BILL ANALYSIS Ó
AB 2312
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Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2312 (Ammiano) - As Amended: May 10, 2012
Policy Committee: Public
SafetyVote: 4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill creates the Medical Marijuana Regulation and Control
Act (Act), creates a
nine-member Board of Medical Marijuana Enforcement (Board)
within the Department of Consumer Affairs (DCA) to regulate the
medical marijuana industry, and authorizes local government to
levy transaction and use taxes of up to 2.5% on the sale of
marijuana.
FISCAL EFFECT
1)One-time startup and ongoing administrative costs, likely in
the hundreds of thousands of dollars, to the Board of
Equalization, potentially in excess of revenues.
BOE would incur one-time costs related to the startup of a new
tax program, in addition to ongoing costs to administer the
program. As BOE notes, one-time start-up costs will be the
same, regardless how many cities or counties levy the tax.
Therefore, if only a few cities or counties impose the tax,
BOE administrative costs would be paid from a smaller revenue
base that may prove insufficient to cover administrative
costs, which creates GF pressure to cover the difference.
2)Significant annual costs, likely in the millions of dollars,
to support a nine-member Board of Medical Marijuana
Enforcement (Board) within DCA to regulate the medical
marijuana industry. It is not clear these costs would be
covered by the application fees created by this bill, as the
Board will be created regardless of the number of
applications.
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For purposes of comparison, DCA administers 23 boards, such as
the 8-PY, $2.8 million Acupuncture Board, the 14-PY, $3.3
million Physical Therapy Board, and the 12-PY, $2.8 million
Veterinary Medical Board. Given the detailed charges of the
proposed Board, however, the costs may be more comparable to
the 58-PY, $11.6 million 7-member Horse Racing Board, charged
with protecting the public's interests, licensing racing
associations and participants, enforcing rules and
regulations, acting as a quasi-judicial body, and collecting
revenues.
This bill would establish unspecified registration application
fees, assessed on a sliding scale to "reflect the projected
revenue of the particular registrant", to "reflect the direct
and indirect costs of the board". This bill would also
authorize fines of up to $25,000 for operating a medical
marijuana facility without the appropriate registration. The
costs of the Board would require significant application
renewal fees and fines. For purpose of illustration, the
average fee to cover the cost of an $11 million board, if
there were 1,500 annual applications and renewals, would be
about $7,500.
3)This bill creates a continuous appropriation from the Medical
Marijuana Fund created by this bill, for purposes of
supporting the Board. Continuous appropriations are contrary
to the general practice of this committee, which prefers
annual budget review of expenditures.
4)Moderate local revenue increase, potentially in the millions
of dollars, from an unspecified TUT increase of up to 2.5% per
county. Based on a 2009 BOE estimate that the potential sales
and use tax on marijuana would be about $400 million, based on
a 9% rate (6% state, 2% local, .75% special district, and .25%
for fiscal recovery fund), if 20% of the taxable sales amount
was medicinal marijuana, and if half of the state's counties,
representing 50% of the state's population, levied an average
2% TUT, the local revenue increase would be about $14 million.
5)Unknown, nonreimbursable local election costs to the extent
cities and counties opt to hold elections on proposed tax
increases. Unconsolidated elections generally cost in the
hundreds of thousands of dollars, depending on the
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jurisdiction.
6)Unknown, minor local savings from prohibiting local law
enforcement from spending any funds to assist federal law
enforcement in enforcing marijuana prohibitions.
SUMMARY CONTINUED
Specifically, this bill:
1)Requires a medical marijuana facility, as specified, to
operate in accordance with this Act.
2)Declares legislative intent that local governments authorize
medical marijuana facilities commensurate with local needs,
consistent with the provisions of this Act. States that this
Act preempts local ordinances or regulations relating to the
control of medical marijuana. Cities and counties shall not
restrict the location of medical marijuana dispensaries to
fewer than one dispensary per 50,000 residents, except:
a) A city or county with a population of 50,000 or more may
further limit or prohibit medical marijuana dispensaries if
an ordinance authorizing that restriction has been approved
by the voters of the jurisdiction.
b) A city or county with a population of less than 50,000
may further limit or prohibit medical marijuana
dispensaries if the legislative body of jurisdiction
provides a written finding to the board with evidence that
from at least one public hearing that medical marijuana is
reasonably available to its residents by other means.
3)Specifies that if a city or county does not enact a medical
marijuana zoning ordinance, medical marijuana facilities in
that jurisdiction shall be regulated by the Board.
4)Creates within the DCA the Board of Medical Marijuana
Enforcement (Board), specifies funding for the Board shall be
advanced by the DCA and repaid by proceeds from applicant
fees, as specified, and requires the Board, among other
duties, to:
a) Approve or deny mandatory registration applications for
the cultivation, distribution, and sale of medical
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marijuana.
b) Suspend, fine, restrict, or revoke registration, and
impose penalties authorized by this article or by
regulation pursuant to this article.
c) Hold public hearings on registration appeals and
complaints.
d) Develop zoning standards.
e) Establish application fees. These fees shall be
deposited into the Medical Marijuana Fund, created by this
bill. Fees shall reflect the Board's costs to administer
and enforce this article, and be assessed on a sliding-fee
scale to reflect the projected revenue of the registrant.
5)Prohibits a medical marijuana facility from operating without
approved mandatory registration. A violation is punishable by
a fine of up to $25,000 and the destruction of any marijuana
elated to the violation.
6)Creates the Medical Marijuana Fund (Fund) to receive all fees
and penalties, and creates the Medical Marijuana Enforcement
Penalty Account (Account) within the Fund, for receipt of
fines collected when a medical marijuana facility operates
without approved mandatory registration. Moneys in the Fund
are to be continuously appropriated to support the Board,
though any expenditures from the Account require legislative
appropriation.
7)Requires that a registration application or renewal be
approved unless the Board determines:
a) The applicant fails to meet the requirements of any
regulation pursuant to this Act.
b) The applicant is under 21 years of age.
c) The applicant fails to provide inadequate or false
information.
d) The applicant has been convicted in the previous five
years of a serious or violent felony, a felony involving
fraud or deceit, or any felony the Board determines impairs
the applicant's ability to operate a medical marijuana
facility.
e) The applicant is a physician making patient
recommendations for medical marijuana.
f) The applicant has been sanctioned by the Board, as
specified.
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8)Makes approved registrations valid for up to two years unless
suspended or revoked.
9)Allows a medical marijuana facility in conformance with local
zoning requirements to continue operations until its
application has been approved or denied.
10) States that a person whose registration application
has been approved shall not be subject to arrest, prosecution,
or other sanctions under state or local law.
11) Prohibits state or local officials from spending
any funds to help federal authorities enforce marijuana
prohibitions regarding activities in compliance with this act.
12) Authorizes a county board of supervisors to levy a
transactions and use tax (TUT) on the sale of medical
marijuana or medical marijuana-infused products for general
purposes at a rate of ____% if approved by a 2/3 vote of the
supervisors and by a majority vote of the county.
13) Authorizes a county board of supervisors to levy a
TUT on the sale of medical marijuana or medical
marijuana-infused products for specific purposes at a rate of
____% if approved by a 2/3 vote of the supervisors and a 2/3
vote of the county.
14) Authorizes the governing board of a city to levy a
TUT on the sale of medical marijuana or medical
marijuana-infused products for general purposes at a rate of
____% if approved by two-thirds of the governing body and by a
majority vote of the city.
15) Authorizes the governing board of a city to levy a
TUT on the sale of medical marijuana or medical
marijuana-infused products for specific purposes at a rate of
____% if approved by two-thirds of the governing body and by a
2/3 vote of the city.
16) Limits the combined TUT increase under this Act to
2.5%, and limits a city TUT increase to 1%.
This 2.5% is above and beyond the current 2% limit of all
district taxes imposed in any county, including city district
taxes.
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COMMENTS
1)Rationale. The author's intent is twofold:
a) Create uniform regulation and practice to resolve the
considerable confusion and controversy in cities and
counties where elected officials have expressed
contradictory opinions about the legality of activities
related to medical marijuana.
b) Create more uniform taxation of medical marijuana by
cities and counties.
According to the author, "Just over 15 years ago, the voters
of California spoke loud and clear through the passage of
Prop. 215 that they wanted to establish and ensure the safe,
affordable access of medical cannabis to patients. It was the
first such law of its kind in the nation but since 1996,
fifteen other states and the District of Columbia have joined
California and passed medical cannabis laws. But while the
initiative called for an effective regulatory framework, the
Legislature has only enacted SB 420, which calls for voluntary
patient and caregiver identification cards with certain
limits, leaving many areas undefined; this ambiguity is
causing a lot of confusion and problems?
"AB 2312 creates an oversight body within the Department of
Consumer Affairs to oversee all parts of this industry, except
for individual patients. Growers, processors, manufactures,
testing and labeling providers, transporters, retailers, and
delivery services will all be required to register with the
state. This information will ensure that every aspect of this
chain will be tracked, from growers all the way to storefront
dispensaries, creating a network of accountability and
transparency that does not exist today. Providers who are
engaged in above-board operations will have nothing to fear as
this will allow law enforcement to effectively utilize their
limited resources by focusing their efforts on the remaining
bad actors.
2)Current Law . In 1996, California voters passed Prop 215, the
Compassionate Use Act, which prohibits prosecution for growing
or using marijuana if a person has an oral or written
recommendation of a physician.
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a) In 2003, SB 420 (Vasconcellos, Statutes of 2003), the
Medical Marijuana Program Act (MMPA), created a voluntary
identification card that patients and caregivers could
obtain to protect them from arrest, and limited the amount
of marijuana that could be legally grown and possessed.
b) In 2005, the U.S. Supreme Court ruled in Gonzales v.
Raich (2005) that the federal government can enforce
marijuana prohibitions despite state medical marijuana law.
c) In 2010, the California Supreme Court ruled in People v.
Kelly that the MMPA section limiting quantities of cannabis
is unconstitutional because it amends a voter initiative.
3)This bill will not/cannot clear the confusion and disagreement
between federal, state and local governments. The possession
and sale of marijuana is a crime under federal law, and
federal law preempts state law. In addition, the California
Supreme Court recently granted review in several cases related
to the rights of medical marijuana patients and dispensaries.
All of these cases deal with the legality of local rules
regarding locality and operation of dispensaries and
cultivation sites. Since the Court will soon rule on the
legality of regulations governing dispensaries, opponents of
the bill, in particular, suggest the bill is premature.
4)Support , including the Marijuana Policy Project and Americans
for Safe Access (ASA), centers on a defense of the
voter-approved Compassionate Use Act and the need for legal
clarity and regulatory resources.
According to ASA, "sensible regulations preserve safe access
to medical cannabis, while reducing crime and complaints
around storefront facilities maintained by legally organized
and operated patient cooperatives and collectives. By
establishing uniform standards and facilitating reasonable
local regulations, AB 2312 will help propagate the proven
benefits of regulation statewide. Additionally, the bill will
provide overdue clarity for local lawmakers, law enforcement,
and patients who cultivate or provide medical cannabis."
5)Opposition , including the League of Cities, the California
Taxpayers Association and many law enforcement organizations,
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centers on opposition to state preemption, cost, and the
fundamental conflict between state and local law, which state
statute cannot control.
a) According to the California District Attorneys
Association, "While the bill allows local jurisdictions to
opt out, it allows a new state board to govern the zoning
of medical marijuana facilities in the absence of a local
ordinance. In doing so, the measure effectively requires
that local jurisdictions allow ready access to medical
marijuana thereby mandating city or county complicity with
activity that is still illegal under federal law. Given the
controversial nature of the underlying policy, we feel that
these decisions that have wide-ranging impacts on local
communities are best made by individuals and boards elected
by, and directly accountable to, the residents most
affected. As such, we cannot abide this usurpation of local
sovereignty by the state."
b) According to the League of Cities, "the bill is
premature. It could further confuse the issues at hand
rather than resolve them, while creating significant new
costs for local jurisdictions."
c) According to the California Taxpayers Association, "this
bill has the potential to allow local governments to impose
transactions (sales) and use taxes beyond the two percent
local rate limitation currently authorized by existing law.
Each county and city could impose a tax that exceeds the
tax rate limit."
Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081