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Orange County Business Journal

Seeking to cut costs to business, Gov. Pete Wilson has issued an executive order requiring all state agencies under his control to review the necessity and cost effectiveness of their regulations by 1999.

In addition, Wilson ordered state officials to identify ways to cut the costs for business, local government and the public to comply with state regulations. Although no actual cuts were mandated, Wilson set a goal of cutting these compliance costs by 5 percent annually for the next three years.

“Just as Californians have demanded through the state Constitution that government limit its spending and taxing powers, so too must state agencies minimize the hidden taxes to consumers, business and local government,” Wilson said in the executive order issued last month.

The order also requires the agencies to justify any regulations that vary from federal law, and requires detailed economic impact statements to accompany all new regulations proposed after July 1.

Wilson administration officials say the order will accelerate their efforts to streamline the state’s regulatory system and to make California’s business climate more competitive.

“This is of huge importance to the business community,” said Paul Kranhold, a spokesman for the Trade & Commerce Agency and Wilson’s chief spokesperson on this issue. “The structure was set up fundamentally against people trying to create jobs in California. If left alone, it creeps and continues to grow.”

But critics mainly environmental, labor and consumer groups and their Democratic allies in the state Legislature contend that current guidelines for economic impact analyses of regulations are sufficient, and that Wilson is ignoring many of the public health and safety benefits these regulations bring.

“I hope Wilson recognizes the folly of this action,” said Mike Paparian, the Sierra Club’s western region representative. “It’s going to take a lot of state resources to do this, and we really question the need. There is a big focus on the cost of these regulations; what’s missing are the major benefits, such as the improvement of children’s health with environmental regulations.”

Critics note that, in 1981, the Office of Administrative Law was set up to review all proposed regulations to ensure they comply with state law.

According to OAL director John Smith, who is a Wilson appointee, all regulations that come to the OAL for review must contain economic impact statements, but Smith said the analyses tend to be “fairly rudimentary.”

“All we do is check to see that the cost impact statement is there. We have neither the staff nor the time to do our own evaluation of the cost impact,” he said.

The executive order applies to state agencies under the governor’s control about three-quarter’s of the state’s bureaucracy.

Many of the state’s largest agencies, such as the California Environmental Protection Agency and the Business, Transportation and Housing Agency which includes the Department of Corporations and the Department of Motor Vehicles are covered by the order.

Agencies run by other elected officials, such as the Department of Insurance and the state Attorney General’s Office, are exempt.

The administration says it has eliminated 3,000 regulations over the past six years in its quest to reduce red tape and make California more competitive. Still, tens of thousands of regulations many of which businesses say are too burdensome remain.

“The bit-by-bit approach taken until now was frustrating to the governor,” Kranhold said. “What was needed was a review of all the state’s regulations. There has never been a review period where an agency is forced to take a regulation off the books if it is found to be ineffective.”

Regulatory reform has long been a top item on the business agenda. A 1992 report on California’s business climate from a panel chaired by Peter Ueberroth said the state’s regulatory system “has gotten out of control.”

Despite Wilson’s previous efforts and a general slowdown in the writing of new regulations during the recession, 80 percent of the 600 state business leaders responding to the 1996 California Business Roundtable Survey said the state’s regulatory environment hurts the business climate.

“California has more onerous regulations than any other state,” said Jeff Gorell, a spokesman for the California Manufacturers Association. “Just look at all the regulations that go above and beyond the federal law, such as the daily overtime pay requirement, and the way prevailing wage is calculated.

“If you spend less time and money complying and fighting regulations that are arbitrary and capricious, you have more time to focus on selling your products, building capital and hiring new employees,” Gorell said.

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