BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 2770 (Nazarian) - Cigarette and tobacco product licensing:   
          fees and funding
          
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          |Version: June 16, 2016          |Policy Vote: B., P. & E.D. 8 -  |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 11, 2016   |Consultant: Brendan McCarthy    |
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          *********** 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.


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