BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 243 |Hearing |7/8/15 |
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|Author: |Wood |Tax Levy: |Yes |
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|Version: |7/3/15 |Fiscal: |Yes |
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|Consultant|Favorini-Csorba and Grinnell |
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MEDICAL MARIJUANA CULTIVATION
Enacts a new regulatory framework for the cultivation of medical
marijuana and authorizes the Board of Equalization to tax
medical marijuana cultivation.
Background and Existing Law
The Compassionate Use Act (CUA) and SB 420. In 1996, voters
approved Proposition 215, known as the Compassionate use Act of
1996 (CUA). The CUA allowed patients and primary caregivers to
obtain and use medical marijuana, as recommended by a physician,
and prohibited physicians from being punished or denied any
right or privilege for making a medical marijuana recommendation
to a patient. In 2003, SB 420 (Vasconcellos, 2003) allowed
patients and primary caregivers to collectively and
cooperatively cultivate medical marijuana, and established a
medical marijuana card program for patients to use on a
voluntary basis. However, since the passage of Proposition 215
and SB 420, the state has not adopted a framework to provide for
appropriate licensure and regulation of medical marijuana. In
addition, despite the CUA and SB 420, marijuana is still illegal
under state and federal law.
Local Authority Over Medical Marijuana. By exempting qualified
patients and caregivers from prosecution for using or from
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collectively or cooperatively cultivating medical marijuana, the
CUA and SB 420 essentially authorized the cultivation and use of
medical marijuana. These laws have triggered the growth of
medical marijuana dispensaries in many localities, and in
response, local governments have sought to exercise their police
powers to regulate or ban activities relating to medical
marijuana. After numerous court cases and years of uncertainty
relating to the ability of local governments to control medical
marijuana activities, particularly relating to the ability to
control the zoning, operation, and existence of medical
marijuana dispensaries, the California Supreme Court (Court), in
City of Riverside v. Inland Empire Patients (2013) 56 Cal. 4th
729, held that California's medical marijuana statutes do not
preempt a local ban on facilities that distribute medical
marijuana. The Court held that nothing in the CUA or SB 420
expressly or impliedly limited the inherent authority of a local
jurisdiction, by its own ordinances, to regulate the use of its
land, including the authority to provide that facilities for the
distribution of medical marijuana will not be permitted to
operate within its borders. Accordingly, many California
jurisdictions, roughly estimated by the League of California
Cities at 50% pending completion of a statewide survey, ban the
cultivation and sale of medical marijuana altogether.
Environmental Concerns. According to some estimates, there are
30,000 cultivation sites in the tri-county area of
Humboldt-Mendocino-Trinity, and an additional 10,000 or more
cultivation sites elsewhere in California. As a result,
California land, watersheds, and some species have been
significantly damaged by some cultivation operations. "Trespass
grows", which cultivate marijuana without permission on public,
tribal or privately owned land, have been associated with
wildlife poisoning, use and dumping of fertilizers and
pesticides, illegal water diversions and water pollution,
logging and land disturbance, and severe problems with garbage
and human waste. These industrial-size marijuana grows, taking
place in the National Forests and on private timberland in some
of the state's most remote and ecologically sensitive areas, are
the subject of a recent study by the California Department of
Fish and Wildlife (CDFW), "Impacts of Surface Water Diversions
for Marijuana Cultivation on Aquatic Habitat in Four
Northwestern California Watershed," which showed that during
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drought conditions, water demand for marijuana cultivation
exceeded stream flow in three of four study watersheds and that
diminished stream flow from this water-intensive activity is
likely to have lethal to sub-lethal effects on salmon and
steelhead trout, which are listed under the state and federal
Endangered Species Acts, and cause further decline of sensitive
amphibian species.
In response, the Budget Act of 2014 appropriated resources for
both CDFW and the State Water Resources Control Board to reduce
environmental damage caused by marijuana cultivation on private
and high value state-owned public lands in California. A total
of $3.3 million was allocated to the two agencies to create a
multi-disciplinary Marijuana Task Force, and to implement a
priority-driven approach to address the natural resources
damages from marijuana cultivation on private lands in northern
California and on high conservation value public lands. This
program was authorized as a pilot program for five years.
Some organizations want to remedy the environmental effects of
past marijuana cultivation and regulate medical marijuana
cultivation more consistently throughout the state.
Proposed Law
Assembly Bill 243 prohibits the cultivation of medical marijuana
without first obtaining a license or permit from both the state
and the relevant city or county, or city and county, in which
the cultivation will occur. To carry out this prohibition, AB
243 establishes new regulatory requirements for medical
marijuana cultivation and taxes marijuana cultivation, as
described below. However, qualified patients and primary
caregivers, as defined under Proposition 215, may cultivate
marijuana without state or local licenses, unless a local
government imposes a separate requirement.
State Regulation of Cultivation. The bill creates a Division of
Medical Cannabis Cultivation (the Division) within the
California Department of Food and Agriculture (CDFA) to oversee
implementation of the new state regulatory program and issue
state licenses for cultivation. The Division is headed by a
gubernatorial appointee. The bill charges the Division with
establishing a program to uniquely identify medical marijuana
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plants, in consultation with the State Water Resources Control
Board and the Department of Fish and Wildlife. The program must
issue a unique identifier to each plant that enables
identification of permitted plants as they are being cultivated.
The unique identifier must be attached to the base of the
marijuana plant. In implementing the program, the Division must
consider water use and environmental impacts. The Division may
also charge a reasonable fee to cover the cost of issuing the
unique identifiers and monitoring, tracking, and inspecting
permitted plants.
Local Authority. AB 243 also authorizes a city, county, or city
and county, through its current or future land use regulations
or ordinance, to issue or deny permits that allow the
cultivation of medical marijuana, with the condition that the
permit does not become active until the cultivator receives a
state license and final local approval. The local government
may inspect the site proposed for cultivation prior to issuing
the permit. AB 243 prohibits a cultivator from applying for a
state license without receiving the required local approval, or
if the local government has prohibited medical marijuana
cultivation.
If the relevant local government has not implemented a local
permitting system by March 1, 2016, the Division becomes the
sole regulator in that jurisdiction. However, the bill also
allows a local government to choose to administer the unique
identification program in place of the state by adopting a
resolution or ordinance before July 1, 2018. In addition, the
state program does not apply in cities or counties that have an
existing program for the unique identification of marijuana
plants.
Taxing Provisions. AB 243 directs the Board of Equalization
(BOE) to administer and collect a tax on cultivating medical
marijuana at a rate of $50 per plant that has a unique
identifier, administered according to the Fee Collections
Procedures Law. Medical marijuana distributors collect the tax
as a separately stated item from licensed cultivators, and may
retain reimbursement for its costs according to regulations BOE
will prescribe. The cultivator is liable for the tax until the
distributor pays BOE, and the tax is due and payable on the last
day of the month following each quarterly period. Distributors
must register with BOE and supply specified information, and pay
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the tax electronically. The measure contains provisions for BOE
to implement the tax, including authority to issue regulations.
The bill bars cultivators from selling marijuana products or any
other sales of medical marijuana to anyone other than a licensed
distributor, and cultivators cannot sell plants without unique
identifiers. BOE must deposit revenues less administrative
costs in the Marijuana Production and Environment Mitigation
Fund, which the bill creates. The bill continuously
appropriates the revenues to BOE and specifies that BOE must
distribute the $50 per plant charge in the following manner:
$5 to the Division to administer the unique identifier
program;
$15 to the division for a competitive grant program that
allocates funds to state and local law enforcement agencies
to prosecute illegal marijuana cultivation. A local law
enforcement agency is only eligible for these funds if its
local government chooses to administer the unique
identifier program.
$15 to the California Natural Resources Agency to fund a
competitive grant program for environmental cleanup and
restoration. Of that $15, at least 35% must be used on
public lands and 20% must be used on private lands. The
agency must develop guidelines for the grant process by
April 1, 2016.
$15 to the multiagency task force to address the
environmental impacts of cannabis cultivation.
Required Reporting. The bill requires several reports to be
submitted by January 1, 2021, including reports by:
BOE, on the total amount of revenue collected from the
tax on cultivation.
The multiagency task force, on the progress of the
project to address environmental impacts of cannabis
cultivation and the use of funds received from the tax.
The California Department of Justice, on the use of
funds provided by the tax to state and local law
enforcement
The California Natural Resources Agency, on the use of
funds for environmental restoration.
Environmental Regulation. AB 243 states the Legislature's intent
that the multiagency task force should continue on a permanent
basis. It also directs state agencies to address the
environmental impacts of medical marijuana cultivation and
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coordinate with cities and counties, where appropriate, on law
enforcement efforts. The bill also requires all Regional Water
Quality Control Boards, and authorizes the State Water Resources
Control Board (SWRCB) to take various regulatory actions to
address discharges of waste resulting from medical marijuana
cultivation and the associated environmental effects.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . The cultivation of marijuana has caused
significant damage to California's natural environment. The
potential for future damage is made all the greater by the lack
of regulation of the medical marijuana industry, and in
particular, the cultivation of medical marijuana. AB 243
creates a regulatory framework around cultivation. The unique
identification program allows for the tracking of medicinal
marijuana plants to ensure that marijuana is not being diverted
to the black market and also allows law enforcement to determine
which plants are legally being cultivated for medical purposes
and which are being illegally cultivated. This enables swifter
eradication actions against illegal grows while avoiding the
accidental eradications of legal medicinal plantings.
Furthermore, AB 243 establishes a tax that meets an urgent need
for funding to address the impacts of illegal marijuana
cultivation. This need is made all the more dire by the current
drought, which exacerbates the harm caused by the illegal
diversion of water to cultivate marijuana.
2. Home Rule . AB 243 prohibits a local government from deciding
to administer the unique identification program after July 1,
2018. This limits local governments' ability to adjust to
changes to a relatively nascent industry. Although currently
concentrated in the "Emerald Triangle," future policy changes
and other factors could significantly change where marijuana is
cultivated in the state after the July 1, 2018 date has passed.
As a result, some jurisdictions that initially saw no need to
administer the program themselves may be prevented from
responding to emerging marijuana-related challenges at the local
level. Furthermore, the measure is unclear on the scope of
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CDFA's regulatory authority and how this authority interacts
with local governments' exercise of their police powers. Would
their authority be limited to simply issuing unique identifiers
to anyone who paid the fee? Or, when considering water use and
environmental impacts, would CDFA be able to place additional
conditions on the state license, such as to specify the
locations where marijuana can be cultivated or how it is grown?
In jurisdictions where no local agencies chose to act by July 1,
2018, would CDFA regulations completely preempt local authority
to regulate marijuana cultivation? The bill raises serious
questions about whether state authority should trump local
decisions on the issue of medical marijuana.
3. Let's be clear . The measure is ambiguous on several points,
including the following:
AB 243 provides that the regulatory program is to be
overseen by an appointee within CDFA. However, the taxing
provisions of the measure would be implemented by the Board
of Equalization. It is unclear whether an appointee at
CDFA is intended to direct the BOE taxing effort.
It is unclear whether this measure is intended to apply
to all cities and counties in the state. AB 243 may not
apply to charter cities, which are afforded additional
control over their "municipal affairs" by the California
Constitution, because it does not include findings and
declarations identifying marijuana cultivation as a matter
of statewide concern.
The bill does not clearly state that receiving a unique
identifier is sufficient-or even necessary-for a cultivator
to receive a license from the state.
4. Redundant . AB 243 states that local governments may use their
current and future land use regulatory authority to issue or
deny cultivation permits. However, local agencies already
possess this authority under the police power granted to them by
the Constitution. Thus it is unclear what additional powers AB
243 grants local governments. The bill also adds unnecessary
complication and administrative costs for local governments by
requiring a "conditional permit" at the local level that only
goes into effect when a state license is issued. Because AB 243
already prohibits the cultivation of marijuana without both a
state license and local permit, where applicable, a cultivator
who only possesses a local permit could not cultivate marijuana,
regardless of whether the local permit was conditional or final.
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5. Taxing . AB 243 seeks to apply a tax infrastructure on
medical marijuana cultivation, a currently unregulated sector of
the economy. BOE would have to identify every cultivator and
distributor in the state, register them, and enforce the tax on
a set of taxpayers that currently lack a relationship with BOE
in a manner sufficient to prevent noncompliance by June 1, 2016.
However, the measure's tax provisions are sparse, and don't
contain needed definitions and other provisions necessary for
BOE to implement the bill even if it were practically possible
to impose a tax regime on a currently black market.
Additionally, implementing such a tax could be very costly to
administer because of the required spending on personnel,
equipment, and information technology. Furthermore, although
this bill's intent is to raise funds quickly to address the
environmental impacts of cultivation, it is unclear whether this
tax will begin collecting funds as quickly as hoped. There are
other sources of funding, such as the General Fund or bond funds
made available by a recently passed state water bond that could
be available to fund restoration sooner if the Legislature
determined that this was more important than other priorities.
6. Related legislation . There are two other medical marijuana
bills progressing through the Legislature that establish
comprehensive regulatory programs and levy fees on medical
marijuana. Senate Bill 643 (McGuire), which the Committee
passed earlier this year by a vote of 5-1, enacts the Medical
Marijuana Public Safety and Environmental Protection Act. SB
643 is currently pending in the Assembly Business and
Professions Committee. SB 643 creates a regulatory structure
for many aspects of medical marijuana in California, but differs
from AB 243 in many respects, including that it:
Establishes an office within the Business, Consumer
Services, and Housing Agency to license and regulate
dispensing facilities, cultivation sites, transporters, and
manufacturers of medical marijuana and medical marijuana
products, and describes a comprehensive set of rules to
govern those activities, rather than establishing an office
within CDFA to solely regulate cultivation.
Allows local jurisdictions to levy local taxes, subject
to voter approval, on the privilege of cultivating,
dispensing, producing, processing, preparing, storing,
providing, donating, selling, or distributing marijuana,
rather than imposing a state tax on cultivation.
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Distributes funding to a wide range of state
environmental agencies to enforce regulations related to
the environmental impact of licensed cultivation sites,
rather than directing the SWRCB and CDFW to address the
impacts and continue their pilot project.
Clarifies that it does not supersede local zoning
requirements or enforcement of local licensing
requirements.
AB 266 (Bonta), which the Committee will hear on July 15, enacts
the Medical Cannabis Regulation and Control Act. AB 266 also
creates a broad regulatory structure for many aspects of medical
marijuana in California, and differs from AB 243 in many
respects, including that it:
Establishes multiple offices in various state agencies,
under the direction of a newly created Governor's Office of
Medical Cannabis Regulation, for the regulation of medical
marijuana, including within the BOE, CDFA, and Department
of Public Health. AB 243 creates the same office within
CDFA, but not the other offices created by AB 266.
Provides for the regulation and licensing of medical
marijuana dispensaries, transporters, dispensaries,
manufactures, and certification of employees and testing
laboratories in addition to regulating and licensing
cultivation, and authorizes the collection of licensing
fees.
Requires the adoption of health and safety standards for
medical cannabis, as well as standards for driving under
the influence of marijuana.
Allows local jurisdictions to levy local taxes, subject
to voter approval, on the privilege of cultivating,
dispensing, producing, processing, preparing, storing,
providing, donating, selling, or distributing marijuana,
rather than imposing a state tax on cultivation.
Provides that nothing in the Act prevents a local
government from adopting or enforcing an ordinance or other
law that bans or regulates the location, operation, or
establishment of a licensee or other person that engages in
commercial cannabis activity.
Requires DFW to promulgate regulations for the
protection of any species affected by cultivation activity,
and regulations for any cultivation-related development,
including alteration of waterways, in addition to requiring
SWRCB to develop regulations on discharges
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7. Double-referred . The Senate Rules Committee ordered a
double-referral of AB 243 --- first to the Senate Governance and
Finance Committee, which has jurisdiction over bills relating to
local agencies' land use authority, and then to the Senate
Environmental Quality Committee, which has jurisdiction over
bills relating to water quality, toxic substances, pesticides,
and waste discharges.
8. Urgency . As an urgency measure, AB 243 would take effect
immediately upon signature of the Governor. The bill states
that an urgency measure is necessary because of the need to
address the damage done by illegal marijuana cultivation at the
earliest time possible.
9. Tax increase . Because the measure would result in an
increase in tax on any taxpayer according to Section 3 of
Article XIIIA of the California Constitution, Legislative
Counsel has keyed the measure a 2/3 vote.
10. Mandate . The California Constitution generally requires the
state to reimburse local agencies for their costs when the state
imposes new programs or additional duties on them. According to
the Legislative Counsel's Office, AB 243 creates a new
state-mandated local program because it increases the duties of
local officials. AB 243 says that if the Commission on State
Mandates determines that it creates a state-mandated local
program, the state must reimburse local agencies by following
the existing statutory process for mandate claims.
Assembly Actions
Assembly Agriculture Committee: 6-2
Assembly Environmental Safety and Toxic Materials Committee:6-0
Assembly Appropriations Committee: 13-1
Assembly Floor: 60-15
Support and
Opposition (7/2/15)
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Support : California League of Conservation Voters; California
Trout; County of Sonoma Board of Supervisors; County of Trinity
Supervisor John Fenley, District 5; Emerald Growers Association;
Sierra Club California; Small Farmers Association; Sonoma County
Water Agency; Trust for Public Land.
Opposition : Urban Counties Caucus.
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