BILL ANALYSIS                                                                                                                                                                                                    

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          Date of Hearing:  April 29, 2015


                                 Jimmy Gomez, Chair

          1396 (Bonta) - As Amended April 16, 2015

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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill allocates revenues generated by SB 591 (Pan), the  
          California Tobacco Tax Act of 2015 (Tobacco Tax Act), to various  
          state funds. This bill is contingent on the passage of SB 591.   
          Specifically, this bill:  


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          1)Defines the California Tobacco Tax Act of 2015 as a trust  
            fund, and continuously appropriates funds in several accounts  
            for tobacco prevention and education, tobacco-related  
            diseases, and tobacco-related law enforcement.   

          2)Requires the Board of Equalization to calculate losses to  
            existing tobacco tax revenue and reimburse those funds  
            (Proposition 99 accounts, Breast Cancer Fund, the Children's  
            and Families Trust Fund which funds First 5, and the GF) for  
            losses due to the new tax.

          3)Restricts the use of funds by state recipients for  
            administrative costs to 2%.

          4)Requires departments receiving funds to publish on their  
            websites an accounting of how funds were spent. 

          FISCAL EFFECT:

          As coupled with SB 591, which raises tobacco tax revenues by  
          imposing the new tax, this bill continuously appropriates over a  
          billion dollars to various funds defined in the bill. 


          1)Purpose. This bill simply allocates funds. The author states  
            the revenue allocations in this bill would provide critical  
            stability to health care provider networks and ensure access  
            to healthcare services for people receiving services in the  
            Medi-Cal program, as well as fund other tobacco-related  


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          2)Societal costs of tobacco use.  A recent University of  
            California, San Francisco (UCSF) study reports the cost of  
            smoking in California amounted to $18.1 billion: $487 per  
            resident and $4,603 per smoker, including direct healthcare  
            costs and indirect costs from lost productivity due to illness  
            and premature death.  Although California's decades-old,  
            tobacco tax-funded antismoking programs are credited with  
            reducing smoking rates, four million people still smoked in  
            the state, including an estimated 146,000 adolescents.

          3)Current tax. California currently imposes taxes of $0.87,  
            split among uses described in (2) in the summary above.   
            California's tobacco tax rate ranks 33rd when compared to the  
            rates of other states.  The national mean is $1.48 per pack,  
            and the range is $0.30 to $4.35.  Some local governments also  
            impose additional taxes.  California has not raised its  
            cigarette excise tax since 1998.  According to the Campaign  
            for Tobacco-Free Kids, the average price for a pack of  
            cigarettes in California is $5.44, with all taxes included.
          4)Staff Comments. 

             a)   Continuous appropriation. This bill continuously  
               appropriates funds to departments for specified activities.  
                Staff recommends the funds be subject to review and  
               appropriation by the Legislature. This model has worked  
               well for current Proposition 99 funds, which the account  
               structure in this bill appears to be modeled upon.  

             b)   Blanks. The bill contains blanks instead of the  
               percentage allocation to the Department of Public Health,  


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               the Department of Education, and the University of  
               California in the Tobacco Prevention and Education Account.  
                Staff recommends the blanks be filled in with numbers.

             c)   Limit on state administrative costs. A 2% limit on state  
               administrative costs appears very low.  Administrative  
               costs vary across activities, but 2% seems to be on the low  
               end of any range.  

               State administrative activities are critical for ensuring  
               adequate control and oversight of any program.  In  
               addition, the smaller the funding allocation, the less  
               likely it is that administrative costs could be that low;  
               smaller allocations will naturally have higher  
               administrative costs as a percentage of total funds.  

               Further, if imposing a strict limit on administrative costs  
               is important, the author may wish to clarify what counts as  
               an administrative cost.  Is this simply all state-level  
               activity that is not "in the field," or does it mean  
               "bureaucratic" activities such as control agency  
               activities, rather than program-related activities?  Some  
               activities are better done at the state level. For example,  
               creating tobacco-related educational materials at the state  
               level, or coordinating statewide technical assistance and  
               training, may be more efficient than allocating funds out  
               to local entities.  The author may wish to further clarify  
               what types of administrative costs are subject to a cap,  
               ensure beneficial state-level activity is not hampered by  
               administrative funding constraints, and correspondingly  
               reassess the limit. 


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          Analysis Prepared by:Lisa Murawski / APPR. / (916)