BILL ANALYSIS Ó
AB 26
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Date of Hearing: January 21, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
26 (Jones-Sawyer) - As Amended January 13, 2016
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill requires applicants for medical marijuana licenses to
institute training programs as a condition of licensure. It
also:
1)Requires licensing authorities, including the Bureau of
Medical Marijuana Regulation (Bureau), the California
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Department of Public Health (CDPH), and the California
Department of Food and Agriculture (CDFA) to deny license
applications or revoke licenses if an applicant or licensee
fails to institute approved training programs.
2)Requires the Bureau to adopt standards for the approval of
training programs, and to be the sole state agency responsible
for approving and regulating training programs.
FISCAL EFFECT:
This estimate is subject to significant uncertainty, as the
number of licensees, the number of training programs, the
complexity of the training, and numerous operational decisions
are all unknown at this time. Staff estimates the Bureau may
incur the following costs (funded through a previously
authorized GF loan to the Medical Marijuana Regulation and
Safety Act Fund, to be repaid through licensure fee revenue):
1)Developing training program standards and developing processes
for application and review of training programs, would likely
result in contract or staff costs in the hundreds of thousands
of dollars. The bill requires approved training on
substantive legal requirements, industry best practices, and
occupational health and safety standards for numerous types of
industries.
2)Costs for initial verification of training programs could
range from minor to significant, depending on how many
training programs apply for approval. If only a few larger
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training programs apply, costs would be lower because one
approved training program would serve multiple licensees. If
more licensees develop their own training programs, approval
costs could be much more significant. If a large number of
training programs apply, it may also require a more
sophisticated Information Technology (IT) solution to track
applicants.
3)To verify licensees are implementing training programs should
be fairly minor and absorbable, assuming the check is
paper-based. If on-site visits are required, costs would
increase. Any ongoing costs for this activity will be
recovered through license fees.
COMMENTS:
1)Purpose. This bill, sponsored by the United Food and
Commercial Workers Union, Western States Council (UFCW), is
intended to ensure workers in the medical cannabis industry
are well-trained on safety rules, industry best practices, and
legal compliance.
2)Background. Medical marijuana, though illegal under federal
law, has been legal under state law since the passage of
Proposition 215 in 1996. The Medical Marijuana Regulation and
Safety Act (MMRSA) was a package of three bills enacted
together in 2015 to regulate the medical marijuana industry
and license its participants. The bills created a
comprehensive state regulatory system for the commercial
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cultivation, manufacture, retail sale, transport,
distribution, delivery, and testing of medical cannabis.
Among other things, the MMRSA establishes the new Bureau under
the Department of Consumer Affairs, which is responsible for
licensing and regulating dispensaries, transporters, and
distributors. The MMRSA charges CDPH with regulating
manufacturers, testing laboratories, and the production and
labeling of edible medical marijuana products, and CDFA with
regulating cultivation. Other state agencies, such as the
Department of Pesticide Regulation and the State Water
Resources Control Board, are responsible for developing
environmental standards. The MMRSA went into effect on
January 1, 2016, though licensure will not be required until
the responsible licensing authorities pass regulations.
3)Marijuana Regulation Startup Costs and Fees. Among other
provisions, AB 243 (Wood), Chapter 688, Statutes of 2015, one
of the bills establishing MMRSA, appropriated $10 million to
the Medical Marijuana Regulation and Safety Act Fund for
start-up activities. MMRSA requires each licensing authority
for medical marijuana, including the Bureau, CDPH, and CDFA,
to charge fees commensurate with regulatory costs. Further,
each licensing authority is required to generate sufficient
fee revenue to cover the specific licensure program
administered by that authority. The Governor's 2016-17 budget
requests positions and between $3-$4 million (for a total of
$10.5 million in 2016-17) for startup activities of each
licensing authority.
4)Prior Legislation. AB 266 (Bonta, Cooley, Jones-Sawyer,
Lackey, and Wood), Chapter 689, Statutes of 2015; SB 643
(McGuire), Chapter 719, Statutes of 2015; and AB 243,
described above, were companion bills that formed the MMRSA.
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5)Related Legislation. AB 567 (Gipson) limits third-party
marijuana delivery services, restricts licensed dispensaries
from employing persons under age 21, and requires tax penalty
amnesty programs for medical cannabis-related businesses.
AB 1548 (Wood) imposes a marijuana distribution tax to be
deposited into the Marijuana Production and Environment
Mitigation Fund.
6)Staff Comments.
a) Lack of Clarity on Reimbursements for Work Done by the
Bureau on Behalf of a Different Department. Current law
related to fees could be clarified to ensure the regulatory
entity performing the activity can be compensated.
Business and Professions Code 19350 provides only for
licensure and renewal fees to support activities of the
licensing authority. Given current law requires the
regulatory programs be fee-supported, it appears the Bureau
could recover costs through licensure and renewal fees, for
their licensees. However, although the law allows fees to
"vary depending upon the varying costs associated with
administering the various regulatory requirements," current
law limits fees to the "reasonable regulatory costs to the
licensing authority." For laboratories, for example, the
licensing authority is CDPH. If the bureau is approving
laboratory training programs on behalf of CDPH, it appears
unclear whether CDPH can charge laboratories to support the
Bureau's workload costs. In order to ensure transparency
and accurately account for costs and revenues, it appears
advisable to clarify current law to ensure the Bureau can,
for example, be reimbursed for any costs related to
approval of training programs for entities regulated by
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CDPH or CDFA. A similar allocation will assumedly be made
to the Bureau for shared, centralized activities such as IT
infrastructure required by MMRSA, so clarifying allowable
funding flows would appear to form a firmer and more
transparent legal basis for such transfers in cases where
centralized work is performed.
Alternatively, the task of approving training programs
could be assigned to the appropriate licensing authority,
such that CPDH would approve training for laboratories and
manufacturers, and CDFA would approve training for
cultivators. Even if this is done, it may still make sense
on principle to clarify allowable transfers of funds based
on centralized work.
b) Cost Recovery Through Licensure Fees? Because this bill
requires a license applicant to institute a bureau-approved
training program as a condition of licensure, this approval
must happen before a potential licensee even applies for
licensure. This means the standards, and a significant
number of training programs, must be approved before any
license fees are collected, and thus that revenue recovery
for this purpose may initially be limited, similar to many
other start-up activities of the bureau. On an ongoing
basis, all regulatory costs are recoverable through
licensure fees. However, it is worth considering charging
the training programs directly for the approval. The bill
does not currently specify such a fee. Authorizing training
program approval fees would allow cost recovery for the
activity directly. It would also ensure any third-party
training programs that are not licensees pay for the cost
of their training program approval. Such third-party
entity would likely charge fees to licensees to train their
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employees. In this context, a fee for training program
approval would appropriately be a cost of doing business
for the third-party entity instead of for the licensee.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081