The Office of Administrative Law (OAL) reviews all new regulations produced by California’s sprawling 200-plus state agencies in the executive branch of government. It checks them for clarity and legality, and eventually oversees their publication. But most importantly it makes sure the agencies follow the state’s Administrative Procedure Act (APA), which created the office. The OAL is transitioning from independent status to a place in the Government Operations Agency by July 1, 2013, as part of a larger government reorganization.

Soon after California became a state in 1850, the Legislature began creating agencies in the executive branch of government to enforce and administer various statutes. The Legislature quickly, and with increasing frequency, began to include a potent power in these enabling statutes: a delegation of the power to adopt rules and regulations having the force of law.

It wasn't until around 60 years ago that the Legislature established procedures to apply generally to all state agency rulemaking. Before then, if the Legislature did specify rulemaking procedures, it did so in a specific statute delegating specific rulemaking authority to a specific agency. This meant there were no general procedural requirements even for such fundamental matters as notice, public hearings, or filing and publication of adopted rules and regulations.

In 1941, the Legislature took the first step to reform this situation by requiring state agencies to file all regulations with the Secretary of State and to publish them in an administrative code, now called the California Code of Regulations. In 1947, the Legislature enacted general notice and hearing requirements to provide for public participation in rulemaking conducted by all state agencies.

The Office of Administrative Law was created in 1979 during Jerry Brown’s first go-round as governor. It was seen by many as a compromise that allowed the Legislature more influence on the activities of agencies administered by the executive. 

Since its creation more than 30 years ago, the agency has averaged 34 staff positions (from a high in 1985 of 58.5). However, beginning with budgets cuts in the early 1990s, OAL has seen a steady reduction in its workforce to its currently budgeted level of 21 while losing none of its responsibilities.

During the campaign for governor in 2010 then-candidate Brown alternatively pledged to reinvigorate the office and close it.

The Office of Administrative Law reviews all new state regulations, checking them for clarity and legality, and eventually overseeing their publication. It makes sure the agencies follow the state’s Administrative Procedure Act (APA), which details a wide range of procedures an agency should follow when adopting regulations, including those requiring public notice and transparency, and applies to nearly every rule-making entity in the executive branch.  The act specifically requires them to vet their regulations through the agency.

Among its duties, the agency accepts petitions from outside sources challenging regulations. Those deemed not to have followed APA procedures are labeled “underground” and blocked. It also assists other regulatory agencies by providing formal and informal APA training and legal advice.

The decisions can be vetoed by the governor (except in the case of “emergency” regulations) or appealed to the courts.

The agency ultimately transmits the regulations to the Secretary of State’s office and publishes them in the California Code of Regulations. OAL oversees the publication and distribution, in print and on the Internet, of the California Code of Regulations and the California Regulatory Notice Register.

Although the office is a creature of the executive, it was created by the Legislature, which made clear it expected close cooperation with OAL in executing regulatory reform.

OAL has four basic functions: regulation review, regulation publication, education and training, and determinations regarding “underground” regulations. The office is a resource for:

·    Locating regulations on a particular topic.

·    Determining which agency is responsible for a particular topic.

·    Requiring whether draft legislation will require the adoption of regulations.

·    Drafting statutory language concerning the adoption of regulations or granting an exemption from APA rulemaking requirements.

·    Making an informed decision on the cost/benefit of granting a statutory exemption from the APA that eliminates public participation.

·    Preparing effective comments concerning a proposed agency regulation and taking part in ongoing agency rulemaking efforts.

·    Understanding APA requirements and the APA process.

·    Determining the quickest way to administratively implement a new program or policy.

·    Determining whether an uncodified agency rule is an "underground regulation"

·    Other related rulemaking topics.

OAL provides state agencies a choice between its two rulemaking procedures: regular or emergency. The latter allows for shorter public notice and comment periods, and a 10-day timetable for OAL to act upon the request instead of the usual 45 days.

To be deemed an “emergency,” the agency making the request must show immediate action is necessary to avoid serious harm to the public. Emergency regulations have an effective time limit, though they can be made permanent.

The office provides a list of all proposed emergency regulations under review.

The Office of Administrative Law is a small office, with a small budget. Nearly 78% of its $3.0 million budget for 2011-2012 was for personnel, mostly lawyers. The rest was for operating expenses.

3-Year Budget (pdf)

The Office of Administrative Law makes a lot of commotion for an “obscure” government agency most people have never heard of. Because it vets nearly every California government regulation created or changed, it often finds itself at the center of a storm.

Taxes

In 1985, a new government rule, opposed by the California Assessors Association but approved by the Board of Equalization, was estimated to be worth $30 million a year in tax savings for the Irvine Co. After initially challenging the rule, the Office of Administrative Law reversed course when the board submitted new documents. The assessors cried foul and threatened a lawsuit, saying they were unaware of the late submission. 

Irvine Co. May Benefit From New Tax Rule (by Leslie Berkman, Los Angeles Times)

Insurance Rates

The Proposition 103 insurance rate rollback, passed in 1989, that would have forced $2.3 billion in customer refunds hit a roadblock for a second time in 1992 when the office rejected regulations to implement it. Although the state Supreme Court in 1989 told Insurance Commission John Garamendi to set regulations governing the rollbacks, OAL maintained that he had no such legal authority and that the high court ought to reconsider the matter.

Insurance Rollback Hits a New Obstacle (by Kenneth Reich, Los Angeles Times)

Workplace Safely

In 1997, the Office of Admistrative Law exercised a “surprise veto”  of California’s first-in-the-nation ergonomics program meant to protect workers from repetitive motion injuries and ignited a storm of controversy. The office cited numerous examples of imprecise language in the regulations. Six months later, the office approved revised Cal-OSHA regulations.

Ergonomics Plan Rejected by State Panel, Will Be Revised (by Stuart Silverstein, Los Angeles Times)

Governor Schwarzenegger

On Governor Arnold Schwarzenegger’s first day in office, November 17, 2003, he issued an executive order directing the Office of Administrative Law to freeze the processing of most new regulations for up to six months. He also ordered the office to review all rules put into effect over the previous five years.

The governor’s stated aim was to assess "the onerous impact of over-regulation on the daily lives of Californians," adding that some regulations were "perceived to work against business and inhibit growth and economic prosperity."

In May, 2004, the governor withdrew his appointment of Edward Heidig as director of the office in the face of stiff opposition from Senate Democrats. Heidig, a former director of the office in the ‘90s, had strong support from California business.

Governor Removes Criticized Director (by Marc Lifsher, Los Angeles Times)

Agency vs. Agency

The agency, from time to time, is sued over rulings it makes. Sometimes those suits are filed by other government entities.

In November 2010, California Insurance Commissioner Steve Poizner sued over an OAL determination that the Department of Insurance improperly tried to stop insurers months earlier from investing in Iran. “I intend to ensure that any insurance company licensed in California is not doing business, in any way, with the Iranian regime,” Poizner said in a statement.

OAL director Susan Lapsley’s office called the regulations invalid, blocking their execution. Her statement said Poizner did not follow the required process, “but rather simply imposed new rules unilaterally without any public input or comment. This is exactly the type of action the APA is designed to prevent….We stand by our opinion.”

In an unusual move, Poizner retained the California Department of Justice, headed by then-Attorney General (and now-Governor) Brown, to file his suit.

Because the Administrative Law attorneys are not generally schooled in litigation and the agency has no budget for it, they normally turn to the attorney general’s office for assistance. In a press release, Lapsley said, “It appears to me that there is a conflict in the attorney general representing the Insurance Commissioner and the Department of Insurance in an action against this office.”

The matter was settled in January 2012 when Poizner’s successor, Dave Jones, announced a settlement of the litigation that allows the insurance commissioner to maintain a public list of businesses “involved in volatile sectors of the Iranian economy,” but that insurers would no longer have to file quarterly reports of their Iranian investments. 

Insurance Commissioner Poizner Sues to Stop Insurance Companies from Investing in Iran (California Department of Insurance)

Jerry Brown Sues His Own Client (by Robert Sallady, California Watch)

California Department of Insurance Settles Suit Over Iran Investments (by Larry Golub, Insurance Litigation & Regulatory Law blog)

In December 2010, just before leaving office, Governor Schwarzenegger declared a “fiscal emergency” in the state and proposed major cuts in the current budget and for 2011-2012. The Legislature chose to wait for incoming Governor Brown’s budget plan.

Schwarzenegger’s plan called for slashing the Office of Administrative Law budget by $500,000 (16%) in the 2010-2011 budget and $1.8 million (58%) in the 2011-2012 budget. Savings would be achieved by supporting regulatory activities through a fee for service mode. He also proposed transferring the office to the State and Consumer Service Agency.

Governor Brown, on his website during the campaign, proposed strengthening the office.

“I would reinvigorate the office and provide the leadership needed to ensure that new regulations stick to the clear intent of a law and do not go beyond what is reasonable.”

His 2011-2012 budget proposed a modest 2.2% cut.

The problem or the solution?

The Office of Administrative Law operates against the backdrop of an ongoing debate about the size and scope of government. Although the stated mission of the office is non-partisan and non-political, its impartiality is often challenged by one side or the other. It is alternatively accused of being politically biased or bogging down the administrative process.

Shortly after the office was created, the Cato Institute, a libertarian think tank and advocate for small government, noted that in its first year OAL had rejected one-fifth of all proposed regulations. The institute was guardedly optimistic that the office would reign in regulatory excess and “may well be King of the Mountain.”

Thirty years later, OAL was being blasted by the Criminal Justice Legal Foundation for being “pointlessly severe” and focusing on “minor details” when it rejected regulations proposed by the Department of Corrections and Rehabilitation that would allow the state to resume executions. (The regulations were eventually approved.)

Victims’ Rights Group Blasts Continuing Hold on Executions (by Steven M. Ellis, Metropolitan News-Enterprise)

The Insurance Lobby

In 2004, Governor Schwarzenegger appointed William Gausewitz OAL director. Gausewitz was a lobbyist for the American Insurance Assn. and Farmers Insurance. The move was attacked by consumer activists as undermining “the neutrality and credibility” of the office, who argued that the appointee should recuse himself from any decisions regarding the insurance industry.  They cited the reluctance in the early ‘90s of the Marz Garcia-led office to approve regulations implementing Prop 103 insurance rate rollbacks.

Four years later, after leaving OAL to take a job as Insurance Commissioner Poizner’s counsel, Gausewitz signed proposed “emergency” rule changes to Prop. 103 that were highly favorable to the insurance industry. A consumer group asked the OAL to avoid politics and block the regulations.  “The agency will have to demonstrate independent judgment if it is to have credibility as an arbiter of the law.”

Senate Should Place Restrictions on Schwarzenegger Appointee Who Was An Insurance Lobbyist, Group Says (ArnoldWatch.org)

Consumer Advocates Call On Office of Administrative Law To Resist Politics, Protect Public (Consumer Watchdog)

Susan Lapsley, 2007-2011

William L. Gausewitz,  2004-2007 

Sheila R. Mohan, 2001–2003 (acting director)

Edward G. Heidig, 1998-1999

John D. Smith, 1993-1997

Marz Garcia, 1991-1992

Linda Hurdle Stockdale Brewer, 1983-1990 (intermittent)

Gene Livingston, 1980-1982