REVISING STATE REGULATION MARCH 12, 2013 NABCA Legal Symposium.

REVISING STATE REGULATION

MARCH 12 , 2013

NABCALegal Symposium

UNDERTAKING THE CHALLENGE OF REGULATORY OVERHAUL

Revising State Regulation

Panelists:• Chris Curtis - Deputy Secretary, Virginia ABC• Steve Humphress - General Counsel, Kentucky ABC

Moderator:• Kevin McNally - Marston & McNally, P.C.

The Task

State Interest

• Revenue• Temperanc

e• Public

Safety

Public Interest

Private Interest

• Access• Innovation• $$$

The Competition

Industry• Nimble• Political• Unlimited

Resources

Regulator• Reactive• Process Bound• Limited Resources

“There is always so much the committee has to do with important legislation, we just can’t take the time to worry about what an agency is doing with something we drafted five or ten years ago. The agency’s going to be on its own for the most part. Because nobody wants to do the job of checking up on it.”

—Anonymous Legislative Committee Chair

Quoted in Seymour Scher, Conditions for Legislative Control, 25 J. Pol. 526, 532 (1963)

The Responsibility

NYU Law Study - 2010

Key Findings• States directly regulate 20% of the economy. Poorly designed

regulations threaten economic growth and fail to efficiently protect the environment, public health, and safety.

• Powerful tools exist for states to promote rational and efficient regulatory decisions.

• Most states choose the wrong tools or wield them ineffectively.• In many states, regulatory review only creates another access

point for private interests who oppose new regulations; very few states use the review process to calibrate decisions and get the most out of regulatory proposals.

• Almost no states have mechanisms to check if necessary regulations are missing or to coordinate inter-agency conflicts.


Key Findings (cont.)

• Almost no states have balanced or meaningful processes to check the ongoing efficiency of existing regulations.

• With exceedingly few (if any) trained economists, limited time, and strained budgets, most state agencies struggle to assess the basic costs of regulations—and completely forgo any rigorous analysis of benefits or alternative policy choices.

• Based on a fifteen-point scale, no state scores an A; the average grade nationwide is a D+; seven states score the lowest possible grade of a D-.

• By following a simple, step-by-step course of reforms (transparency, training, inter-state sharing, resource prioritization, new guidance documents, revised statutes, and ongoing reevaluation), all states can improve the rationality and effectiveness of their regulatory systems.

The Challenge

Regulatory Review Two States’ Experiences

VirginiaChristopher Curtis

Deputy Director, Virginia Department of Alcoholic Beverage Control

KentuckyStephan B. Humphress

General Counsel,Kentucky Department of Alcoholic Beverage Control

VIRGINIA

Snoozer


Why do it nowPurposeWho is included in processDescription of the processConclusion


Reasons for Reviewing the Regulations

- Had not been done since late 1990’s

- Senior Management Initiative


“A task force of Department personnel and industry representatives will review regulations to recommend changes where the regulations are not practical or enforceable or the cost of administering them exceeds their value in controlling the distribution, sale or consumption of alcoholic beverages”

-----From ABC Newsletter in Summer of 1982


Current Purpose of Review• Narrowly tailor regulations to achieve intended

objectives• Create minimal impact on business community• Remove obsolete or unnecessary language-

regulation• Incorporate statutorily mandated language or

regulations• Consolidate/simplify existing language• Basically, streamline provisions to ease burden on

regulated community


The Usual “Suspects”Virginia Petroleum, Convenience Store and

Grocery AssociationVirginia Wine CouncilVirginia Hospitality and Travel AssociationVirginia Beer WholesalersVirginia Wine WholesalersDiageo North AmericaThe Country Vintner (wine wholesaler)Distilled Spirits Council of United States


Associated Distributors/Charmer Sunbelt (wine/beer wholesaler and liquor broker)

Virginia Nightlife AssociationAnheuser Busch/In BevMiller/Coors Brewing CompanyRetail Merchants AssociationVirginia Manufacturers Association (craft

brewers)The Wine InstituteVirginia College Alcohol Leadership Council


Kickoff of the process – August 2011 with stakeholder meeting

Set a mutually agreeable date for suggested changes – October 17, 2011

Second meeting with stakeholders on November 16, 2011

Initial public comment period until March 30, 2012

After these meetings and public comment, proposed changes submitted and second public comment period ended August 29, 2012


Notice of Intended Regulatory Action (NOIRA)

Agency submits NOIRA for executive branch review.

Agency is authorized by Governor to submit NOIRA for publication.

NOIRA is published in The Virginia Register of Regulations.

Submit your comment during the 30-day public comment period.


Proposed regulationAgency considers public comment and

submits proposed regulation.Governor approves proposed regulation.Proposed regulation is published in the

Register and notification is sent to all registered Town Hall users.

Submit your comment during the 60-day public comment period.

Final regulation



Conclusions

• More frequent reviews

• Open, transparent process

• Balance

KENTUCKY

KENTUCKY’S 2012GOVERNOR’S TASK FORCE ON

ALCOHOLIC BEVERAGE CONTROL LAWS

Bulk of Kentucky’s alcoholic beverage laws date back to 1936 when Prohibition ended.

Over years, Kentucky’s alcoholic beverage laws have been enacted piecemeal at different times for a specific purpose outside of a specific statutory scheme.

Resulting body of Kentucky law is a patchwork of confusing and sometimes conflicting provisions.

WHY TASK FORCE WAS CREATED

A Kentucky Supreme court justice once described the alcoholic beverage statutes as “a maze of obscure statutory language,” which were “confusing at best,” and whose meaning was “anybody’s guess.” Howard v. Salyer, 695 S.W.2d 420, 427 (Ky. 1985).

Since 1985, the laws have become even more confusing.


The subject of alcoholic beverages remains very political and controversial in Kentucky making legislation difficult.

Kentucky still permits local option elections whereby citizens are permitted to vote on whether a territory is “wet” or dry.”

Kentucky’s 120 counties are permitted to have a local option election to have a county vote on whether to be wet or dry.

Additionally, Kentucky permits 145 cities to separately vote on whether the city is wet or dry even if a county remains dry.


Kentucky is still predominantly a dry state.

Many legislators from dry territories are reluctant to vote for any bill dealing with alcoholic beverages or will only vote for a bill with a very restrictive purpose.

Kentucky Constitution requires all titles of bills to include subject of legislation.

State Senate and House generally only pass one bill titled “bill dealing with alcoholic beverages.”

Controversial amendments sought by various industry groups often attached to good, neutral house-keeping bills causing them to fail.


In 2011, a Kentucky legislator decided to sponsor a bill that would that amend the alcoholic beverage laws so as to make them more understandable.

A bill draft was prepared and sent to Department of Alcoholic Beverage Control for review.

In reviewing bill, Department had several concerns: (1) scope; (2) objectives; and, (3) process.

Department convinced legislator that a Task Force comprised of representatives from all alcoholic beverage industries would be the best process for attempted comprehensive legislation.


It was decided that an executive branch Task Force was necessary so that Department would provide needed administrative support, resources, and expertise.

Department identified several challenges in creating the Task Force: (1) Membership (2) Objectives (3) Time

TASK FORCE CHALLENGES

On July 18, 2012, Governor Steve Beshear signed an executive order creating the Task Force on the Study of Kentucky’s Alcoholic Beverage Laws.

Executive Order required the Task Force to complete its work and deliver written recommendations on or before January 15, 2013.

Task Force only had six (6) months from creation to deliver written report.

TASK FORCE CREATION

Task Force submitted its written report on January 11, 2013.

Report and recommendations consisted of 156 pages. http://abc.ky.gov/Pages/taskforce.aspx

HB 300, the bill which effectuated the Task Force’s Recommendations, was passed by the state House of Representatives on February 26, 2013.

Still pending in Kentucky Senate as of today.

TASK FORCE CREATION

http://abc.ky.gov/Pages/taskforce.aspx

Secretary of the Public Protection Cabinet (Chair)

One representative of the Governor’s Office

Two members of the Senate

Two members of the House of Representatives

The Commissioner of the Department of Alcoholic Beverage Control

The Department’s Director of the of Distilled Spirits and Wine Division

The Department’s Director of the Malt Beverages Division

TASK FORCE MEMBERS

One member from each of the following:

Kentucky Liquor Retail Coalition Kentucky Restaurant Association Wine and Spirits Wholesalers of Kentucky, Inc. Kentucky Distillers’ Association Kentucky Vineyard Society (small farm winery ) Kentucky Beer Wholesalers’ Association Kentucky Malt Beverage Council Kentucky licensed microbrewery Kentucky Association of Counties Kentucky League of Cities Mothers Against Drunk Driving

TASK FORCE MEMBERS

In planning, Department tried to identify issues which could be addressed in limited time and which were not overly divisive to members: Local option laws - “moist” elections made even more

confusing and hard to understand. Licensing laws- piecemeal legislation resulted in over

seventy (70) different license types scattered throughout laws and regulations.

Public safety- recent court opinion required changes to Kentucky’s disorderly premises statute.

Scope of Task Force was placed into Executive Order so that TF focus would not be distracted by industry agendas.

TASK FORCE PROCESS

TASK FORCE

The Good the Bad and the Ugly

Executive Order appointed Task Force members comprised of legislators, regulators, and industry.

Executive Order limited scope yet it was broad enough to address many issues.

Structure of one main Task Force with three (3) working sub-committees worked well.

Executive Order placed firm goals, objectives and deadlines in writing.

Department representatives were assigned to lead committees and provided needed support staff.

Good committee leaders resulted in better committees and work product.

TASK FORCE – THE GOOD

Educational sessions, speakers, and materials were provided to members before discussing issues.

Members were allowed to identify issues (within scope of topic) which they wished to be examined.

Appropriate time amount was devoted to an issue and then committee moved to next issue.

Committee meetings were scheduled on same day for convenience of members (9:00, 10:30, and 1:00).

Committee meetings held once a month. Additional meetings scheduled if necessary.

All members sat together at same tables for familiarity with speakers located to side.


Public forums were held across the state to gather information.

Committee chairs were organized and had suggestions for committee to discuss, accept, amend, or reject.

Task Force recommendations were the free choice of members not coerced Department agenda items.


Six (6) months was not enough time. Should have had at least one (1) year.

Some representatives still came to table with personal agendas instead of with desire to make Kentucky’s laws better.

Some non-Task Force members participated from the sidelines and caused division.

Most work was performed by Department staff.

When members missed meetings, time to re-educate them upon return slowed down process.

Work was not evenly distributed between committees.

TASK FORCE – THE BAD

Have public forums at beginning of Task Force to gather needed information, not at end.

Have informational speakers speak at initial, informational stages of committees, not at end.

Committee chairs need to be organized and have a plan.

Report should include actual bill draft language to effectuate recommendations.

Avoid sub-committee “secret” working groups.

Avoid preparer errors resulting in multiple emails or documents for same correspondence.


Anticipate negative media stories when Task Force does not address an issue of public interest that might arise during pendency of project.

Do not attempt to make everybody happy or agree to not address any controversial issue.


Establish rules at beginning as to what committee or Task Force vote is needed to move an issue forward.

Do not require member unanimity for an issue to move forward.

Avoid any discussion or changes to licensee fees or issues involving money. If address in large group, there will be some

opposition to any fee increase. If address in small group, there will be accusations

of secret meetings and not being allowed to participate.

TASK FORCE – THE UGLY

Waiting to see if HB 300 passes the state Senate and becomes law.

The failure of HB 300 means that Kentucky’s alcoholic beverage laws are doomed and hopelessly beyond repair.

The passage of HB 300 would likely lead to another Task Force in the future which addresses more challenging and difficult issues.

TASK FORCE – CONCLUSION


15 Principles of Regulatory Decision Making

#1: Regulatory review requirements should be realistic given resources.

#2: Regulatory review should calibrate rules, not simply be a check against them.

#3: Regulatory review should not unnecessarily delay or deter rulemaking.

#4: Regulatory review should be exercised consistently, not only on an ad hoc basis.

#5: Regulatory review should be guided by substantive standards, to ensure consistency and to increase accountability.



#6: At least part of the review process should be devoted to helping agencies coordinate.

#7: At least part of the review process should be devoted to combating agency inaction.

#8: Regulatory review should promote transparency and public participation.

#9: Periodic reviews of existing regulations should be guided by substantive standards.

#10: Periodic reviews of existing regulations should be balanced, consistent, and meaningful..



#11: Impact analyses should give balanced treatment to both costs and benefits.

#12: Impact analyses should be meaningfully incorporated into the rulemaking process.

#13: Impact analyses should focus on maximizing net benefits, not just on minimizing compliance costs.

#14: Impact analyses should consider a range of policy alternatives.

#15: Impact analyses should include a meaningful and balanced distributional analysis

52 Experiments with Regulatory Review The Political and Economic Inputs into State Rulemakings

Jason A SchwartzReport No. 6November 2010

Institute for Policy IntegrityNew York University School of Law

Available at: http://www.lhc.ca.gov/studies/activestudies/regulatoryreform/NYU%20Examina.%20of%20State%20Reg%20Systems.pdf

Recommended Reading:


REVISING STATE REGULATION MARCH 12, 2013 NABCA Legal Symposium.

Documents

state agencies

regulatory systems

interstate sharing

new regulations

merits of regulatory

efficient regulatory

review process

designed regulations