BILL REQ. #:  S-3784.1 

Read first time 01/10/2006.   Referred to Committee on Government Operations & Elections.

     AN ACT Relating to county and city participation in the rule-making process; amending RCW 34.05.010 and 34.05.313; and reenacting and amending RCW 34.05.328.

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

Sec. 1   RCW 34.05.010 and 1997 c 126 s 2 are each amended to read as follows:
     The definitions set forth in this section shall apply throughout this chapter, unless the context clearly requires otherwise.
     (1) "Adjudicative proceeding" means a proceeding before an agency in which an opportunity for hearing before that agency is required by statute or constitutional right before or after the entry of an order by the agency. Adjudicative proceedings also include all cases of licensing and rate making in which an application for a license or rate change is denied except as limited by RCW 66.08.150, or a license is revoked, suspended, or modified, or in which the granting of an application is contested by a person having standing to contest under the law.
     (2) "Agency" means any state board, commission, department, institution of higher education, or officer, authorized by law to make rules or to conduct adjudicative proceedings, except those in the legislative or judicial branches, the governor, or the attorney general except to the extent otherwise required by law and any local governmental entity that may request the appointment of an administrative law judge under chapter 42.41 RCW.
     (3) "Agency action" means licensing, the implementation or enforcement of a statute, the adoption or application of an agency rule or order, the imposition of sanctions, or the granting or withholding of benefits.
     Agency action does not include an agency decision regarding (a) contracting or procurement of goods, services, public works, and the purchase, lease, or acquisition by any other means, including eminent domain, of real estate, as well as all activities necessarily related to those functions, or (b) determinations as to the sufficiency of a showing of interest filed in support of a representation petition, or mediation or conciliation of labor disputes or arbitration of labor disputes under a collective bargaining law or similar statute, or (c) any sale, lease, contract, or other proprietary decision in the management of public lands or real property interests, or (d) the granting of a license, franchise, or permission for the use of trademarks, symbols, and similar property owned or controlled by the agency.
     (4) "Agency head" means the individual or body of individuals in whom the ultimate legal authority of the agency is vested by any provision of law. If the agency head is a body of individuals, a majority of those individuals constitutes the agency head.
     (5) "Entry" of an order means the signing of the order by all persons who are to sign the order, as an official act indicating that the order is to be effective.
     (6) "Filing" of a document that is required to be filed with an agency means delivery of the document to a place designated by the agency by rule for receipt of official documents, or in the absence of such designation, at the office of the agency head.
     (7) "Institutions of higher education" are the University of Washington, Washington State University, Central Washington University, Eastern Washington University, Western Washington University, The Evergreen State College, the various community colleges, and the governing boards of each of the above, and the various colleges, divisions, departments, or offices authorized by the governing board of the institution involved to act for the institution, all of which are sometimes referred to in this chapter as "institutions."
     (8) "Interpretive statement" means a written expression of the opinion of an agency, entitled an interpretive statement by the agency head or its designee, as to the meaning of a statute or other provision of law, of a court decision, or of an agency order.
     (9)(a) "License" means a franchise, permit, certification, approval, registration, charter, or similar form of authorization required by law, but does not include (i) a license required solely for revenue purposes, or (ii) a certification of an exclusive bargaining representative, or similar status, under a collective bargaining law or similar statute, or (iii) a license, franchise, or permission for use of trademarks, symbols, and similar property owned or controlled by the agency.
     (b) "Licensing" includes the agency process respecting the issuance, denial, revocation, suspension, or modification of a license.
     (10) "Mail" or "send," for purposes of any notice relating to rule making or policy or interpretive statements, means regular mail or electronic distribution, as provided in RCW 34.05.260. "Electronic distribution" or "electronically" means distribution by electronic mail or facsimile mail.
     (11)(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.
     (12) "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.
     (13) "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.
     (14) "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.
     (15) "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.
     (16) "Public" includes county and city governments.
     (17) "Rule" means any agency order, directive, or regulation of general applicability (a) the violation of which subjects a person to a penalty or administrative sanction; (b) which establishes, alters, or revokes any procedure, practice, or requirement relating to agency hearings; (c) which establishes, alters, or revokes any qualification or requirement relating to the enjoyment of benefits or privileges conferred by law; (d) which establishes, alters, or revokes any qualifications or standards for the issuance, suspension, or revocation of licenses to pursue any commercial activity, trade, or profession; or (e) which establishes, alters, or revokes any mandatory standards for any product or material which must be met before distribution or sale. The term includes the amendment or repeal of a prior rule, but does not include (i) statements concerning only the internal management of an agency and not affecting private rights or procedures available to the public, (ii) declaratory rulings issued pursuant to RCW 34.05.240, (iii) traffic restrictions for motor vehicles, bicyclists, and pedestrians established by the secretary of transportation or his designee where notice of such restrictions is given by official traffic control devices, or (iv) rules of institutions of higher education involving standards of admission, academic advancement, academic credit, graduation and the granting of degrees, employment relationships, or fiscal processes.
     (((17))) (18) "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.
     (((18))) (19) "Rule making" means the process for formulation and adoption of a rule.
     (((19))) (20) "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. 2   RCW 34.05.313 and 1995 c 403 s 303 are each amended to read as follows:
     (1)(a) During the development of a rule or after its adoption, an agency may develop methods for measuring or testing the feasibility of complying with or administering the rule and for identifying simple, efficient, and economical alternatives for achieving the goal of the rule. When the interests of a county or city are or could reasonably be affected by a subject of rule making, the agency shall invite all affected counties and cities to participate in a pilot rule project. If any affected county or city accepts the invitation to participate, then the agency and the participating counties and cities shall jointly develop a pilot rule project.
     (b) A pilot project shall include public notice, participation by volunteers who are or will be subject to the rule, a high level of involvement from agency management, reasonable completion dates, and a process by which one or more parties may withdraw from the process or the process may be terminated. Volunteers who agree to test a rule and attempt to meet the requirements of the draft rule, to report periodically to the proposing agency on the extent of their ability to meet the requirements of the draft rule, and to make recommendations for improving the draft rule shall not be obligated to comply fully with the rule being tested nor be subject to any enforcement action or other sanction for failing to comply with the requirements of the draft rule.
     (2) An agency conducting a pilot rule project authorized under subsection (1) of this section may waive one or more provisions of agency rules otherwise applicable to participants in such a pilot project if the agency first determines that such a waiver is in the public interest and necessary to conduct the project. Such a waiver may be only for a stated period of time, not to exceed the duration of the project.
     (3) The findings of the pilot project should be widely shared and, where appropriate, adopted as amendments to the rule.
     (4) If an agency conducts a pilot rule project in lieu of meeting the requirements of the regulatory fairness act, chapter 19.85 RCW, the agency shall ensure the following conditions are met:
     (a) If over ten small businesses are affected, there shall be at least ten small businesses in the test group and at least one-half of the volunteers participating in the pilot test group shall be small businesses.
     (b)(i) If there are at least one hundred businesses affected, the participation by small businesses in the test group shall be as follows:
     (A) Not less than twenty percent of the small businesses must employ twenty-six to fifty employees;
     (B) Not less than twenty percent of the small businesses must employ eleven to twenty-six employees; and
     (C) Not less than twenty percent of the small businesses must employ zero to ten employees.
     (ii) If there do not exist a sufficient number of small businesses in each size category set forth in (b)(i) of this subsection willing to participate in the pilot project to meet the minimum requirements of that subsection, then the agency must comply with this section to the maximum extent practicable.
     (c) The agency may not terminate the pilot project before completion.
     (d) Before filing the notice of proposed rule making pursuant to RCW 34.05.320, the agency must prepare a report of the pilot rule project that includes:
     (i) A description of the difficulties small businesses had in complying with the pilot rule;
     (ii) A list of the recommended revisions to the rule to make compliance with the rule easier or to reduce the cost of compliance with the rule by the small businesses participating in the pilot rule project;
     (iii) A written statement explaining the options it considered to resolve each of the difficulties described and a statement explaining its reasons for not including a recommendation by the pilot test group to revise the rule; and
     (iv) If the agency was unable to meet the requirements set forth in (b)(i) of this subsection, a written explanation of why it was unable to do so and the steps the agency took to include small businesses in the pilot project.

Sec. 3   RCW 34.05.328 and 2003 c 165 s 2 and 2003 c 39 s 13 are each reenacted and 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) Provide notification in the notice of proposed rule making under RCW 34.05.320 that a preliminary cost-benefit analysis is available. The preliminary cost-benefit analysis must fulfill the requirements of the cost-benefit analysis under (d) of this subsection. If the agency files a supplemental notice under RCW 34.05.340, the supplemental notice shall include notification that a revised preliminary cost-benefit analysis is available. A final cost-benefit analysis shall be available when the rule is adopted under RCW 34.05.360;
     (d)(i) 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;
     (ii) In the case of costs and benefits to counties and cities when counties and cities are required to comply with the rule, the analysis shall be tailored to reflect that the cost of compliance is more or less affordable by counties and cities dependant on various factors. For purposes of this subsection, counties and cities able to afford the costs of regulation shall be determined in descending order, either individually or by groupings not to be less than five groups, biennially by the office of financial management by taking into consideration population, population growth, population density on taxable land, median income, property tax revenues, sales tax revenues, and general fund budget of the county or city. The ranking of the county or city required to comply with the rule shall be considered by the agency in determination of the ability of the county or city to comply with the rule. The less able a county or city is to afford compliance, the greater the cost to the county or city of compliance;
     (e) Determine, after considering alternative versions of the rule and the analysis required under (b), (c), and (d) 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;
     (f) 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;
     (g) 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;
     (h) 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
     (i) 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 (h) 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 rule implementation plan shall describe all counties and cities included within the purview of the proposed rule. For the rules that impact the included counties and cities, the rule implementation plan shall be prepared jointly by the agency and the included cities and counties. 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;
     (c) Promote and assist voluntary compliance; and
     (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, and local entities regulating the same activity ((or)), subject matter, or geographic location 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;
     (c) Report to the joint administrative rules review committee:
     (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.
     For purposes of this subsection, "local entities" means counties and cities.
     (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, revenue, social and health services, 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 77.55 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 statewide 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;
     (vi) Rules that set or adjust fees or rates pursuant to legislative standards; or
     (vii) Rules of the department of social and health services relating only to client medical or financial eligibility and rules concerning liability for care of dependents.
     (c) For purposes of this subsection:
     (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.