BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1575 |Hearing |6/29/16 |
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|Author: |Bonta |Tax Levy: |No |
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|Version: |6/22/16 |Fiscal: |Yes |
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|Consultant|Favorini-Csorba |
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Medical cannabis
Amends various provisions of the Medical Marijuana Regulation
and Safety Act.
Background and Existing Law
Federal and state law prohibits the possession, possession with
intent to sell, cultivation, sale, transportation, importation,
or furnishing of marijuana. However, in 1996, California voters
approved Proposition 215, known as the Compassionate use Act of
1996 (CUA). Under CUA, qualified patients with specified
illnesses or their primary caregivers cannot be prosecuted for
possessing or cultivating medical marijuana upon the written or
oral recommendation or approval of an attending physician.
Thus, CUA allowed qualified patients and primary caregivers to
obtain and use medical marijuana.
The Legislature clarified CUA in 2003 by enacting SB 420
(Vasconcellos, 2003). SB 420 exempted qualified patients and
caregivers from prosecution for using or from collectively or
cooperatively cultivating medical marijuana and established a
medical marijuana card program for patients to use on a
voluntary basis. SB 420 provides a safe harbor for qualified
patients as to the amount of marijuana they may possess and the
number of plants they may maintain. It also protects patients
with valid identification cards from both arrest and criminal
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liability for possession, transportation, delivery, or
cultivation of marijuana. Thus, California's estimated $1
billion medical marijuana industry existed amid a conflict
between federal and state law, and within state law itself. The
industry remained largely unregulated until 2015.
Medical Marijuana Regulation and Safety Act. In 2015, the
Legislature enacted the Medical Marijuana Regulation and Safety
Act (MMRSA), a package of legislation that comprehensively
regulates many aspects of medical marijuana including
cultivation, manufacturing, transportation, distribution, sale,
and product safety. The MMRSA comprises three bills-SB 643
(McGuire, 2015), AB 243 (Wood, 2015), and AB 266 (Bonta, 2015).
Among other provisions, MMRSA:
Creates the Bureau of Medical Marijuana Regulation (the
Bureau) within the Department of Consumer Affairs to
oversee and enforce the state's medical marijuana
regulations, in collaboration with the Board of
Equalization (BOE), the California Department of Public
Health (DPH), and the California Department of Food and
Agriculture (CDFA);
Establishes categories of licenses for various medical
marijuana activities, such as cultivation, manufacturing,
distribution, transportation, and sale, and provides
certain state agencies with the authority to issue those
licenses and enforce their terms;
Requires BOE and CDFA to implement a program that allows
regulators to uniquely identify each legally cultivated
medical marijuana plant and trace that plant throughout the
distribution chain;
Prohibits licensees from commencing activity under the
authority of a state license until the applicant has
obtained a license or permit pursuant to the applicable
local ordinance;
Includes protections of the ability of local governments
to pass and enforce laws, licensing requirements, and
zoning ordinances.
Authorizes local governments to establish a licensing
system for the cultivation of medical marijuana through
their current or future land use authority, and prohibits
the cultivation of medical marijuana without obtaining both
a state license-issued by CDFA-and a local license.
Provides that qualified patients and their caregivers do
not have to secure licenses for cultivation if they are
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growing marijuana for their own personal use in an area of
less than 100 square feet.
Phases out, within one year of notice on the Bureau's
website that licensing has begun, collectives and
cooperatives organized for the purpose of cultivating
marijuana for use by qualified patients and caregivers.
The MMRSA was finalized in the waning hours of the 2015
legislative session, resulting in some errors, inconsistencies,
and unresolved issues in the bills. In early 2016, the
Legislature fixed two time-sensitive issues with the MMRSA
through urgency legislation that was signed by the Governor on
February 3, 2016 (AB 21, Wood). AB 21 repealed a March 1, 2016
deadline for cities and counties to regulate medical marijuana
cultivation and amended the provisions governing the ability of
qualified patients and caregivers to cultivate marijuana for
their own use. AB 21 was enacted knowing that more
comprehensive clean-up of MMRSA was needed. The marijuana
industry, local governments, and others want the Legislature to
enact those changes.
Proposed Law
Assembly Bill 1575 changes the name of MMRSA to the Medical
Cannabis Regulatory and Safety Act, changes certain references
from "marijuana" to "cannabis," and makes additional changes to
the following areas:
Licensing authorities and restrictions.
o Authorizes DPH to create, issue, and suspend
or revoke manufacturing and testing licenses.
o Makes DPH responsible for determining labeling
and package requirements.
o Gives individuals one year from the date after
the Bureau posts a notice that licensing authorities
have commenced issuing licenses to comply with
commercial cannabis licensing laws.
o Authorizes the secretary or director of each
licensing authority to prescribe, adopt, and enforce
emergency regulations necessary to implement the Act.
o Provides that state licenses are generally
valid for 12 months from the date of issuance.
o Allows a licensee to operate as a for-profit
business, as a not-for-profit entity, or as a
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combination of both.
o Requires the Bureau to review the
appropriateness of current license quantity and
combination restrictions and report its recommendation
for elimination or extension of these provisions to
the Legislature by January 1, 2025.
o Effective January 1, 2026, allows a licensee
to only hold a state license in up to two separate
license categories in certain combinations.
Dispensaries and delivery.
o Amends the way dispensaries are classified and
requires dispensaries to securely store medical
cannabis.
o Requires the Bureau to establish advertising,
marketing, signage, and other labeling requirements
and restrictions and requires all advertisements for
licensees to include the valid state license number of
the licensee.
o Requires the Bureau to establish various
regulations regarding the delivery of medical cannabis
and medical cannabis products, including: minimum
requirements for employees; protocols to provide
qualified patients and primary caregivers with
information on relevant laws, regulations, and local
ordinances; a system for registering and maintaining
the status of all delivery personnel of dispensaries;
and minimum requirements for patient information that
is stored by each delivery operation.
o Requires all identifying information obtained
about a qualified patient or primary caregiver to be
obtained and stored in compliance with the
Confidentiality of Medical Information Act and all
other privacy laws and regulations.
Research & development, testing, and distribution.
o Requires a testing laboratory to analyze
samples in the final form which the patient will
consume product, according to a scientifically valid
methodology.
o Prohibits a licensed testing laboratory from
acquiring or receiving medical cannabis or medical
cannabis products except from a licensed facility.
o States that it is not a violation of this bill
or any other state law for a business to obtain from a
licensee less than eight ounces per month of medical
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cannabis to conduct research and development with
written authorization by the relevant city, county, or
city and county, if that local agency expressly
authorizes that activity by local ordinance.
o Repeals a requirement that a distributor
inspect the product to ensure its identity and
quantity before ensuring the cannabis product is
tested by a testing laboratory.
o Clarifies and establishes procedures for
providing medical cannabis and medical cannabis
products to a distributor and for testing those
products and requires the Bureau to specify how
medical cannabis meant for wholesale purposes must be
inspected by the distributor, tested by a laboratory,
and packaged and sealed prior to activities other than
dispensing.
Penalties.
o Imposes civil penalties on a person engaging
in commercial cannabis activity without a license and
required associated unique identifiers of up to twice
the amount of the license fee for each violation, per
day.
o Allows the licensing authority, state or local
authority, or court to order the destruction of
medical cannabis associated with that violation; and
specifies the funds in which to deposit the penalties.
o Allows licensing authorities to review and
reduce penalties in some cases.
Local authority.
o Provides that the fees established by
licensing authorities are in addition to, and do not
limit, any fees or taxes imposed by a city, county, or
city and county in which the licensee operates.
o States that an ordinance that regulates
cannabis or marijuana, or medical cannabis or medical
marijuana, does not require the consent of the
Secretary of the CDFA under the Secretary's authority
to oversee local seed, plant, and crop ordinances.
o Authorizes a dispensary to provide cannabis in
a city, county, or city and county that does not
expressly prohibit it by local ordinance.
o Authorizes a city to contract with the
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relevant county to enforce local licensing
requirements.
o Prohibits cities and counties from regulating
packaging safety standards, but allows regulations of
appellations of origin or other branding or marketing
materials.
o Clarifies that a person or entity shall not
submit an application for a state license unless that
person or entity first receives a license, permit, or
authorization specific to commercial cannabis activity
from a local jurisdiction, and prohibits state
licensing authorities from issuing a license to an
applicant that cannot document its local approval.
Miscellaneous.
o Redefines "owner" to mean a person (1) having
an aggregate ownership interest of five percent or
more in the licensee or (2) who has the power to
direct, or cause to be directed, the management or
control of the licensee, and includes members of the
boards of directors.
o Clarifies definitions for commercial cannabis,
commercial marijuana activity, cultivation site,
cultivator, dispensary, distributor, manufacturer,
manufacturing site, and other terms.
o Requires the Bureau to be subject to review by
the appropriate policy committees of the Legislature
by January 1, 2023.
o States the intent of the Legislature to enact
a statute that improves the medical cannabis
industry's ability to comply with federal law and
regulations that would allow improved access to
banking services and requires BOE, in conjunction with
the Department of Business Oversight, to recommend
improvements to the financial monitoring of medical
cannabis businesses.
o Allows existing collectives and cooperatives
organized under SB 420 to operate for profit, not for
profit, or any combination of the two, if they have a
valid BOE Seller's Permit and a local license, permit,
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or authorization, until phased out as under existing
law.
o Makes advertising by a collective without
including a BOE Seller's permit number an infraction,
punishable by a fine of $500.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Prior to MMRSA, the medical cannabis
industry operated in a legal grey area. The MMRSA creates a
complex regulatory program for overseeing every aspect of
medical cannabis production, including over a dozen types of
licenses for various commercial activities and provisions
governing interactions with local regulations, product and
consumer safety, patient protection, and control of cannabis
throughout the supply chain. But some changes are needed to
ensure the proper functioning of the regulatory program, given
its complexity and that these regulations are imposed wholesale
on a formerly unregulated and somewhat underground industry. AB
1575 makes these changes to MMRSA to further its original intent
and goals. AB 1575 represents a collaborative approach that
continues to balance local control with many of the needs of
existing medical cannabis businesses. These changes represent
the difference between a successful effort that ensures a
well-regulated, functional medical cannabis industry and the
reemergence of a black market with the associated local, state,
and federal law enforcement issues.
2. Provisions of interest . Local governments in California have
dual interests in the regulatory framework for medical cannabis:
(1) to ensure the integrity of the overall licensing scheme to
make sure that individuals operating commercial cannabis
activities within their jurisdictions are comprehensively
regulated by the state through the licensing system, and (2) to
maintain local control and authority over cannabis activities is
preserved. In many ways, AB 1575 furthers these goals, such as
by setting a low threshold for who is considered an owner of a
medical cannabis facility, reiterating that local licenses are
needed before applying to the state for a license, and
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clarifying that any state license fees are in addition to any
local fees. Yet these considerations need to be balanced
against the burdens on legal medical cannabis producers. Given
that cannabis production has been somewhat illicit, onerous
regulatory requirements may drive some producers back
underground and undermine the entire regulatory program. Thus,
some areas of discussion among the varied stakeholder remain,
including:
Defining ownership to cover all individuals that have
control over a facility without unduly limiting the ability
of licensees to invest in other aspects of medical cannabis
production.
Balancing the privacy considerations of qualified
patients and caregivers vs. the ability of local law
enforcement to evaluate the legal status of cannabis
activity.
Ensuring local oversight over cannabis research and
development while allowing businesses to pursue those
efforts without going through the full permitting process.
3. Related legislation . SB 837 (Committee on Budget and Fiscal
Review), which was enrolled on June 21st, enacts clarifying
changes to MMRSA requested by state agencies charged with
implementing the act. SB 837 enacts some of the same changes as
AB 1575, such as establishing the role of Department of Public
Health for issuing licenses relating manufacturing and testing
of medical cannabis. However, the bills also differ
significantly, such as how water sources and the environment are
protected from cultivation activities and the types of licenses
that may be held concurrently.
3. Mandate . The California Constitution generally requires the
state to reimburse local agencies for their costs when the state
imposes new programs or additional duties on them. AB 1575
makes it an infraction for a collective or cooperative to submit
an advertisement that does not include the valid seller ID
number issued by BOE. By creating a new crime, AB 1575 creates a
new state-mandated program. But the bill disclaims the state's
responsibility for reimbursing local governments for enforcing
these new crimes. That's consistent with the California
Constitution, which says that the state does not have to
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reimburse local governments for the costs of new crimes (Article
XIIIB, 6[a][2]).
4. Incoming ! AB 1575 passed the Senate Business, Professions,
and Economic Development Committee at its June 20th meeting on a
vote of 6-1.
Assembly Actions
Assembly Business and Professions: 14-0
Assembly Banking and Finance Committee: 8-2
Assembly Appropriations Committee: 15-1
Assembly Floor: 65-8
Support and
Opposition (6/23/16)
Support : Americans for Safe Access; California Cannabis
Delivery Association; California Cannabis Industry Association;
California Credit Union League; California Police Chiefs
Association; California State Association of Counties; City of
Santa Monica; Consortium Management Group; Kind Financial;
League of California Cities; Rural County Representatives of
California; Southern Humboldt Community Alliance; UCBA Trade
Association; Urban Counties of California.
Opposition : One individual.
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