Inside the Capitol: Should Joint Rule 10.5 be changed?

The burning question of the day: Should Joint Rule 10.5 be changed?

If you, like most normal people, have little interest in the Capitol’s battles, then this question prompts a big yawn.

But if you engage in the interminable wars over legislation, then this issue is a very, very big deal. So pay attention: You may be tested on this later.

The question of whether Joint Rule 10.5 should be changed stems from concerns about bills that affect California’s civil court system.

Just what exactly is Joint Rule 10.5?

This rule guides the Legislature’s lawyers — the Office of the Legislative Counsel — when they decide whether a bill should be defined, or “keyed” as they say in the Capitol, as a fiscal bill. A bill that is classified as a fiscal bill has a different, and tougher, path through the Legislature.

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 of whether Joint Rule 10.5 should be changed stems from concerns about bills that affect California’s civil court system – bills that historically have not been keyed fiscal by the Legislative Counsel.

For example, bills to 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.  But that seems contrary to a generally-accepted definition of “fiscal,” because increasing the number of cases in court will certainly add to the court’s costs.

However, the language of Joint Rule 10.5 is not that broad. Here’s the text (I know you hoped to get through this story without reading legalese, but that’s not happening):

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 see, 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 cuts spending related 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.

Amending Joint Rule 10.5 as suggested will not necessarily result in more bills on the respective Suspense Files in the two houses.

This returns us to the second category — expenditure of state money.

For example, why does a bill that would eliminate the use of arbitration in certain circumstances not cause the expenditure of state money, as many more civil cases will be filed in state courts? But the Legislative Counsel says no more spending of state funds will take place with such a proposed law change. Therefore, the bill is not “fiscal.”

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, under certain circumstances, the chair of the Senate Appropriations Committee 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 that these bills would get analyzed by the fiscal committee staff to determine whether there is enough of an impact on the state to justify a separate hearing on the bill.
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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.