BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 266 |Hearing |7/15/15 |
| | |Date: | |
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|Author: |Bonta |Tax Levy: |No |
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|Version: |7/13/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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Medical cannabis
Enacts the Medical Cannabis Regulation and Control Act, creating
statewide medical cannabis regulation led by the Office of
Medical Cannabis Regulation in the Governor's Office.
Background and Existing Law
California's estimated $1 billion medical marijuana industry
exists amid a conflict between federal and state law, and within
state law itself: current federal and state law prohibits the
possession, possession with intent to sell, cultivation, sale,
transportation, importation, or furnishing of marijuana;
however, under the Compassionate Use Act (CUA) qualified
patients with specified illnesses or their qualified caregivers
cannot be prosecuted for possessing or cultivating medical
marijuana upon the written or oral recommendation or approval of
an attending physician (Proposition 215, 1996).
The United States Supreme Court held in Gonzalez vs. Raich (125
S.Ct. 3195, 2004) that California could not exempt marijuana for
medicinal use from the criminal possession statute in
contravention of federal law, ruling that the Federal Control
Substances Act preempts any state attempt to decriminalize
marijuana. Although federal agencies may enforce federal law in
California notwithstanding the CUA, state law enforcement is not
required to assist federal agencies doing so. In 2009, the
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United States Department of Justice (USDOJ) issued a memorandum
to its 93 U.S. Attorneys informing them that prosecuting
individuals who use medical marijuana in compliance with state
laws should not be a priority. However, federal law enforcement
agencies have continued to conduct raids on marijuana
dispensaries, including the four U.S. Attorneys in California
warning landlords of dozens of marijuana dispensaries throughout
the state in 2011, accusing their tenants of using the CUA as a
front for large-scale drug sales. On August 29, 2013, the USDOJ
updated its guidance to state that while illegal distribution
and sale of marijuana is a serious crime that provides a
significant source of revenue to large-scale criminal
enterprises, gangs, and cartels, USDOJ is committed to using its
limited investigative and prosecutorial resources to address the
most significant threats. The guidance also encouraged states
to enact strong and effective regulatory and enforcement
programs.
The CUA encourages federal and state governments to implement a
plan to provide for the safe and affordable distribution of
medical marijuana to those who need it, but also states that it
is not to be construed to supersede legislation prohibiting
conduct that endangers others or to condone the diversion of
medical marijuana for nonmedical purposes. The Legislature
enacted subsequent legislation, (SB 420, Vasconcellos, 2003)
which:
Provides that qualified patients, persons with valid
identification cards, and the designated primary caregivers
of qualified patients and persons with identification
cards, who associate within the State of California in
order to collectively or cooperatively cultivate marijuana
for medical purposes, shall not solely on the basis of that
fact be subject to state criminal sanctions under existing
law.
Directs the Department of Public Health (DPH) to
administer the Medical Marijuana Program, where patients
apply for identification cards when deemed appropriate by
their attending physician.
Requires county health departments to issue
identification cards to patients and primary caregivers who
voluntarily register. Cards are valid for one year and may
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be renewed annually.
The Legislature's authority to regulate medical marijuana is
limited; unless an initiative expressly authorizes the
Legislature to amend an initiative, only the voters may change
it. In People v. Kelly (47 Cal.4th 1008, 2010), the California
Supreme Court ruled that SB 420's legislative restriction on the
number of plants a qualified patient may possess was
unconstitutional because it interfered with the rights
established by the CUA. Under Kelly, the Legislature may
clarify or expand the rights established in Proposition 215, but
it may not enact legislation that interferes with the use of
marijuana for medicinal purposes.
I. Local Ordinances. The California Constitution allows a
city to "make and enforce within its limits, all local, police,
sanitary and other ordinances and regulations not in conflict
with general laws, known as the police power of cities." It is
from this fundamental power that local governments derive their
authority to regulate land through planning, zoning, and
building ordinances, thereby protecting public health, safety
and welfare. Local agencies also use this police power to abate
nuisances to protect public health. Under this power, many
cities in California permanently banned dispensary operations,
while others have adopted temporary land use moratoria, adopted
regulations permitting a limited number of dispensaries, or
otherwise regulated the sale, storage, and delivery of medical
marijuana. Some local agencies limit felons from appearing on
property that houses a dispensary operation. Additionally, many
other local agencies in California ban, limit, or otherwise
regulate both outdoor and indoor cultivation of medical
marijuana.
State law, including initiatives, generally preempt local
ordinances when the two conflict. However, for medical
marijuana dispensaries, Courts have supported local agencies
against claims that ordinances conflict with the CUA or SB 420.
The Fourth Appellate District Court ruled in City of Claremont
v. Kruse (177 Cal. App. 4th 1153, 2009) that because they are
not mentioned in the text or history of the CUA, local
regulation is allowed, so cities can issue a temporary
moratorium on issuing permits and licenses to medical marijuana
dispensaries, or enforce licensing and zoning requirements
applicable to them. The California Supreme Court upheld local
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dispensary bans in City of Riverside v. Inland Empire Patients
Health and Welfare Center (Case S198638, 2013) and the Third
Appellate District Court upheld local cultivation bans in Maral
v. City of Live Oak (Case C071822, 2013).
In 2014, voters in the City of Los Angeles approved Measure D,
which banned medical marijuana businesses. The measure
immunized 135 businesses operating before the city's 2007
moratorium was enacted from prosecution, thereby allowing them
to continue to operate under specified restrictions, while
shutting down dispensaries opened after 2007.
II. Local Taxes. Section Five of Article XI of the California
Constitution allows charter cities to levy taxes which haven't
been preempted by state or federal governments. The Government
Code also allows general law cities, but not counties, to levy
any tax that a charter city can unless state law limits or
prohibits such a tax. Article XIIIA of the California
Constitution requires 2/3 voter approval when a local agency
wants to impose or increase a special tax, or majority vote for
general taxes.
Many cities in California tax marijuana cultivation or
dispensary sales. The City of Arcata applies a 45 percent tax
on residences that use more than 600 percent of the energy
baseline, while the City of Desert Hot Springs imposes a tax of
$25/square foot for marijuana gardens under 3000 sq. ft. The
City of Rancho Cordova requires all marijuana grows to pay $600
per square foot for up to 25 square feet of growing space. Many
cities impose taxes as a percentage of a dispensary's revenue.
With 2/3 vote, cities can use revenue for specific purposes,
such as paying costs of regulating medical marijuana cultivation
and sales, or can use revenues for general purposes with a
majority vote.
III. Professional Regulation. Current law directs the Department
of Consumer Affairs to regulate many businesses and professions
to ensure public health, safety, and welfare, including the
Medical Board, which licenses and regulates the conduct of
physicians and surgeons. The Medical Board prioritizes its
investigative and prosecutorial resources to address the
greatest threats of harm, and state law sets forth a list of
priorities for Board enforcement. While current law specifies
that prescribing, dispensing, or furnishing dangerous drugs
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without an appropriate prior examination and a medical
indication by a physician constitutes unprofessional conduct,
the CUA bars punishment or denying any right or privilege to
physicians for having recommended medical marijuana/medical
cannabis to a patient. Additionally, current law deems
unprofessional conduct the employing, aiding, or abetting of any
unlicensed person or any suspended, revoked, or unlicensed
practitioner to engage in the practice of medicine or any other
mode of treating the sick or afflicted.
IV. Other State Regulation and State Taxation. For the most
part, the CUA and SB 420 are state law for medical marijuana.
However, the Legislature prohibited any medical marijuana
cooperative, collective, dispensary, operator, establishment, or
provider, as specified, from being located within 600 feet of a
school (AB 2650, Buchannan, 2010), and further clarified the
authority of local agencies to adopt and enforce ordinances
regulating the location, operation, or establishment of a
medical marijuana cooperative or collective (AB 1300,
Blumenfield, 2011). In February 2007, BOE issued a Special
Notice confirming its policy of subjecting medical marijuana
transactions to the Sales and Use Tax, as well as its
requirement that businesses engaging in such transactions hold a
Seller's Permit. A permit does not allow individuals to make
unlawful sales, but instead merely provides a way to remit any
sales and use taxes due. Additionally, in 2008, then Attorney
General Brown issued Guidelines for the Security and
Non-Diversion of Marijuana Grown for Medical Use, which set
parameters for qualified patients and caregivers, as well as the
lawful operation of medical marijuana collectives and
cooperatives. While not statute, courts gave the guidelines
weight when adjudicating cases, according to legal experts on
the subject. The author wants to respond to the need for a
strong statewide regulatory and enforcement program by enacting
a comprehensive regime for medical cannabis law in California.
Proposed Law
Assembly Bill 266 enacts the Medical Cannabis Regulation and
Control Act, which creates a new structure for statewide medical
marijuana regulation, led by the Office of Medical Cannabis
Regulation located in the Governor's Office.
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Office of Medical Cannabis Regulation (OMCR). AB 266 creates,
within the Office of the Governor, the Governor's Office of
Medical Cannabis Regulation under the supervision of the
Director of the Office of Medical Cannabis Regulation. The bill
grants the office overall executive authority and responsibility
for implementing the Act, and directs the office to coordinate
and provide oversight of all activities under the Act, including
tracking medical cannabis, medical cannabis products, and
licensees. The OMCR Director can consult with state agencies
possessing expertise in licensure and enforcement when
developing a regulatory framework pursuant to the provisions of
this bill. OMCR must also develop an enforcement framework that
clarifies the enforcement roles of state and local governments
under the act.
OMCR must maintain a registry of all permit holders, and a
record of all state licenses and commercial cannabis activity of
the permit holder throughout the length of licensure and for a
minimum of seven years following the expiration of each license.
OMCR must make limited licensee information available to a
licensee so that it may verify whether it is engaging in
commercial cannabis activities with a properly licensed entity.
The Governor appoints the Director, who must be confirmed by the
Senate, and is paid a salary fixed by the Governor with the
approval of the Director of Finance. The Director appoints all
employees within the office. The bill creates three divisions,
which report directly to the office, and which are responsible
to the director for the proper carrying out of duties. However,
the persons administering the divisions are appointed by their
agencies, not the Governor or the OMCR director. Divisions
include:
The Division of Medical Cannabis Regulation, within the
State Board of Equalization (BOE), to administer provisions
of this bill related to dispensaries and transporters;
The Division of Medical Cannabis Manufacturing and
Testing, within the California Department of Public Health
(DPH), to administer provisions of this bill related to
manufacturing, testing, and certification of testing
laboratories for medical cannabis and medical cannabis
products; and,
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The Division of Medical Cannabis Cultivation, within the
Department of Food and Agriculture (CDFA), to administer
provisions of this bill pertaining to cultivation of
medical cannabis.
The bill also requires the California Environmental Protection
Agency and the California Natural Resources Agency to coordinate
and direct the following entities in the discharge of their
designated regulatory responsibilities, including:
The State Water Resources Control Board in promulgating
regulations related to discharge into waterways, and
diversion therefrom, resulting from medical cannabis
cultivation; and
The Department of Fish and Wildlife in promulgating
regulations for the protection of any species affected by
cultivation activity, and regulations for any
cultivation-related development, including alteration of
waterways.
AB 266 requires the California Department of Justice (DOJ) to:
Conduct criminal background checks of applicants for
licensure;
Develop uniform security standards for dispensaries and
all phases of transport covered by provisions of this bill;
and
Provide supplemental enforcement on an as-needed basis
at the request of the OMCR.
OMCR and other licensing authorities can:
Establish rules and regulations;
Prescribe, adopt, and enforce emergency regulations as
necessary;
Issue state licenses to persons for the cultivation,
distribution, manufacture, transportation, and retail sale
of medical cannabis within the state which don't limit the
authority of a city, county, or city and county specified
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in the bill;
Set application, licensing, and renewal fees for state
licenses;
Establish standards for commercial cannabis activity;
Establish procedures to issue, renew, suspend, deny, and
revoke state licenses;
Impose penalties;
Take action with respect to an application for a state
license;
Oversee the operation of the Medical Cannabis Regulation
Fund; and
Consult with other state or local agencies, departments,
representatives of the medical cannabis community, or
public or private entities for the purposes of establishing
statewide standards and regulations.
OMCR must review all regulations and guidance promulgated by
licensing authorities to ensure no duplication, overlap, or
inconsistent regulations occur. Any information technology
systems OMCR creates to store and process data related to
commercial cannabis licensing must be integrated, with all
licensing data immediately available to licensing authorities.
The bill requires the public's health and safety to be the
highest priority for the OMCR and the licensing authorities in
exercising licensing, regulatory, and disciplinary functions.
OMCR must issue a report to the Legislature on or before March 1
of each year with specified contents.
Task Force. Before April 1, 2016, AB 266 requires OMCR to
convene a task force to advise it on the development of
standards, recommend appropriate roles for each state entity,
and recommend guidelines on communication and information
sharing between state entities, and with local agencies, to
implement the Act. The measure requires the task force to
submit a report on the standards, determinations, and guidelines
to implement the Act to the Legislature and affected state
entities by August 1, 2016. The bill requires the task force to
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be comprised of 15 members: four appointed by the Governor,
three each for the Speaker of the Assembly and the Senate
Committee on Rules, all of which must represent specific
constituencies, plus the director or chief of CDFA, DPH, BOE,
DOJ, and the California Highway Patrol (CHP). Each task force
member must serve a two-year term, and licensing authorities are
not responsible for travel costs or otherwise compensating task
force members for participating.
Authority Structure. AB 266 provides that each licensing
authority must work in conjunction with local agencies to
implement the Act. The bill provides that peace officers may
visit and inspect the premises of a licensee.
Cities have full power and authority to enforce the Act and any
OMCR rules, regulations, or guidance for licensed facilities
within their cities, and have complete responsibility to
regulate licensees in the city limits who would normally be
regulated by the county without liability, cost, or expense to
the county. Counties have full enforcement power to enforce the
Act in unincorporated areas. State agencies can collaborate
with local agencies to enforce standards and regulations within
the scope of each's statutory responsibilities and to the extent
resources are available, but are not required to enforce local
agency regulations regarding the site or operation of a facility
or transporter issued a state license.
AB 266 states that cities and counties can enact ordinances
establishing additional, more stringent standards for local
licenses and permits for commercial cannabis activity. However,
the state preempts any local regulations should conflicts exist
between state and local requirements and regulations regarding
health and safety, testing, security, and worker protection. AB
266 states that its provisions do not prevent a city, county, or
city and county from adopting local ordinances, whether
consistent or inconsistent with enforcement and local control
provisions, that:
Regulate the location, operation, or establishment of a
licensee or a person that cultivates processes, possesses,
stores, manufactures, tests, transports, distributes, or
sells medical cannabis.
Prohibit medical cannabis activity within its
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jurisdiction.
Provide for the administrative, civil, or criminal
enforcement of the ordinances described above.
Establish a fee for the operation within its
jurisdiction of a licensee; or on another person that
cultivates processes, possesses stores, manufactures,
tests, transports, distributes, or sells medical cannabis
or medical cannabis products; or a person exempt from
licensure.
Enacting and enforcing other laws and ordinances to
preserve local control.
The measure states that it doesn't preclude local agencies from
enforcing zoning ordinances or other laws, ordinances, or
regulations that ban or regulate location, operation, or
establishment, of a licensee or other person that engages in
commercial cannabis activities. The bill also states that
obtaining a state license does not allow operation in a local
jurisdiction that has prohibited that kind of business.
Enforcement. A licensing authority's director, a district
attorney, county counsel, city attorney, or city prosecutor can
bring an action in the name of the state to enjoin a violation
or threatened violation of the Act, and to assess and recover
civil penalties. The action must be brought in the county in
which the violation occurred, and conform with provisions in the
Code of Civil Procedure.
Any state or local agency must notify OMCR and the relevant
licensing authority of any violations or arrests involving a
licensee or licensed premises within ten days. State agencies
must promptly investigate violations to see if grounds exist to
revoke a state license. OMCR must establish procedures to
provide any relevant requesting state and local agencies with
24-hour access to information to verify a state license, track
transportation manifests and licensee facility inventories. The
record must allow state and local law enforcement, agencies, and
licensing entities to verify a state license, include specified
summary information regarding a licensee.
The bill provides that it doesn't supersede the City of Los
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Angeles's Measure D, which applies in the City of Los Angeles
notwithstanding the bill's provisions. BOE must enter into a
memorandum of understanding with the City of Los Angeles to
establish protocols to track businesses, grant immunity by the
initiative, track cannabis and medical cannabis products to and
from the City of Los Angeles, and allow for the legal transfer
of medical cannabis and medical cannabis products originating
from licensees outside the city.
Actions of licensees or provisional licensees, or their
employees, permitted under a state or local license or permit
are neither unlawful under state law, nor subject to sanction
under state law, civil penalty, or forfeiture of assets. The
same protection applies to actions of a person who in good faith
and upon investigation allow his or her property to be used by a
licensee, provisional licensee, or its employees. However,
conduct within the scope of a license, but not fully in
compliance with the Act, is subject to civil penalties but not
penal provisions of state law.
Persons engaging in commercial cannabis activities without a
license are subject to civil penalties of up to twice the amount
of the license fee for each violation, with each operating day
counting as a violation, and not penal provisions in state law.
OMCR, licensing authorities, or courts can order the destruction
of the medical cannabis. Civil penalties for engaging in
unlicensed activity must be deposited into the Cannabis Fines
and Penalties Account, created by the bill.
Civil penalties imposed on licensees resulting from actions
brought by the Attorney General are deposited in the General
Fund, whereas civil penalties resulting from actions brought by
a district attorney or county counsel are paid to the treasurer
in the county in which the judgment was entered, and to the city
treasurer in the city in which the judgment was entered if
brought by a city attorney.
Medical Cannabis Regulation and Licensure. AB 266 prohibits
conducting commercial cannabis activity without a license
beginning on January 1, 2017. Local agencies must issue local
permits according to local ordinances, and have sole authority
under the bill to revoke a local permit. AB 266 prohibits
sales, distribution, provision, or donation of medical cannabis
or medical cannabis products to a patient or caregiver other
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than at a licensed dispensing facility or through delivery from
a licensed facility. The bill bars cultivation except at
licensed cultivation sites, and provides that only licensed
manufacturers can make or process medical cannabis or medical
cannabis products. Additionally, the measure prohibits
transportation by anyone other than licensed transporters from
licensed facilities.
The bill exempts from its licensure requirements qualified
patients who cultivate, possess, store, manufacture or transport
medical cannabis for personal medical use but doesn't provide,
donate, sell, or distribute to others, and qualified caregivers
who do the same for no more than five patients but does not
receive remuneration for doing so. However, local agencies can
enact ordinances regulating or banning activities of qualified
patients and caregivers.
AB 266 sets up a three-level system for regulation, cultivation
or manufacture; testing or processing; and retail sale: first,
all cultivators or manufacturers must send all of their medical
cannabis and medical cannabis products only to licensed
processors for processing and testing prior to retail sale, or
to dispensaries, qualified patients, or caregivers, according to
license. The bill requires medical cannabis and medical
cannabis products to be tested by a certified testing laboratory
licensed by DPH prior to retail sale or dispensing to test for
potency, pesticides, mold, and other contaminants of dried
flower and for potency and purity of extracts.
The bill sets forth allowable combinations of licenses, but bars
a person or entity that holds a state license from licensure for
any other activity, or holding an ownership interest in real
property, personal property, or assets used in another licensing
category, unless a local jurisdiction required a single licensee
to do so before January 1, 2016. The measure also prohibits
specified licensees from selling alcoholic beverages at retail.
The measure bars licensees from cultivating, processing,
storing, manufacturing, transporting or selling medical cannabis
or products unless they keep accurate records at the licensed
premises with specified information for seven years. OMCR, the
local agency with enforcement power over the licensee, and any
other appropriate state or local agency may examine this
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information or visit and examine the site. Refusal to allow
access is unlawful, and punishable as a misdemeanor; however,
inspections must be conducted during regular business hours, and
licensees have five days to provide books and records. Failing
to maintain books and records is subject to a civil penalty of
$15,000 per violation, and a licensing authority may summarily
suspend a license, and must move to revoke it, if a licensee or
his or her employee refuses, impedes, obstructs, or interferes
with an inspection.
Provisional Licenses. Each licensing authority must allow
qualified applicants to receive and renew provisional licenses,
with an expiration date set by each, as soon as practicable.
Each licensing authority must issue a license for individuals
and entities it determines were regularly cultivating,
processing, manufacturing medical cannabis and medical cannabis
products in the three months before March 1, 2016, and did so in
compliance with local ordinances; however, licensing authorities
must not grant provisional licenses for applicants who committed
an act or crime constituting denial of a license, or against
whom there are pending state or local administrative or judicial
proceedings, or other actions brought by local agencies for
violating local ordinances relating to cannabis activity. The
provisional license allows the applicant to operate until an
application for a state license has been approved or denied, but
no later than 90 days after the authority begins accepting
regular licensing application. Applicants for provisional
licenses must supply specified information.
Each licensing authority must make recommendations to the
Legislature regarding establishing an appeals and judicial
review process by persons aggrieved by licensing authorities.
Regulations. The bill directs licensing authorities to
promulgate regulations for implementation and enforcement of
licensure, including, among others, the various forms of
activity that require a license; procedures for issuance,
renewal, suspension, denial, and revocation; application,
procedures for appealing fines and license denial, suspension,
or revocation; creating forms; setting fees; time periods to
approve or deny applications; and establishing qualifications
for licensees, including security requirements. The bill allows
licensing authorities to issue licenses beginning on and after
January 1, 2018, and bans individuals from engaging in
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commercial cannabis activity after that date without possessing
a state license, including a provisional license; however, the
state cannot issue licenses for applicants who propose to
operate within the City of Los Angeles. Instead, these firms
must comply with regulations called for by the bill regarding
production, labelling, and manufacturing; application of
pesticides; facilities and transporters as promulgated by BOE;
security measures regarding transportation; and standards
promulgated by the Division of Medical Cannabis Manufacturing
and Testing.
Among other requirements, applicants must pay a fee; register
with the licensing authority; provide a written description of
the scope of business of the proposed facility; provide evidence
that the applicant and owner have been legal full-time residents
of the state for not less than four years; provide detailed
written operating procedures; submit the applicant's
fingerprints to the DOJ; supply documentation from the local
jurisdiction in which it does business that it's in compliance
with all local ordinances, provide evidence it's at least 600
feet from a school if it's a cultivator or dispensary; certify
that the information on the application is true under penalty of
perjury; provide a statements that a labor peace agreement has
been entered into if the applicant employs more than 20
employees; and provide any information required by the licensing
authority.
Each state licensing authority's license is distinct and
separate, lasts only for one year, and must be reported to OMCR
within 24 hours of approval. Each state agency must make a
thorough investigation to determine whether the applicant
qualifies for a license, and can place conditions on a license
if grounds exist to deny it, but would be removed among meeting
the conditions. Each licensing authority can deny an
application for licensure or renewal, or suspend or revoke a
state license for among other reasons, making untrue statements,
conduct that constitutes fraud or gross negligence, failure to
comply with any rule or regulation including holding a seller's
permit, failure to submit requested information, and if an
applicant, or any of its officers, directors, or owners, have
been convicted of a felony criminal conviction for the
possession for sale, sale, manufacture, transportation, or
cultivation of a controlled substance, including a narcotic drug
classified in Schedule II, III, IV, or V (but excluding
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marijuana), for drug trafficking involving a minor, a violent
felony, a serious felony, a felony offense involving fraud or
deceit, or any other felony that, in the licensing authority's
determination, would impair the applicant's ability to
appropriately operate as a state licensee.
State agencies must notify applicants of a denial in writing,
with detailed reasons for which the application was denied. The
applicant can appeal the denial, and must be given a hearing
within 30 days, but the denial must be upheld unless the
applicant can demonstrate that he or she eligible for licensure
and in compliance with the Act. Licensing authorities may
refuse to issue, reinstate, or renew a license, and may suspend
one, for a licensee who fails to resolve outstanding
liabilities, including additions to tax, penalties, and interest
assessed by BOE. The bill suspends all licenses issued with the
same personnel of record who have been assessed a liability
until the debt is satisfied; the personnel of record are
prohibited from serving in any capacity for which licensure is
necessary, but may act as nonsupervisory employees.
The following state agencies must issue licenses pursuant to
regulations the bill calls on them to adopt for specified
purposes:
The Division of Medical Cannabis Cultivation within CDFA
for licensing cultivation sites, issuing standards for
weighing devices, and best practices for cultivation. To
do so, the measure declares medical cannabis to be an
agricultural product. License type is contingent upon the
size of the cultivation site, with a maximum of 44,000
square feet.
BOE for licensing and regulating distributors,
dispensing facilities, and transporters. BOE must submit a
request for proposals for a "track and trace" program for
medical cannabis by March 1, 2016. BOE must choose a
supplier and fully implement the program that provides
specified information prior to issuing licenses.
The Division of Medical Cannabis Manufacturing and
Testing within DPH to license cannabis manufacturers,
certify testing laboratories using specific standards from
the International Organization for Standardization, and set
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health and safety standards for medical cannabis and
medical cannabis products, including edible products.
AB 266's other general regulatory and licensing provisions
include:
Each licensing authority must charge a licensing fee
calculated to cover the costs of administering the bill.
Fees can vary according to the varying costs as they relate
to the nature and scope of the different activities, but
cannot exceed each's reasonable costs. However, licensing
fees must be set dependent on the size of the business.
The measure directs its license fees into the accounts
it creates, and allows the Legislature to appropriate funds
from the accounts to each Division to fully fund its
administrative costs.
Fines and penalties are deposited into the Medical
Cannabis Fines and Penalties Account, which the Legislature
can use to fund a grant program administered by OMCR to
state and local entities to assist regulation or
enforcement, or remedy environmental impacts of
cultivation.
Authorizes general fund or special fund loans to
establish and support regulatory activities, but requires
repayment by January 1, 2022. OMCR's Director distributes
loaned moneys to licensing authorities as necessary.
OMCR and all licensing authorities must keep names of
patients, their medical conditions, or names of primary
caregivers confidential, and cannot disclose them except to
an authorized state or local agency employee to perform
official duties.
AB 266 sets specific standards in the following areas:
The bill requires that all employees engaged in
commercial cannabis cultivation activities, and drivers
employed to transport medical cannabis or medical cannabis
products to be subject to Industrial Welfare Commission's
Wage Order 4-2001, regarding the minimum wage and meals and
lodging credits.
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The Department of Pesticide Regulation must issue
regulations regarding the application of pesticides or
other pest control in connection with outdoor and indoor
cultivation.
Licensees transporting medical cannabis must complete an
electronic shipping manifest that identifies the patient
and primary caregiver by name and address, and transfer the
manifest to the licensing authority, and the licensee
receiving the product. Licensees receiving the product
must maintain each manifest, and submit to the licensing
authority a record verifying receipt of the shipment and
its contents. However, distributors and dispensaries can
transport medical cannabis products of a value less than
the "statewide monetary threshold," set by BOE after review
by the task force and OMCR, between licensees without a
transport license.
Medical cannabis or medical cannabis products may only
be transported in storage compartments firmly affixed to
the vehicle. Vehicles can only travel between licensed
facilities, with specified exceptions, between 8:00am and
8:00pm. All vehicles must be staffed by at least two
employees, one of whom must remain with the vehicle if it
contains medical cannabis. CHP is responsible for
enforcing these provisions.
The bill applies specific transport rules for the City
of Los Angeles, due to Measure D.
BOE must develop a database containing manifests with
specified information.
Local agencies cannot prevent the delivery or
transportation by a licensee; however, the bill requires
licensed transporters to obtain a permit from the local
agency in which their premises are located, and all
employees must carry their current transporter license.
Standards for medical cannabis or medical cannabis
products must be equivalent to the California Retail Food
Code. The bill requires sellers of edible products to be
registered under the Sherman Food, Drug, and Cosmetic Law,
AB 266 (Bonta) 7/13/15 Page 18
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and further requires packages and labels from being made to
be attractive to children. Product labels must include the
statements: "Keep out of reach of children and animals";
"For medical use only"; "The intoxicating effects of this
product may be delayed by up to two hours"; as well as
specified information, such as warnings if nuts or other
known allergens are used, and the net weight, among others.
Professional Regulation. The bill states that recommending
medical cannabis to a patient for a medical purpose without an
appropriate prior examination and a medical indication
constitutes unprofessional conduct, and bars physicians and
surgeons from recommending medical cannabis to a patient unless
they're the patient's attending physician. The measure also
deems unprofessional conduct for physicians and surgeons any
employment by or other agreement with a holder of a mandatory
commercial licensee under the bill. Additionally, the measure
makes unlawful and punishable as a misdemeanor a physician or
surgeon that recommends medical cannabis making any solicitation
for remuneration from a licensee. Lastly, the measure directs
the Medical Board of California to consult with the California
Marijuana Research Program on developing and adopting medical
guidelines for the appropriate administration and use of medical
cannabis.
Labor Standards. The bill requires the Division of Labor
Standards Enforcement (DLSE), within the Department of
Industrial Relations (DIR), to maintain minimum standards for
the competency and training of employees of a licensed
cultivator or dispensary through a system of testing and
certification; maintain an advisory committee and panels as
necessary; adopt regulations; issue certification cards to
certified employees; and establish registration fees. DSLE must
develop a certification program for cannabis employees by
January 1, 2017, under which all employees performing work as
cannabis employees must be certified by January 1, 2019.
However, apprentices aren't subject to registration if part of a
state-approved apprenticeship program.
The measure defines many of its terms, contains a severability
clause, and makes legislative findings and declarations
supporting its provisions, including the impact of its
provisions requiring specified information to be confidential as
a limitation on the public's right to know. The bill also
AB 266 (Bonta) 7/13/15 Page 19
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specifies that should the Commission on State Mandates determine
that it constitutes a state mandate, any reimbursement made must
be done so pursuant to according to the Commission's current
process.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "After
becoming the first state in the nation to allow the use of
medical cannabis with the approval of Proposition 215,
California has fallen behind the nation and failed to implement
a comprehensive licensing and regulatory structure to ensure
patient access and protect our environment, public safety, and
public health. AB 266 approaches regulation by applying
existing regulatory frameworks to the industry while adapting to
the unique and historical circumstances surrounding medical
cannabis. AB 266 respects local decisions on the regulation of
medical cannabis-including the decision to ban-and incorporates
local control throughout the regulatory process, such as
requiring an individual to obtain a license or permit from both
state and local agencies prior to engaging in medical cannabis
activity. AB 266 protects patients by requiring compliance with
stringent regulatory standards, preserves the environment by
building on the existing interagency taskforce work in this
field, and ensures that workers in the cannabis industry are
treated fairly and receive equal protections. AB 266 combines
the input of stakeholders throughout the state to create
thoughtful, effective regulations that comply with federal
enforcement goals, and create a better system for the entire
life cycle of the medical cannabis treatment."
2. Sure, but will it work ? AB 266 responds to the lack of
statewide regulation of medical marijuana, which has grown into
a multi-billion dollar industry. However, state government will
face a mammoth task to implement the bill, due to the scope and
complexity of the job required to sensibly regulate this area.
AB 266 creates a new office to coordinate major new regulatory
programs in three agencies (CDFA, DPH, BOE), charges the three
AB 266 (Bonta) 7/13/15 Page 20
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agencies with issuing comprehensive licensing regulations, and
then requires the agencies to operate the programs. BOE must
successfully deploy a track and trace information technology
program to collect transport and distribution for every shipment
of medical cannabis in the state, as well as a database
containing electronic shipping manifests with specific
information. Additionally, the bill requires a task force,
advisory committees, legislative reports, integrated information
technology projects with immediate accessibility, and even a
grant program. While medical marijuana poses a potentially
significant public health and safety challenge, is statewide
regulation of AB 266's degree warranted given the efforts local
governments have made in the almost 20 years since the CUA's
enactment? If so, is the state capable of effectively
implementing this bill given its current responsibilities?
Perhaps the state should only act to supplement and fill in the
gaps in local regulation, such as black market sales and
environmental damage from cultivation, instead of taking on the
entire task itself. The Committee may wish to consider whether
AB 266 is the appropriate response for this problem.
3. Who regulates ? AB 266 presents a unique innovative model
that responds to the current difficulty identifying a state
agency with the clear capability to regulate all aspects of
commercial medical cannabis activity in the state. The bill
consolidates most power in the newly-created OMCR within the
Office of the Governor, and directs new Divisions within
existing agencies with current expertise to report to OMCR and
to regulate specific programs: CDFA for cultivation; BOE for
dispensing, distributing, and transporting; and CDPH for
manufacturing, testing, and edible cannabis products. However,
two other bills currently under consideration by the Legislature
take a different approach:
SB 643 (McGuire), which the Committee approved earlier
this year, establishes a comprehensive licensing and
regulatory framework for the cultivation, manufacture,
transportation, storage, distribution, and sale of medical
marijuana to be administered by the Office of Medical
Marijuana Regulation within the Business, Consumer
Services, and Housing Agency.
AB 243 (Wood), which the Committee approved at its July
8th hearing, creates a Division of Medical Cannabis
AB 266 (Bonta) 7/13/15 Page 21
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Cultivation within CDFA to oversee implementation of the
new state regulatory program and issue state licenses for
cultivation, led by a gubernatorial appointee. The bill
charges the Division with establishing a program to
uniquely identify medical marijuana plants by issuing 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.
4. How to regulate ? AB 266 grants significant authority to
administrative agencies to design the specific rules for medical
cannabis in California as part of the process of promulgating
regulations. While the bill contains many statutory
requirements, state agencies, and especially the OMCR director,
will make many of the important decisions Additionally, the
bill would use a three-tier system that divides medical cannabis
activity into three distinct parts, similar to alcoholic
beverage regulation in California: cultivation and manufacture;
transportation and distribution; and retail sales. This system
ensures that market power is diffuse. No single company can
dominate the entire market if the law only allows them to
compete in one part of it. Additionally, the three tiers allow
each regulatory program to be assigned to the agency most
appropriate to regulate that part of the market; BOE already has
relationships with dispensaries holding seller's permits, and
CDFA knows agricultural production better than any other agency.
However, AB 266's opponents disagree, stating that the
requirement is an undue burden, logistically impossible to
attain, and unnecessarily costly. Instead, opponents argue for
a mandatory "seed to sale" tracking system, currently in place
in Colorado.
5. How to tax ? Currently, AB 266 contains no substantive tax
provisions. However, cities are currently using their existing
authority to apply taxes on medical marijuana cultivation and
sales for both general purposes and to pay its regulatory costs.
The two bills listed above contain substantive tax provisions,
including:
SB 643 authorizes a city, county, or city and county to
impose taxes on the privilege of cultivating, dispensing,
producing, processing, preparing, storing, providing,
donating, selling, or distributing marijuana by a licensee
AB 266 (Bonta) 7/13/15 Page 22
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operating under the Act, under specified conditions.
AB 243 imposes a $50 per plant tax to pay for its
regulatory program, create a grant program, and to
supplement current efforts to remediate the environmental
impacts of illegal cultivation.
California's 58 counties lack some of the Constitutional
authorities cities have, and would benefit from a flexible grant
of taxing authority similar to SB 643. The Committee may wish
to consider amending AB 266 to allow counties to impose taxes on
marijuana to conform with SB 643.
6. Home rule . Medical cannabis regulation has largely been
left to local agencies since voters enacted Proposition 215, and
case law has derived largely as a result of litigating local
ordinances. The local impacts of medical marijuana production
are matters best addressed by local governments, who may want to
set their own standards for accommodating compassionate use in a
way that works in each of the state's may and distinct cities
and counties. However, AB 266 reduces local governments'
flexibility to balance these various considerations by providing
that state laws on health and safety, testing, security, and
worker protections trump local ordinances. The Committee may
wish to consider whether superseding home rule in this case is
merited.
7. Other states . The Senate Committee on Health notes:
"Experiences of other states have helped to inform the current
conversation in California. Notably, this bill establishes
standards for transport of medical cannabis products and
security surrounding transport, proper preparation, and labeling
of edible medical cannabis products and requirements for testing
of products. Other states have attempted to ensure safety for
the transit of these products, particularly given the high value
of products and tendency toward cash transactions in the
industry. However in Washington and Oregon, third-party
carriers are not permitted, creating challenges for transport of
products. Colorado authorizes third-party carriers with proper
documentation to transport these products. Private transport
companies which often employ armed personnel are being utilized
in states that authorize medical cannabis use and regulate
marijuana for recreational purposes. Efforts to create a
regulatory environment specifically for the transport of
AB 266 (Bonta) 7/13/15 Page 23
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products could also result in an increase in the use of private
security firms here. With regards to edible medical cannabis
products, concerns have been raised over the lack of proper
labeling and dosage in other states, and efforts aimed at
preventing accidental ingestion (such as labeling requirements)
are taking shape. Edible products often produce delayed and
longer-lasting results than other methods of delivery, and
consumers may be harmed by a lack of accuracy in information
about the potency of edible medical cannabis products and a lack
of awareness by patients of the amount of THC they may be
ingesting. This bill also sets standards for testing medical
cannabis products and the certification of testing laboratories.
A report to the Oregon Legislature noted that, in the absence
of any guidance from the United States Department of Agriculture
and the Food and Drug Administration, many state regulatory
agencies have determined that some safety testing of medical
cannabis products is better than no safety testing, but that
assumption creates other challenges when testing is done at
unregulated or potentially substandard facilities, and products
potentially end up being sold with certificates of safety that
may not be true or authentic and could in fact be misleading.
Health risks have been cited for medical cannabis products that
are treated with pesticides or other contaminants, and proper
testing by certified laboratories, as this bill establishes, is
seen as an important measure to ensure product quality."
8. 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 266 creates a new
state-mandated local program because it increases the duties of
local officials. AB 266 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.
9. Coming and going . 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' regulatory and taxing authority, and then to the
Senate Health Committee, which has jurisdiction over bills
relating to public health and safety.
AB 266 (Bonta) 7/13/15 Page 24
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Assembly Actions
Assembly Business and Professions Committee: 13-0
Assembly Appropriations Committee: 12-0
Assembly Floor: 62-8
Support and
Opposition (7/13/15)
Support : BOE Member George Runner, California Cannabis
Operators League; California Medical Association, California
Police Chiefs Association, City of Oakland, League of California
Cities, Mayors and Councilmembers Association of Sonoma County,
United Food and Commercial Workers Union - Western States
Council.
Support If Amended : California State Association of Counties;
Rural County Representatives of California; Urban Counties
Caucus.
Opposition : American Civil Liberties Union, Fresno Cannabis
Association; Selan Law Firm.-- END --