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PA Bulletin, Doc. No. 14-2551

RULES AND REGULATIONS

Title 51—PUBLIC OFFICERS

DEPARTMENT OF STATE

[ 51 PA. CODE CH. 53 ]

Lobbying Disclosure Registration Fee

[44 Pa.B. 7671]
[Saturday, December 13, 2014]

 The Department of State (Department) amends § 53.1 (relating to biennial filing fee) to read as set forth in Annex A. The final-form rulemaking increases the biennial registration fee for individuals and entities required to be registered under 65 Pa.C.S. Chapter 13A (relating to lobbying disclosure) (act) from $200 to $300.

Effective Date

 The final-form rulemaking will be effective upon publication in the Pennsylvania Bulletin. The increased fees will be implemented for the 2015-2016 biennial registration period.

Statutory Authority

 The final-form rulemaking is authorized under section 13A08(j) of the act (relating to administration), which provides that the Department may by regulation adjust the filing fee established under section 13A10 of the act (relating to registration fees; fund established; system; regulations) if the Department determines that a higher fee is needed to cover the costs of carrying out the provisions of the act.

Background and Purpose

 A registration fee of $100 for individuals and entities required to be registered was the fee originally established under section 13A10 of the act. Section 13A08(j) of the act permits the fee to be raised by regulation if the Department determines that a higher fee is needed to cover the costs of carrying out the provisions of the act. The former registration fee of $200 was adopted at 40 Pa.B. 3825 (July 10, 2010). At that time, the Department acknowledged that even the $200 fee covered less than half of the expenses associated with administration of the act.

 For the 2007-2008 biennial registration period, the Department's costs for administering the act were approximately $1,052,105, and the registration fees paid to the Department at that time were approximately $581,438. For the 2009-2010 biennial registration period, the Department's costs were approximately $1,423,106, and the registration fees paid to the Department were approximately $324,509. For the 2011-2012 registration period, the Department's costs were approximately $1,800,028. The biennial registration fee was raised to $200 for the 2011-2012 registration period, and the amount of fees collected was approximately $733,879. For 2013-2014 biennial registration period, the Department's costs are projected to be approximately $1,661,000, and the registration fees collected are estimated to be approximately $684,400. When the $300 fee is adopted for the 2015-2016 registration period, it is projected that the Department will spend approximately $1,603,000 to administer the act, while the registration fees collected will be approximately $1,026,600.

 From 2007 to 2014, the Department will have spent approximately $5,936,240 to administer the act, while collecting only approximately $2,324,227 in revenue received from registration fees. In that same time period, from 2007 to 2014, the Department will have used approximately $3,597,400 from the General Fund.

 The act states that the Department may raise the fee to cover the costs of carrying out the act. By raising the fee to $300, the Department is able to continue to administer the act at the currently projected funding levels, and the regulated community contributes more fairly to their regulation.

Summary of Comments and Responses to Proposed Rulemaking

 Upon consideration of the comments received, the Department re-evaluated the amount of the fee increase and determined that a reduction from the proposed $700 to a fee of $300 was appropriate. The $300 fee is an increase of $100 from the former fee, keeping the increase in line with the previous increase. A $300 registration fee is both reasonable and mindful of the Department's goal to share the cost of lobbying disclosure regulation more equally between the regulated community and the citizens of this Commonwealth. Additionally, assuming appropriate General Fund support, an increased fee of $300 allows the Department to continue to provide the same level of customer service to the registrants and the same level of transparency in the lobbying disclosure process available to the public for the next 6 years, which obviates the need for the Department to increase the fees incrementally on a biennial basis.

 The proposed rulemaking was published at 43 Pa.B. 3009 (June 1, 2013) with a 30-day public comment period. The Department received a total of 21 comments from the public and 3 legislative comments during the public comment period. The Department received an additional comment from Stephen MacNett of Conrad O'Brien PC on November 12, 2013.

 Due to concerns raised by commentators, the Department undertook an in-depth review of alternative fee options. Options considered included the following: (1) a tiered fee structure with fees based on filer type; (2) a tiered fee structure where fees would be calculated based on expense report amount; (3) a fee structure based on number of affiliations; and (4) different fees for profit and nonprofit registrants. However, each option considered presented both policy and legal concerns. The option of a tiered fee structure by filer type would be the simplest in terms of the Online Registration System and program operation because this structure would utilize the three filer types (lobbyist, lobbying firm and principal) currently available. However, this change would result in increased costs for two of the three filer types. The Department also considered a fee structure where fees would be based on expense report amount. Under this fee structure principals would be the primary filer type, as lobbying firms and lobbyists only file expense reports if, during the reporting period, the lobbying firms or lobbyist engaged in lobbying that was not contained in any expense report filed by a principal or principals represented. As expenses change from quarter to quarter and year to year, this option would be an unpredictable funding source. The Department also considered a fee structure based on profit and nonprofit status. However, this too would be problematic. The Department found that a reduced fee for nonprofit entities may not be equitable because not all nonprofits are small businesses (some nonprofits are large companies) and not all small businesses are nonprofits. Additionally, this fee structure would require the Department to research each filer to ensure its nonprofit status. The Department concluded that the lobbying disclosure registration fee is a single fee for all registrants as based on its interpretation of sections 13A08(j) and 13A10(a) of the act and § 51.6 (relating to biennial review of exemption threshold, reporting threshold and filing fees) and § 53.1. Therefore, the Department does not believe that it has the authority under the act to implement the alternatives reviewed.

 One commentator suggested a more limited increase to the fee with an automatic inflator to provide predictability for companies and entities engaged in lobbying. However, the act specifically states that the Department must review the fees every 2 years. An automatic inflator would be contrary to the statutory mandate, and therefore not a feasible option.

 Department staff also looked to other states' lobbying disclosure programs for comparison. Specifically, the Department looked at the following states: Indiana and Texas, both which have fee structures based on profit or nonprofit status; Massachusetts and Wisconsin, both which have fee structures based on filer type and number of affiliations; and Kansas, which has a fee structure based on amount spent lobbying. Unlike the Commonwealth, however, there is specific authority in each state's statute enabling each fee type.

 The Department, as required under section 13A08(j) of the act, did review the $2,500 threshold amount to determine whether an adjustment in the amount was necessary. Accounting for inflation since the threshold was established, the reporting threshold could be set at approximately $2,850. The act authorizes the Department to revise the threshold by publication in the Pennsylvania Bulletin every 2 years beginning in 2009. The Department is committed to increasing the threshold amount for registration and reporting.

 Beginning in November 2013 through March 2014, the Department contacted various members of the regulated community to explain the research conducted for various fee options and the rationale for the fee increase in an effort to reach a consensus on an appropriate amount of increase in the fee.

Amount of the increase is beyond legislative intent

 The commentators' concerns regarding the legislative intent were two-fold. First, that the registration fee was never intended to cover all the costs of administering the act. Second, that the intent of the act, to provide transparency in the legislative process, would be frustrated by the proposed fee amount. In considering both prongs of this concern, the Department lowered the fee to a rate that more equally shares the cost of lobbying disclosure regulation between the regulated community and the taxpayers of this Commonwealth.

 The Tive Lobbying Group (Tive Lobbying), the Pennsylvania Library Association (PaLA), Common Cause of Pennsylvania (Common Cause), the House State Government Committee (HSGC), Representative Frank Dermody, Democratic Leader (Representative Dermody), and Drew Crompton, General Counsel to Senator Joseph B. Scarnati III, President Pro Tempore, stated that the registration fee was never intended to cover the entire cost of administering the act. The Department has reduced the fee increase from $700 biennially as proposed, which would have fully funded the Department's administrative costs, to $300 biennially, which will more equally distribute the cost of administering the act between the regulated community and the citizens of this Commonwealth.

 The Pennsylvania Association for Government Relations (PAGR), Tive Lobbying, PaLA, Phillips Associates, Common Cause, Stephen MacNett, the HSGC and Drew Crompton remarked that the amount of the proposed fee increase would erode the transparency intended by the act. The Department took this concern into consideration when preparing the final-form rulemaking, and believes that the reduction in the amount of increase to a fee of $300 will allow for continued transparency as envisioned by the act and achieved by the lobbying disclosure regulation thus far.

Concerns regarding the anticipated 1/3 decrease in registration

 PAGR, Tive Lobbying, the Pennsylvania Farm Bureau (Farm Bureau), the Pennsylvania Commercial Action Network (PCAN), Common Cause, Stephen MacNett and the HSGC expressed concerns regarding the anticipated 1/3 decrease in registration. In the proposed rulemaking, the Department cautiously projected that as many as 1/3 of currently registered lobbyists may not renew their registrations when the fee increase becomes effective. This estimate was based on information received from the program area that many lobbyists who currently register with the Department, although they are not required to under the act, may no longer do so under a $700 fee. It is difficult to determine how many lobbyists register with the Department although they are not required to do so under the act. This is because lobbyists do not typically file expense reports, and are only required to do so if the principal for whom they are employed does not include an expense on their report. Therefore, the Department determined that a cautious estimate of 1/3 would be appropriate.

 Due to the reduction in the fee increase amount, the Department no longer projects a 1/3 decrease in lobbyists' registration. When the Department increased the fee for the 2011-2012 registration period, registrations actually increased. In keeping with the previous rate of increase ($100), the Department does not believe, based on prior experience, that the fee increase will result in a 1/3 decrease in lobbyist registrations. The Department is mindful that slight fluctuations in the number of registrants can occur at any time. However, the Department does not anticipate a decrease in registrations as a result of this fee level.

The increased fee would infringe upon Constitutional rights

 Commentators commented that a fee of this magnitude unconstitutionally infringes on free speech and the right of citizens to petition their government for redress of grievances. The comments stated that the increased fee would restrict and deter freedom of speech and serve as a disincentive for citizens to engage in the democratic process. Balsbaugh Insurance Agency, Inc., Disability Rights Network of Pennsylvania (DRN), Pennsylvania Advocacy and Resources for Autism and Intellectual Disabilities (PAR), ARIPPA, PCAN, Phillips Associates and Representative Dermody commented that a fee of this magnitude would have a chilling effect on freedom of speech. Guardian Storage Solutions, Tive Lobbying, F.C. Brown and Associates, Common Cause, Stephen MacNett and Representative Dermody indicated that the fee increase would infringe upon the right of citizens to petition their government for redress of grievances.

 The Department lowered the rate of the increase to an increase of $100, which reflects the same amount of increase as the previous fee increase, effective for the 2011-2012 biennial registration period. A fee of $300 will allow the Department to maintain the current level of public disclosure and transparency for the next several biennial periods. The Department believes that this will be a much more manageable registration fee, and will not unconstitutionally burden the free speech rights or the rights to petition government, of the citizens and lobbyists of this Commonwealth.

Proposed fee places a significant burden on small lobbying efforts and nonprofit organizations

 Guardian Storage Solutions, B.J. Alan Company, DRN, Pennsylvania Partnerships for Children, National Association of Social Workers Pennsylvania Chapter (NASW), Pennsylvania Pharmacists Association (PA Pharmacists), PAGR, Blue Cross of Northeastern Pennsylvania (BCNEPA), Pennsylvania Society of Association Executives (PSAE), PAR, Tive Lobbying, ARIPPA, PaLA, Wanner Associates, Farm Bureau, Common Cause, Representative Dermody and Drew Crompton stated that a fee of this magnitude places an undue burden and significant hardship on small businesses and associations, advocacy groups, nonprofit organizations and other small lobbying efforts. The Department recognizes that an increase in costs is not optimal for anyone, including small lobbying efforts and nonprofit organizations. The Department responded to the comments by significantly reducing the amount of the proposed fee. The additional fees are necessary so that the Department can defray some of the substantial costs associated with administering the act. Although the regulated community bears the burden of an increased fee, it is of utmost importance that the Department is able to continue to administer the act.

 DRN and NASW suggested that the Department charge a different fee for nonprofit entities. The Department is not statutorily authorized to charge different fees for different filer types or entities based on nonprofit status, public advocacy, and the like. The act sets forth a single fee that the regulations define as a flat fee for each registrant.

The Department needs to minimize their own costs before increasing the fee

 B.J. Alan Company, PAGR, PSAE, PAR, ARIPPA, Wanner Associates, PCAN and Drew Crompton suggested that the Department undertake efforts to reduce the costs associated with the administration of the act before passing along the increase in costs to the regulated community through a fee increase. The Department has evaluated and will continue to evaluate efficiencies. Unfortunately, the most costly aspects of administering the act are statutorily required, for example, the Online Registration System. The Department already significantly cut costs by reducing the Lobbying Disclosure Division staff by 20% in Fiscal Year (FY) 2013-2014. Additionally, the Department has improved customer service by, among other things, making access to register and file expense reports faster and simpler, sending e-mail reminders to public users so they know what tasks need to be completed and developing user dashboards so that registration information is customized to the user. To continue to be responsive to public feedback, more database enhancements are planned in 2014, including improving the search function, simplifying the forms for those that file by paper and aligning entries to the most current registration information.

 PAGR, PAR and Wanner Associates suggested that one area where the Department could cut costs is by simplifying the audit process. Commentators remarked that the audit process is burdensome and duplicative. The statutorily required audit accounts for a large part of lobbying disclosure expenses. The Department has researched and reviewed the audit process numerous times, however, the requirements set forth by the act and the process prescribed in the regulations severely limit the Department's ability to cut costs in this area. Section 13A08(f) of the act sets forth the requirement for and process of lobbying disclosure audits. Specifically, section 13A08(f)(1) of the act provides that ''[e]very two years the Secretary of the Commonwealth shall contract for the services of one or more certified public accountants or certified public accounting firms'' (emphasis added). The requirement that the audit be conducted by certified public accountants is the main reason for the high audit cost.

The proposed fee would represent a 700% increase in 7 years

 B.J. Alan Company, DRN, Pennsylvania Partnerships for Children, NASW, PAGR, BCNEPA, Dauphin County Office of County Commissioners (Dauphin County Commissioners), PSAE, PAR, Tive Lobbying, ARIPPA, PaLA, Wanner Associates, Farm Bureau, PCAN, Phillips Associates, Common Cause, the HSGC and Representative Dermody commented that the fee increase would represent an increase of 700% from the original registration fee set by the act 7 years ago. Commentators also noted that the increase proposed would be a 250% increase to the former fee of $200, which was implemented for the 2011-2012 registration period following a 100% fee increase.

 The fee set by the act was entirely insufficient. Therefore, the Department bore a majority of the costs, including building the Online Registration System. The Department was underfunded and fronted many of the costs associated with lobbying disclosure regulation. Since the General Fund contribution has decreased despite the increase in costs (see Chart A), the Department is no longer in the position to bear the majority of the costs. As noted previously, the majority of the Department's expenses are related to the Online Registration System. The Department made a number of enhancements to the Online Registration System despite being underfunded. Now, however, the Department requires funds to continue to operate at the same level of customer service, public access and transparency that has come to be expected. Therefore, a fee increase is necessary. In addition to allowing the Department to continue to provide the public with transparency in lobbying activities in this Commonwealth and the regulated community with assistance, the $300 fee will allow for a more equal distribution of lobbying disclosure costs among the regulated community and the taxpayers of this Commonwealth.

 Common Cause and ARIPPA commented that the proposed fee far exceeded the rate of inflation. Unfortunately, the costs associated with lobbying disclosure regulation have far exceeded the rate of inflation and the Department is no longer able to afford to continue to fund the majority of the costs. Despite the Department's efforts to decrease spending, costs have increased dramatically. These increases are beyond the control of the Department, for example, increases to benefit rates and maintenance costs associated with the Online Registration System, and require the Department to increase the fee so that lobbying disclosure regulation may continue. While the adopted fee of $300 is beyond the rate of inflation, the Department's costs of administering the act have consistently exceeded the rate of inflation. For example, in FY 2013-2014 salaries increased 3.25% per employee for four full-time employees benefit rates for four full-time employees increased 15% and technology costs increased by $45,558. Because of these and other increases, additional revenue is required. An increase to $300 will allow the Department to defray some of these increased costs and maintain the current level of services and transparency for the next several registration cycles.

The proposed fee would be among the highest lobbying disclosure registration fees in the country

 PA Pharmacists, PAGR, BCNEPA, Wanner Associates and Common Cause stated that the proposed fee would make the Commonwealth one of the most expensive states to lobby in the United States. While the fee may appear to be one of the highest in the country, the numbers are somewhat misleading. Whereas the Commonwealth charges a flat registration fee, many states charge a fee per principal or per lobbyist, which, depending on the number of principals represented or lobbyists employed, can be very costly. The fee in those states appears to be lower, but in reality, the sums are much higher. For example, lobbyists in South Dakota pay a registration fee of $40 per year for each employer. The number of employers a lobbyist may have could be just one or could be ten or higher, so the registration fee could be anywhere from $40 per year to $400 per year or more. The fee of $300 biennially is comparable to, and even less than, other states with the same fee structure. Therefore, the Commonwealth will not be at a competitive disadvantage as compared to other states.

Lobbying regulation is a public benefit that should be publically funded

 Tive Lobbying, PaLA, PCAN and Drew Crompton commented that lobbying disclosure regulation provides an important public benefit and therefore should be publically funded. Commentators stated that the regulation of lobbying activities serves an important public function, that being transparency in the legislative process, and therefore the regulation of lobbying disclosure activities should be funded by the citizens of this Commonwealth. The $300 fee will distribute the costs associated with lobbying disclosure regulation more equally between the regulated community and the taxpayers of this Commonwealth. The program will continue to be publically funded.

Compliance with the act is already expensive

 B.J. Alan Company, NASW, PA Pharmacists, Dauphin County Commissioners, PAR, Tive Lobbying and Wanner Associates commented that compliance with the act is expensive and burdensome at the current fee level. While the Department empathizes with the commentators, the Department is charged with administering the act only. The requirements for compliance are prescribed by the act and regulations, both of which the Department is obliged to administer. The Department has and will continue to make efforts to make compliance less burdensome. The Department will also continue to look for efficiencies.

The proposed fee would create barriers to transparency

 PAGR, Tive Lobbying, Farm Bureau, Phillips Associates, Common Cause and Representative Dermody commented that the amount of the proposed fee increase would create barriers to transparency. Commentators remarked that the decrease in number of registrants and the forcing out of small lobbying efforts would result in decreased transparency. Further, commentators averred that this fee would erode the transparency the act has accomplished to date.

 The $300 fee in this final-form rulemaking will allow the Department to continue to provide transparency and public access to the legislative process, without the concerns presented by an increase of 250%. The new increase will be more manageable for registrants and accomplish the Department's goal of maintaining transparency and customer service at the currently available level.

The proposed fee would force out small lobbying efforts

 Balsbaugh Insurance Agency, Inc., PA Pharmacists, PAGR, BCNEPA, PSAE, Tive Lobbying, ARIPPA, PaLA, Wanner Associates, Farm Bureau, Phillips Associates, Common Cause and Drew Crompton commented that a fee of this magnitude would force small lobbying efforts to discontinue lobbying activities. Commentators indicated that many small lobbying groups find it difficult to finance lobbying activity under the current fee, and if the fee were to increase to $700 as proposed, many of those groups would be forced to discontinue their lobbying efforts.

 The Department took this concern into consideration when deciding to pursue the $300 registration fee in this final-form rulemaking, which the Department believes will be more manageable for small lobbying efforts.

The proposed fee would make the vital function of lobbying for heavily regulated industries more expensive

 B.J. Alan Company and BCNEPA commented that the increase would make lobbying, a vital function for heavily regulated industries, much more expensive.

 The Department acknowledges that a fee increase is not ideal for anyone from small lobbying efforts to large scale efforts and understands that lobbying is a vital function of heavily regulated industries. In recognition of this, the Department reduced the amount of increase from a 250% increase to a $100, or 50%, increase. The additional fees are necessary to allow the Department to continue to administer the act and provide adequate assistance to the regulated community as well as transparency in the lobbying activities in the Commonwealth to the public. Although the regulated community does bear the burden of the increased cost, the community should contribute to the costs associated with their regulation.

Independent Regulatory Review Commission Comments

 The Independent Regulatory Review Commission (IRRC) offered the following comments on the proposed rulemaking.

 IRRC comment: Why did the Department see no need for ''early and meaningful input from the regulated community,'' as directed by Governor's Executive Order 1996-1?

 Response: The goal and purpose of Governor's Executive Order 1996-1 is for the regulated community to provide the promulgating agency with meaningful feedback that will assist in the development of a regulation. Unfortunately, with a fee increase regulation, comments and feedback from the regulated community tend to be reactive to the idea of paying more money. For this, as well as other reasons, the Department has historically viewed the setting of fees as an administrative function. The Department has, however, re-evaluated that position and realizes that while numbers (that is, how much) are administrative, the regulated community can provide meaningful comments on how an increase is accomplished. Therefore, the Department has sought, received and will continue to be receptive to comments from the community on how to achieve the goal of the fee increase and balance of the budget.

 IRRC comment: Based on the comments, it appears that the fee increase will curtail the disclosure that the act has accomplished to date. Why is this result in the public interest?

 Response: As this result would not be in the public interest, the Department re-evaluated the amount of increase. The Department determined, upon consideration of the comments received from IRRC and the public, as well as the potential results, that a fee of $300 would serve all interested parties.

 IRRC comment: Provide supporting documentation of total dollar amounts it has used for annual and biennial periods.

 Response: Refer to Chart A (Lobbying Disclosure Spending by Biennial Renewal Period) provided by the Department's Bureau of Finance and Operations (Bureau). Chart A provides an overview of lobbying disclosure spending by biennial renewal period, including Department spending, Authorized Funds from the Lobbying Disclosure Restricted Account, General Funds used and registration fees received.

 IRRC comment: Provide a breakdown of the dollar amounts by activity to show how the dollars are spent.

 Response: Refer to Chart B (Lobbying Disclosure FY 2014-15 Approved Rebudget) provided by the Bureau. Chart B is the approved lobbying disclosure rebudget for FY 2014-2015, which contains an itemized account of lobbying disclosure costs by funding source.

 IRRC comment: Provide an explanation demonstrating that the expenses exclusively represent the costs of carrying out the provisions of the act.

 Response: Lobbying disclosure expenses fall into two main categories—personnel costs and operating costs. Operating costs account for 58% of the total lobbying disclosure budget, while personnel costs account for the remaining 42% of the total lobbying disclosure budget. Personnel costs consist of salaries and benefits of four full-time employees. Operating costs represent all other lobbying disclosure costs, from the Lobbying Disclosure Online Registration System to postage, with allocations ranging from $50 to $335,000. While many of the operating costs are minimal, for example a $100 allocation for postage costs, there are several high-priced items, namely, telecommunications, the contract for auditing services and costs related to the Online Registration System. These items also represent the most important aspects of lobbying disclosure regulation. Telecommunications provides the means through which the Lobbying Disclosure Division provides assistance to the regulated community, the statutorily mandated audit encourages compliance with the act and the Online Registration System, also statutorily mandated, provides public disclosure and transparency in the legislative process. The Online Registration System accounts for 76% of the operating costs. Refer to Chart B provided by the Bureau.

 IRRC comment: Provide an explanation of what the Department has done to reduce expenses to the greatest extent possible before imposing a higher fee on the regulated community.

 Response: The Department has made several efforts to cut costs, including reducing the Lobbying Disclosure Division staff by 20% for FY 2013-2014. Additionally, the Department has improved customer service by, among other things, making access to register and file expense reports faster and simpler, sending e-mail reminders to public users so they know what tasks need to be completed and developing user dashboards so that registration information is customized to the user. To continue to be responsive to public feedback, more database enhancements are planned in 2014, including improving the search function, simplifying the forms for those that file by paper and aligning all entries to the most current registration information. Refer to Chart C (Changes to Lobbying Disclosure Budget) provided by the Bureau for further cost reduction information. Chart C provides an account of the changes (decreases and increases) to the lobbying disclosure budget, including personnel changes, salary and benefit increases, and operating changes. As many of the Department's primary costs are mandated by the act, and the Department has already sustained a 20% reduction of lobbying staff, it would be difficult to make additional cuts without significantly reducing the level of customer service provided to registrants and the public.

 IRRC comment: How did the Department calculate this 1/3 assumption?

 Response: Based on feedback from the regulated community, the Department estimated that lobbyists, who are exempt from registration under section 13A06 of the act (relating to exemption from registration and reporting), but register only to gain access to the Capitol, would no longer do so if the fee were to increase to $700. It is important to note, however, that was a very cautious estimate, and while unlikely that as many as 1/3 of the currently registered lobbyists would not register following the fee increase, the Department determined that a cautious estimate was appropriate for a fee increase at the proposed rate of $700.

 This estimate does not, however, apply to the fee of $300. Based on the previous fee increase of 100% effective for the 2011-2012 biennial registration period, the Department does not anticipate a significant decrease in lobbyists' registration. The Department is mindful that slight fluctuations in the number of registrants can occur at any time; however, the Department does not anticipate a decrease in registrations as a result of this fee level.

 IRRC comment: How did the Department incorporate this assumption into the fee increase, revenue and expense dollar estimates shown elsewhere in the Regulatory Analysis Form (RAF) and preamble?

 Response: The Department incorporated this assumption into the fee increase, revenue and expense dollar estimates throughout the RAF and the preamble to the proposed rulemaking by reducing the projected number of lobbyist registrants for the 2013-2014 registration period (1,377) by 1/3. This was calculated by multiplying the number of lobbyists (1,377) by 1/3, the product (459) of which represents the projected number of lobbyists that will not seek renewal. To determine the total number of lobbyists estimated for the 2015-2016 biennial period, the product (459) was subtracted from the number of lobbyists (1,377). This number was used to calculate the revenue anticipated for the registration periods following the proposed increase.

 As the rate of increase has been reduced from 250% to an increase of $100, the Department no longer estimates a 1/3 decrease in lobbyist registrations. Any decrease in registration is anticipated to be minor.

 IRRC comment: In RAF 19, the Department estimates regulated entities will incur an additional cost of $1,349,500 for the 2015-2016 registration period. However, RAF 23 appears to show an increased cost to the regulated community of $2,210,600.

 Response: The amounts shown in RAF 19 (proposed) represent the additional cost that will be incurred by the regulated community. Simply stated, how much the increase will cost the regulated community. The first number, $1,579,000, represents the increased amount to the regulated community. This number was calculated as follows:

 Step 1: multiply the projected number of registrants (3,158) by the current fee ($200) to determine the current cost of compliance

 3,158 x 200 = 631,600

 Step 2: multiply the projected number of registrants (3,158) by the proposed fee ($700) to determine the cost of compliance under the proposed fee

 3,158 x 700 = 2,210,600

 Step 3: subtract the current cost of compliance ($631,600) from the cost of compliance under the proposed fee ($2,210,600) to determine the additional cost of compliance (how much more the regulated community will pay) under the proposed fee

 2,210,600 - 631,600 = 1,579,000

 The second number, $1,349,500, represents the increased cost of compliance if, as the Department previously estimated, 1/3 of the currently registered lobbyists do not renew their registration when the proposed fee is implemented. This number differs from the first number because it takes the decreased registration into account. The number was calculated following the same formula, using 2,699 for the number of registrants in place of 3,158.

 While the numbers shown in RAF 19 represent the increased amount or additional cost to the regulated community, the numbers shown in RAF 23 represent the total cost to the regulated community. This number is the product in step two.

 IRRC comment: In regard to fees, RAF 18 also includes a table that shows a figure of $665,000 of funds used from the restricted account, not the $733,879 fee figure in the example. What accounts for the difference between the fees received and the funds withdrawn from the restricted account?

 Response: The lobbying disclosure registration period is a biennial period; therefore, the Department must divide the revenue received in half so that the revenue lasts for the entire 2-year period. Lobbyists, lobbying firms and principals must register with the Department, unless exempt under section 13A06 of the act, within 10 days of acting in any capacity as a lobbyist, lobbying firm or principal. A new registration, that is the registration of a lobbyist, lobbying firm or principal that has not previously registered with the Department or whose registration was terminated or expired, could occur at any time during a biennial period. A lobbyist, lobbying firm or principal that is already registered with the Department, however, must renew the registration at the beginning of each new biennial registration period (unless exempt under the act), as lobbying registrations expire approximately 10 business days after the new registration period begins. Therefore, the majority of the revenue generated from registration fees is received at the beginning of the registration period. Additionally, the amount of funds the Department is authorized to withdraw from the Restricted Account is determined prior to the registration period for which it is authorized. The Department bases the amount of funds to withdraw upon the projected revenue generated from the fees because the total revenue generated is unknown until the biennial registration period is closed. As a result, the total fee revenue is sometimes greater than the amount projected and amount authorized. For example, the revenue in the 2011-2012 biennial period was $733,879, while the amount authorized for that period was only $665,000.

 IRRC comment: The Department should reconcile the amounts presented in RAF 18 and RAF 23a.

 Response: The amounts shown in RAF 18 are different from those that appear in RAF 23a as a result of the different time periods represented by each chart. The chart in RAF 18 contains numbers that represent biennial registration periods, specifically, the 2007-2008, 2009-2010, 2011-2012 and 2013-2014 biennial registration periods, whereas the chart in RAF 23a contains numbers that represent fiscal years, specifically FY 2010, FY 2011, FY 2012 and FY 2013. While the biennial registration period begins on January 1 in odd numbered years and ends on December 31 of the following even numbered year, the fiscal year begins on July 1 and ends on June 30 of the following year. Therefore, the biennial registration period crosses 3 different fiscal years. For example, the current biennial registration period began on January 1, 2013, and ends on December 31, 2014, while the current fiscal year began on July 1, 2013, and ended on June 30, 2014. The current fiscal year is within the current biennial registration period, however, the current biennial registration period also includes the last 6 months of the previous fiscal year (FY 2012-2013) and the first 6 months of the next fiscal year (FY 2014-2015). As the biennial registration period and the fiscal year represent different segments of time, the numbers contained therein are different.

 IRRC comment: The Department should justify why it has not increased the thresholds.

 Section 13A08(j) of the act requires the Secretary of the Commonwealth to review the threshold for registration and reporting on a biennial basis. Section 13A08(j) of the act also provides the Secretary the authority to increase the threshold for reporting and registration administratively. The threshold may be increased biennially and requires that the Department publish the adjusted amount in the Pennsylvania Bulletin by June 1 every 2 years. The Department reviews the threshold for registration and reporting to determine whether the rates are reasonable for assuring appropriate disclosure, as required by the act. Section 13A06 of the act provides that individuals whose economic consideration for lobbying does not exceed $2,500 in the aggregate during any reporting period or a principal whose total expenses for lobbying purposes do not exceed $2,500 during any reporting period, are exempt from registration under section 13A04 of the act (relating to registration) and reporting under section 13A05 of the act (relating to reporting). This is the threshold amount originally set by the act in 2006. The Department is considering raising this amount to adjust for inflation. Accounting for inflation, the threshold could be adjusted to $2,849.07 (inflation adjusted fee amount calculated by Federal Bureau of Labor Statistics' CPI Inflation Calculator available at www.bls.gov/data/inflation_calculator.htm). Raising the threshold may benefit smaller lobbying efforts, which would no longer have to register and pay the registration fee if their lobbying activities fell beneath the threshold amount. The Department is committed to adjusting the threshold amount for registration and reporting.

IRRC Disapproval

 On September 29, 2014, IRRC issued a disapproval order, finding the regulation did not meet the criteria of legislative intent, reasonableness and protection of the public health, safety and welfare. See section 5.2(a) and (b)(2) and (3) of the Regulatory Review Act (71 P. S. § 745.5b(a) and (b)(2) and (3)).

 First, IRRC stated that the regulation does not sufficiently balance all the provisions of the act. To address this concern, the Department reduced the fee to $300. The Department believes that this fee rate strikes the intended balance between funding by the public and the regulated community. Further, the Department believes that a $300 fee will allow individuals and organizations who wish to petition the government for redress of grievances to do so. The Department does not believe that a moderate increase will adversely affect participation in the democratic process, particularly when also taking into account the Department's commitment to increasing the threshold amount for registration and reporting.

 Next, IRRC stated that a 400% increase from the original fee established in the act is profoundly beyond an inflation adjustment based on the Consumer Price Index. IRRC also stated that while the Department proposed raising the fee twice, the Department has not yet adjusted the threshold amount for registration and reporting to account for inflation. Further, IRRC stated that by not adjusting the threshold amount, the Department may be burdening smaller businesses with lobbying related costs when they could potentially be exempted, as well as possibly incurring unnecessary costs to regulate those small lobbying efforts, beyond what the act envisioned. In an effort to compromise, the Department reduced the proposed fee from $400 to $300 biennially. While the Department understands that this fee is still above the rate of inflation from the original $100 fee, the Department's costs of administering the act have consistently exceeded the rate of inflation. For example, in FY 2013-2014 salaries increased 3.25% per employee for four full- time employees, benefit rates for four full-time employees increased 15% and technology costs increased by $45,558. Because of these and other increases, additional revenue is required for the Department to continue to administer the act with the same level of customer service and public disclosure that is currently available. Therefore, the Department, in consideration of IRRC's concerns, believes that the $300 fee will achieve the balance between the public benefit of transparency, with the right to petition government, and the statutory mandates placed upon the Department, contemplated by IRRC.

 IRRC also stated that it remains concerned with the impact of a flat $400 fee on small lobbying efforts and nonprofits, particularly regarding the participatory process envisioned by the act. While the Department understands the concerns raised by IRRC, it also recognizes the importance of its customer service to the small business community. Small businesses and nonprofit organizations, which tend not to have the infrastructure and support of a large lobbying firm, rely on the Department for guidance and assistance in their lobbying activities. Therefore, cuts to the availability and level of customer service that would be the probable result of insufficient funding would be most detrimental to small lobbying efforts and nonprofits. The Department believes that the reduced rate of $300 strikes the proper balance between the fiscal impact on small lobbying efforts and nonprofit organizations and the high level of customer service required from the Department to meet the needs of this community. Additionally, a fee increase to $300 will allow the Department to maintain the current levels of customer service.

 Additionally, IRRC stated that the Department had not sufficiently established that a $400 fee will not hinder the right to petition government for redress of grievances. The Commission's concern is certainly a valid one; however, the law takes these rights into account by allowing for numerous exemptions. While the Department believes a $400 fee would not hinder the rights of the citizenry to petition the government for redress of grievances, in an effort to address the Commission's concerns, the Department decreased the fee to $300 in this final-form rulemaking. The Department believes that the $300 fee strikes the balance contemplated by IRRC, between the two funding sources (the regulated community and the taxpayers of this Commonwealth). Further, the Department does not believe that the additional $100 biennially, or $50 per year, will inhibit individuals and organizations from exercising their right to petition government for redress of grievances. Finally, the Department does not believe a $300 fee, which is an additional 14¢ a day above the current fee, will negatively affect participation in the Democratic process.

Description of the Final-Form Rulemaking

 The final-form rulemaking amends § 53.1(a) to increase the biennial registration fee for individuals and entities required to be registered under the act from $200 to $300. The increased registration fee will go into effect for the 2015-2016 biennial registration period.

Fiscal Impact

 The final-form rulemaking will increase the biennial registration fee for individuals and entities required to be registered under the act. The Department estimates there will be 3,422 registrants that will be required to pay the increased fee in 2015-2016 and thereafter. Small businesses that are members of the regulated community or individuals employed by small businesses will be impacted by the final-form rulemaking. However, small businesses and individuals whose lobbying activities are exempt under section 13A06 of the act are not required to register and, therefore, will not be impacted by the fee increase. The final-form rulemaking should not have other adverse fiscal impact on the private sector, the general public, the Commonwealth or its political subdivisions. However, if a local government engages in regulated activity for which registration is required, the local government would bear the cost of the increased registration fee and would be considered to be part of the regulated community.

Paperwork Requirement

 The final-form rulemaking will require the Department to update some of its forms to reflect the new fee. However, the final-form rulemaking will not create additional paperwork for the regulated community or the private sector.

Sunset Date

 The act provides that the Department shall review the filing fee on a biennial basis and may by regulation adjust the filing fee if the Department determines that a higher fee is needed to cover the costs of carrying out the provisions of the act. Therefore, a sunset date has not been assigned.

Regulatory Review

 Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on May 20, 2013, the Department submitted a copy of the notice of proposed rulemaking, published at 43 Pa.B. 3009, to IRRC and the Chairpersons of the Senate State Government Committee (SSGC) and the HSGC for review and comment.

 Under section 5(c) of the Regulatory Review Act, IRRC, the SSGC and the HSGC were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the SSGC, the HSGC and the public.

 Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on September 17, 2014, the final-form rulemaking was deemed approved by the Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on September 18, 2014, and disapproved the final-form rulemaking.

 As directed by section 5.1(j.4) of the Regulatory Review Act, IRRC, the SSGC, the HSGC and the Department proceeded in accordance with section 6 of the Regulatory Review Act (71 P. S. § 745.6) following disapproval. Under section 6(a) of the Regulatory Review Act, the Department reviewed IRRC's order, responded to IRRC's concerns and submitted the final-form rulemaking with revisions consistent with section 7(a)(2) of the Regulatory Review Act (71 P. S. § 745.7(a)(2)). On October 7, 2014, the Department submitted a revised final-form rulemaking and the required report to IRRC and to the Chairpersons of the the SSGC and the HSGC in accordance with section 7(c) of the Regulatory Review Act.

 Under section 7(d) of the Regulatory Review Act, on November 6, 2014, this final-form rulemaking was deemed approved by the Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on October 23, 2014, and approved the final-form rulemaking.

Contact Person

 Interested persons may obtain information regarding the revised final-form rulemaking by contacting Caroline A. Bailey, Assistant Counsel, Department of State, 301 North Office Building, Harrisburg, PA 17120, carbailey@pa.gov.

Findings

 The Department finds that:

 (1) Public notice of the proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.

 (2) A public comment period was provided as required by law and all comments were considered in drafting this final-form rulemaking.

 (3) The amendments to the final-form rulemaking do not enlarge the purpose of the proposed rulemaking published at 43 Pa.B. 3009.

 (4) This final-form rulemaking is necessary and appropriate for administering and enforcing the authorizing act identified in this preamble.

Order

 The Department, acting under its authorizing statute, orders that:

 (a) The regulations of the Department, 51 Pa. Code Chapter 53, are amended by amending § 53.1 to read as set forth in Annex A.

 (b) The Department shall submit this order and Annex A to the Office of Attorney General for approval as required by law.

 (c) The Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.

 (d) This order shall take effect upon publication in the Pennsylvania Bulletin.

CAROL AICHELE, 
Secretary

 (Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 44 Pa.B. 7145 (November 8, 2014).)

 Fiscal Note: Fiscal Note 16-56 remains valid for the final adoption of the subject regulation.

 

 

 

Annex A

TITLE 51. PUBLIC OFFICERS

PART III. LOBBYING DISCLOSURE

CHAPTER 53. REGISTRATION AND TERMINATION

§ 53.1. Biennial filing fee.

 (a) Under section 13A10(a) of the act (relating to registration fees; fund established; system; regulations), a principal, lobbying firm or lobbyist required to be registered under the act shall pay a biennial filing fee of $100 to the Department, made payable to the ''Commonwealth of Pennsylvania.'' As of January 1, 2011, the biennial filing fee will be $200. As of January 1, 2015, the biennial filing fee will be $300.

 (1) The biennial filing fee shall be tendered to the Department with the filing of the principal's, lobbying firm's or lobbyist's first registration statement in each registration period. However, if the Department receives the filing fee within 5 calendar days of the filing of a registration statement, the registration will not be considered delinquent, in compliance with § 51.4 (relating to delinquency).

 (2) The biennial filing fee will be a flat fee for the registration period in which paid. A registrant will not be required to pay more than one biennial filing fee in any given biennial registration period, unless a registrant terminates and attempts to reregister during the same biennial registration period.

 (3) A separate biennial filing fee shall be paid for each principal, lobbying firm or lobbyist required to be registered, even if employed by a firm, association, corporation, partnership, business trust or business entity that is also required to register and that has paid or will pay the fee.

 (4) The biennial filing fee is nonrefundable and nontransferable.

 (5) Filing fees expire at the end of each registration period, regardless of when paid.

 (b) The failure to pay a biennial filing fee as required by the act and this section will constitute a failure to register as required by the act.

 (c) Money received from biennial filing fees will be deposited in the Fund.

[Pa.B. Doc. No. 14-2551. Filed for public inspection December 12, 2014, 9:00 a.m.]


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