BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   September 8, 2015


                            ASSEMBLY COMMITTEE ON FINANCE


                                Shirley Weber, Chair


          ABX2 8  
          (Wood) - As Introduced July 16, 2015


          SUBJECT:  Tobacco products: minimum legal age.


          SUMMARY:  Specifically, this bill:  


             1)   Raises the minimum legal age to purchase and/or consume  
               tobacco products from 18 years of to 21 years of age. 


             2)   Applies the 21-years of age restriction to all  
               provisions of the Stop Tobacco Access to Kids Enforcement  
               Act (better known as the STAKE Act).


          EXISTING LAW:  


             1)   Requires the state to determine the rate at which  
               individuals under 18 years of age can illegally purchase  
               tobacco products. The Department of Public Health (DPH)  
               conducts random inspections at about 750 retail locations  
               annually to determine a statewide average rate at which  
               retailers are not in compliance with state and federal law.  
               The total annual cost to conduct the current survey is  
               $400,000. 








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             2)   Requires the DPH to enforce the law prohibiting the sale  
               of tobacco products to minors by conducting compliance  
               inspections.  The current annual cost for the DPH's  
               enforcement program is $1.6 million per year. 



             3)   Requires the Board of Equalization (BOE) to license  
               tobacco wholesalers and retailers. The purpose of this  
               licensing requirement is to facilitate the collection of  
               state tobacco taxes and prevent tax evasion. Tobacco  
               products are subject to both a specific excise tax on  
               tobacco products as well as the general Sales and Use Tax.


          FISCAL EFFECT:  


             1.   This bill would likely result in an ongoing, annual,  
               cost increase of several hundred thousand dollars to  
               support the DPH's expected workload increase associated  
               with enforcement, inspections and surveying of retailers  
               participating in the sell of tobacco products (General fund  
               or the Cigarette and Tobacco Tax Surcharge Fund). 



             2.   Local governments may incur new costs associated with  
               this bill related to crimes and infractions. Under the  
               California Constitution, such costs are not reimbursable by  
               the state.

             3.   According to the BOE, assuming fiscal year 2016-17 will  
               be the first complete year of the measure's impact, total  
               excise tax and sales tax revenues would decline by $68.4  
               million for FY 2016-17.  Specifically, for FY 2016-17,  








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               cigarette excise tax revenue losses are forecast to be  
               $37.6 million, tobacco products excise tax losses would be  
               $5.5 million, and related sales and use tax losses would be  
               $25.3 million. 





                  a.        The BOE notes that this revenue estimate does  
                    not account for any further changes in economic  
                    activity that may or may not result from enactment of  
                    the bill.
          COMMENTS:  This bill would undoubtedly create new  
          distinguishable costs for the state.  However, it would also  
          result in unquantifiable, but significant, health care cost  
          savings for the state.  





          According to the Centers for Disease Control and Prevention,  
          estimates of annual direct health care costs related to smoking  
          are between $130 billion and $180 billion per year, nationally.  
          This bill is likely to reduce health care costs, by reducing  
          tobacco use rates. If the long-term reduction in the expenditure  
          of health care costs relating to smoking is proportional to the  
          reduction in the use rate, total direct health care costs in the  
          state would be reduced by as much as $2 billion per year in the  
          long-run. A significant portion of those savings would likely  
          accrue to public payers such as the Medi-Cal program and  
          CalPERS. 





          REGISTERED SUPPORT / OPPOSITION:








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          Support


          American Cancer Society Cancer Action Network


          American Heart Association/American Stroke Association
          American Lung Association in California
          Association of Northern California Oncologists
          California Academy of Preventive Medicine
          California Black Health Network
          California Chronic Care Coalition
          California Dental Association
          California Medical Association
          California Optometric Association
          California Pan-Ethnic Health Network
          California Primary Care Association
          California State Association of Counties
          California Society of Addiction Medicine
          Community Action Fund of Planned parenthood of Orange and San  
          Bernardino Counties
          First 5 Association of California
          Health Access California
          Health Officers Association of California
          Medical Oncology Association of Southern California, Inc.
          Planned Parenthood Action Fund of the Pacific Southwest
          Planned Parenthood Advocacy Project Los Angeles
          Planned Parenthood Affiliates of California
          Planned Parenthood Mar Monte


          Planned Parenthood Northern California Action Fund
          Santa Clara County Board of Supervisors










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          Service Employees International Union, California





          Opposition


          American Legion-Department of California


          AMVETS-Department of California
          Association of the United States Army, California State  
          Commanders Veterans Council
          Fleet Reserve Association
          Jewish War Veterans, Department of California
          Military Officers Association of America, California Council of  
          Chapters
          Military Order of the Purple Heart, Department of California
          Vietnam Veterans of America - California State Council


          Analysis Prepared by:Marvin Deon/ FINANCE /916-319-2099