BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 2770 (Nazarian) - Cigarette and tobacco product licensing: fees and funding ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 16, 2016 |Policy Vote: B., P. & E.D. 8 - | | | 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 11, 2016 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- *********** ANALYSIS ADDENDUM - SUSPENSE FILE *********** The following information is revised to reflect amendments adopted by the committee on August 11, 2016 Bill Summary: AB 2770 would prohibit tobacco tax revenues from being appropriated to the State Board of Equalization to support the Cigarette and Tobacco Products Licensing Program. Fiscal Impact: Unknown cost pressure to provide General Fund monies to support the Cigarette and Tobacco Products Licensing Program (General Fund). In recent years, the Licensing Program has been funded with a combination of licensing fees paid by AB 2770 (Nazarian) Page 1 of ? tobacco retailers and distributors and revenues derived from taxes imposed on tobacco products. Recently, the licensing fees assessed on tobacco retailers and distributors were increased, with the intention of fully funding the Licensing Program with licensee fees. Those fee increases go into effect on January 1, 2017. The current year budget still provides some funding from tobacco tax revenues to support the Licensing Program, because the increased license fee revenues will only be in place for one-half of the current year. Under the bill, if projected fee revenues are not sufficient to fully fund the Licensing Program, there would be pressure to either augment the fee revenues with General Fund revenue or reduce program expenditures. Until full-year fee revenues have been collected, there is uncertainty about whether the fee revenues will be sufficient to fully fund the Licensing program. In addition, the licensing fee levels are set in statute. As the costs to implement the licensing program grow over time due to cost inflation, the Board of Equalization will not be able to raise the licensing fees to offset those cost increases. Under this bill, there would be cost pressure on the General Fund to offset cost increases or to raise licensing fees. Author Amendments: Delay the probation on using tobacco tax revenues for the licensing program until July 1, 2019 and make technical changes. -- END --