SB 981 amends Government Code section 11346.3 to require that any standardized regulatory impact analysis prepared by the State Air Resources Board (CARB) address cost‑of‑living impacts in addition to the usual economic metrics. The bill lists specific cost categories — retail gasoline and transportation, consumer electric bills, consumer goods and food, housing and building construction costs — and requires consideration of costs to businesses.
This change sits inside the existing California framework for economic impact assessments and standardized regulatory impact analyses (SRIAs). Practically, SB 981 expands the scope of data CARB must gather and quantify for major regulations and embeds those consumer‑facing measures into the Department of Finance review process, increasing the analytical burden on CARB and sharpening the evidence basis for assessing how air regulation affects household budgets and business expenses.
At a Glance
What It Does
SB 981 adds a clause to the SRIA rules requiring the State Air Resources Board to quantify cost‑of‑living impacts — including retail gasoline, transportation, electricity, consumer goods, food, housing and building construction costs — and to assess costs to businesses when preparing SRIAs for major regulations.
Who It Affects
Primary targets are the State Air Resources Board and regulated industries in energy, transportation, housing, and consumer goods sectors; secondary effects reach households, especially those sensitive to fuel, electricity, and food prices, and consultants or academic groups that supply data and modeling.
Why It Matters
CARB’s regulations frequently influence fuel, electricity, and transportation markets; requiring explicit cost‑of‑living analysis changes what evidence CARB must assemble, can alter how tradeoffs are framed, and creates new analytic and procedural burdens that can shape regulatory design and defensibility.
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What This Bill Actually Does
SB 981 inserts a narrow but consequential requirement into California’s regulatory impact regime: when the State Air Resources Board prepares a standardized regulatory impact analysis for a major regulation, the SRIA must explicitly address a set of cost‑of‑living metrics alongside the usual job, business, investment, innovation, and public‑benefit measures. The bill lists examples — retail gasoline and transportation costs, consumer electric bills, consumer goods and food costs, housing and building construction costs — and also requires an assessment of costs to businesses.
That list is additive to the SRIA elements already required for major regulations under Section 11346.3(c).
Mechanically, the SRIA must follow Department of Finance guidance adopted under Section 11346.36 and be submitted to the Department of Finance for comment; the statute already requires DOF to comment within 30 days and allows agencies to update analyses and summarize DOF comments in the rulemaking record. SB 981 does not alter those review mechanics or the existing exemptions that exclude the University of California, the named college under Section 92200, and the Fair Political Practices Commission from these analytic requirements.The statute lets agencies draw on existing state, federal, or academic publications when assembling the SRIA, and it preserves the consolidated small‑business definition option (independently owned, not dominant, fewer than 100 employees) for counting small businesses.
Those technical details matter because quantifying cost‑of‑living effects will rely heavily on secondary sources, model inputs, and assumptions rather than on neat primary data directly tying a regulation to consumer price changes.In practice, the new requirement pushes CARB to make explicit how its proposed air‑quality or climate rules will translate into changes in household and business expenses. That means CARB will need to expand modeling and data collection to monetize or otherwise characterize downstream effects — for example, how vehicle standards or a low‑carbon fuel standard affect retail gasoline prices, or how appliance or building requirements alter construction or electricity bills.
The effort will change the scope of the agency’s analytic work, alter the evidence available to regulators and the public, and increase the work the Department of Finance must review.
The Five Things You Need to Know
The bill adds Section 11346.3(c)(4): any standardized regulatory impact analysis prepared by the State Air Resources Board must include cost‑of‑living impacts such as retail gasoline and transportation costs, consumer electric bills, consumer goods and food costs, housing and building construction costs, and costs to businesses.
SRIAs for major regulations must follow Department of Finance procedures under Section 11346.36 and be submitted to the Department of Finance; DOF must comment on adherence within 30 days and those comments are to be summarized in the rulemaking record.
Agencies may rely on existing state, federal, or academic publications to supply information for the SRIA; SB 981 does not mandate primary data collection or a specific modeling methodology.
The bill preserves existing exemptions: the University of California, the college named in Education Code Section 92200, and the Fair Political Practices Commission are not subject to these SRIA requirements.
For non‑major regulations (or major regulations proposed before November 1, 2013) agencies may use the consolidated small business definition (independently owned, not dominant, under 100 employees) when assessing impacts; this definition remains available under the statute.
Section-by-Section Breakdown
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Baseline duty to assess adverse economic impact
Subdivision (a) restates the general obligation that agencies must assess potential adverse economic impacts of proposed regulations on California businesses and individuals and base rulemaking on adequate information. Practically, this is the statutory hook that requires agencies to avoid unnecessary or unreasonable compliance burdens and to consider competitive impacts versus out‑of‑state firms; SB 981 leaves that foundation in place while layering on the CARB‑specific SRIA requirement.
Economic assessment for non‑major regulations and small business definition
Subdivision (b) governs economic assessments for regulations that are not 'major' and allows agencies to use a consolidated small‑business definition (independently owned, not dominant, under 100 employees) for counting small businesses. The provision also clarifies that agencies can draw on existing state publications, which is important because SB 981 later permits reliance on secondary sources for cost‑of‑living metrics rather than demanding new primary surveys.
Standardized regulatory impact analysis for major regulations and CARB addition
Subdivision (c) requires SRIAs for major regulations and lists the usual analytical elements (jobs, business creation or elimination, competitiveness, investment, innovation, and benefits). SB 981 inserts paragraph (4) specific to the State Air Resources Board: in addition to the standard SRIA elements, CARB must assess cost‑of‑living impacts in specified categories and the costs to businesses. This is the operative change: it narrows a new, prescriptive set of categories only for CARB SRIAs.
Limits on reporting requirements applied to businesses
Subdivision (d) reconfirms that any regulation requiring a report does not apply to businesses unless the adopting agency finds that applying the requirement to businesses is necessary for health, safety, or welfare. That constraint interacts with SB 981 because CARB might otherwise seek new reporting from businesses to quantify cost impacts; subdivision (d) requires a health/safety/welfare finding before businesses can be required to submit reports.
Purpose and baseline for regulatory analyses
Subdivision (e) frames analyses as tools to choose the least burdensome, cost‑effective measures that achieve statutory goals and makes clear analyses inform regulatory design rather than relitigate statutory policy. For CARB, this requires tying any cost‑of‑living findings into a comparative assessment of alternative regulatory approaches that achieve the same statutory objectives while minimizing burden.
Department of Finance review and incorporation into the rulemaking record
Subdivision (f) preserves the process by which agencies submit completed SRIAs to the Department of Finance, which must comment within 30 days on adherence to guidance and allows agencies to update analyses in response. SB 981’s CARB‑specific requirement therefore operates inside an established DOF review loop that will now have to evaluate the adequacy of CARB’s cost‑of‑living metrics and underlying assumptions.
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Explore Environment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Low‑ and moderate‑income households: the explicit focus on retail gasoline, electricity, food, and housing costs forces CARB to disclose how a regulation could change household budgets, giving these households clearer evidence of likely distributional effects.
- Policy analysts and legal teams defending or challenging CARB rules: more granular, consumer‑facing metrics in the SRIA strengthen the factual record used in administrative proceedings and litigation.
- State budget and fiscal planners: DOF and other fiscal offices gain systematic information on how environmental regulations could affect consumer prices and business costs, which helps cross‑agency fiscal planning.
- Industry sectors sensitive to energy and construction costs (transportation, utilities, construction, food retailers): the SRIA will surface the mechanisms linking regulations to sectoral costs, enabling targeted mitigation measures or transition policies.
Who Bears the Cost
- State Air Resources Board (CARB): must expand modeling, data collection, and monetization efforts to quantify cost‑of‑living effects, increasing staff time, contracting, and analytic expenses.
- Department of Finance: faces added review workload assessing the validity of complex, often disputed assumptions linking regulations to retail prices and housing costs within a 30‑day statutory window.
- Regulated businesses and trade associations: will likely have to supply data, engage in technical comment, and potentially incur compliance or mitigation costs if analyses justify stricter controls.
- Consultants, modelers, and academic researchers: the new requirement creates demand for specialized economic and distributional modeling, shifting costs from public agencies to external contractors (paid by agencies or stakeholders).
- Small businesses: while not directly assigned new reporting obligations without a health/safety/welfare finding, they may face indirect costs where analyses support regulations that increase input or construction costs.
Key Issues
The Core Tension
The bill forces a choice between better transparency about how air and climate rules affect household and business budgets and the risk that such quantification will privilege short‑term, measurable price effects over harder‑to‑quantify environmental and health benefits, creating pressure to design less ambitious regulations to avoid visible consumer cost impacts.
Requiring CARB to quantify cost‑of‑living impacts is straightforward in language but hard in application. Many of the categories named in SB 981 — retail gasoline prices, consumer electric bills, food and consumer goods prices, housing and construction costs — move for reasons largely outside any single regulation.
Separating the portion of a price change attributable to a CARB rule from market forces, federal policy, and macroeconomic trends will force agencies to make modeling choices and assumptions that materially affect results. Those modeling choices will be factual levers in rulemaking debates and could extend the time and expense of rulemaking as parties contest methodologies.
There is also a normative trade‑off: mandating that CARB foreground several consumer‑price metrics can improve transparency about distributional effects, but it risks skewing decision‑making toward near‑term, easily quantified consumer costs and against long‑term environmental or health benefits that are harder to monetize. The statute preserves the analytic baseline — least burdensome, equally effective measures — but leaves open how agencies will weigh monetized consumer costs against nonmonetary or long‑term benefits.
Finally, practical implementation raises unanswered questions: what specific models and data sources will DOF deem acceptable, how DOF will evaluate complex counterfactuals within a 30‑day window, and whether CARB will need new statutory authority to collect business‑level data if current reporting limits block necessary information gathering.
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