BILL ANALYSIS Ó
AB 266
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Date of Hearing: May 20, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
266 (Cooley) - As Amended May 11, 2015
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill creates a state licensing and regulatory framework for
the cultivation, processing, distribution, testing,
recommendation, and sale of medical cannabis. The bill includes
provisions related to licensure; health and safety standards,
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which include medical cannabis testing and labeling;
record-keeping; security; transportation; taxation;
certification of employees; and physician recommendation and
advertising. Specifically, this bill:
1) Establishes parameters related to medical recommendation
of marijuana, requiring the Medical Board to prioritize for
investigation repeated acts of recommending marijuana for
medical reasons and adopt medical guidelines for its
administration and use, and prohibiting a physician from
recommending marijuana unless the person is a patient's
"attending physician," as defined by the Compassionate Use
Act.
2) Exempts from licensure a patient who cultivates or
possesses marijuana for personal medical use, or a primary
caregiver who cultivates, possesses or provides marijuana to
no more than five patients, as specified.
3) Establishes the Bureau of Medical Marijuana (bureau)
within the Department of Consumer Affairs, to enforce its
provisions. Requires the bureau, by July 1, 2017, to
promulgate regulations for implementation and enforcement,
as specified.
4) Creates the fee-based and continuously appropriated
Medical Marijuana Regulation Fund and the Special Account
for Environmental Enforcement; specifies all penalties are
deposited into the GF; and authorizes the bureau to
administer a grant program to allocate funds to state and
local entities to assist with administration and
enforcement.
5) Authorizes the bureau to conditionally license marijuana
cultivation sites, dispensing facilities, manufacturers, and
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transporters, and to collect related licensing fees.
Specifies protection of the public is the paramount priority
of the bureau.
6) Requires, beginning Jan. 1, 2017, the bureau to provide
for conditional licensure, as specified. Prohibits
unlicensed activity. Makes licensees subject to local
jurisdiction restrictions, including prohibitions on
operation.
7) Specifies medical marijuana transportation requirements,
including secure vehicles and minimum staffing.
8) Authorizes cities and counties to enforce this statute and
regulations adopted by the bureau, and provides this act
does not supersede in any way the City of Los Angeles's
Measure D.
9) Requires licensed facilities to implement specified
security measures, including access, storage, and inventory
controls. Requires annual audits of all licensees, the cost
of which is paid by licensees.
10) Authorizes boards of supervisors to impose, by ordinance,
applicable to voter approval requirements, a tax on
cultivation, storing, distributing or selling marijuana by a
licensee.
11) Establishes food safety, potency, and labeling standards
for edible marijuana products.
12) Requires the California Department of Public Health (CDPH)
to promulgate standards for certification of testing
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laboratories to perform random sample testing of all medical
marijuana products, and to certify testing laboratories.
13) Requires the Division of Labor Standards Enforcement in
the Department of Industrial Relations (DIR) to develop
competency and training certification standards for
cultivation and dispensing employees. Creates a one-time
$25 registration fee which is deposited in the newly created
Cannabis Certification Fund, and is available upon
appropriation for the cost of certifying employees.
14) Makes willful violations of this act punishable by a civil
fine of up to $35,000. Technical violations are punishable
by fines of up to $10,000.
FISCAL EFFECT:
Costs/Fees:
1)Significant annual costs, likely in excess of $20 million
(Medical Marijuana Regulation Fund/special funds), to create
the Bureau of Medical Marijuana Regulation (bureau) in the
Department of Consumer Affairs (DCA) to regulate the medical
marijuana industry. The bill specifies startup costs for
establishment of the bureau are to be advanced as a loan from
the DCA.
As a comparison, the budget of the Department of Alcoholic
Beverage Control (ABC) is approximately $60 million and 450
positions. The ABC is charged with licensing and regulating
persons and businesses engaged in the manufacture, importation
and distribution of alcoholic beverages, and administering the
provisions of the ABC Act to protect the health, safety,
welfare and economic well-being of the state. In addition, the
ABC Appeals Board has a $1 million budget.
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Based on funding and staffing levels of the ABC, and
considering the complexities of the undertaking and the
significant start-up costs of any new entity (adoption of
regulations and fee schedules, office equipment and expenses,
etc.), it appears reasonable to assume the costs of providing
statewide regulation for cultivation, manufacture, testing,
transportation, distribution, and sale of medical marijuana,
along with associated hearings, appeals, litigation and
enforcement, would conservatively be in the range of 35% of
the ABC budget.
2)This bill establishes unspecified registration fees. The costs
of creating and maintaining the bureau, as specified, within
DCA would require significant application fees. For purpose of
illustration, the average fee to cover the cost of a $20
million entity, if there were 2,000 annual applications, would
be $10,000 per application.
3)This bill creates a continuous appropriation from the Medical
Cannabis Regulation Fund to support the division. Continuous
appropriations are contrary to the general practice of this
committee, which prefers annual budget review of expenditures.
4)Unspecified revenues related to marijuana cultivation,
distributed from the Account to State Water Resources Control
Board, the Department of Fish and Wildlife, the Department of
Forestry and Fire Protection, the Department of Pesticide
Regulation, and the Department of Food and Agriculture to
support enforcement of environmental regulation.
5)One-time costs potentially exceeding $100,000 (Contingent Fund
of the Medical Board of California) to issue medical
guidelines related to marijuana. Ongoing costs to the
California Medical Board for investigating physicians who
overprescribe marijuana should be minor and absorbable.
6)Minor ongoing costs to DOJ for background checks, covered by
applicant fees.
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7)Unknown, potentially significant litigation costs to DOJ to
defend DCA. Costs would be reimbursed by DCA, presumably with
applicant fee revenue, if sufficient.
8)One-time costs to DIR to certify cultivation and dispensing
employees in the range of $1 million (GF), and $900,000
annually ongoing (fee-supported Cannabis Certification Fund /
GF or special funds).
9)One-time costs to CDPH, likely in the range of low millions
one-time, as well as costs in a similar range ongoing, to
certify laboratories for testing of marijuana (reimbursements
from Medical Marijuana Regulation Fund/potential GF or special
funds).
10) Unknown, potentially significant non-reimbursable
local law costs for enforcement of medical marijuana
regulation.
Tax and penalty revenue:
1)Unknown moderate local revenue increase, potentially in the
millions of dollars, from a permissive and unspecified local
tax.
2)Unknown GF revenue from fines of up to $35,000 for willful
violations and up to $10,000 for technical violations of the
act.
COMMENTS:
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1)Purpose. According to the author, after nearly 20 years of
access to medical marijuana without a reasonable framework for
distribution, it is time to put such a framework into place,
whether voters are called upon to decide in 2016 or not. The
status quo of periodic litigation, regulatory uncertainty, and
the lack of uniform health and safety standards is a
disservice to the public. This bill is sponsored by the League
of California Cities and the California Police Chiefs
Association.
2)Current Medical Marijuana Law. Possession and sale of
marijuana is a crime under federal law, and federal law
preempts state law. California patients who obtain a
physician's recommendation are protected from prosecution for
possessing or cultivating an amount of cannabis reasonably
related to their current medical needs, as are patients'
caregivers. Patients and caregivers who obtain a state MMP
identification card from their county health department are
protected from arrest and prosecution for possessing,
delivering, or cultivating cannabis. Patients and caregivers
who engage in these activities, however, remain liable to
federal arrest and prosecution, and those who operate
dispensaries face frequent federal enforcement actions. A
brief history of relevant law is below:
a) In 1996, California voters passed Prop 215, the
Compassionate Use Act (CUA), which prohibits prosecution
for growing or using marijuana if a person has an oral or
written recommendation of a physician.
b) In 2003, SB 420 (Vasconcellos, Statutes of 2003), the
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Medical Marijuana Program Act, created a voluntary
identification card that patients and caregivers could
obtain to protect them from arrest, and limited the amount
of marijuana that could be legally grown and possessed.
c) In 2005, the U.S. Supreme Court ruled in Gonzales v.
Raich (2005) that the federal government can enforce
marijuana prohibitions despite state medical marijuana law.
d) In 2010, the CA Supreme Court ruled in People v. Kelly
that the MMP section limiting quantities of cannabis is
unconstitutional because it amends a voter initiative.
e) In 2013, the CA Supreme Court held medical marijuana
statutes do not preempt a local ban on facilities that
distribute medical marijuana, and that municipalities may
prohibit such conduct as a public nuisance (City of
Riverside v. Inland Empire Patient's Health & Wellness
Center).
f) Also in 2013, the U.S. Department of Justice (USDOJ)
issued guidance that stated, "In jurisdictions that have
enacted laws legalizing marijuana in some form and that
have also implemented strong and effective regulatory and
enforcement systems to control the cultivation,
distribution, sale, and possession of marijuana, conduct in
compliance with those laws and regulations" is less likely
to threaten federal priorities which include the most
significant public threats, including disrupting gang and
cartel activities, preventing revenue diversion, etc. DOJ
states where strong state and local regulatory systems
exist, "enforcement of state law by state and local law
enforcement and regulatory bodies should remain the primary
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means of addressing marijuana-related activity."
California is the only state that permits medical marijuana
in the absence of a robust statewide regulatory system;
half of all states have some such system.
1)Support. This bill is primarily supported by law enforcement
and local governments. United Food and Commercial Workers
Union - Western States Council and California Communities
United Institute also support this bill. Supporters believe
this bill establishes an improved regulatory structure to
ensure medical marijuana can be provided to patients with
legitimate medical needs, in a manner that comports with the
needs of law enforcement, local governments, patient
advocates, local community organizations, and medical
professionals.
2)Opposition. Advocates for marijuana legalization and marijuana
growers oppose this bill. Opposition believes the bill's
regulatory approach is excessively burdensome and costly, and
will not improve patient access and public safety.
3)Related Legislation.
a) AB 34 (Bonta and Jones-Sawyer), also on today's
calendar, creates a similar statewide regulatory framework,
but tasks the ABC with most licensure duties instead of
DCA, and sets up divisions within CDPH and the California
Department of Agriculture to oversee manufacture and
cultivation, respectively.
b) AB 243 (Wood), also on today's calendar, requires
medical marijuana cultivation (MMC) to be conducted in
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accordance with state and local laws and best practices, as
specified, and would require state agencies to address
environmental impacts of MMC and coordinate with local
governments in enforcement efforts, and establishes a MMC
permitting system.
c) SB 643 (McGuire), pending in the Senate Appropriations
Committee, establishes within DCA a Bureau of Medical
Marijuana Regulation, under the supervision and control of
the Chief of the Bureau of Medical Marijuana Regulation,
and requires the bureau to license and regulate dispensing
facilities, cultivation sites, transporters, and
manufacturers of medical marijuana and medical marijuana
products, subject to local ordinances, and enforced
primarily at the local level.
1)Prior Legislation.
a) AB 1262 (Correa) of 2014, which established a licensing
and regulatory framework for the cultivation, processing,
transportation, testing, recommendation and sale of medical
marijuana to be administered by the Department of Consumer
Affairs (DCA) and enforced primarily at the local level,
was held on the Suspense File of this committee.
b) AB 1894 (Ammiano), 2014, which established the Medical
Cannabis Regulation and Control Act to regulate the
cultivation, testing, transportation, distribution, and
sale of medical cannabis, and created the Division of
Medical Cannabis Regulation (division) in the ABC, failed
passage on the Assembly floor, 26-33.
c) AB 473 (Ammiano), 2013, which created the Division of
Medical Marijuana Regulation and Enforcement within the ABC
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to regulate cultivation, testing, transportation,
distribution, and sale of medical marijuana failed passage
on the Assembly floor (35-37).
d) AB 2312 (Ammiano), 2012, which established the Medical
Marijuana Regulation and Control Act, authorizing local
taxes on medical cannabis and creating a board to regulate
the medical cannabis industry, was never heard in the
Senate.
7)Staff Comments.
a) Fee Revenue. The DIR is tasked with certifying and
annually renewing registration for cannabis workers. The
bill establishes a fee not to exceed $25 for initial
registration, but it specifies there shall not be a fee for
the annual renewal of registration. This puts pressure on
the GF or special funds to fund whatever ongoing costs are
incurred for registration in absence of fee support.
Similarly, fee funding for certifying testing laboratories
is unclear. It does not authorize CDPH to charge
certification fees to testing laboratories. The Laboratory
Field Services program within CDPH licenses, registers, and
certifies clinical laboratories, and charges fees that are
specified in statute. CDPH does not appear to have broad
fee authority that would allow them to apply existing fees
or charge new fees for this new mandated activity. Staff
suggests fee authority be clarified, and provided in a
manner sufficient to fund these regulatory activities
without GF or other special funds support.
b) Technical amendments. In different sections, this bill
makes reference to both the bureau and CDPH with respect to
certification of laboratories. This language should be
revised to ensure consistent references to CDPH for this
purpose, if that is the author's intent.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
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