BILL ANALYSIS Ó
SENATE COMMITTEE ON PUBLIC HEALTH AND DEVELOPMENTAL SERVICES
Senator Ed Hernandez, O.D., Chair
BILL NO: ABX2 11
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|AUTHOR: |Nazarian |
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|VERSION: |March 3, 2016 |
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|HEARING DATE: |March 7, 2016 | | |
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|CONSULTANT: |Myriam Bouaziz |
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SUBJECT : Cigarette and tobacco product licensing: fees and
funding
SUMMARY : Updates the Cigarette and Tobacco Products Licensing
Program under the Board of Equalization by increasing licensing,
distributor, and wholesaler fees.
Existing law:
1)Requires, under the Cigarette and Tobacco Licensing Act of
2003 (Licensing Act), a retailer to have in place and maintain
a license to engage in the sale of cigarettes or tobacco
products. Provides that a retailer license is valid for a
12-month period and must be renewed annually.
2)Requires a retailer, in order to obtain a license, to file a
license application accompanied by a one-time license fee of
$100 for each retail location. Requires the retailer to renew
the license annually but only requires the $100 fee per retail
location with the initial application.
3)Requires, if a retailer's license has expired, that as a
condition of reinstatement, they pay an additional fee of
$100.
4)Establishes the Stop Tobacco Access to Kids Enforcement
(STAKE) Act, which charges the Department of Public Health
(DPH) with developing a program to reduce the availability of
tobacco products to persons under 18 years of age and
specifies that various agencies, including, but not limited
to, DPH, the Attorney General, or local law enforcement
agencies may enforce the STAKE Act. Requires DPH, after a
third, fourth, or fifth violation, to notify the Board of
Equalization (BOE) of the violation and for the BOE to then
ABX2 11 (Nazarian) Page 2 of ?
assess an additional civil penalty and to suspend or revoke
the sellers' license for a specific amount of time, based on
the number of violations in a given period.
This bill:
1)Increases, beginning January 1, 2017, the current one-time
retailer license fee of $100 per location to $265 per location
and imposes a $265 fee for the annual renewal of a tobacco
retailer license.
2)Increases, beginning January 1, 2017, the annual distributor
and wholesaler licensing fee from $1,000 to $1,200.
3)Requires BOE to report back to the Legislature no later than
January 1, 2019, regarding the adequacy of funding for the
Cigarette and Tobacco Products Licensing Act of 2003.
Requires the report to include data and recommendations about
whether the annual licensing fee funding levels are set at an
appropriate level to maintain an effective enforcement
program.
FISCAL EFFECT : This bill, as amended, has not been analyzed by
a fiscal committee.
PRIOR VOTES :
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|Assembly Floor: |48-26 |
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|Assembly Finance Committee: |6 - 3 |
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|Assembly Public Health and |9 - 4 |
|Developmental Services Committee: | |
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COMMENTS :
1)Author's statement. According to the author, the one-time
tobacco licensing fee is not adequate to cover costs
associated with maintaining a viable enforcement program,
which is crucial to help maintain Master Settlement Agreement
(MSA) compliance and enforce the STAKE Act. The author states
this bill serves businesses by stopping violators from
ABX2 11 (Nazarian) Page 3 of ?
circumventing the law and competing with legitimate
businesses. The author notes this bill ends BOE's practice of
relying on the administrative funds generated by tobacco taxes
such as Proposition 10 (1998) which funds First 5, to cover
the administration of the licensing program. The author
contends the licensing program must be funded solely by
licensing fee revenue, and this bill protects the viability of
tobacco health and education programs. The author concludes
additional revenue made available by this bill will eliminate
the need to divert tobacco excise taxes from their intended
purpose to instead pay for the deficit in the tobacco
licensing program.
2)Cigarette and Tobacco Products Licensing Act of 2003. The Act
established a statewide licensing program for retailers,
manufacturers, distributors, and importers of cigarettes and
tobacco products, (AB 71 [Horton], Chapter 890, Statutes of
2003). The Act was enacted to counter cigarette tax evasion
through illegal sales of cigarettes and tobacco products in
California. According to BOE, the Act has been successful in
reducing illegal sales.
3)Insufficient Funds. The current licensing fee structure does
not generate the necessary revenue to cover the administrative
costs associated with the licensing program. According to the
Legislative Analyst's Office (LAO), the licensing fee in the
Act generated $18 million for in the program's first year.
However, in recent years, revenue from the fee has been
one-tenth of that initial level, with annual expenditures
averaging $7 million more than the annual fee revenue from
2005-06 to 2013-14. The LAO notes that in 2013-14, it cost
approximately $10 million to run the program, while revenue
has remained stagnant at $2 million. A subsequent report from
BOE stated that inadequate funding of this program can lead to
a lack of field enforcement, or a reduction in compliance
staff, potentially leading to further decreases in funding.
Further, in 2006, the Legislature approved a budget proposal
to begin charging the special funds that receive cigarette and
tobacco excise tax revenue for part of the costs of
administering the licensing program. While this has helped
increase the funding to administer the license program, this
change has reduced the resources available to programs
receiving cigarette and tobacco excise tax funds. The BOE
estimates the new fees will raise $12 million. The revenue
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will ensure that there is more money available for the special
funds programs that receive cigarette and tobacco excise tax
revenue.
4)Related legislation. SBX2 5 (Leno) recasts and broadens the
definition of "tobacco product" in current law to include
electronic cigarettes as specified; extends current
restrictions and prohibitions against the use of tobacco
products to electronic cigarettes; extends current licensing
requirements for manufacturers, importers, distributors,
wholesalers, and retailers of tobacco products to electronic
cigarettes; requires electronic cigarette cartridges to be
child-resistant; and exempts active duty military personnel,
as specified, from the requirement of being 21 years of age or
older to purchase tobacco products. SBX2 5 is pending on the
Senate Floor.
SBX2 7 (Hernandez) increases the minimum legal age to purchase
or consume tobacco from 18 to 21. SB X2 7 is pending on the
Senate Floor.
ABX2 7 (Stone) removes many, but not all, exemptions in
existing law that allow tobacco smoking in certain indoor
workplaces and expands the prohibition on smoking in a place
of employment to include owner-operated businesses. ABX2 7
will be heard in this committee on March 7, 2016.
ABX2 9 (Thurmond) extends current tobacco use prevention
funding eligibility and requirements for county offices of
education and school districts to include charter schools;
broadens the definition of products containing tobacco and
nicotine, as specified, and prohibits their use in specified
areas of schools and school districts, regardless of funding;
and requires specified signs to be prominently displayed at
all entrances to school property. ABX2 9 will be heard in this
committee on March 7, 2016.
ABX2 10 (Bloom) allows counties to impose a tax on the
privilege of distributing cigarettes and tobacco products.
ABX2 10 will be heard in this committee on March 7, 2016.
ABX2 11 (Nazarian) revises the Cigarette and Tobacco Products
Licensing Act of 2003 to change the retailer license fee from
a $100 one-time fee to a $265 annual fee, and increase the
distributor and wholesaler license fee from $1,000 to $1,200.
ABX2 11 (Nazarian) Page 5 of ?
ABX2 11 will be heard in this committee on March 7, 2016.
5)Support. The American Lung Association (ALA) in California,
and numerous other organizations including the California
Dental Association, California Pan-Ethnic Health Network,
Health Access California, and California Black Health Network
support this bill, stating, adjusting state tobacco licensee
fees to ensure that they cover the cost of administering the
licensing program will eliminate a chronic shortfall in the
BOE's costs to administer the program and allow the current
diversion of tobacco excise taxes to cease. The ALA notes
that siphoning of funds into the licensing programs means that
there are fewer Proposition 99 funds available for reducing
smoking, providing health care services, supporting
tobacco-related research, and funding resource programs for
the environment - the intended purposes of the Proposition 99
funds.
There is no known opposition on file.
SUPPORT AND OPPOSITION :
Support: American Cancer Society Cancer Action Network
(sponsor)
American Heart Association/American Stroke Association
American Lung Association in California
California Academy of Family Physicians
California Dental Association
California Medical Association
California Pan-Ethnic Health Network
Children's Defense Fund - California
Chronic Care Coalition
First 5 Association of California
First 5 Los Angeles
Planned Parenthood Affiliates of California
Service Employees International Union
Oppose: None received
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