BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
601 (Padilla)
Hearing Date: 05/28/2009 Amended: 05/18/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 5-3
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BILL SUMMARY: SB 601 would prohibit the Board of Equalization
(BOE) from issuing a new cigarette and tobacco products license
for a retail location within 600 feet of a school, unless public
convenience or necessity would be served by the issuance, as
specified. The bill would also restrict the issuance of a new
retail license to "traditional retail locations."
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
BOE: determination of Unknown, significant administrative
costs, Special*/
license applicant eligibiltiy potentially in the range of
$600 annually General
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* Cigarette and Tobacco Products Compliance Fund, General Fund,
other tobacco tax special funds (see staff comments)
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STAFF COMMENTS: SUSPENSE FILE.
This bill is intended to limit access of cigarette and tobacco
products to youth in hopes of preventing tobacco use among
minors.
Existing law requires retailers of cigarette and tobacco
products to pay a one-time license fee of $100 and requires
annual renewal of the retailer license. A retailer is subject
to a $100 reinstatement fee if they allow the license to expire.
Fees collected pursuant to the Cigarette and Tobacco Licensing
Act are deposited into the Cigarette and Tobacco Products
Compliance Fund and are available solely for the purpose of
implementing, enforcing, and administering the Act.
Approximately 38,200 retailers are currently licensed by BOE.
Each year approximately 6,000 new licenses are issued, but a
corresponding number are typically surrendered, so the total
number of active licenses has been fairly stable since the
Licensing Act was established in 2003.
SB 601 could place significant administrative burdens on BOE,
primarily due to the requirement to determine the proximity of
an applicant retail location to a school, determine a "public
convenience or necessity" threshold, and develop regulations and
procedures to identify and issue licenses to "traditional retail
locations." At the time of this analysis, BOE had not finalized
a detailed estimate, but unabsorbable annual costs associated
with the current version of the bill would likely be in the
range of $600,000. These costs would primarily be for new
investigative and administrative staffing.
The bill requires BOE, the State Department of Public Health
(DPH), and the Department of Alcoholic Beverages Control (ABC)
to share all information in regards to retailers to implement
the Licensing Act. The restriction on issuance of a tobacco
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SB 601 (Padilla)
retailer license within 600 feet of a school is modeled after a
similar restriction on ABC's issuance of a liquor license.
Current law also authorizes BOE to issue a license without
further investigation of an applicant for a retail location if
the applicant holds a valid license issued by ABC for that same
location. Since there are numerous other restrictions on
licenses issued by ABC, including but not limited to proximity
to schools, BOE would need to investigate the reasons for an ABC
license denial, which may require more than the sharing of
records. SB 601 would at a minimum require BOE to develop
procedures for determining proximity to schools. This provision
would also require permanent staffing for BOE to determine
compliance with the proximity limits for each of the 6,000 new
applicants each year.
SB 601 provides an exception to the restriction of a tobacco
retailer's proximity to schools if a local governing body
determines within 90 days of notification of a completed
application that "public convenience or necessity" would be
served by the issuance. This exception would presumably be most
applicable to smaller communities and rural areas with limited
retail space. The bill deems the application denied if the
local jurisdiction does not make a determination within 90 days.
Since BOE would not be required to make the determination,
administrative costs would be minimal.
SB 601 also restricts issuance of a new tobacco retail license
to "traditional retail locations," which includes grocery
stores, convenience stores, pharmacies, liquor stores, gas
stations, smoke shops, wine and cigar stores, superstores, or
tobacco and cigar stores. The bill authorizes BOE to adopt
regulations that specify other locations that would be included
in this definition. BOE would develop regulations and
procedures to identify and issue licenses to traditional retail
locations, which would require input from legal staff,
coordination with the Office of Administrative Law, and BOE
board members. Most of these costs would be one-time
expenditures.
Compliance Fund deficiencies
Up until 2005-06, all BOE costs to enforce and administer the
Licensing Act were fully covered by license fee revenues,
penalties, and fines deposited into the Compliance Fund.
However, since the retail license revenues were predominantly a
one-time revenue gain, the Compliance Fund does not have
sufficient revenues to cover BOE's ongoing costs. In 2008-09,
for example, Compliance Fund revenues were supplemented with
$1.1 million from the General Fund and about $8 million in other
tobacco tax revenues. Staff notes that the administrative costs
associated with this bill would place further strains on the
General Fund and other tobacco tax funds. To the extent that SB
601 results in fewer overall licenses and less convenience for
consumers, there would be a net loss in excise tax and license
fee revenues.