BILL ANALYSIS                                                                                                                                                                                                    Ó



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          ASSEMBLY THIRD READING


          AB 6  
          X2 (Cooper)


          As Amended  August 27, 2015


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Public Health   |10-2 |Bonta, Maienschein,   |Mayes, Steinorth    |
          |                |     |Baker, Bonilla,       |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |Levine, Santiago,     |                    |
          |                |     |Mark Stone, Thurmond, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Finance         |6-3  |Weber, Bloom, Gomez,  |Melendez, Bigelow,  |
          |                |     |                      |Obernolte           |
          |                |     |                      |                    |
          |                |     |Jones-Sawyer,         |                    |
          |                |     |McCarty, Ting         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Defines the term smoking for purposes of the Stop  
          Tobacco Access to Kids Enforcement (STAKE) Act; expands the  








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          definition of a tobacco product to include electronic cigarettes  
          (e-cigarettes) and 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.  Specifically, this bill:  


          1)Defines smoking as inhaling, exhaling, burning, or carrying  
            any lighted or heated cigar, cigarette, or pipe, or any other  
            lighted or heated tobacco or plant product intended for  
            inhalation, whether natural or synthetic, in any manner or in  
            any form.  Includes the use of an electronic smoking device  
            that creates an aerosol or vapor, in any manner or in any  
            form, or the use of any oral smoking device for the purpose of  
            circumventing the prohibition of smoking.


          2)Expands the definition of tobacco product to include an  
            electronic device that delivers nicotine or other vaporized  
            liquids to the person inhaling from the device, including, but  
            not limited to an electronic cigarette, cigar, pipe, or  
            hookah.  Includes in the definition any component, part, or  
            accessory of a tobacco product, whether or not sold  
            separately.


          3)Clarifies that a tobacco product does not include a product  
            that has been approved by the United States Food and Drug  
            Administration (FDA) for sale as a tobacco cessation product  
            or for other therapeutic purposes where the product is  
            marketed and sold solely for such an approved purpose.


          4)Requires all cartridges for electronic cigarettes and solution  
            for filling or refilling an electronic cigarette to be in  
            childproof packaging.  Defines child-resistant packaging as  
            packaging that meets current federal regulations. 









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          FISCAL EFFECT:  According to the Assembly Finance Committee:


          Approximately $115,00 (Proposition 99) for the Department of  
          Public Health (DPH) for purchasing retailer lists, revising  
          informational materials, and conducting annual scientific  
          surveys, and General Fund cost pressure to increase STAKE Act  
          enforcement activities.


          Approximately $3.8 million in costs for the Board of  
          Equalization in 2015-16,  minor savings in 2016-27, $1.8 million  
          in costs in 2017-18, and minor costs in out-years for the  
          proposed Board of Equalization (BOE) licensing program.


          DPH estimates the following costs, which are described in the  
          narrative below the chart:


                                                                           


           ----------------------------------------------------------------- 
          |    DPH Cost & Fund Source    |  2015-16  |  2016-17  | 2017-18  |
          |                              |           |           |          |
          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |Revise regulations (0236      |         $0|    $64,400|        $0|
          |Unallocated Account,          |           |           |          |
          |Proposition 99 Funds)         |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |E-cig retailer lists for      |     $8,000|     $8,000|    $8,000|
          |enforcement (0066 STAKE       |           |           |          |
          |Special Fund)                 |           |           |          |
          |                              |           |           |          |








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          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |Revise informational          |   $107,172|         $0|        $0|
          |materials (0236 Unallocated   |           |           |          |
          |Account, Proposition 99       |           |           |          |
          |Funds)                        |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |Annual scientific survey for  |         $0|   $400,000|  $400,000|
          |monitoring illegal e-cig      |           |           |          |
          |sales to youth (0236          |           |           |          |
          |Unallocated Account,          |           |           |          |
          |Proposition 99 Funds)         |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |STAKE Act program             | $1,600,000| $1,600,000|$1,600,000|
          |requirements to monitor       |           |           |          |
          |illegal E-cig sales to youth  |           |           |          |
          |(General Fund)                |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |------------------------------+-----------+-----------+----------|
          |          NET COSTS           | $1,715,172| $2,072,400|$2,008,000|
          |                              |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
          |                              |           |           |          |
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          Revise regulations.  According to DPH, this bill would require  
          the DPH Food and Drug Branch (FDB) to revise STAKE Act  
          regulations for conducting compliance checks in vape shops and  
          vape lounges.  DPH, Office of Regulations (OOR) estimates that  
          regulations would be complete within 18 months.  Regulations  








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          would also be required to be revises related to signage.  


          E-cigarette retailer lists.  In order to incorporate e-cigarette  
          retailers that are not already BOE-licensed as a tobacco  
          retailer into STAKE Act compliance checks, DPH/FDB would  
          purchase an e-cigarette vendor list developed by a database  
          company for an estimated minimum cost of $4,000-$8,000 per year.


          Revise informational materials.  DPH would need to revise STAKE  
          Act signage, educational materials, and training materials to  
          include the e-cigarette provisions. The cost of revising and  
          printing STAKE Act signs and clean air materials (signs,  
          posters, cards, manuals/booklets) and the Tobacco Control Laws  
          brochure is estimated at $100,000. DPH staff time associated  
          with revising educational materials and training materials is  
          estimated at 10% Full-Time Equivalent, Health Program Specialist  
          I for one year at $7,172.  


          Annual scientific survey.  Business and Professions Code Section  
          22959 requires the annual transfer of $2 million from the  
          Department of Health Care Services' federal Substance Abuse  
          Prevention & Treatment (SAPT) Block Grant to DPH to administer  
          the provisions of the Synar Amendment.  The FDB STAKE Program's  
          portion of these funds is $1.6 million.  This funding is used  
          for conducting STAKE Act compliance inspections that include  
          undercover youth tobacco purchase inspections with an undercover  
          youth decoy, operating a STAKE Act complaint line, and following  
          up on illegal youth tobacco sales complaints.  The remaining  
          $400,000 is used to conduct a scientific youth tobacco purchase  
          survey in order to annually report the annual illegal youth  
          sales rate, as required by the federal Synar Amendment. 


          Pursuant to guidance received from the federal Center for  
          Substance Abuse Prevention (CSAP) Project Officer, if this bill  
          passes, California would have the option to include e-cigarettes  








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          in its Synar inspections since these products would be  
          considered eligible for Synar compliance activities. The annual  
          youth tobacco survey which is a random survey of approximately  
          725 stores and results in a sample that is sufficient in size to  
          provide a statewide rate.  While this bill does not require a  
          separate survey, absent additional resources, DPH would be  
          required to split the funds between two separate enforcement  
          requirements.  This could result in a diminished survey on  
          tobacco retailers to accommodate e-cigarette only retailers.   
          For fiscal years beyond 2015-2016, DPH would request additional  
          funds in the amount of $400,000 to augment the annual scientific  
          survey to monitor the illegal e-cigarette sales rate to youth.


          STAKE Act program requirements.  The DPH STAKE enforcement  
          program's portion fund is $1.6 million.  This funding is used  
          for conducting STAKE Act compliance inspections that include  
          undercover youth tobacco purchase inspections with an undercover  
          youth decoy, operating a STAKE Act complaint line, and following  
          up on illegal youth tobacco sales complaints.  Current DPH STAKE  
          Act enforcement activities include any activity subsequent to a  
          violation of the STAKE Act, including issuance of the notice of  
          violation and civil penalty, administrating and preparing the  
          STAKE Act case package for an administrative hearing.  Fines and  
          penalties collected as a result of STAKE Act activities are  
          collected by DPH and used to pay for a portion of legal staff.  
          The budget for the STAKE Act program has been flat since the  
          program was created 20 years ago and the funds collected from  
          penalties have decreased due to increased compliance with the  
          tobacco sales to minors law. 


          Currently, DPH performs approximately 2,000 buys with the $1.6  
          million block grant funds.  CDPH currently spends approximately  
          $5-$6 per tobacco purchase resulting in approximately $10,000 to  
          $12,000 to buy the cigarettes during compliance buys. DPH  
          conducted online research and found e-cigarettes range in cost  
          from $10-$50.  The variety in inventory for e-cigarettes and  
          availability from one retailer to another is much wider than for  








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          regular cigarettes. 


          While this bill authorizes DPH to enforce e-cigarette sales  
          compliance through the STAKE Act, absent additional resources,  
          DPH would be required to enforce both e-cigarette and tobacco  
          sale compliance with the funds available currently for tobacco.  
          Given the comparably high cost of e-cigarettes, this requirement  
          could result in diminished oversight of tobacco retailers to  
          accommodate e-cigarette retailers.  In order to mirror the  
          current STAKE Act program, DPH would request additional funds in  
          the amount of $1.6 million in General Fund to monitor the  
          illegal e-cigarette sales rate to youth. 


          By including electronic devices in the definition of tobacco,  
          this bill could impact California's ability to maintain no more  
          than a 20% rate of illegal tobacco sales to minors.  Pursuant to  
          42 United States Code (U.S.C.) 300x-26, commonly known as the  
          Synar Amendment, if California does not meet the 20 percent  
          threshold, the Department of Health Care Services (DHCS) could  
          lose up to 40 percent of its SAPT Block Grant allocation.  This  
          means that DHCS could lose approximately $100 million of its  
          SAPT Block Grant award if illegal tobacco sales to minors  
          exceeds 20%.  Nevertheless, it is unclear how likely it is that  
          these new legal requirements threaten California's ability to  
          meet the federal threshold, and also unclear how much new  
          resources would be needed to ensure that California continue to  
          meet the federal threshold.


          





          The BOE estimates the following costs and revenues:









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           ----------------------------------------------------------------- 
          |        Costs         |  2015-16  | 2016-17  | 2017-18  |2018-19 |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |    (In Millions)     |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |----------------------+-----------+----------+----------+--------|
          |BOE Administrative    |       $3.8|      $3.1|      $2.5|    $1.3|
          |Costs                 |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |----------------------+-----------+----------+----------+--------|
          |       Revenue        |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |    (In Millions)     |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |----------------------+-----------+----------+----------+--------|
          |BOE Licensing Revenue |         $0|      $3.4|      $0.7|    $0.7|
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |----------------------+-----------+----------+----------+--------|
          |      NET COSTS       |       $3.8|     -$0.3|      $1.8|    $0.6|
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
          |                      |           |          |          |        |
           ----------------------------------------------------------------- 


          BOE Costs. According to BOE, the bill results in additional BOE  
          administrative costs to identify, notice, and license  








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          e-cigarette and tobacco device retailers and to suspend or  
          revoke retailer licenses for e-cigarette and tobacco device  
          sales to minors violations. These costs include:  e-cigarette  
          identification, notification, and registration; publication and  
          form revisions; compliance, inspection and enforcement tasks;  
          public inquiry responses; and related computer programming.


          BOE Revenue. The anticipated revenue would be generated by the  
          new licensing fee proposed in the bill to which e-cigarette  
          retailers would be subject. AB X2 11 (Nazarian) of the current  
          legislative session addresses related issues that might have an  
          impact on this bill.  AB X2 11 proposes to increase existing  
          licensing fees on tobacco retailers in light of reported  
          insufficient resources for the tobacco licensing program within  
          the BOE.  This bill creates a new licensing fee that mirrors the  
          existing fee by creating a one-time fee for e-cigarette  
          retailers who are not already tobacco retailers who have already  
          paid the one-time tobacco licensing fee of $100. 


          COMMENTS:  According to the author e-cigarette usage by youth is  
          exploding, for example, amongst high school students use has  
          shot up from 600,000 in 2013 to around two million in 2014.  The  
          author states this bill is about preventing an entire new  
          generation of nicotine addicts.  The author contends that  
          licensing e-cigarette retailers like tobacco retailers will  
          prevent young people from accessing e-cigarettes.  The author  
          points out that prohibiting the use of e-cigarettes in all the  
          places where smoking is currently prohibited is important  
          because, while the health effects of e-cigarettes are still  
          being determined, we do know that both inhaled and exhaled  
          e-cigarette aerosol contains particulate matter that has shown  
          to be potentially harmful to the lungs and that 10 chemicals in  
          the Prop 65 warning on chemicals that cause cancer and birth  
          defects have been found in e-cigarettes.  


          E-cigarettes are defined in California law as a device that can  








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          provide an inhalable dose of nicotine by delivering a vaporized  
          solution.  Typically, they are composed of a rechargeable,  
          battery-operated heating element, a replaceable cartridge that  
          may contain nicotine or other chemicals, and an atomizer that,  
          when heated, converts the contents of the cartridge into a  
          vapor.  This vapor can then be inhaled by the user.  These  
          products are often made to look like such products as  
          cigarettes, cigars, and pipes.  They are also sometimes made to  
          look like everyday items such as pens and USB memory sticks, for  
          people who wish to use the product without others noticing.


          The health effects of e-cigarettes have not been fully studied,  
          so consumers currently don't know the potential risks of  
          e-cigarettes, how much nicotine or other potentially harmful  
          chemicals are being inhaled during use, or whether there are any  
          benefits associated with using these products.  According to the  
          January 2015 State Health Officer's report on E-Cigarettes, A  
          Community Health Threat, e-cigarette use is rising rapidly.  The  
          report notes that while the long-term health impact resulting  
          from use of this product is presently unknown, it is known that  
          e-cigarettes emit at least 10 chemicals that are found on  
          California's Proposition 65 list of chemicals known to cause  
          cancer, birth defects, or other reproductive harm.


          The FDA has issued a proposed rule that would extend the  
          agency's tobacco authority to cover additional products that  
          meet the legal definition of a tobacco product, such as  
          e-cigarettes.  The agency intends to regulate electronic  
          cigarettes and related products in a manner consistent with its  
          mission of protecting the public health.  The FDA has not  
          completed its' evaluation of e-cigarettes for safety or  
          effectiveness.  When the FDA conducted limited laboratory  
          studies of certain samples, they found significant quality  
          issues that indicate that quality control processes used to  
          manufacture these products are substandard or non-existent.   
          They also found that cartridges labeled as containing no  
          nicotine contained nicotine and that three different electronic  








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          cigarette cartridges with the same label emitted a markedly  
          different amount of nicotine with each puff.  Experts have also  
          raised concerns that the marketing of products such as  
          e-cigarettes can increase nicotine addiction among young people  
          and may lead kids to try other tobacco products. 


          In California, use among young adults ages 18 to 29 tripled in  
          one year.  A 2015 study funded by the National Institute of  
          Health and published in the Journal of the American Medical  
          Association, compared tobacco use initiation among 222 students  
          who had used e-cigarettes, but not combustible tobacco products,  
          and 2,308 who had neither used e-cigarettes or combustible  
          tobacco products when initially surveyed at the start of ninth  
          grade.  During the first six months after being surveyed, 30.7%  
          of those who had used e-cigarettes started using combustible  
          tobacco products, such as cigarettes, cigars, and hookahs,  
          compared to only 8.1% of those who had never used e-cigarettes. 


          A study published July 27, 2015, in the Journal of Pediatrics  
          surveyed almost 2,100 California high school students, and found  
          that one-quarter had tried e-cigarettes.  Ten percent were  
          currently using e-cigarettes, and those current users where much  
          more likely than their peers to also smoke cigarettes.   
          California law prohibits anyone from selling or furnishing an  
          electronic cigarette to anyone under the age of 18.  There are  
          no restrictions on where they may be used.
                                               

          Numerous organizations support this bill, including the  
          California Primary Care Association, the California Medical  
          Association, the California Society of Addiction Medicine, and  
          Planned Parenthood Affiliates of California.  Supporters state  
          that they are deeply concerned that e-cigarettes are starting  
          kids on a lifetime of addiction to nicotine.  Supporters note  
          that there are more than 470 brands of e-cigarettes for sale,  
          offered in more than 7,700 flavors including Captain Crunch,  
          gummy bear, cotton candy, and Fruit Loops.  They also contend  








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          that youth are clearly the marketing targets, noting that in the  
          last two years youth usage rates for electronic cigarettes have  
          tripled.  Finally, supporters note that very little is known  
          about the health effects of electronic cigarettes or the aerosol  
          they release, and there is no evidence that show the aerosol  
          emitted by e-cigarettes is safe for non-users to inhale.  


          The Smoke-Free Alternatives Trade Association (SFATA) states  
          they are opposed to this bill unless it is amended to remove the  
          definition of e-cigarettes and vapor products as tobacco.  SFATA  
          states the classification of vapor products as tobacco is  
          grossly inappropriate given that the products clearly do not  
          contain tobacco.  SFATA contends that defining e-cigarettes and  
          vapor products is scientifically inaccurate, and appears to be  
          part of a broader and misleading campaign to equate vapor  
          products with tobacco, and has potentially unfair and  
          unwarranted tobacco tax-related implications.  Finally, SFATA  
          notes that California is the birthplace of innovative  
          technologies that continue to drive new markets and growing  
          industries and stifling innovation runs counter to the FDA,  
          which encourages manufacturers to use innovation to reduce risk  
          and exposure.




          Analysis Prepared by:                                             
                          Lara Flynn / HEALTH / (916) 319-2097  FN:  
          0002354

















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