BILL ANALYSIS Ó AB 1575 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1575 (Bonta) - As Amended April 25, 2016 ----------------------------------------------------------------- |Policy |Business and Professions |Vote:|14 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Banking and Finance | |8 - 2 | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill contains numerous provisions related to medical cannabis (marijuana) licensure and regulation. Specifically, this bill: 1)Replaces the word "marijuana" with "cannabis" in numerous code sections. AB 1575 Page 2 2)Modifies, adds, and reorders definitions of terms. 3)Clarifies California Department of Public Health (CDPH) authority to regulate manufacturing and testing laboratories. 4)Exempts persons and entities complying with state law and local ordinances from specified fines, penalties, and criminal sanctions for cannabis-related activities. 5)Specifies the Bureau of Medical Marijuana Regulation (Bureau, renamed "Bureau of Medical Cannabis Regulation") is subject to review by appropriate policy committees of the Legislature. 6)Requires the Board of Equalization (BOE), in conjunction with the Department of Business Oversight (DBO), to form an advisory committee to examine strategies that will improve financial monitoring of medical cannabis businesses, and report to the Legislature by July 1, 2017. 7)Specifies an ordinance that regulates cannabis or medical cannabis shall not require the consent of the Secretary of the California Department of Food and Agriculture (CDFA). 8)Specifies that a collective or cooperative may operate on a for-profit basis or not-for-profit basis. 9)Clarifies the allowable use of cannabis for research purposes. AB 1575 Page 3 10)Authorizes the Bureau to promulgate regulations to establish minimum qualifications for state authorization to conduct research, regulations relating to the amount of product a cultivator or manufacturer is required to send to a distributor for inspection and a testing laboratory for testing, and regulations related to delivery of medical cannabis. 11)Specifies the fees established by state licensing authorities are in addition to, and shall not limit, any fees or taxes imposed local jurisdictions. 12)Contains a number of other technical, clarifying, or narrow substantive changes. FISCAL EFFECT: 1)Minor staff costs to BOE and DBO to form an advisory group and produce recommendations. 2)Initial costs to CDPH, CDFA, and the Bureau are funded through a previously authorized GF loan to the Medical Marijuana Regulation and Safety Act Fund, to be repaid through licensure fee revenue. Ongoing costs will be funded through license fee revenue specific to the license type, once a licensing structure is established and fee collection begins. a) CDPH indicates additional requirements of this bill, including provisions related to laboratory testing standards, edible cannabis, and scientific input to the regulatory process will be absorbed within existing planned workload. A Budget Change Proposal (BCP) in the 2016-17 Governor's Budget requests $12 million for CDPH and 37 AB 1575 Page 4 positions to be phased in over three fiscal years, starting with the current year. b) CDFA indicates exempting local ordinances from secretarial approval will be fiscally beneficial to the Department by reducing workload. Other provisions will be absorbed within existing planned workload. A BCP in the 2016-17 Governor's Budget requests $3.5 million for CDFA and 18 positions to begin in the current year. c) The Bureau may incur significant new staff costs related to promulgation, implementation, and enforcement of regulations noted in (10), above. Start-up costs would be in the $160,000 and ongoing costs are $1.2 million. IT costs may also be significant but cannot be estimated at this time. A BCP in the 2016-17 Governor's Budget requests $1.6 million for the Bureau and 9.0 positions to begin in the current year, and $3.8 million and 25 positions in 2016-17, and $4 million in 2017-18. COMMENTS: 1)Purpose. This bill is essentially an omnibus cleanup bill to the regulatory structure created last year for medical cannabis. According to the author, last year's bills established a licensing structure that prioritizes the protections of patient, the public, and the environment, as well as local control. Based on conversations with stakeholders, patients, and members of the public, AB 1575 makes key changes to improve implementation of the regulatory framework and ease the transition for existing operators, local governments, and the general public. 2)Background. Medical cannabis (or marijuana), though illegal AB 1575 Page 5 under federal law, has been legal under state law since the passage of Proposition 215 in 1996. The Medical Marijuana Regulation and Safety Act (MMRSA) was a package of three bills enacted together in 2015 to regulate the medical marijuana industry and license its participants. The bills created a comprehensive state regulatory system for the commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis. Among other things, the MMRSA establishes the new Bureau under the Department of Consumer Affairs, which is responsible for licensing and regulating dispensaries, transporters, and distributors. The MMRSA charges CDPH with regulating manufacturers, testing laboratories, and the production and labeling of edible medical marijuana products, and CDFA with regulating cultivation. Other state agencies, such as the Department of Pesticide Regulation and the State Water Resources Control Board, are responsible for developing environmental standards. The MMRSA went into effect on January 1, 2016, though licensure will not be required until the responsible licensing authorities pass regulations. 3)Marijuana Regulation Startup Costs and Fees. Among other provisions, AB 243 (Wood), Chapter 688, Statutes of 2015, one of the bills establishing MMRSA, appropriated $10 million to the Medical Marijuana Regulation and Safety Act Fund for start-up activities. MMRSA requires each licensing authority for medical marijuana, including the Bureau, CDPH, and CDFA, to charge fees commensurate with regulatory costs. Further, each licensing authority is required to generate sufficient fee revenue to cover the specific licensure program administered by that authority. 4)Staff Comments. BOE notes it appears questionable whether an AB 1575 Page 6 advisory group can be formed to identify proposed changes to state law or regulations that would improve banking access, and submit a report by July 1, 2017, and that the author may wish to consider delaying the report date to provide sufficient time for the advisory group to solve such a complicated issue. 5)Prior Legislation. AB 266 (Bonta, Cooley, Jones-Sawyer, Lackey, and Wood), Chapter 689, Statutes of 2015; SB 643 (McGuire), Chapter 719, Statutes of 2015; and AB 243, described above, were companion bills that formed the MMRSA. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081