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SB 705

Limit Rules With Substantial Financial Costs.

2025-2026 Session Introduced by Steve Jarvis and 1 co-sponsor

SB 705 requires rigorous fiscal analysis and higher voting thresholds before costly rules (≥$1M/5 years, or ≥$10M) can be adopted by boards/commissions.

Passed 1st Reading
#administrativecode;administrativerules;public
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Bill Summary · SB 705

SB 705 — Limit Rules With Substantial Financial Costs

Status: Passed 1st Reading (Introduced Jan 3, 2025)
Subject: Administrative code; administrative rules; public

Purpose / Intent

SB 705 adds procedures and limits on state agency rulemaking when proposed permanent rules (or rule sets) impose substantial aggregate financial costs on affected parties. The bill requires more rigorous fiscal analysis and, for higher-cost rules adopted by boards/commissions/councils, higher internal voting thresholds before the rule can be adopted.

Key provisions

  • Amends G.S. 150B-21.4(b1) (fiscal note / “substantial economic impact” requirements):

    • Defines “substantial economic impact” as an aggregate financial impact of at least $1,000,000 over a five‑year period (text replaces prior references to a 12‑month period).
    • Requires agencies to prepare a fiscal note and obtain Office of State Budget and Management (OSBM) approval and a certification that the agency followed specified regulatory principles before publishing a proposed permanent rule in the NC Register (unless identical to a required federal regulation).
    • OSBM must prepare a requested fiscal note within 90 days; if OSBM fails, the agency may prepare the note (in which case OSBM review is not required). If the agency prepares the note, OSBM must review it within 14 days and either approve it or explain why not.
    • Prescribes elements of the analysis: timeframe determination, baseline assessment, identification of affected persons and types of expenditures, monetized estimates where possible, listing non-monetized costs, and use of a 7% discount rate to calculate net present value for future costs.

  • Adds new § 150B-19.4 — vote thresholds for rules with substantial costs:

    • If a proposed permanent rule (or set of rules) would impose aggregate costs ≥ $1,000,000 over any five‑year period and the adopting agency is a board/commission/council/like body, adoption must be by at least a two‑thirds vote of members present and voting.
    • If aggregate costs ≥ $10,000,000 over any five‑year period, adoption by such a board/commission/council requires a unanimous vote of members present and voting.
    • Exception: if the rule is required by federal law (including to maintain delegated program compliance), a two‑thirds vote suffices even for the $10M threshold.
    • Applies to all rules adopted under Article 2A of Chapter 150B, including periodic review/readoption.
    • “Aggregate financial cost” is defined as the costs identified in the substantial economic impact analysis (benefits excluded).

Who is affected

  • State agencies, boards, commissions, councils, and other units that adopt administrative rules under Article 2A.
  • Businesses, nonprofits, local governments, and individuals who would bear costs from such rules.
  • OSBM (added review responsibilities) and agency rulemaking staffs (greater analytic requirements).

Procedural / timeline aspects

  • The bill requires OSBM involvement and sets timeframes: 90 days for OSBM to prepare a requested fiscal note; 14 days for OSBM to review an agency‑prepared note.
  • Uses a five‑year analytical window for cost estimates and a 7% discount rate for future costs.
  • The bill states it is effective upon becoming law and applies to rules adopted on or after that date.

Potential impacts (practical effects)

  • Increases analytic and procedural requirements before costly rules are published; may improve transparency and cost awareness.
  • Raises internal adoption thresholds for boards/commissions for higher‑cost rules, potentially slowing or preventing adoption unless there is stronger consensus.
  • Could shift time and resource burden to agencies for preparing detailed fiscal notes; OSBM workload could increase.
  • Aims to limit financially burdensome rulemaking but may delay regulatory responses or require legislative action for high‑cost policy changes.

Compiled from official sources — confirm details with the bill’s official record.

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