MINUTES OF THE SENATE COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session April 24, 1995 The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:00 p.m., on Monday, April 24, 1995, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Ann O'Connell, Chairman Senator Randolph J. Townsend, Vice Chairman Senator Jon C. Porter Senator William J. Raggio Senator William R. O'Donnell Senator Dina Titus Senator Raymond C. Shaffer GUEST LEGISLATORS PRESENT: Assemblywoman Joan Lambert STAFF MEMBERS PRESENT: Dana Bennett, Senior Research Analyst Teri J. Spraggins, Committee Secretary OTHERS PRESENT: Carole Vilardo, Lobbyist, Nevada Taxpayers Association Gaylyn Spriggs, Director, Government Affairs, Rayrock Mines, Inc. David Howard, Vice President, Legislative Affairs, Reno-Sparks Chamber of Commerce Eric Cooper, Lobbyist, Las Vegas Chamber of Commerce Thelma Clark, Lobbyist, Nevada Seniors Coalition Lorne Malkiewich, Director, Legislative Counsel Bureau Ande Engleman, Concerned Citizen Senator O'Connell called the meeting to order and began the hearing with testimony on Assembly Bill (A.B.) 286. ASSEMBLY BILL 286: Revises provisions governing contents of notice for proposed administrative regulations. Assemblywoman Joan Lambert testified A.B. 286 makes a small change in the way state agencies approve regulations. She explained it takes a provision of the law which already exists in Nevada Revised Statutes (NRS) 233B.066, where an informational statement is filed along with the regulation at the Office of the Secretary of State after the entire process is completed. She said when the entire process is completed, the public never sees the informational statement. She proposed the portion of the statement which would be of interest be completed first and be included with the public notice before the hearing, to give the public useful and meaningful information before they go to the public hearing. She explained to the committee that the information statement is completed anyway and there is no fiscal impact to include it at the start of the process. She gave the committee examples of information statements which she acquired from the Legal Division of the Legislative Counsel Bureau (LCB) (Exhibit C). She said the statements were representational. She added this will get more information out to the public before a regulation is passed. Senator Raggio said he sees the change to the NRS 233B.0603, but he pointed out the handout which stated NRS 233B.066. He asked if this amended a different part of the NRS. Mrs. Lambert explained NRS 233B.0603 is notice of intent to adopt a regulation. She told the committee that notice has to be posted before a hearing. She said NRS 233B.066 states after the notice has been posted, the hearing has been held, the LCB has reviewed the regulations, and it is going to filing at the Office of the Secretary of State and is essentially law, then the informational statement must accompany it. She reiterated that they take part of that informational statement and make it public and let people know about it before the process begins. Senator Raggio asked if they already require the information that is new in the notice of intent? Mrs. Lambert responded, "Yes." Senator Raggio asked if this is to just change the information to be in the notice prior to the hearing. Mrs. Lambert responded, "Right." He pointed out to Mrs. Lambert that there is not much information contained in the informational statements. Mrs. Lambert stated she feels that the informational statements will improve as the process matures. Senator Raggio asked, "So this is not going to require anything new to be compiled by the agency. It will just have to be in the notice?" Mrs. Lambert replied the agencies will continue to prepare the informational statements as they are currently doing, but will do it early in the process instead of at the end of the process. Senator O'Donnell asked if there are going to be additional costs when the bill is passed. He asked who prepares the informational statements. Mrs. Lambert responded that the same people in the agencies, who complete these statements now, will complete them earlier in the process. Senator O'Donnell asked if these informational statements are completed after the regulation goes into effect? Mrs. Lambert replied when the process is completed, the informational statement is compiled and filed with the Office of the Secretary of State along with the regulation. She stated it is an uninformative process regarding the public. She reiterated that she proposes the information statements be completed earlier and made public. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, stated her support for A.B. 286. She said, given the current regulatory environment and the perception of the regulatory environment in the United States, this bill will create a "user- friendly system." She stressed this will allow the public to be more aware. Gaylyn Spriggs, Director, Government Affairs, Rayrock Mines, Inc., testified in favor of A.B. 286. She stated they favor a more public notice in the regulation process. She stressed she would like to see regulations follow legislative intent and not exceed legislative intent. David Howard, Vice President, Legislative Affairs, Reno-Sparks Chamber of Commerce; Eric Cooper, Lobbyist, Las Vegas Chamber of Commerce; and Thelma Clark, Lobbyist, Nevada Seniors Coalition, voiced support for A.B. 286. Senator O'Connell closed the hearing on A.B. 286 and opened the hearing on Senate Joint Resolution (S.J.R.) 23 of the Sixty- seventh Session and Assembly Joint Resolution (A.J.R.) 19. She explained to the committee and to the audience that they were both the same bill. She stated S.J.R. 23 of the Sixty-seventh Session was passed last session. An interim committee met and a duplicate bill, A.J.R. 19, was prepared in case S.J.R. 23 of the Sixty-seventh Session did not pass. SENATE JOINT RESOLUTION 23 OF THE SIXTY-SEVENTH SESSION: Proposes to amend Nevada Constitution to authorize specifically legislative review of administrative regulation. (BDR C-39) ASSEMBLY JOINT RESOLUTION 19: Proposes to amend Nevada Constitution to authorize legislative review of administrative regulations. Lorne Malkiewich, Director, Legislative Counsel Bureau, stated Senator O'Connell was correct in her explanation of S.J.R. 23 of the Sixty-seventh Session and A.J.R. 19. He testified he was on the staff of the interim study of the structure and function of the LCB. He told the committee Senator Townsend was on the committee also. He testified the bills are identical and that A.J.R. 19 was prepared because the Legislature is serious about passing this legislation. He noted if S.J.R. 23 of the Sixty- seventh Session were to fail, then A.J.R. 19 would be in the works and ready for its second review at the next session. He explained that S.J.R. 23 of the Sixty-seventh Session lost by a small margin during the last election. He added the purpose of S.J.R. 23 of the Sixty-seventh Session is to put specific authority into the constitution for the Legislature to veto regulations. Mr. Malkiewich said: Several years ago, the Legislature had this authority. A district judge, in Carson City, ruled that that was a violation of the separation of powers doctrine. That was appealed to the supreme court and the supreme court affirmed on other grounds, so we never heard from the supreme court whether they agreed that this was a violation of the separation of powers. Since review of regulations is virtually nine-tenths of the workload of the Legal Division during the interim, we are concerned that if this was declared unconstitutional, we would have this huge vacuum in our workload. That might not be terrible, but it would certainly would create a great imbalance. Out of fear that this would be declared unconstitutional, and recognizing the fact that many of these would be brought in the first judicial district court where the judge has already expressed his inclination to rule it unconstitutional, we thought the safest thing to do was to scale back the statute to make the commission's review advisory, just indicating that we believe that a regulation exceeds an agency's authority and seek a constitutional amendment. These two constitutional amendments would indicate specifically that the Legislature has that authority. You see, we are amending the separation of powers provision and you will note the key provisions of the separation of powers' language, the very end of what would become subsection 1, except in cases expressly directed or permitted in this constitution. If the constitution specifically grants certain powers to one of the branches, you cannot raise a separation of powers argument against it. This would specifically grant to the Legislature the authority to review and reject regulations proposed by executive branch agencies or to have an entity such as the legislative commission veto that. Senator Porter asked Mr. Malkiewich to provide a history of the bill. Mr. Malkiewich explained that legislative review of regulations goes back about 30 years. He explained the Nevada Administrative Code was created about 20 years ago where they codified all the regulations. He said when the case came out in 1985 or 1986, the veto authority was taken away from the legislative commission. He explained the commission's review is advisory, with the agency retaining the ability to require the filing of the regulation, even with the commission's objection. He stated their review was a legislative oversight function and would not cause a separation of powers problem. He told the committee at that point an amendment to the constitution was prepared for the ballot. He said in 1990, the amendment lost by a small margin. Senator Porter asked Mr. Malkiewich to explain the lawsuit. Mr. Malkiewich explained the lawsuit, Roberts versus the University System, was concerned with state longevity pay. He explained that the Department of Personnel believed it was the intent of the Legislature that the professional staff at the university was exempted from receiving longevity pay. He stated when the Department of Personnel attempted to put that belief into a regulation, the legislative commission told them, "You cannot adopt that regulation and they did not." He noted the Legislature came back the next session and clarified with a specific statute that yes, this longevity pay does not include professional employees of the university system. He testified that in the meantime, this lawsuit came along, challenging the fact that university employees did not get the longevity pay. He explained the supreme court said "You have this statute. This statute says it does not apply to the university people." He said, "The statement of the court was something to the effect that a clearer, if not more timely, statement of legislative intent cannot be imagined. A little after the fact, but the court basically indicated, 'Here is what the legislative intent was,' no need to reach the issue of whether the review of administrative regulations was constitutional." Ms. Spriggs told the committee that she used to work for the LCB, reviewing the regulations submitted by agencies. She said it came to her attention that when the legislative session was over, agencies submitted many regulations. She stated the regulation which interested her had a 3000 percent increase in all of the fees for the Nevada Department of Environmental Protection (NDEP). She said she questioned it and asked if they had the authority to do that. She said since then, she has been trying to get more oversight into the regulatory process. Senator O'Connell stated, "Generally the language in a law will give the authority to an agency to simply promulgate regulations. From the hearing, you would hope the intent of the regulations that will be promulgated will be . . . known by the agency. That is an exceptional case, but it is not out of the ordinary to have that type of thing happen where they overextend the intent of what the legislative body meant." Ms. Vilardo testified she believes the 1989 session had set a specific fee with the NDEP. She stated there had been extensive hearings on the subject. She told the committee during the regulatory process, the NDEP decided it did not like the fee that had been established so they put a new fee through. She said when that fee was challenged, NDEP asserted they had been given broad-base-fee authority in 1981; and that they did not agree with what happened in 1989, so they reverted to the 1981 statute. Ms. Vilardo continued her testimony by telling the committee about an agency in 1988 which caused changes in the open-meeting law and brought about subsequent changes. She stated there was a bill put through regarding bank share stocks and auditing fees. She testified she sat through the hearing when both of those issues became statute. She said there was no intent for the fees on that regulation to be retroactive for 9 months prior to the enactment of the bill. She said no one supported the bill, everyone opposed it, but the regulation was adopted as retroactive. She said nothing could be done. She said, "This is not to stop regulations. I do not think there are any of us who do not agree that there is an element of regulation that is needed. It is the overzealous regulation that does not benefit the state, its citizens or the businesses in this state." Senator O'Connell closed the hearing on S.J.R. 23 of the Sixty- seventh Session and A.J.R. 19 and opened the hearing on Assembly Bill (A.B.) 214. ASSEMBLY BILL 214: Authorizes Legislature to reject certain proposed administrative regulations. (BDR 18-437) Mr. Malkiewich explained A.B. 214 is another bill which came out of the interim study. He said: It is following up on something, if you served on the legislative commission, you've heard Assemblyman Price raise this issue, 'Every time a state supreme court rules that legislative review of administrative regulations could be constitutional, he indicates that maybe we should try it. Maybe we should go ahead and put the review in, even without that constitutional amendment.' So what the committee recommended was that we propose a bill that makes the strongest case for a constitutionally defensible legislative review of administrative regulations. That's why you see the lengthy legislative declaration at the beginning of A.B. 214. This is setting the stage for a legal argument if this is challenged in court, indicating in general, that the Legislature is the body with the authority to adopt law and to the extent that the legislative branch agencies adopt regulations which exceed their authority, they are invading the legislative provenance. They are adopting laws. Therefore, so long as all the Legislature is doing is reviewing the regulations to ensure that it is consistent with the grant of regulatory authority from the Legislature, that should be upheld in court. Beyond that, sections 2, 3 and 4 of the bill simply are putting back the provision that used to be in effect concerning the legislative review of administrative regulations. Right now, the process is, when a regulation comes to the legislative commission and there's an objection, the legislative commission expresses its objection, the agency is notified, and the agency can do one of two things. It can revise the regulation to attempt to comply with it, or it can just say, 'We do not care, go ahead and file it,' even though the commission has objected. I should note for the record that the unfortunate successor to Ms. Spriggs in reviewing all of those regulations is Senator Titus. With this change, if the legislative commission objected to the regulation it would again notify the agency, but if the agency did not modify the regulation, it would not be filed over the commission's objection. It would be sent to the next session of the Legislature and the next session of the Legislature would have 30 days to declare that the regulation is not effective. If it does not, it [the regulation] is thereafter filed. One of the changes we made to try and limit the attacks on the constitutionality was to provide that this legislative veto does not apply to entities deriving their authority from the Constitution of the State of Nevada. This would basically be the constitutional officers, the attorney general or the secretary of state or the state treasurer in adopting regulations. Their authority derives directly from the constitution. That might be a slightly weaker case than these entities that are created by statute whose authority and existence is the subject of the legislative grant of authority. Unfortunately, in so doing, there is a little loop that was created and that is what the handout (Exhibit D) is for. It is a technical problem. By exempting subsection 3, rather than specifying that the legislative veto does not apply, an entity that derives its authority from the constitution, theoretically would never have its regulation filed if we objected to it. That was not the intent. This handout page, which was prepared, does reflect the intent of the statute. Referring to page 3 of the bill Senator O'Donnell asked, "If we are not in session, what kind of concurrent resolution are we talking about?" Mr. Malkiewich responded: The objection by the commission would just suspend the regulation until the Legislature convenes. So if the legislative commission determines that it exceeds an agency's authority, the commission postpones the filing until the 30th day of the next regular session. The regulation does not take effect. It is transmitted to the Legislature and the Legislature, once it comes into session, has 30 days to object to the regulation. Senator O'Donnell asked, "So within the first 30 days of the Legislature, we have to declare, by concurrent resolution, that the regulation will not be effective?" Mr. Malkiewich replied, "That is correct." Senator O'Donnell asked, "What happens prior to that, during the interim?" Mr. Malkiewich answered, "The regulation is not in effect. The legislative commission, by objecting to it, in its current form, would suspend the regulation, stop it from taking effect until the Legislature has a chance to review it." A discussion ensued about this portion of the bill. Mr. Malkiewich told the committee the agency can do two things. It can attempt to revise the regulation to the commission's satisfaction. If the agency decides to not revise the regulation, the regulation goes to the next session of the Legislature and the Legislature decides whether the agency has the authority to adopt this regulation. He explained, "It can only take effect if the commission approves it. If the commission does not approve it, and the agency does not seek to revise it, then it goes to the next session of the Legislature for its review. Until the commission approves it or until the next session fails to object to it [the regulation], it will not take effect. A regulation could not take effect without being approved either by the legislative commission or the Legislature as a whole." Ms. Vilardo stated her support of A.B. 214. Ande Engleman, Concerned Citizen, testified she has seen abuses to the public by the regulatory process and therefore supports A.B. 214. She told the committee that last summer Assemblywoman Lambert made her aware of abuses in the regulatory system. She said, "I enthusiastically support these bills." Mrs. Clark asked Mr. Malkiewich about page 3, lines 31 and 32. "It says that the agency may continue to revise it and resubmit it to the commission. Shouldn't that say resubmit it to the LCB, instead of the commission? We would not go to the commission directly, would we?" Mr. Malkiewich explained the language is incorporating the procedure outline in subsection 1: Continue to revise it as indicated in subsection 1, and the procedure in the statute says it is returned to the director [of the Legislative Counsel Bureau] who puts it on the agenda for the next meeting of the commission. It does go to the legislative commission for its approval. It would be resubmitted to the director who then submits it to the commission. We can clarify that point. However, the intent there is if the agency revises it, if this commission still does not approve the regulation, the agency can revise it. Again, submit it to the director who would submit it to the commission at the next meeting. Since we need to amend it [the bill], we can certainly clarify that point. Ms. Clark asked if an agency is told to revise the regulation, will they have an opportunity to discuss the regulation with someone at the LCB to receive some input on how to change the wording in the regulation Mr. Malkiewich replied: When regulations are reviewed by the Legislative Counsel Bureau, by the Legal Division, they are reviewed to determine that they are clear, concise and suitable for incorporation in the Nevada Administrative Code [NAC]. We do virtually the same thing with the proposed regulation that we do with a proposed bill: determine what sections need to be amended; what sections need to added; fit it into NAC as we would fit a bill into NRS; and make sure the language is consistent with the language used in NAC. We know that the authority to reject the regulation goes with the legislative commission. If we note at the time of review that there are concerns about the agency's authority, we will raise it at that time with the agency. What we have found is, in most cases, we can resolve the problem at that time. An agency will not realize that the statute specifies a $50 fee. They cannot by regulation establish a $100 fee. Therefore, rather than going through the embarrassment of having it go to the legislative commission and having the commission object to it, we'll point it out to the agency and generally they will agree. If they do not agree, then we will include the provision in the regulation submitted to the commission; and, in most cases where a regulation is objected to by the commission, that's what's happened. We normally will call it to the agency's attention, and they will say no, we want to adopt it in this form or at least take it to the commission. That procedure would not change. Ms. Clark asked that this be included in the language of the bill. Mr. Malkiewich responded: I do not think we can give the counsel bureau staff the authority to approve the regulations . . . if the commission has objected to it, it is going to have to come back to the commission. Now again, in the preliminary process, before it gets to the commission, if we can resolve the problem, we will do so. However, if the commission has objected, the LCB staff can certainly work with the agency to try to work it out. Senator O'Donnell commented: I just figured out how we can make this a lot simpler. Why don't you just delete subsection 3 of section 3? If they have a problem, and they cannot continue to come through with a revised set of regulations, then they can ask. Every agency has the opportunity to ask for a BDR (bill draft request), and handle it legislatively. Why do they have to send, within the first 30 days, a concurrent resolution saying they do not agree with the legislation? How many concurrent resolutions do you think we'll have? Mr. Malkiewich responded this authority will help negotiations and speed the procedures for approving regulations. He said: As for why we have the review for the adopting of a concurrent regulation . . . first we put it in the negative. So if you do nothing, you do not have to do anything to make it become effective. To object to it, we wanted to make the Legislature, as a whole, take an act so if there's a question, the issue is legislative intent. The thought was if the Legislature, in the most constitutionally defensible manner, ...would be for the Legislature as a whole to have the ultimate final authority on whether or not this was within their legal authority. Senator O'Donnell asked if the agency writes a regulation which the commission rejects, and they continually resubmit, the regulation is not in effect until the commission approves it? Mr. Malkiewich responded, "Correct." Senator O'Donnell remarked, "Then it goes to concurrent resolution. In other words, we declare that we disagree with this regulation. That's essentially a bill draft. So that gives the ability of the agency to go in and lobby . . . sort of convince the whole body that this regulation is, in fact, the right one. I think that is what you meant by putting that in here. Is that correct?" Mr. Malkiewich replied, "That is correct." Senator O'Donnell asked, "If that is the scenario, then essentially if we are in the negative, we are passing a bill to affirm by not passing the concurrent resolution. We are essentially affirming the regulation." Mr. Malkiewich responded: That is correct and certainly it could be reversed. We could put the burden upon the agency to get the regulation approved by concurrent resolution. It certainly could reverse the burden and say that the regulation does not take effect unless the Legislature, by concurrent resolution, approves it or unless the Legislature specifically approves it by legislative act. I think having the Legislature make the final say on it is important for the constitutionality. Remember this one is being proposed in the absence of a constitutional amendment specifically granting this authority. We need to be very careful that we do not give too much authority to the legislative commission, that their authority be limited to temporary suspension. That the ability to reject a resolution in its entirety be with the Legislature. I think that is why it is stated in the negative now. The Legislature would have to make a certain act to reject that regulation. I think it is to create the strongest constitutional case possible. Senator O'Donnell asked the committee what kind of amendments will be proposed to the bill. Senator O'Connell responded the technical amendment proposed by Mr. Malkiewich. A discussion ensued regarding possible amendments. Senator O'Donnell stated: The point I am trying to make is if the Legislature does not do anything in 30 days, it is de facto regulation. Even though the commission during the entire interim has negated any kind of regulation, negated any kind of action. If we do not take any action, the 63 of us, if it dies because one house or the other just does not get to it, it becomes regulation automatically, if it is not dealt with within 30 days. It should be the other way around. It should be that the Legislature has to approve it, not that the Legislature does not have to do anything . . . do you understand what I am saying? Mr. Malkiewich stressed, "To defend the constitutionality, we would probably want to put in an affirmative duty upon the Legislature to review it, but not have it take effect unless approved by the Legislature." Senator Titus remarked, "I think we need to have this case just as strong as we can constitutionally, because it is not just a problem in the state. You've seen the whole question of legislative veto at the national level and the courts are not real clear on that." Mr. Malkiewich responded, "I think you understand the issue perfectly. You can set it up either way. I believe if you require the Legislature to take an act to reject it, it is a little bit stronger, but I do not know if that is going to make the difference. That is a policy decision for this company to make." The discussion continued regarding the proposed technical amendment. Mr. Malkiewich assured Ms. Clark that he will include the language change regarding regulation submission which she proposed. Senator O'Connell closed the hearing on A.B. 214 and adjourned the meeting at 3:00 p.m. RESPECTFULLY SUBMITTED: Teri J. Spraggins, Committee Secretary APPROVED BY: Senator Ann O'Connell, Chairman DATE: Senate Committee on Government Affairs April 24, 1995 Page