BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1575


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          Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          1575 (Bonta) - As Amended April 25, 2016


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          |             |Banking and Finance            |     |8 - 2        |
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          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. 








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          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.










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          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  








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               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  








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            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  








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            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