Should Joint Rule 10.5 Be Changed?

By Chris Micheli

Before answering this question, readers should be aware of what Joint Rule 10.5 is. This Joint Rule provides guidance to the Office of the Legislative Counsel when determining whether a bill should be “keyed” as a fiscal bill. If Legislative Counsel determines that a bill is “fiscal,” then the measure will be referred to the Appropriations Committee in each house. If a bill is not keyed fiscal, then it will be sent only to a policy committee for hearing (unless the Appropriations Committee requests and receives the bill).

The question whether Joint Rule 10.5 should be amended concerns bills that affect the civil court system that have historically not been keyed fiscal by the Legislative Counsel. For example, a bill that would change the law (such as the Civil Code or Code of Civil Procedure) that would result in more cases being filed in superior court are generally not keyed fiscal, which seems contrary to a generally-accepted definition of “fiscal.” However, the language of Joint Rule 10.5 is not that broad.

The following is the text of Joint Rule 10.5:

Rereferral to Fiscal and Rules Committees

10.5.A bill shall be rereferred to the fiscal committee of each house when it would do any of the following:

(1) Appropriate money.

(2) Result in a substantial expenditure of state money.

(3) Result in a substantial increase or loss of revenue to the state.

(4) Result in substantial reduction of expenditures of state money by reducing, transferring, or eliminating any existing responsibilities of any state agency, program, or function.

Concurrent and joint resolutions shall be rereferred to the fiscal committee of each house when they contemplate any action that would involve any of the following:

(1) Any substantial expenditure of state money.

(2) Any substantial loss of revenue to the state.

The above requirements do not apply to bills or concurrent resolutions that contemplate the expenditure or allocation of operating funds.

This rule may be suspended in either house as to any particular bill by approval of the Committee on Rules of the house and two-thirds vote of the membership of the house.

As one can read, there are only four instances in which a bill is keyed “fiscal.” First, a bill that appropriates money, which is easy to ascertain because the language of the bill would actually appropriate a specified sum of money. Second, a bill that results in a “substantial expenditure of state money.” This one is tricky and we will come back to it.

Third, a bill that results in a “substantial increase or loss of revenue to the state.” This type of bill is relatively easy to determine as well, such as a tax bill that creates a new tax credit or exemption (i.e., that results in loss of revenue) or a bill that repeals a tax credit or exemption (i.e., that results in an increase of revenue). Fourth, a bill that results in reduction of expenditures of state money relating to a state agency program or functions. This bill, too, should be easy to determine because the bill would specify that it reduces, transfers or eliminates an existing program, agency or function of the state.

This returns us to the second category — expenditure of state money. Why does a bill that, for example, would eliminate the use of arbitration in specified circumstances not cause the expenditure of state money as many more civil cases are filed in California state courts? This is due to the determination by the Legislative Counsel that no more expenditure of state monies will occur with such a proposed law change.

In other words, just because more cases will be filed in civil court does not result in the expenditure of state funds. Instead, the workload will remain the same with additional cases being addressed when the courts get to them.

Due to the narrow language contained in subdivision (2) of Joint Rule 10.5, perhaps a fifth category should be added to the Joint Rule to address those instances in which changes to laws (assuming most would occur in the Civil Code or Code of Civil Procedure) would result in workload changes to state agencies.

For example, the Legislature could add a subdivision (5) to read: (5) Result in additional workload for a state agency, department, board, commission, or court, or a reduction in workload for any such entity.

What would the result be of this additional subdivision to Joint Rule 10.5? A handful of additional bills each year would get referred to the Senate and/or Assembly Appropriations Committees. Of course, those committees would give these additional bills appropriate review, but determine whether they need a hearing.

For example, in specified circumstances, the Senate Appropriations Committee Chair can send a bill to the Senate Floor, even if it is keyed fiscal, if he or she determines there is nominal cost to the state.

So, amending Joint Rule 10.5 as suggested will not necessarily result in more bills on the respective Suspense Files in the two houses. Instead, it could mean these bills would get analyzed by the fiscal committee staff to determine whether there is sufficient impact to the state to warrant a hearing on the bill.

 

Chris Micheli is a Principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc. He also serves as an Adjunct Professor at McGeorge School of Law in its Capital Lawyering Program.

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