BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 266 (Bonta) - Medical cannabis.
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|Version: August 17, 2015 |Policy Vote: HEALTH 8 - 1, GOV. |
| | & F. 4 - 0 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 17, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 266 would create a state and local licensing and
regulatory structure for the regulation of medical cannabis in
the state. The bill would establish a new Office of Medical
Cannabis Regulation within the Office of the Governor to oversee
state regulatory efforts and would also require several other
state agencies to assume licensing and regulatory
responsibilities.
Fiscal
Impact: The bill creates a very complicated and extensive
licensing and regulatory framework for medical cannabis in the
state. The overall costs to implement the licensing and
regulatory requirements in the state are not fully known, but
are likely to be substantial. In total, overall state costs are
likely to be over $20 million per year. Those costs will depend,
in part, on the number of medical cannabis businesses that seek
licensure from the state. The bill authorizes all the licensing
entitites to establish fees sufficient to cover the costs of
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licensing and enforcement of the requirements of the bill. The
bill authorizes a loan from the General Fund to pay for the
initial costs to set up the various licensing programs.
Ongoing costs, likely in the millions to tens of millions per
year, for the operation of the new Office of Medical Cannabis
Regulation (General Fund and special fund). The new Office is
given overall responsibility for coordinating and implementing
the requirements of the bill. However, the bill also delegates
the direct licensing authority to several other state
agencies. The scope of the cost to operate the new Office will
vary significantly depending on how actively engaged the
Office is in the licensing and regulatory duties authorized
under the bill, or whether the Office largely allows the other
licensing entities to take responsibility for their licensing
and regulatory activities and acts more as an oversight
office.
Ongoing costs, likely in the millions to tens of millions per
year, for the Department of Food and Agriculture to license
and regulate cultivation activity (General Fund and special
fund).
Unknown costs, likely in the millions to low tens of millions
per year for the Board of Equalization to license
distributors, dispensing facilities, and transported (General
Fund and special fund).
One-time costs of $8 million and ongoing costs of $6 million
per year for the Department of Public Health to perform
required licensing and enforcement actions relating to testing
laboratories and medical cannabis products that would be
regulated as food products (General Fund and special fund).
Unknown costs for the Department of Justice to conduct
criminal background checks of licensees (special fund). Under
current practice, applicants for a criminal background check
are required to pay the $65 cost to conduct a criminal
background check using fingerprint databases.
Ongoing costs of about $1 million per year for the Department
of Industrial Relations to develop and implement a
certification process for employees of the medical cannabis
industry (General Fund and special fund).
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Unknown costs for the California Highway Patrol to enforce
statutory and regulatory requirements for the transportation
of medical cannabis (General Fund and special fund). The bill
is not clear whether the California Highway Patrol is given
overall statutory authority to enforce those requirement (as
it is generally for requirements of the Penal Code and Motor
Vehicle Code) or whether the bill intends the Highway Patrol
to take an active oversight role.
One-time costs of $200,000 for the California Highway Patrol
to contract for research to assist in developing protocols for
determining when a driver is under the influence of cannabis
(General Fund and special fund).
Unknown costs for enforcement of the bill's requirements by
local governments (local funds and special funds). The bill
requires both the new state and local governments to take
responsibility for enforcement activity. How those
responsibilities will be divided between levels of government
and how much funding the state will make available to local
governments for enforcement activity is unknown at this time.
Because local governments have the legal authority under the
bill to prohibit the operation of medical marijuana facilities
in their jurisdictions, local governments can essentially opt
out of the enforcement responsibilities required under the
bill. Thus the state is not likely to be required to reimburse
local governments for enforcement costs.
Background: Under the Compassionate Use Act of 1996 (Proposition 215, a
voter approved initiative measure), state law prohibits the
criminal prosecution of a patient with specified illnesses or a
caregiver for possession or cultivation of marijuana upon the
recommendation of a physician.
Under current law, the Department of Public Health operates a
program under which individuals can apply for an identification
card for the use of medical marijuana.
Under current practice, there is no state licensing or
regulation of medical marijuana cultivation or dispensing. At
the local level, oversight and regulation is limited and varies
by city and county. Some cities or counties have prohibited the
AB 266 (Bonta) Page 3 of
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operation of commercial medical marijuana operations while
others have enacted outright bans on medical marijuana,
including personal possession and use. In 2013, the voters in
the City of Los Angeles passed Measure D which authorizes a
limited number of existing medical marijuana dispensaries to
remain open if they had been in continuous operation since 2007
and had been registered with the City.
Proposed Law:
AB 266 would create a state and local licensing and regulatory
structure for the regulation of medical cannabis in the state.
The bill would establish a new Office of Medical Cannabis
Regulation within the Office of the Governor to oversee state
regulatory efforts and would also require several other state
agencies to assume licensing and regulatory responsibilities.
Specific provisions of the bill would:
Create a new Office of Medical Cannabis Regulation
within the Office of the Governor with overall authority
for implementation of medical cannabis regulation;
Establish a new Division of Medical Cannabis Regulation
within the Board of Equalization to administer requirements
relating to dispensaries and transportation;
Establish a new Division of Medical Cannabis Manufacture
and Testing within the Department of Public Health to
administer requirements for certification of testing
laboratories;
Establish a new Division of Medical Cannabis Cultivation
within the Department of Food and Agriculture to administer
requirements for cultivation;
Require the California Environmental Protection Agency
and the Natural Resources Agency to coordinate the various
state agencies that have regulatory responsibilities that
impact cultivation;
Require the Department of Justice to perform criminal
background checks on applicants for licensure;
Authorize the Office of Medical Cannabis Regulation and
other state licensing authorities to enforce the provisions
of the bill;
Require the establishment of a taskforce to recommend
appropriate roles for state entities and local governments
for enforcement of the bill's requirements;
AB 266 (Bonta) Page 4 of
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Prohibit physicians who prescribe medical marijuana from
receiving compensation from licensed medical marijuana
facilities;
Prohibit a physician from prescribing medical marijuana,
unless the physician is the patient's attending physician;
Require each licensing authority to work with local
agencies to implement and enforce the provisions of the
bill;
Authorize peace officers, including specified state
peace officers, to enforce the provisions of the bill;
Require the Office of Medical Cannabis Regulation to
develop an enforcement framework that clarifies the
enforcement responsibilities of state agencies and local
governments;
Authorize local governments to enforce the provisions of
the bill;
Specify that cannabis businesses operating within the
City of Los Angeles will continue to be subject to Measure
D and are only required to meet specified requirements of
the bill (excluding the requirement to be licensed by the
state);
Specify that local governments may continue to adopt
ordinances to regulate or prohibit commercial cannabis
activity;
Require the California Highway Patrol to establish
protocols to determine whether a driver is under the
influence of medical cannabis;
Require the Department of Food and Agriculture to
license cultivators;
Require the Board of Equalization to license
dispensaries and transporters;
Require the Department of Public Health to license
manufacturers and testing laboratories;
Establish a provisional licensing program, under which
all licensing authorities shall issue provisional license
to qualifying entities that were in business prior to March
2016;
Require the provisional licensing system to remain in
place until licensing entities have adopted licensing
regulations;
Beginning in July 2017, require all commercial cannabis
activity to be conducted between licensed entities;
Beginning in 2018, prohibit a person from engaging in
commercial cannabis activity without both a state license
AB 266 (Bonta) Page 5 of
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and a local permit;
Prohibit the issuance of a state license to an applicant
who proposes to operate in the City of Los Angeles (this
does not prohibit such an applicant from conducting
business as allowed under Measure D);
Repeal existing law authorizing collective cultivation
of medical cannabis, once the state has certified that
licensing authorities have begun issuing conditional
licenses;
Require all licensed cultivators or manufacturers to
send all medical cannabis and related products to a
licensed processor for processing, testing, and tracking
prior to retail sale;
Require the Department of Industrial Relations to
develop standards for competency and training of employees
in the medical cannabis industry and require the
development of a mandatory certification process for
employees;
Authorize each licensing authority to charge a fee to
recover all the costs of administering the requirement of
the bill;
Authorize the Office to create a grant program, funded
with penalty revenues, for allocation to state and local
agencies for enforcement activities;
Authorize a loan from the General Fund to support the
initial activities authorized under the bill, to be repaid
from licensing fees.
Related
Legislation:
SB 643 (McGuire) would establish a licensing and
regulatory framework for medical marijuana, to be
administered by a new Office within the Business, Consumer
Services and Housing Agency and enforced by the state or
local governments. That bill is pending in the Assembly
Appropriations Committee.
AB 243 (Wood) would establish a tax on the cultivation
of medical marijuana and the allowable uses of the
proceeds, create the Division of Medical Cannabis
Cultivation within the Department of Food and Agriculture
that would license cultivation and implement a unique
identification program for marijuana cultivated in
California, and require regional water quality boards to
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address waste discharges of marijuana cultivation including
specified issues. That bill is pending in this committee.
SB 1262 (Correa, 2014) was similar to this bill. That
bill was held in the Assembly Appropriations Committee.
Staff
Comments: The recently adopted amendments make a variety of
changes to provisions of the bill relating to implementation of
the bill in the City of Los Angeles, licensure of individuals
with prior criminal convictions, standards for testing medical
cannabis, licensing of cultivation operations, grandfathering of
existing operations that are vertically integrated, and make a
variety of technical amendments.
As drafted, the bill creates a diffuse organizational structure
for licensing and regulating medical cannabis operations in the
state. The bill establishes a new Office of Medical Cannabis
Regulation with "overall executive authority and responsibility
for implementation of all aspects of cannabis regulation
pursuant to this chapter". However, the bill also creates new
offices in several other state agencies and requires those new
offices to develop regulatory standards, issue licenses, and
enforce regulatory requirements on specific entities in the
medical cannabis industry. The bill requires specific state
entities to report directly to the new Office. In principal,
this seems to be intended to create direct lines of authority
and responsibility from licensing agencies to the new Office. In
practice, it is likely to be very difficult for the new Office
to effectively oversee and manage entities within other state
agencies. In practice the state agencies (such as the Board of
Equalization or the Department of Public Health) will still
exert direct control over the licensing entities. Whether or not
those existing state agencies would allow the new Office to
exert any effective control over entities within their agencies
is unknown.
As drafted, the bill intends to license and regulate each aspect
of the industry, in a kind of interlocking regulation. In
principal, this makes sense as a way to ensure the entire
industry operates within the law. However, to the extent that
any one of the state agencies that directly oversee a new
licensing entity does not place a high priority on developing or
administering medical cannabis regulation, the entire state
regulatory structure could be held up. If one or more state
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agencies does not place a high priority on developing and
implementing the required regulatory structure for medical
cannabis, it is not clear how the new Office of Medical Cannabis
Regulation could compel the licensing entity to do so.
As noted above, the bill would require that the duty of
enforcing and administering the bill be vested in the new Office
of Medical Cannabis Regulation. In addition, the bill would also
provide that cities and counties have the full power and
authority to enforce the provisions of the bill. How the new
Office, other state agencies, and local governments would share
responsibility for enforcement activities and the level of grant
funding that the Office makes available to local governments for
enforcement activity would have a significant impact on how the
bill's provisions would be enforced. The bill does not
explicitly address whether the licensing fees assessed by state
agencies can include fees to provide funding to local
governments to enforce the bill's provisions.
The bill would mandate that local governments enforce the
requirements of the bill (both explicit statutory requirements
and requirements in regulations adopted by the new Office of
Medical Cannabis Regulation or other state agencies). The bill
would also explicitly allow local governments to prohibit
medical cannabis establishments in their jurisdiction. Because
local governments could opt out of the enforcement requirements
of the bill by prohibiting medical cannabis facilities in their
jurisdiction, the bill would not impose a reimbursable mandate
on the state. The only other costs that may be incurred by a
local agency relate to crimes and infractions. Such costs are
not reimbursable by the state under the California Constitution.
The bill would create a statewide regulatory program, but would
essentially exempt medical cannabis operations in the City of
Los Angeles from licensure. (Those operations would be required
to meet certain regulatory requirements, for example relating to
tracking of medical cannabis.) While the state can opt to
respect the provisions of Measure D in the City of Los Angeles,
it is under no obligation to do so.
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