Transcript NABCA Legal Symposium

NABCA
Legal Symposium
REVISING STATE
REGULATION
MARCH 12, 2013
Panelists:
• Chris Curtis - Deputy Secretary, Virginia ABC
• Steve Humphress - General Counsel, Kentucky ABC
Moderator:
• Kevin McNally - Marston & McNally, P.C.
State
Interest
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Revenue
Temperance
Public
Safety
Private
Interest
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Public Interest
Access
Innovation
$$$
Industry
Regulator
• Nimble
• Political
• Unlimited
Resources
• 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)
Key Findings
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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.
Christopher Curtis
Stephan B.
Humphress
Deputy Director,
Virginia Department of
General Counsel,
Alcoholic Beverage Control
Kentucky Department of
Alcoholic Beverage Control
Snoozer
 Why do it now
 Purpose
 Who is included in process
 Description of the process
 Conclusion
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
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Association
Virginia Wine Council
Virginia Hospitality and Travel Association
Virginia Beer Wholesalers
Virginia Wine Wholesalers
Diageo North America
The Country Vintner (wine wholesaler)
Distilled Spirits Council of United States
 Associated Distributors/Charmer Sunbelt
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(wine/beer wholesaler and liquor broker)
Virginia Nightlife Association
Anheuser Busch/In Bev
Miller/Coors Brewing Company
Retail Merchants Association
Virginia Manufacturers Association (craft brewers)
The Wine Institute
Virginia College Alcohol Leadership Council
 Kickoff of the process – August 2011 with
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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 regulation
 Agency considers public comment and submits
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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
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Bulk of Kentucky’s alcoholic beverage laws
date back to 1936 when Prohibition ended.
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Over years, Kentucky’s alcoholic beverage
laws have been enacted piecemeal at
different times for a specific purpose outside
of a specific statutory scheme.
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Resulting body of Kentucky law is a
patchwork of confusing and sometimes
conflicting provisions.
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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).
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Since 1985, the laws have become even
more confusing.
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The subject of alcoholic beverages remains very
political and controversial in Kentucky making
legislation difficult.
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Kentucky still permits local option elections whereby
citizens are permitted to vote on whether a territory
is “wet” or dry.”
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Kentucky’s 120 counties are permitted to have a
local option election to have a county vote on
whether to be wet or dry.
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Additionally, Kentucky permits 145 cities to
separately vote on whether the city is wet or dry
even if a county remains dry.
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Kentucky is still predominantly a dry state.
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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.
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Kentucky Constitution requires all titles of bills to
include subject of legislation.
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State Senate and House generally only pass one bill
titled “bill dealing with alcoholic beverages.”
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Controversial amendments sought by various
industry groups often attached to good, neutral
house-keeping bills causing them to fail.
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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.
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It was decided that an executive branch Task
Force was necessary so that Department would
provide needed administrative support,
resources, and expertise.
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Department identified several challenges in
creating the Task Force:
 (1) Membership
 (2) Objectives
 (3) Time
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On July 18, 2012, Governor Steve Beshear
signed an executive order creating the Task
Force on the Study of Kentucky’s Alcoholic
Beverage Laws.
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Executive Order required the Task Force to
complete its work and deliver written
recommendations on or before January 15,
2013.
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Task Force only had six (6) months from creation
to deliver written report.
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Task Force submitted its written report on
January 11, 2013.
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Report and recommendations consisted of 156
pages. http://abc.ky.gov/Pages/taskforce.aspx
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HB 300, the bill which effectuated the Task
Force’s Recommendations, was passed by the
state House of Representatives on February 26,
2013.
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Still pending in Kentucky Senate as of today.
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Secretary of the Public Protection Cabinet (Chair)
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One representative of the Governor’s Office
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Two members of the Senate
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Two members of the House of Representatives
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The Commissioner of the Department of Alcoholic
Beverage Control
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The Department’s Director of the of Distilled Spirits
and Wine Division
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The Department’s Director of the Malt Beverages
Division
One member from each of the following:
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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
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.
The Good the Bad and the Ugly
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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.
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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.
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Public forums were held across the state to
gather information.
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Committee chairs were organized and had
suggestions for committee to discuss, accept,
amend, or reject.
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Task Force recommendations were the free
choice of members not coerced Department
agenda items.
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Six (6) months was not enough time. Should have
had at least one (1) year.
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Some representatives still came to table with personal
agendas instead of with desire to make Kentucky’s
laws better.
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Some non-Task Force members participated from the
sidelines and caused division.
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Most work was performed by Department staff.
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When members missed meetings, time to re-educate
them upon return slowed down process.
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Work was not evenly distributed between committees.
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Have public forums at beginning of Task Force to
gather needed information, not at end.
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Have informational speakers speak at initial,
informational stages of committees, not at end.
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Committee chairs need to be organized and have a
plan.
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Report should include actual bill draft language to
effectuate recommendations.
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Avoid sub-committee “secret” working groups.
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Avoid preparer errors resulting in multiple emails or
documents for same correspondence.
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Anticipate negative media stories when Task
Force does not address an issue of public interest
that might arise during pendency of project.
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Do not attempt to make everybody happy or
agree to not address any controversial issue.
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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.
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.
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15 Principles of Regulatory Decision Making
#1:
#2:
#3:
#4:
#5:
Regulatory review requirements should be realistic given
resources.
Regulatory review should calibrate rules, not simply be a
check against them.
Regulatory review should not unnecessarily delay or deter
rulemaking.
Regulatory review should be exercised consistently, not
only on an ad hoc basis.
Regulatory review should be guided by substantive
standards, to ensure consistency and to increase
accountability.
15 Principles of Regulatory Decision Making
#6:
#7:
#8:
#9:
#10:
.
At least part of the review process should be devoted to
helping agencies coordinate.
At least part of the review process should be devoted to
combating agency inaction.
Regulatory review should promote transparency and
public participation.
Periodic reviews of existing regulations should be
guided by substantive standards.
Periodic reviews of existing regulations should be
balanced, consistent, and meaningful.
15 Principles of Regulatory Decision Making
#11:
#12:
#13:
#14:
#15:
Impact analyses should give balanced treatment to both
costs and benefits.
Impact analyses should be meaningfully incorporated
into the rulemaking process.
Impact analyses should focus on maximizing net
benefits, not just on minimizing compliance costs.
Impact analyses should consider a range of policy
alternatives.
Impact analyses should include a meaningful and
balanced distributional analysis
Recommended Reading:
52 Experiments with Regulatory Review
The Political and Economic Inputs into State Rulemakings
Jason A Schwartz
Report No. 6
November 2010
Institute for Policy Integrity
New York University School of Law
Available at:
http://www.lhc.ca.gov/studies/activestudies/regulatoryreform/NY
U%20Examina.%20of%20State%20Reg%20Systems.pdf