BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                      AB 1396

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          1396 (Bonta)

          As Amended  June 3, 2015

          2/3 vote. Urgency

          |Committee       |Votes |Ayes                |Noes                |
          |                |      |                    |                    |
          |                |      |                    |                    |
          |Health          |13-5  |Bonta, Bonilla,     |Maienschein,        |
          |                |      |Burke, Chiu, Gomez, |Chávez, Patterson,  |
          |                |      |Gonzalez,           |Steinorth, Waldron  |
          |                |      |                    |                    |
          |                |      |                    |                    |
          |                |      |Roger Hernández,    |                    |
          |                |      |Lackey, Nazarian,   |                    |
          |                |      |Rodriguez,          |                    |
          |                |      |Santiago, Thurmond, |                    |
          |                |      |Wood                |                    |
          |                |      |                    |                    |
          |Appropriations  |12-5  |Gomez, Bonta,       |Bigelow, Chang,     |
          |                |      |Calderon, Daly,     |Gallagher, Jones,   |
          |                |      |Eggman,             |Wagner              |
          |                |      |                    |                    |
          |                |      |                    |                    |
          |                |      |Eduardo Garcia,     |                    |
          |                |      |Gordon, Holden,     |                    |
          |                |      |Quirk, Rendon,      |                    |
          |                |      |Weber, Wood         |                    |


                                                                      AB 1396

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          |                |      |                    |                    |
          |                |      |                    |                    |

          SUMMARY:  Allocates the revenues generated by SB 591 (Pan) of the  
          current legislative session, the California Tobacco Tax Act of  
          2015 (Tobacco Tax Act), to various state funds, as specified.   
          Makes the enactment of this bill contingent upon enactment of SB  
          591.  Contains an urgency clause to ensure that the provisions of  
          this bill go into immediate effect upon enactment.  Specifically,  
          this bill:

          1)Requires the Board of Equalization (BOE) to:

             a)   Calculate the adverse impact the tax proposed by SB 591  
               has on the revenues collected by existing tobacco taxes and  
               their specific purpose; and,

             b)   Determine the fiscal effect that any resulting decrease in  
               tobacco consumption has on the Cigarette and Tobacco Products  
               Surtax Fund, the Breast Cancer Fund, the California Children  
               and Families Trust Fund, and the General Fund (GF) and then  
               transfer revenues to offset the revenue decrease directly  
               resulting from imposition of additional taxes.

          2)Creates the California Tobacco Tax Act Fund as a trust fund,  
            established solely to carry out the purposes set forth in this  

          3)Requires the state Controller to allocate the moneys remaining  
            to the following accounts and purposes, subject to review and  
            appropriation by the Legislature:


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             a)   The Tobacco Prevention and Education Account to be used in  
               specified percentages as follows:

               i)     Eighty percent to the Department of Public Health  

               ii)    Ten percent to the Department of Education; and,

               iii)   Ten percent to the University of California (UC).

             b)   The Tobacco Disease Related Health Care Account to be used  
               by the Department of Health Care Services to improve existing  
               programs to provide quality and access to health care  
               programs for families and children; and,

             c)   The Tobacco Law Enforcement Account to be used by BOE,  
               DPH, and the Department of Justice for enforcing laws that  
               regulate the distribution and sale of cigarettes and other  
               tobacco products, including laws that prohibit cigarette  
               smuggling, counterfeiting, selling untaxed tobacco, selling  
               tobacco without a proper license, and selling tobacco to  
               minors, and enforcing tobacco-related laws, court judgments,  
               and settlements.

          4)Limits administrative costs to no more than 5% of the funds  
            received from the Tobacco Tax Act Fund by any department.

          5)Requires agencies receiving funds, except the BOE, to publish  
            annually on their respective Internet Web sites an accounting of  
            moneys received from the Tobacco Tax Act and how the moneys were  


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          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, as coupled with SB 591, which raises tobacco tax  
          revenues by imposing the new tax, this bill would allocate over $1  
          billion to various funds defined in this bill.  The funds would be  
          subject to appropriation by the Legislature.

          COMMENTS:  According to the author, this bill will ensure that  
          tobacco tax revenues generated by SB 591 are used to provide  
          efficiency, economy, and quality of care to all patients  
          regardless of economic circumstance.  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.   
          The author estimates $1.5 billion to be raised will help the  
          states cope with the dramatic expansion of enrollment in  
          California's Medi-Cal program, according to the author, in  
          particular helping to increase Medi-Cal rates.

          According to supporters, this bill, together with SB 591, will  
          prevent kids from smoking, improve access to health care services,  
          fund prevention and education efforts, and help tobacco users  
          quit.  Tobacco related diseases are the leading cause of  
          preventable death in California, claiming more than 40,000 lives  
          each year and costing the state of California over $13 billion in  
          healthcare costs annually.  Over $3.5 billion are taxpayer dollars  
          used to treat Medi-Cal patients with tobacco-related illnesses.   
          The best way to offset these costs and protect millions of  
          California residents is through investment in the California  
          Tobacco Control Program, which has successfully reduced smoking  
          rates and cigarette consumption in our state.  This program, since  
          its inception in 1989, has saved the state of California $139  
          billion dollars.  This bill would generate over $151 billion in  
          revenues that will be used to fund proven and effective tobacco  
          prevention and cessation programs, as well as improved access to  
          health care for low-income families.


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          According to opponents, this bill will accelerate the decline of  
          tobacco tax revenues received by the state and will place more  
          pressure on the GF to support existing programs.  Opponents are  
          also concerned that the tax increase proposed by SB 591 increase  
          the amount of tobacco products sold on the black market, creating  
          a higher cost for law enforcement.  Opponents further argue that a  
          tax will negatively impact the tobacco industry, including the  
          employees who work for tobacco companies.

          Analysis Prepared by:                                               
                          Rylan Gervase / HEALTH / (916) 319-2097  FN: