BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 24 (Hill) - Electronic cigarettes: licensing and restrictions ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 21, 2015 |Policy Vote: HEALTH 6 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 28, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- SUSPENSE FILE. AS AMENDED. Bill Summary: SB 24 would raise the minimum legal age to purchase or consume tobacco products and electronic cigarettes from 18 to 21. The bill would extend many existing restrictions or prohibitions on the use of tobacco products to electronic cigarettes. The bill would require electronic cigarette manufacturers, wholesalers, and retailers to be licensed. Fiscal Impact (as approved on May 28, 2015): One-time costs of about $180,000 to revise regulations and educational materials relating to the prohibition on the sale of tobacco products to minors by the Department of Public Health (General Fund or tobacco tax funds). SB 24 (Hill) Page 1 of ? Ongoing costs in the hundreds of thousands per year for additional survey activities at retail stores selling electronic cigarettes (General Fund or tobacco tax funds). Current federal law requires the state to determine the rate at which individuals under 18 years of age can illegally purchase tobacco products. The Department of Public Health conducts random inspections at about 750 retail locations annually to determine a statewide average rate at which retailers are not in compliance with state and federal law. The total annual cost to conduct the current survey is $400,000. Federal law would continue to require the Department to conduct the existing survey. There are about 1,100 retail locations that only sell electronic cigarettes and related products. Because this bill would expand the universe of retail locations subject to the inspection requirement, the Department is likely to incur additional costs to survey a sample of those retail locations to accurately determine the rate at which minors can purchase electronic cigarettes. Ongoing costs in the hundreds of thousands per year for enforcement actions relating to illegal sales of tobacco products and electronic cigarettes to minors (General Fund or tobacco tax funds). Under current law, the Department of Public Health enforces the law prohibiting the sale of tobacco products to minors by conducting compliance inspections using youth decoy purchasers and following up on complaints from the public. The total annual cost for the Department's enforcement program is $1.6 million per year. By adding electronic cigarette retailers to the current enforcement program, the bill will increase the Department's enforcement efforts, particularly for retailers who do not already sell traditional tobacco products. The amount of that increased enforcement activity will depend both on the number of additional retailers covered by the law and the compliance rate of those retailers (or if retailers of traditional tobacco products are found to be selling electronic cigarettes to minors at higher rates than traditional tobacco products). SB 24 (Hill) Page 2 of ? Because the state has fully allocated the existing federal funding for this program, any additional costs will be borne by the General Fund, tobacco tax funds, or other fund sources. Ongoing licensing costs of about $300,000 for the Board of Equalization to license retailers who sell electronic cigarettes but are not currently licensed because they do not sell tobacco products (Compliance Fund). Under current law, the Board licenses wholesalers and retailers of tobacco products, to facilitate the collection of tobacco taxes. This bill will require the Board to also license electronic cigarette retailers. Currently, the Board expends about $280 per licensee to operate the licensing program. Licensees pay a one-time licensing fee of $100. The remaining program costs are offset with tobacco tax revenues. According to the Stanford Prevention Center, there are about 1,000 retailers in the state that specialize in electronic cigarettes and do not sell other tobacco products. The Board would incur additional licensing costs to license those retailers, which would be offset by the initial licensing fee. The author's amendments authorize the Board to assess an additional licensing fee up to $280 to cover the Board's licensing costs Background: Under current law (the Stop Tobacco Access to Kids Enforcement or STAKE Act) the Department of Public Health is responsible for enforcing the prohibition on furnishing tobacco products to minors (those under 18 years of age). Federal law requires states to demonstrate that they are complying with federal law in this area, by demonstrating that the rate at which minors can purchase tobacco products does not exceed 20%. The Department fulfills these requirements by conducting a survey of about 750 retail stores, using minors to attempt a purchase. Using information from the survey, as well as public complaints and other sources, the Department conducts enforcement actions against retailers in violation of the law. In addition to assessing fines for non-compliance, the Department is authorized to notify the Board of Equalization of repeated violations by a retailer; the Board is then authorized to suspend the retailer's license. Current law requires the Board of Equalization to license tobacco wholesalers and retailers. The purpose of this licensing requirement is to facilitate the collection of state tobacco taxes and prevent tax evasion. Tobacco products are subject to SB 24 (Hill) Page 3 of ? both a specific excise tax on tobacco products as well as the general Sales and Use Tax. Current state law prohibits smoking of tobacco products in various places, such as school campuses, public buildings, places of employment, retail food facilities, and other places. Current law requires employers generally, and operators of certain facilities such as hospitals, clinics, and food facilities specifically, to post signs declaring that no smoking is permitted, with certain exceptions. Those requirements are enforced at the local level. Proposed Law: SB 24 would raise the minimum legal age to purchase or consume tobacco products and electronic cigarettes from 18 to 21. The bill would extend many existing restrictions or prohibitions on the use of tobacco products to electronic cigarettes. The bill would require electronic cigarette manufacturers, wholesalers, and retailers to be licensed. The bill does not redefine tobacco products to include electronic cigarettes, but rather adds electronic cigarettes specifically to many provisions of law regulating the use of tobacco products. Specific provisions of the bill would: Raise the minimum legal age to purchase or consume tobacco products and electronic cigarettes from 18 to 21; Extend the existing provisions of the STAKE Act to electronic cigarettes; Prohibit the use of electronic cigarettes in specific places, such as schools, places of employment, public buildings, apartments, and other places; Require places where smoking is currently prohibited to have signage that states both "no smoking" and "no using electronic cigarettes"; Make electronic cigarette wholesalers and retailers subject to licensure by the Board of Equalization; Require all cartridges for electronic cigarettes and solutions for refilling electronic cigarettes to be in childproof packaging. SB 24 (Hill) Page 4 of ? Related Legislation: SB 140 (Leno) would expand the definition current law of "tobacco product" in certain sections of law to include electronic cigarettes. That bill is on this committee's Suspense File. SB 151 (Hernandez) would raise the minimum legal age to purchase or consume tobacco products from 18 to 21. That bill is on this committee's Suspense File. AB 216 (Garcia) would raise the fine for selling an electronic cigarette to a minor. That bill is pending in the Assembly. AB 768 (Thurmond) would prohibit the use of electronic cigarettes in any baseball stadium. That bill is pending in the Assembly Staff Comments: The only costs that may be incurred by a local agency relate to crimes and infractions. Under the California Constitution, such costs are not reimbursable by the state. As noted above, the bill requires operators of certain buildings to change existing no smoking signage to specifically prohibit the use of electronic cigarettes. This provision is likely to impose costs on local governments. However, because the provisions of the bill apply generally (to employers or operators of hospitals, for example) this requirement does not create a reimbursable state mandate. Author's amendments (as adopted May 28, 2015): make raising the smoking age from 18 to 21 contingent on the enactment of SB 151 (Hernandez) and authorize the Board of Equalization to impose an additional one-time licensing fee, up to $280, to cover the costs of licensing electronic cigarette retailers. -- END -- SB 24 (Hill) Page 5 of ?