of a rule are filed with the agency within forty-five days after the notice of proposed expedited rule making is published, or if all objections that have been filed are withdrawn by the persons filing the objections, the agency may enter an order adopting the rule without further notice or a public hearing. The order shall be published in the manner required by this chapter for any other agency order adopting, amending, or repealing a rule.

(7) If a written notice of objection to the expedited adoption of the rule is timely filed with the agency and is not withdrawn, the notice of proposed expedited rule making published under this section shall be considered a statement of inquiry for the purposes of RCW 34.05.310 and the agency may initiate further rule adoption proceedings in accordance with this chapter except that RCW 34.05.328 does not apply.

Sec. 207. 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, for general application by the agency and not directed to one specific event or person for the purpose of providing guidance to persons as to their obligations under the law. Consumer-related guides and brochures produced by an agency that generally explain an agency program or a person's rights under the law do not constitute interpretive statements for purposes of this chapter. A document entitled "technical assistance document" does not constitute an interpretive statement for purposes of this chapter. Tax determinations issued by the department of revenue that have precedential value do not constitute interpretive statements for purposes of this chapter.

(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. A policy statement may also include factors the agency will consider in implementing a law, court decision, or agency order. A policy statement must be used for general application by the agency and not directed to one specific event or person for the purpose of providing guidance to persons as to their obligations under the law. Consumer-related guides and brochures produced by an agency that generally explain an agency program or a person's rights under the law do not constitute policy statements for purposes of this chapter. A document entitled "technical assistance document" does not constitute a policy statement for purposes of this chapter. Tax determinations issued by the department of revenue that have precedential value do not constitute policy statements for the purpose of this chapter.

(15) "Rule" means any agency order, directive, ((or)) regulation, or statement 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. 208. RCW 34.05.230 and 1996 c 206 s 12 are each amended to read as follows:

(1) ((~~If the adoption of rules is not feasible and practicable,~~)) An agency is encouraged to advise the public of its current opinions, approaches, and likely courses of action by means of interpretive or policy statements. ((~~Current interpretive and policy statements are advisory only.~~)) To better inform and involve the public, an agency is encouraged to convert long-standing interpretive and policy statements into rules through the expedited rule adoption process in section 206 of this act.

(2) Interpretive and policy statements are advisory only and do not foreclose alternative courses of action by persons in agency actions. Interpretive or policy statements cannot be used to substantially modify existing rules.

(3) A person may petition an agency requesting the conversion of interpretive and policy statements into rules. A person may also petition an agency requesting the repeal or withdrawal of interpretive or policy statements. Upon submission, the agency shall notify the joint administrative rules review committee of the petition. Within sixty days after submission of a petition, the agency shall either deny the petition in writing, stating its reasons for the denial, or initiate rule-making proceedings in accordance with this chapter, or repeal or withdraw the interpretive or policy statement.

((~~(3)~~)) (4) Each agency shall maintain a roster of interested persons, consisting of persons who have requested in writing to be notified of all interpretive and policy statements issued by that agency. Each agency shall update the roster once each year and eliminate persons from the roster who do not indicate a desire to continue on the roster. Whenever an agency issues an interpretive or policy statement, it shall send a copy of the statement to each person listed on the roster. The agency may charge a nominal fee to the interested person for this service. Agencies are not required to notify or send people copies of interpretive or policy statements that concern only internal agency procedures that do not affect private rights or procedures available to the public.

((~~(4)~~)) (5) Whenever an agency issues an interpretive or policy statement, except for an interpretive or policy statement that concerns only internal agency procedures that do no affect private rights or procedures available to the public, it shall submit to the code reviser for publication in the Washington State Register a statement describing the subject matter of the interpretive or policy statement, and listing the person at the agency from whom a copy of the interpretive or policy statement may be obtained.

Sec. 209. RCW 82.32.410 and 1991 c 330 s 2 are each amended to read as follows:

(1) The director may designate certain written determinations as precedents.

(a) By rule adopted pursuant to chapter 34.05 RCW, the director shall adopt criteria which he or she shall use to decide whether a determination is precedential. These criteria shall include, but not be limited to, whether the determination clarifies an unsettled interpretation of Title 82 RCW or where the determination modifies or clarifies an earlier interpretation.

(b) Written determinations designated as precedents by the director shall be indexed by subject matter. The determinations and indexes shall be made available for public inspection and shall be published by the department.

(c) The department shall disclose any written determination upon which it relies to support any assessment of tax, interest, or penalty against such taxpayer, after making the deletions provided by subsection (2) of this section.

(2) Before making a written determination available for public inspection under subsection (1) of this section, the department shall delete:

(a) The names, addresses, and other identifying details of the person to whom the written determination pertains and of another person identified in the written determination; and

(b) Information the disclosure of which is specifically prohibited by any statute applicable to the department of revenue, and the department may also delete other information exempted from disclosure by chapter 42.17 RCW or any other statute applicable to the department of revenue.

NEW SECTION. Sec. 210. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

(1)(a) Except for the circumstances in (b) of this subsection, no state agency may enforce or attempt to enforce in an agency action an interpretive statement, policy statement, guideline, bulletin, staff instruction, or other such issuance against any person in such a manner that the procedures or standards contained in the agency issuance are considered binding. The information contained in such an issuance may illustrate acceptable and unacceptable procedures or standards, but the agency must consider individual facts in cases that arise to allow for individualized determinations in agency actions. If a court or presiding officer finds that an agency is applying the information contained in an agency issuance in a binding manner, then the procedures or standards contained in the agency issuance shall be considered invalid because the agency failed to adopt these procedures or standards as rules.

(b) Nothing in (a) of this subsection prohibits an agency from enforcing any guidelines, policies, or other such issuances applicable to the personnel of the agency.

(2) Any person may rely upon a technical assistance document, issued to that person by the agency, in the course of meeting the requirements of a rule or statute.

NEW SECTION. Sec. 211. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

In lieu of regular mail, an agency may send the contents of any notice pertaining to rule making required under this chapter by electronic mail or facsimile mail if requested in writing by the person entitled to receive the notice.

Sec. 212. RCW 34.05.325 and 1995 c 403 s 304 are each amended to read as follows:

(1) The agency shall make a good faith effort to insure that the information on the proposed rule published pursuant to RCW 34.05.320 accurately reflects the rule to be presented and considered at the oral hearing on the rule. Written comment about a proposed rule, including supporting data, shall be accepted by an agency if received no later than the time and date specified in the notice, or such later time and date established at the rule-making hearing.

(2) The agency shall provide an opportunity for oral comment to be received by the agency in a rule-making hearing.

(3) If the agency possesses equipment capable of receiving electronic mail, telefacsimile transmissions, or recorded telephonic communications, the agency ((~~may~~)) shall provide in its notice of hearing filed under RCW 34.05.320 that interested parties may comment on proposed rules by these means. If the agency ((~~chooses~~)) is able to receive comments by these means, the notice of hearing shall provide instructions for making such comments, including, but not limited to, appropriate telephone numbers to be used; the date and time by which comments must be received; required methods to verify the receipt and authenticity of the comments; and any limitations on the number of pages for telefacsimile transmission or electronic mail comments and on the minutes of tape recorded comments. The agency shall accept comments received by these means for inclusion in the ((~~official record~~)) rule-making file established under RCW 34.05.370 if the comments are made in accordance with the agency's instructions.

(4) The agency head, a member of the agency head, or a presiding officer designated by the agency head shall preside at the rule-making hearing. Rule-making hearings shall be open to the public. The agency shall cause a record to be made of the hearing by stenographic, mechanical, or electronic means. Unless the agency head presides or is present at substantially all the hearings, the presiding official shall prepare a memorandum for consideration by the agency head, summarizing the contents of the presentations made at the rule-making hearing. The summarizing memorandum is a public document and shall be made available to any person in accordance with chapter 42.17 RCW.

(5) Rule-making hearings are legislative in character and shall be reasonably conducted by the presiding official to afford interested persons the opportunity to present comment. Rule-making hearings may be continued to a later time and place established on the record without publication of further notice under RCW 34.05.320.

(6)(a) Before it files an adopted rule with the code reviser, an agency shall prepare a concise explanatory statement of the rule:

(i) Identifying the agency's reasons for adopting the rule;

(ii) Describing differences between the text of the proposed rule as published in the register and the text of the rule as adopted, other than editing changes, stating the reasons for differences; and

(iii) Summarizing all comments received regarding the proposed rule, and responding to the comments by category or subject matter, indicating how the final rule reflects agency consideration of the comments, or why it fails to do so.

(b) The agency shall provide the concise explanatory statement to any person upon request or from whom the agency received comment.

Sec. 213. RCW 34.05.354 and 1995 c 403 s 701 are each amended to read as follows:

(1) Not later than ((~~June 30th~~)) April 1st or October 1st of each year, each agency shall submit to the code reviser, according to procedures and time lines established by the code reviser, rules that it determines should be repealed by the expedited repeal procedures provided for in this section. An agency shall file a copy of a preproposal notice of inquiry, as provided in RCW 34.05.310(1), that identifies the rule as one that is proposed for expedited repeal.

(2) An agency may propose the expedited repeal of rules meeting one or more of the following criteria:

(a) The statute on which the rule is based has been repealed and has not been replaced by another statute providing statutory authority for the rule;

(b) The statute on which the rule is based has been declared unconstitutional by a court with jurisdiction, there is a final judgment, and no statute has been enacted to replace the unconstitutional statute;

(d) Other rules of the agency or of another agency govern the same activity as the rule, making the rule redundant.

(3) The agency shall also send a copy of the preproposal notice of inquiry to any person who has requested notification of copies of proposals for the expedited repeal of rules or of agency rule making. The preproposal notice of inquiry shall include a statement that any person who objects to the repeal of the rule must file a written objection to the repeal within thirty days after the preproposal notice of inquiry is published. The notice of inquiry shall also include an explanation of the reasons the agency believes the expedited repeal of the rule is appropriate.

(4) The code reviser shall publish all rules proposed for expedited repeal in a separate section of a regular edition of the Washington state register or in a special edition of the Washington state register. The publication shall be not later than ((~~July~~)) May 31st or November 30th of each year, or in the first register published after that date.

(5) Any person may file a written objection to the expedited repeal of a rule. The notice shall be filed with the agency rules coordinator within thirty days after the notice of inquiry has been published in the Washington state register. The written objection need not state any reason for objecting to the expedited repeal of the rule.

(6) If no written objections to the expedited repeal of a rule are filed with the agency within thirty days after the preproposal notice of inquiry is published, the agency may enter an order repealing the rule without further notice or an opportunity for a public hearing. The order shall be published in the manner required by this chapter for any other order of the agency adopting, amending, or repealing a rule. If a written objection to the expedited repeal of the rule is filed with the agency within thirty days after the notice of inquiry has been published, the preproposal notice of inquiry published pursuant to this section shall be considered a preproposal notice of inquiry for the purposes of RCW 34.05.310(1) and the agency may initiate rule adoption proceedings in accordance with the provisions of this chapter.

Sec. 214. RCW 19.85.025 and 1995 c 403 s 401 are each amended to read as follows:

(1) Unless an agency receives a written objection to the expedited repeal of a rule, this chapter does not apply to a rule proposed for expedited repeal pursuant to RCW 34.05.354. If an agency receives a written objection to expedited repeal of the rule, this chapter applies to the rule-making proceeding.

(2) This chapter does not apply to a rule proposed for expedited adoption pursuant to section 206 of this act, unless a written objection is timely filed with the agency and the objection is not withdrawn.

(3) This chapter does not apply to the adoption of a rule described in RCW 34.05.310(4).

((~~(3)~~)) (4) An agency is not required to prepare a separate small business economic impact statement under RCW 19.85.040 if it prepared an analysis under RCW 34.05.328 that meets the requirements of a small business economic impact statement, and if the agency reduced the costs imposed by the rule on small business to the extent required by RCW 19.85.030(3). The portion of the analysis that meets the requirements of RCW 19.85.040 shall be filed with the code reviser and provided to any person requesting it in lieu of a separate small business economic impact statement.

PART III

JUDICIAL REVIEW

Sec. 301. RCW 34.05.570 and 1995 c 403 s 802 are each amended to read as follows:

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

(a) Except as provided in subsection (2) of this section, 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; and

(e) In a proceeding otherwise authorized where the court is asked to defer to an agency's interpretation of a statute as expressed by a policy or interpretive statement, the court may only defer to the agency's interpretation if the statute is ambiguous. The court shall review the interpretive or policy statement under the error of law standard, but the amount of deference that a court may give to the agency's interpretation shall depend on the following factors: (i) Whether the interpretive or policy statement was issued contemporaneously with the passage of the statute to which it relates; (ii) the consistency with earlier and later agency pronouncements, including whether the agency had historically ever interpreted the statute to require the standards or procedures announced in the interpretive or policy statement; (iii) the validity of the agency's reasoning; and (iv) the substantive impact of the interpretive or policy statement. Interpretive or policy statements that were issued contemporaneously with the applicable statute and that have been consistently interpreted by the agency shall be given more deference by the court. Because interpretive or policy statements have not been subject to the notice and comment procedures of the rule-making process, the court shall give less deference to an agency's interpretation of the law when there is a large substantive impact. This subsection does not apply to an interpretive or policy statement that the court finds is invalid because it constitutes a rule that was not adopted in accordance with all applicable provisions of law.

(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. When the validity of a rule is challenged, after the petitioner has identified the defects in the rule, the burden of going forward with the evidence is on the agency. 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: 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 the rule is arbitrary and capricious.

(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.

Sec. 302. RCW 34.05.534 and 1995 c 403 s 803 are each amended to read as follows:

A person may file a petition for judicial review under this chapter only after exhausting all administrative remedies available within the agency whose action is being challenged, or available within any other agency authorized to exercise administrative review, except:

(1) A petitioner for judicial review of a rule need not have participated in the rule-making proceeding upon which that rule is based, have petitioned for its amendment or repeal, have petitioned the joint administrative rules review committee for its review, or have appealed a petition for amendment or repeal to the governor;

(2) A petitioner for judicial review need not exhaust administrative remedies to the extent that this chapter or any other statute states that exhaustion is not required; or

(3) The court may relieve a petitioner of the requirement to exhaust any or all administrative remedies upon a showing that:

(a) The remedies would be patently inadequate;

(b) The exhaustion of remedies would be futile; or

(c) The grave irreparable harm that would result from having to exhaust administrative remedies would clearly outweigh the public policy requiring exhaustion of administrative remedies.

NEW SECTION. Sec. 303. A new section is added to chapter 34.05 RCW under the subchapter heading "Part IV" to read as follows:

The presiding officer shall apply the applicable statute and rules governing an issue in any adjudicative proceeding. An agency rule is invalid if it does not allow a presiding officer to consider both the statute and the rules in an adjudicatory proceeding.

Sec. 304. RCW 48.04.010 and 1990 1st ex.s. c 3 s 1 are each amended to read as follows:

(1) The commissioner may hold a hearing for any purpose within the scope of this code as he or she may deem necessary. The commissioner shall hold a hearing:

(a) If required by any provision of this code; or

(b) Upon written demand for a hearing made by any person aggrieved by any act, threatened act, or failure of the commissioner to act, if such failure is deemed an act under any provision of this code, or by any report, promulgation, or order of the commissioner other than an order on a hearing of which such person was given actual notice or at which such person appeared as a party, or order pursuant to the order on such hearing.

(2) Any such demand for a hearing shall specify in what respects such person is so aggrieved and the grounds to be relied upon as basis for the relief to be demanded at the hearing.

(3) Unless a person aggrieved by a written order of the commissioner demands a hearing thereon within ninety days after receiving notice of such order, or in the case of a licensee under Title 48 RCW within ninety days after the commissioner has mailed the order to the licensee at the most recent address shown in the commissioner's licensing records for the licensee, the right to such hearing shall conclusively be deemed to have been waived.

(4) If a hearing is demanded by a licensee whose license has been temporarily suspended pursuant to RCW 48.17.540, the commissioner shall hold such hearing demanded within thirty days after receipt of the demand or within thirty days of the effective date of a temporary license suspension issued after such demand, unless postponed by mutual consent.

(5) Any hearing held under this section must be conducted by an administrative law judge unless the person demanding the hearing agrees in writing to have an employee of the commissioner conduct the hearing.

Sec. 305. RCW 34.12.040 and 1981 c 67 s 4 are each amended to read as follows:

(1) Except as provided in subsection (2) of this section, whenever a state agency conducts a hearing which is not presided over by officials of the agency who are to render the final decision, the hearing shall be conducted by an administrative law judge assigned under this chapter. In assigning administrative law judges, the chief administrative law judge shall wherever practical ((~~(1)~~)) (a) use personnel having expertise in the field or subject matter of the hearing, and ((~~(2)~~)) (b) assign administrative law judges primarily to the hearings of particular agencies on a long-term basis.

(2) An employee of the office of the insurance commissioner may conduct a hearing as provided in RCW 48.04.010(5).

PART IV

LEGISLATIVE REVIEW

Sec. 401. RCW 34.05.630 and 1996 c 318 s 4 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~~)) rules review committee.

(2) All agency policy and interpretive statements, guidelines, or other such issuances of general applicability are subject to selective review by the ((~~legislature~~)) rules review committee for the purpose of determining whether an issuance constitutes a rule that has not been adopted in accordance with all applicable provisions of law. If the committee finds that an issuance constitutes a rule, the rules review committee may also examine whether the rule is within the intent of the legislature as expressed by the statute that the rule implements.

(3) If the rules review 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((,)) or (b) that the rule has not been adopted in accordance with all applicable provisions of law, ((~~or (c) that an agency is using a policy or interpretive statement in place of a rule,~~)) the agency affected shall be notified of such finding and the reasons therefor. Within thirty days of the receipt of the rules review committee's notice, the agency shall file notice of a hearing on the rules review 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 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((,)) or (b) whether the rule was adopted in accordance with all applicable provisions of law((~~, or (c) whether the agency is using a policy or interpretive statement in place of a rule~~)).

Sec. 402. RCW 34.05.640 and 1996 c 318 s 5 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 committee pursuant to RCW 34.05.620 or 34.05.630, the affected agency shall notify the committee of its intended 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.

(2) If the rules review committee finds by a majority vote of its members: (a) That the proposed or existing rule in question will not be modified, amended, withdrawn, or repealed by the agency so as to conform with the intent of the legislature((,)) or (b) that ((~~an existing~~)) a rule was not adopted in accordance with all applicable provisions of law((~~, or (c) that the agency will not replace the policy or interpretive statement with a rule~~)), the rules review committee may, within thirty days from notification by the agency of its intended 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 committee.

(3) If the rules review committee makes an adverse finding regarding an existing rule under subsection (2) (a) or (b) of this section, the committee may, by a majority vote of its members, recommend suspension of the 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) The code reviser shall publish transmittals from the rules review committee or the governor issued pursuant to subsection (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. If the transmittal relates to a policy or interpretive statement, guideline, or other such issuance of general applicability, the code reviser shall publish the reference in the chapter of the Washington State Register and Washington Administrative Code that addresses the most relevant subject matter to the issuance.

(5) 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 committee.

Sec. 403. RCW 34.05.655 and 1996 c 318 s 7 are each amended to read as follows:

(1) Any person may petition the rules review committee for a review of a proposed or existing rule, or a policy or interpretive statement, guideline, or other such issuance of general applicability. A petition to review a policy or interpretive statement, guideline, or other such issuance of general applicability may only be filed for the purpose of requesting the rules review committee to determine whether the issuance constitutes a rule that has not been adopted in accordance with all provisions of law. If the rules review committee determines that the issuance constitutes a rule, the committee may also examine whether the rule is within the intent of the legislature as expressed by the statute that the rule implements. Within thirty days of the receipt of the petition, the rules review committee shall acknowledge receipt of the petition and describe any initial action taken. If the rules review committee rejects the petition, a written statement of the reasons for rejection shall be included.

(2) A person may petition the rules review committee under subsection (1) of this section requesting review of an existing rule only if the person has petitioned the agency to amend or repeal the rule under RCW 34.05.330(1) and such petition was denied. In the case of a policy or interpretive statement, guideline, or other such issuance of general applicability, a person may only petition the rules review committee under subsection (1) of this section if the person has petitioned the agency in accordance with RCW 34.05.230(3) to repeal or withdraw the issuance, or convert the issuance into rules.

(3) A petition for review of a rule under subsection (1) of this section shall:

(a) Identify with specificity the proposed or existing rule to be reviewed;

(b) Identify the specific statute identified by the agency as authorizing the rule, the specific statute which the rule interprets or implements, and, if applicable, the specific statute the department is alleged not to have followed in adopting the rule;

(c) State the reasons why the petitioner believes that the rule is not within the intent of the legislature, or that its adoption was not or is not in accordance with law, and provide documentation to support these statements;

(d) Identify any known judicial action regarding the rule or statutes identified in the petition.

A petition to review an existing rule shall also include a copy of the agency's denial of a petition to amend or repeal the rule issued under RCW 34.05.330(1) and, if available, a copy of the governor's denial issued under RCW 34.05.330(3).

(4) A petition for review of a policy or interpretive statement, guideline, or other such issuance of general applicability under subsection (1) of this section shall:

(a) Identify the specific ((~~statement~~)) issuance to be reviewed;

(b) Identify the specific statute which the ((~~rule~~)) issuance interprets or implements;

(c) State the reasons why the petitioner believes that the ((~~statement~~)) issuance meets the definition of a rule under RCW 34.05.010 and should have been adopted according to the procedures of this chapter;

(d) Identify any known judicial action regarding the ((~~statement~~)) issuance or statutes identified in the petition.

(5) Within ninety days of receipt of the petition, the rules review committee shall make a final decision on the rule for which the petition for review was not previously rejected.

Sec. 404. 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)~~)) (3) and 34.05.640(2) 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) If the joint administrative rules review committee recommends to the governor that an existing rule be suspended because it does not conform with the intent of the legislature or was not adopted in accordance with all applicable provisions of law, the recommendation shall establish a rebuttable presumption in any proceeding challenging the validity of the rule that the rule is invalid. The burden of demonstrating the validity of the rule is then on the adopting agency.

PART V

FEES AND EXPENSES

Sec. 501. RCW 4.84.350 and 1995 c 403 s 903 are each amended to read as follows:

(1) Except as otherwise specifically provided by statute, a court shall award a qualified party that prevails in a judicial review of an agency action fees and other expenses, including reasonable attorneys' fees, unless the court finds that the agency action was substantially justified or that circumstances make an award unjust. A qualified party shall be considered to have prevailed if the qualified party obtained relief on a significant issue that achieves some benefit that the qualified party sought.

(2) The amount awarded a qualified party under subsection (1) of this section shall not exceed twenty-five thousand dollars for the fees and other expenses incurred in superior court, and twenty-five thousand dollars for the fees and other expenses incurred in each court of appeal to a maximum of sixty thousand dollars. Subsection (1) of this section shall not apply unless all parties challenging the agency action are qualified parties. If two or more qualified parties join in an action, the award in total shall not exceed twenty-five thousand dollars in the superior court and twenty-five thousand dollars in each court of appeal to a maximum of sixty thousand dollars. The court, in its discretion, may reduce the amount to be awarded pursuant to subsection (1) of this section, or deny any award, to the extent that a qualified party during the course of the proceedings engaged in conduct that unduly or unreasonably protracted the final resolution of the matter in controversy.

(3) A party who is awarded fees and other expenses by the superior court or by any court of appeal shall be entitled to those fees and expenses, regardless of whether the party ultimately prevails in a final resolution of the matter.

Sec. 502. RCW 4.84.360 and 1995 c 403 s 904 are each amended to read as follows:

Fees and other expenses awarded under RCW 4.84.340 and 4.84.350 shall be paid by the agency over which the party prevails from operating funds appropriated to the agency within ((~~sixty days~~)) thirty days of the decision of a superior court or court of appeal. The fees and other expenses shall be paid from moneys appropriated to the agency for administration and support services and not out of moneys for program activities or service delivery if the operating budget or budget notes separately designate administration and support services. Agencies paying fees and other expenses pursuant to RCW 4.84.340 and 4.84.350 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 the provisions of chapter 39.76 RCW and shall be deemed payable on the date the court announces the award.

Sec. 503. RCW 4.84.340 and 1995 c 403 s 902 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout RCW 4.84.340 through 4.84.360.

(1) "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.

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

(3) "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 shall 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.

(4) "Judicial review" means ((~~a judicial review as defined by chapter 34.05 RCW~~)) review of an agency action in the superior court and courts of appeal.

(5) "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 or (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. 1141J(a)), may be a party regardless of the net worth of such organization or cooperative association.

PART VI

REGULATORY IMPACT NOTES

Sec. 601. RCW 43.41.110 and 1981 2nd ex.s. c 4 s 13 are each amended to read as follows:

The office of financial management shall:

(1) Provide technical assistance to the governor and the legislature in identifying needs and in planning to meet those needs through state programs and a plan for expenditures.

(2) Perform the comprehensive planning functions and processes necessary or advisable for state program planning and development, preparation of the budget, inter-departmental and inter-governmental coordination and cooperation, and determination of state capital improvement requirements.

(3) Provide assistance and coordination to state agencies and departments in their preparation of plans and programs.

(4) Provide general coordination and review of plans in functional areas of state government as may be necessary for receipt of federal or state funds.

(5) Participate with other states or subdivisions thereof in interstate planning.

(6) Encourage educational and research programs that further planning and provide administrative and technical services therefor.

(7) Carry out the provisions of RCW 43.62.010 through 43.62.050 relating to the state census.

(8) Be the official state participant in the federal-state cooperative program for local population estimates and as such certify all city and county special censuses to be considered in the allocation of state and federal revenues.

(9) Be the official state center for processing and dissemination of federal decennial or quinquennial census data in cooperation with other state agencies.

(10) Be the official state agency certifying annexations, incorporations, or disincorporations to the United States bureau of the census.

(11) Review all United States bureau of the census population estimates used for federal revenue sharing purposes and provide a liaison for local governments with the United States bureau of the census in adjusting or correcting revenue sharing population estimates.

(12) Provide fiscal notes depicting the expected fiscal impact of proposed legislation in accordance with chapter 43.88A RCW.

(13) Provide regulatory impact notes depicting the expected regulatory impact of proposed legislation on businesses in accordance with sections 602 through 606 of this act.

(14) Be the official state agency to estimate and manage the cash flow of all public funds as provided in chapter 43.88 RCW. To this end, the office shall adopt such rules as are necessary to manage the cash flow of public funds.

NEW SECTION. Sec. 602. The legislature hereby recognizes the necessity of developing a uniform and coordinated procedure for determining the expected regulatory impact of bills and resolutions on businesses. The legislature also recognizes that developing the statements of regulatory impact, which shall be known as regulatory impact notes, requires the designation of a state agency to be principally responsible for the notes.

NEW SECTION. Sec. 603. (1) The office of financial management shall, in cooperation with appropriate legislative committees and legislative staff, establish a procedure to provide regulatory impact notes on the expected impact of bills and resolutions that increase or decrease regulations on the operation of businesses subject to the state's business and occupation taxes levied in chapter 82.04 RCW.

(2) A regulatory impact note shall be prepared on the basis of a sample of businesses that are regulated by the bill or resolution. The regulatory impact note shall contain an estimate of the fiscal impact to the affected businesses for the biennium in which the bill or resolution will take effect as well as a cumulative forecast of the fiscal impact for the succeeding two fiscal years. If it is determined that no dollar estimate is possible, the regulatory impact note shall contain a statement to that effect.

(3) In establishing the regulatory impact procedure called for under this chapter, the office of financial management shall coordinate the development of regulatory impact notes with all state agencies affected.

NEW SECTION. Sec. 604. (1) After a regulatory impact note that depicts the expected regulatory impact of a bill or resolution is prepared and approved as to form, accuracy, and completeness by the office of financial management, copies shall be filed immediately with:

(a) The chair of the committee to which the bill or resolution was referred upon introduction in the house of origin;

(b) The senate committee on ways and means, or its successor; and

(2) Whenever possible, the regulatory impact note shall be provided before or at the time the bill or resolution is first heard by the committee of reference in the house of origin.

(3) If a regulatory impact note has been prepared for a bill or resolution, a copy of the regulatory impact note shall be placed in the bill books or otherwise attached to the bill or resolution and shall remain with the bill or resolution throughout the legislative process insofar as possible.

NEW SECTION. Sec. 605. If requested by a legislator, the office of financial management shall also provide a regulatory impact note on a legislative proposal. The regulatory impact note shall be returned to the requesting legislator, and copies shall be filed with the appropriate legislative committees under section 604 of this act at the time the proposed legislation is introduced in either house.

NEW SECTION. Sec. 606. Nothing in this chapter prevents either house of the legislature from acting on a bill or resolution before it as otherwise provided by the state Constitution, by law, and by the rules and joint rules of the senate and house of representatives, nor shall the lack of a regulatory impact note as provided in this chapter or an error in the accuracy of the note affect the validity of a measure otherwise duly passed by the legislature.

PART VII

MISCELLANEOUS

NEW SECTION. Sec. 701. A new section is added to chapter 43.17 RCW to read as follows:

(1) An agency, prior to releasing a final report or study regarding management by a county, city, town, special purpose district, or other unit of local government of a program delegated to the local government by the agency or for which the agency has regulatory responsibility, shall provide copies of a draft of the report or study at least two weeks in advance of the release of the final report or study to the legislative body of the local government. The agency shall, at the request of a local government legislative body, meet with the legislative body prior to the release of a final report or study regarding the management of such a program.

(2) For purposes of this section, "agency" means an office, department, board, commission, or other unit of state government, other than a unit of state government headed by a separately elected official.

NEW SECTION. Sec. 702. A new section is added to chapter 43.05 RCW to read as follows:

When issuing a citation or other written finding that a person has violated a statute, rule, or order, the agency shall include with the citation or other written finding the text of the specific statute or statutes granting the agency the authority to regulate the subject matter of the citation or other written finding.

NEW SECTION. Sec. 703. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

(1) The statute law committee shall convene a working group that includes representatives of the office of financial management, state agencies, and the general public for the purpose of (a) developing proposed rules relating to the acceptance of electronic filings of proposed rules and interpretive or policy statements from state agencies; (b) developing proposed rules pertaining to the filing and publication of executive orders, information submitted by agencies in the preparation of statements of inquiry, and other information deemed important for publication in the Washington State Register; and (c) developing a method for noting in the published volumes of the Revised Code of Washington or the Washington Administrative Code, or both, if interpretive or policy statements have been issued that pertain to the statutes or rules. The working group shall be convened no later than October 1, 1997, and develop the proposed rules no later than July 1, 1998. The code reviser shall adopt the proposed rules developed by the statute law committee working group created in this section.

(2) This section expires January 1, 1999.

NEW SECTION. Sec. 704. Part headings used in this act do not constitute any part of the law.

NEW SECTION. Sec. 705. Sections 602 through 606 of this act constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 706. 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.