BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 473
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 473 (Ammiano)
          As Amended  May 24, 2013
          Majority vote 

           PUBLIC SAFETY       5-2         APPROPRIATIONS      11-6        
           
           ----------------------------------------------------------------- 
          |Ayes:|Ammiano, Jones-Sawyer,    |Ayes:|Bocanegra, Bradford, Ian  |
          |     |Mitchell, Quirk, Skinner, |     |Calderon, Campos, Eggman, |
          |     |                          |     |Gomez, Hall, Ammiano,     |
          |     |                          |     |Pan, Quirk, Weber         |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Melendez, Waldron         |Nays:|Gatto, Harkey, Bigelow,   |
          |     |                          |     |Donnelly, Linder, Wagner  |
           ----------------------------------------------------------------- 

           SUMMARY  :  Enacts the Medical Marijuana Regulation and Control  
          Act (Act), and creates the Division of Medical Marijuana  
          Regulation and Enforcement in order to regulate the cultivation,  
          manufacture, testing, transportation, distribution, and sale of  
          medical marijuana.  Specifically,  this bill  :  

          1)Makes legislative findings and declarations regarding the  
            Compassionate Use Act of 1996 (CUA) and the Medical Marijuana  
            Program Act of 2003 (MMPA), the need for greater certainty and  
            uniformity regarding the rights and obligations of medical  
            marijuana facilities, and the need for the imposition and  
            enforcement of regulations to prevent unlawful cultivation and  
            diversion of marijuana for non-medical use while at the same  
            time not preempting local government ordinances.

          2)States that the provisions of this Act are enacted under the  
            powers reserved to the state in the Tenth Amendment to the  
            United States Constitution.

          3)States legislative intent to provide for the comprehensive  
            regulation of the cultivation, manufacturing, testing,  
            transportation, distribution, and sale of medical marijuana  
            and the enforcement of laws relating to these activities.

          4)Creates the Division of Medical Marijuana Regulation  
            (division) in the Department of Alcoholic Beverage Control  








                                                                  AB 473
                                                                  Page  2


            (ABC).

          5)Defines the following terms:

             a)   "Division" is the Division of Medical Marijuana  
               Regulation and Enforcement.

             b)   "Identification program" is "the universal  
               identification card program for mandatory commercial  
               registrants."

             c)   "Mandatory commercial registrant" is "any individual,  
               partnership, joint venture, association, limited liability  
               company, corporation, estate, trust, receiver, syndicate,  
               or any other group or combination thereof acting as a unit,  
               or any employee thereof, that operates any facility,  
               building, structure, or location where medical marijuana is  
               grown, possessed, stored, manufactured, tested, or sold,  
               other than a location or building in which a patient or  
               patient's primary caregiver, as defined by the  
               Compassionate Use Act of 1996, is growing medical marijuana  
               exclusively for patient medical use and not for sale."

             d)   "Testing and labeling" means mandatory labeling and a  
               quality assurance plan in place that addresses:  dosage,  
               microbiological contaminants, random sample testing,  
               handling, care, and storage.

             e)   "Fund" is the Medical Marijuana Fund established under  
               Business and Professions Code Section 26028.

          6)Specifies that this chapter does not prevent a city or county  
            from doing any of the following:

             a)   Adopting local ordinances that regulate the location,  
               operation, or establishment of a medical marijuana  
               cooperative or collective;

             b)   Enforcing those ordinances civilly or criminally; and,

             c)   Enacting other laws consistent with this chapter.

          7)Requires the division to be administered by a chief executive  
            to be appointed by the director.








                                                                  AB 473
                                                                  Page  3



          8)Mandates that the chief executive be the appointing authority  
            of all employees within the division.

          9)States that all heads of subdivisions or advisory commissions  
            within the division are responsible to the chief executive.

          10)Confers on the division all power necessary for the  
            administration of this chapter, including, but not limited to:

             a)   Establishing statewide standards for the cultivation,  
               manufacturing, testing, transportation, distribution, and  
               sales of medical marijuana and medical marijuana products;

             b)   Establishing a scale of state-imposed fees for the  
               cultivation, manufacture, testing, transportation,  
               distribution, and sale of medical marijuana and medical  
               marijuana products; 

             c)   Adopting, amending, and rescinding reasonable  
               regulations, special rulings, and necessary findings for  
               the regulation and control of the cultivation, manufacture,  
               testing, transportation, distribution, and sale of medical  
               marijuana, and to govern the procedures of the division to  
               exercise the powers and perform the duties conferred upon  
               it;

             d)   Approving or denying mandatory registration application  
               for cultivation, manufacturing, testing, labeling,  
               transportation, distribution, and sale of medical  
               marijuana;

             e)   Suspending, fining, restricting, or revoking mandatory  
               commercial registration upon a violation of a rule or  
               regulation adopted by the division;

             f)   Imposing penalties;

             g)   Taking any reasonable action with respect to a mandatory  
               commercial registration application; 

             h)   Hearing and determining, at a public hearing, any  
               appeals of application denials and any complaints against a  
               mandatory commercial registrant;








                                                                  AB 473
                                                                  Page  4



             i)   Administering oaths and issuing subpoenas to require the  
               presence of individuals and the production of documents  
               necessary to the determination of a hearing; 

             j)   Maintaining the confidentiality of any information  
               obtained from a mandatory commercial registrant related to  
               medical marijuana patients and caregivers in strict  
               compliance with the federal Health Insurance Portability  
               and Accountability Act and other specified laws;

             aa)  Developing any necessary forms, identification cards,  
               and applications;

             bb)  Overseeing the operation of the Medical Marijuana Fund;  
               and, 

             cc)  Establishing reasonable fees.

          11)Allows the division to charge separate fees for each  
            mandatory commercial registrant application but limits the  
            total fees imposed to the total costs of administering this  
            regulatory scheme.

          12)Requires the division to assist in the development of uniform  
            policies for the taxation of medical marijuana businesses.

          13)Requires the division to identify successful regulatory  
            structures for the purpose of supporting cities and counties  
            in appropriately governing activities related to medical  
            marijuana.

          14)Establishes the Medical Marijuana Fund within the State  
            Treasury.  The fund shall include any interest and dividends  
            earned on money in the fund.

          15)Specifies that all fees collected pursuant to this regulatory  
            scheme shall be deposited into the fees account, that all  
            monies are continuously appropriated without regard to fiscal  
            year to the division.

          16)Establishes the Medical Marijuana Penalties Account and  
            specifies that all penalties collected shall be deposited into  
            it.  All monies available in the penalties account are  








                                                                  AB 473
                                                                  Page  5


            available for purpose of this chapter, upon appropriation by  
            the Legislature.

          17)Requires, by July 1, 2014, the division to establish a  
            mandatory commercial registration program and a fee structure  
            for the cultivation, manufacture, testing, transportation,  
            distribution, and sale of medical marijuana and medical  
            marijuana products, and make available mandatory commercial  
            registration forms.

          18)Specifies that a mandatory commercial registration  
            application or renewal shall be approved unless the division  
            determines any of the following:

             a)   The applicant fails to meet the established requirements  
               or any regulation adopted;

             b)   The applicant, or any of its officers or directors, is  
               under 21 years of age; 

             c)   The applicant has knowingly answered a question or  
               request for information falsely on the form;

             d)   The applicant, or any of its officers or directors, has  
               been convicted in the past five years of a serious or  
               violent felony, as specified, a felony involving fraud or  
               deceit, or any other felony that, in the division's  
               estimation, would impair the applicant's ability to  
               appropriately operate medical marijuana cultivation,  
               manufacturing, testing, distribution or sales;

             e)   The applicant is a licensed physician making medical  
               marijuana recommendations for patients; or, 

             f)   The applicant, or any of its officers or directors, had  
               been sanctioned by the division for operating unregistered  
               commercial medical marijuana activities, or has had a  
               registration revoked in the previous three years.

          19)Allows the division to establish various classes or types of  
            registration, including distinguishing between operators and  
            employees, for specific medical marijuana-related activities.

          20)States that each mandatory commercial registration  








                                                                  AB 473
                                                                  Page  6


            application approved by the division is separate and distinct.

          21)Allows an applicant to apply for registration in multiple  
            classes of specified medical marijuana activities.

          22)States that an approved application is valid for a period not  
            to exceed two years from the date of approval, unless revoked  
            or suspended.

          23)Requires the division to notify the registrant 90 days prior  
            to expiration.

          24)Requires the registrant to apply for renewal not less than 60  
            days prior to expiration, but allows the division to waive  
            this requirement in its discretion.

          25)Requires the division to act upon a renewal application  
            within 10 days before expiration of the registration.

          26)Requires an application for mandatory commercial registration  
            to include, but not be limited to, all of the following:

             a)   A plan for conformance with testing and labeling  
               requirements;

             b)   A plan to address security for the premises where  
               marijuana cultivation, manufacturing, testing,  
               distribution, or sales will occur;

             c)   A showing that any facility proposed in the application  
               has received local zoning approval; 

             d)   Protocols to prevent the unlawful diversion of  
               marijuana; and,

             e)   Evidence that the applicant has received a business  
               license from the locality in which the facility will be  
               located.

          27)Requires the division to approve and to contract with one or  
            more laboratories that can document compliance with industry  
            best practices to provide plan-consulting services and testing  
            services to determine compliance.









                                                                  AB 473
                                                                  Page  7


          28)Allows the division to approve cultivation registration only  
            in conjunction with the city, county, or city and county land  
            use authority in which the cultivation occurs, where the city,  
            county, or city and county address compliance with relevant  
            state and federal environmental impact laws and regulations,  
            including, but not limited to clear-cutting, road building,  
            water diversion, and use of chemicals.

          29)Exempts all mandatory commercial registrants from arrest,  
            prosecution, or sanctions, as specified, unless the registrant  
            does not possess a valid registration or the conduct in  
            question is not within the scope of the registration.

          30)States that this chapter does not apply to and has no  
            diminishing effect on the rights and protections granted to  
            individual patients and primary caregivers under the CUA.

          31)Exempts individual patients and caregivers cultivating  
            marijuana at their private residences who do not sell or  
            charge for the cultivation of marijuana from mandatory  
            commercial registration.

          32)Allows a facility, building, structure, or location operating  
            in conformance with local zoning requirements as of the  
            effective date of this chapter to continue to operate until  
            such time as its application for registration is approved or  
            denied.

          33)Requires the division to work with law enforcement entities  
            throughout California in order to implement and to enforce the  
            rules and regulations regarding medical marijuana, and to take  
            appropriate action against businesses and individuals who do  
            not comply.

          34)States that nothing in this chapter prevents a city, county,  
            or city and county from enforcing a local zoning ordinance or  
            law of general application.

          35)Requires, commencing on January 1, 2015, that any product  
            containing marijuana offered for sale be subject to testing  
            and labeling requirements.

          36)Makes it a misdemeanor, commencing on January 1, 2015, for  
            any person, except a mandatory commercial registrant, to offer  








                                                                  AB 473
                                                                  Page  8


            for sale any product containing marijuana, or to operate any  
            facility where medical marijuana is grown, processed, stored,  
            manufactured, tested, or sold, other than a place where a  
            patient or his or her primary caregiver, as defined by the  
            CUA, is growing marijuana exclusively for patient use and not  
            for sale.

          37)Makes it a misdemeanor for a person to steal or fraudulently  
            use a registrant's identification card or status to acquire,  
            possess, cultivate, transport, use, produce, or distribute  
            marijuana, or to tamper with or fraudulently produce an  
            identification card or registration status.

          38)Establishes the following penalties for the misdemeanor  
            crimes:

             a)   For the first offense, imprisonment in the county jail  
               for no more than six months, or a fine up to $1,000, or  
               both.

             b)   For a second or subsequent offense, imprisonment in the  
               county jail for no more than one year, or a fine up to  
               $1,000, or both.

          39)Subjects a person operating an unregistered medical marijuana  
            facility to civil penalties of up to $25,000, which shall be  
            deposited in the Penalties Account.

          40)Authorizes the division to destroy any marijuana being  
            cultivated, manufactured, or possessed in violation of this  
            chapter.

          41)Prohibits the spending of funds by state or local officials  
            to assist federal authorities in enforcing federal marijuana  
            prohibitions with regard to activities carried out by  
            mandatory commercial registrants in compliance with these  
            provisions.  Nothing in this chapter shall be construed to  
            limit law enforcement's ability to investigate unlawful  
            activity in relation to a mandatory commercial registrant.

          42)States that the provisions of this Act are severable, and  
            that if one is held invalid, the invalidity will not affect  
            other provision which can still be given effect.









                                                                  AB 473
                                                                  Page  9


           FISCAL EFFECT  :   According to the Assembly Appropriations  
          Committee:

          1)Significant annual costs, potentially in the range of $15  
            million, to create the Division of Medical Marijuana  
            Regulation and Enforcement within the ABC to regulate the  
            medical marijuana industry.  It is not clear these costs would  
            be fully covered by the registration fees authorized by this  
            bill, as the division will be created regardless of the number  
            of applications.  It is also not clear from what source the  
            division would fund what would be significant start-up costs  
            for the division. 

            The entire budget of the ABC is $57 million, with 428  
            positions. The ABC is charged with licensing and regulating  
            persons and businesses engaged in the manufacture, importation  
            and distribution of alcoholic beverages in, and with  
            administering the provisions of the ABC Act to protect the  
            health, safety, welfare and economic well-being of the state.   
            In addition to the ABC, there is also the ABC Appeals Board,  
            with eight positions and a $1 million budget.  

            Based on funding and staffing levels of the ABC and the  
            Appeals Board, and considering the significant start-up costs  
            of any new entity (adoption of regulations and fee schedules,  
            office equipment and expenses, etc), it seems reasonable to  
            assume the costs of providing statewide regulation of the  
            cultivation, manufacture, testing, transportation,  
            distribution, and sale of medical marijuana, along with  
            associated hearings, appeals and litigation, would at least be  
            in the range of one-quarter of the ABC budget.  

          2)This bill would establish unspecified registration application  
            fees. The costs of creating and maintaining the division, as  
            specified, within the ABC would require significant  
            application fees and fines.  For purpose of illustration, the  
            average fee to cover the cost of a $15 million entity, if  
            there were 2,000 annual applications, would be about $7,500  
            per application. 

            Given the current legal environment surrounding medical  
            marijuana, with the California Supreme Court ruling last week  
            that local governments can ban medical marijuana production  
            and distribution, and given the federal government's interest  








                                                                  AB 473
                                                                  Page  10


            in shutting down dispensaries, will there be a sufficient  
            number of applications and penalties to fully fund the  
            division?     

          3)This bill creates a continuous appropriation from the Medical  
            Marijuana Fees Account created by this bill to support the  
            division. Continuous appropriations are contrary to the  
            general practice of this committee, which prefers annual  
            budget review of expenditures.
           
           4)Unknown, minor local savings from prohibiting the expenditure  
            of state or local funds to assist federal law enforcement in  
            enforcing marijuana prohibitions.   
           
           COMMENTS  :   "The people of California overwhelmingly enacted the  
          Compassionate Use Act of 1996 with the passage of Proposition  
          215.  The people declared that their purpose in enacting the  
          measure was, among other things, '[to] ensure that seriously ill  
          Californians have the right to obtain and use medical marijuana  
          for medical purposes where that medical use is deemed  
          appropriate and has been recommended by a physician who has  
          determined that the person's health would benefit from the use  
          of marijuana in the treatment of cancer, anorexia, AIDS, chronic  
          pain, spasticity, glaucoma, arthritis, migraine, or any other  
          illness for which marijuana provides relief.'

          "The Compassionate Use Act of 1996 called on state government to  
          implement a plan for the safe and affordable distribution of  
          marijuana to all patients in medical need of marijuana.

          "In 2003, the Legislature enacted the Medical Marijuana Program  
          Act (MMPA).  Under the guidance of the MMPA, approximately 60  
          California cities and counties have created medical marijuana  
          access ordinances that can act as a guide for the state.   
          However, many other cities and counties are calling for more  
          guidance and regulation from the state and have passed bans or  
          moratoria on medical marijuana cultivation and distribution  
          while awaiting such guidance.

          "Greater certainty and uniformity are urgently needed regarding  
          the rights and obligations of medical marijuana facilities, and  
          for the imposition and enforcement of regulations to prevent  
          unlawful cultivation and the diversion of marijuana to  
          nonmedical use."








                                                                  AB 473
                                                                  Page  11



          Please see the policy committee analysis for a full discussion  
          of this bill.


           Analysis Prepared by  :    Sandy Uribe / PUB. S. / (916) 319-3744 

                                                                FN: 0000887