BILL ANALYSIS Ó ABX2 8 Page 1 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. ABX2 8 Page 2 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, ABX2 8 Page 3 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: ABX2 8 Page 4 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 ABX2 8 Page 5 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