BILL ANALYSIS Ó
AB 18 X2
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ASSEMBLY THIRD READING
AB 18
X2 (Bonilla)
As Amended September 10, 2015
2/3 vote. Tax levy
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Public Health |9-4 |Bonta, Bonilla, |Maienschein, Baker, |
| | |Campos, Eduardo |Mayes, Steinorth |
| | |Garcia, Levine, | |
| | |Santiago, Mark Stone, | |
| | |Thurmond, Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Finance |6-3 |Weber, Bloom, Gomez, |Melendez, Bigelow, |
| | | |Obernolte |
| | | | |
| | |Jones-Sawyer, | |
| | |McCarty, Ting | |
| | | | |
| | | | |
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SUMMARY: Imposes a $0.05 per drink tax on all spirits-based
cocktails purchased in restaurants, bars, and other venues in
the state to fund developmental disability services and other
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health programs.
FISCAL EFFECT: According to the Assembly Finance Committee:
1)Board of Equalization (BOE) Costs. According to BOE,
approximately $2 million is necessary for start-up costs to
implement a new surtax program. The initial costs for this
bill would be paid for by a one-time General Fund loan, to be
reimbursed once revenues are generated. There are
approximately 15,000-20,000 licensees that would need to
register with BOE for the purposes of administering this new
tax. According to BOE, the one-time implementation costs for
this bill would include developing computer programs,
developing forms and publications, creating registration for
licensees, carrying out compliance and audit efforts,
developing regulations, training staff, and answering
surtax-related inquiries from taxpayers and licensees.
This bill would likely result in ongoing annual costs to the
BOE of approximately $1 million for the continued support of
this program. This cost would be funded by revenues generated
from the surtax. The ongoing costs will support the ongoing
maintenance and annual restructuring of this tax.
2)BOE Revenue. The BOE has estimated that this new tax will
generate $22 million annually. This estimate is based upon
data from the North American Industry Classification System
(NAICS) codes related to food services and drinking places, as
well as 2012 United States (U.S.) Census data specifically
pertaining to specified NAICS codes. The methodology used for
this revenue estimate is based upon available taxable sales
data.
COMMENTS:
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Under the current Alcoholic Beverage Tax Law, the following
taxes and surcharges are assessed on the sale of beer, wine, and
distilled spirits:
-----------------------------------------------------
| | Tax | Per | Total |
| | | Gallon | |
| | | | |
| | | | |
| | |Surcharge| |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Beer | $0.04 | $0.16 | $0.20 |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Wine (not more than 14% | $0.01 | $0.19 | $0.20 |
|alcohol) | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Wine (more than 14% | $0.02 | $0.18 | $0.20 |
|alcohol) | | | |
| | | | |
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|--------------------------+--------+---------+-------|
|Sparkling wine | $0.30 | $0.00 | $0.30 |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Hard cider | $0.02 | $0.18 | $0.20 |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Distilled spirits (100 | $2.00 | $1.30 | $3.30 |
|proof) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Distilled spirits (100+ | $4.00 | $2.60 | $6.60 |
|proof) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
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According to the author, this bill will help provide the
necessary funding to ensure California's compliance with the
Lanterman Developmental Disabilities Services Act (Lanterman
Act), a California law passed in 1969, which provides people
with developmental disabilities and their families the right to
receive necessary services in their community. There have been
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significant reductions in the Department of Developmental
Services (DDS) budget. One billion dollars has been lost since
the Great Recession. This is about 25% of the entire DDS
budget. According to information provided by the author,
approximately $400 million is needed for DDS programs including
in-home supportive services, community-based programs, and
supportive living services. The current regional center
caseload ratio is 1 worker/75 consumers. However, in statute
the regional center caseload is required to be 1 worker/62
consumers. Given the current regional center caseload, the
state is at risk for losing federal dollars if it does not come
into compliance with the Lanterman Act. In order to meet
caseworker ratios required under current statute, the state
would need about 650 additional regional center workers. The
author further states that the funding from a $0.05 charge on
cocktails is needed for providers to deliver respite care,
transportation, day treatment programs; and independent and
supported living programs to our developmental disability
community.
Alcohol Consumption and Public Health. According to the Centers
for Disease Control and Prevention (CDC), excessive alcohol use,
either in the form of heavy drinking (drinking 15 or more drinks
per week for men or eight or more drinks per week for women), or
binge drinking (drinking five or more drinks on an occasion for
men or four or more drinks on an occasion for women), can lead
to increased risk of health problems such as liver disease or
unintentional injuries. Alcohol use contributes to illnesses as
varied as liver cirrhosis, esophageal cancer, pancreatitis, and
epilepsy. It also plays a role in violent crimes such as sexual
assaults, domestic violence, and child abuse, while also causing
serious injuries and traffic fatalities.
According to the CDC's Behavioral Risk Factor Surveillance
System (BRFSS) survey, more than half of the adult U.S.
population drank alcohol in the past 30 days. Approximately 5%
of the total population drank heavily, while 17% of the
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population binge drank. The 2010 BRFSS notes that, compared to
other states, Californians report relatively low rates of binge
drinking. CDC states that excessive alcohol consumption cost
the United States $223.5 billion in 2006. This amounts to about
$1.90 per drink, or about $746 per person. The costs due to
excessive drinking largely resulted from losses in workplace
productivity (72% of the total cost), health care expenses
(11%), and other costs due to a combination of criminal justice
expenses, motor vehicle crash costs, and property damage.
While a relatively small percentage of drinkers report binge or
heavy drinking, these drinkers accounts for a disproportionately
high percentage of state costs. CDC estimates that binge
drinking is responsible for more than 70% of the cost of
excessive alcohol use in all states and the District of
Columbia. Additionally, about $2 of every $5 of the economic
costs of excessive alcohol use were paid by federal, state, and
local governments. CDC found that the total state costs for
excessive drinking were generally of the same order of magnitude
as the costs for smoking and Medicaid.
California is the largest market for alcohol sales in the United
States. It is estimated that in a single year, Californians
consume almost 14 billion alcoholic drinks (including spirits,
wine, and beer). The National Institute of Alcohol Abuse and
Alcoholism Surveillance Report #102 estimated that, nationally,
Americans consumed an average of 2.34 gallons of ethanol each in
2013. California was ranked with 30 other high consumption
states that had over 2.31 gallons per person per year.
According to the Distilled Spirits Council of the U.S., about
one-third of alcohol consumed in California is spirts-based,
while the remaining two-thirds are wine and beer.
A 2006 study published in the American Journal of Preventive
Medicine calculated the cost of excessive alcohol consumption in
California at $32 billion, with $13.7 billion coming from the
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state funds. A 2008 study published in the journal Alcoholism:
Clinical and Experimental Research titled "The Cost of Alcohol
in California" calculated the overall economic cost of excessive
alcohol consumption - including costs such as health issues,
injury, violent crime, property crime, and traffic collisions -
at $38.5 billion. According to the California Department of
Public Health, excessive alcohol consumption caused
approximately 88,000 deaths and 2.5 million years of potential
life lost annually in the U.S. during 2006 to 2010, making it
the fourth leading preventable cause of death. In California,
the rate of alcohol-attributable deaths (ADD/year/100,000
population, 2006 to 2010) is higher for males (43.9) and African
Americans (36.6) in comparison with the total population (29.4).
The Lanterman Act. The Lanterman Act, which was enacted in
1977, guides the provision of services and supports for
Californians with developmental disabilities. Each individual
under the Act (typically referred to as a "consumer") is legally
entitled to treatment and habilitation services and supports in
the least restrictive environment possible. Lanterman Act
services are designed to enable all consumers to live more
independent and productive lives in the community. The term
"developmental disability" is defined in statute as a disability
that originates before an individual attains 18 years of age,
continues, or can be expected to continue, indefinitely, and
constitutes a substantial disability for that individual. It
includes intellectual disabilities, cerebral palsy, epilepsy,
and autism spectrum disorders. It also includes disabling
conditions that are closely related to intellectual disabilities
or require treatment, care, and management similar to what is
required for individuals with an intellectual disability. These
conditions must occur before age 18, result in a substantial
handicap, be likely to continue indefinitely, and involve brain
damage or dysfunction (conditions that are solely psychiatric or
physical in nature are excluded).
Passage of the Lanterman Act marked the beginning of
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California's shift from a model of care that relied on
institutional placement to one that focused on providing
services and supports at home or in other community-based
settings, and it was followed by a number of federal and state
legal decisions, as well as administrative and legislative
initiatives, which reinforced the new entitlement to services.
Of particular note was the 1994 settlement agreement reached in
the William Coffelt et. al. v. the California Department of
Developmental Services, et. al. class-action lawsuit to develop
additional community placement options and reduce the population
of individuals in institutions by 2,000 within five years. Five
years later, the U.S. Supreme Court ruled in Olmstead vs LC (527
U.S. 581 (1999)) that a lack of community supports was not legal
grounds for denying people with disabilities a move from an
institution into a community setting if they could benefit from
community placement. The court ruled that such a denial
constituted a violation of individual civil rights, as well as
discrimination under the Americans with Disabilities Act. In
California, 10 years after the Olmstead decision, Capitol People
First et al. v DDS, et al. resulted in a settlement in which DDS
and the regional centers agreed to develop additional community
living options and establish new practices to ensure the
Lanterman Act's promise of services in the least-restrictive
environment would be maintained.
Regional Center Rates. Current statute and regulations set
forth rate requirements for regional centers to adhere to when
contracting with vendors to provide services to consumers.
There are different types of rates for services provided in
different settings, many of which are negotiated between
regional centers and vendors and are subject to a cap as a
result of the state's cost-containment efforts over the past
several years. July 1, 2008 marked the original implementation
date for statewide and regional center median rates, with a
requirement that regional centers do not negotiate rates higher
than the lower of the two median rates for services. Each
regional center is required to annually certify to DDS its
median rate for each negotiated rate service, which DDS verifies
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during its biennial fiscal audit of the regional center.
Despite the median rate cap, a regional center can obtain a rate
increase from DDS under a "health and safety exemption" for a
particular consumer if the regional center can demonstrate the
exemption is necessary to maintain his or her health and safety.
Most recently, Fiscal Years 2014-15 and 2015-16 Budget trailer
bill provisions allowed for provider rate increases to address
new state minimum wage requirements and sick leave benefits.
The California Medical Association (CMA) states that alcohol
abuse is an issue that puts a significant cost burden on
California's healthcare system. Alcohol-related deaths from car
accidents still make up a third of all car accident fatalities.
CMA further states that alcohol taxes reduce excessive drinking
and alcohol-related problems; one estimate suggests that a
nickel-per-drink increase in alcohol would reduce fatal traffic
accidents by 7%. The California Supported Living Network and
other supporters of this bill, state that it will provide an
important funding source to keep individuals and families
together, living independently, and getting the services that
integrate them into communities.
Opponents, representing makers, carriers, and sellers of alcohol
products, assert that there are no negative social costs
associated with normal moderate consumption of alcoholic
beverages and this bill unfairly penalizes 90% to 95% of
responsible drinkers. They argue that this bill could make it
even more difficult for businesses that are struggling to keep
their doors open and retain employees during these difficult
economic times by disproportionately targeting a specific
category of products for fee increases. Opponents maintain that
the alcohol industry already pays more than its fair share of
revenue to the state, and that this bill would add new costs and
reporting burdens on small businesses in California's
hospitality industry.
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Analysis Prepared by:
Dharia McGrew / HEALTH / (916) 319-2097 FN:
0002437