BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SBX2 5| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SBX2 5 Author: Leno (D), et al. Amended: 8/26/15 Vote: 21 SENATE PUBLIC HEALTH & DEVELOP. SVCS. COMM.: 9-3, 8/19/15 AYES: Hernandez, Beall, Hall, Leno, McGuire, Mitchell, Monning, Pan, Wolk NOES: Morrell, Moorlach, Nielsen NO VOTE RECORDED: Anderson SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/24/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen SUBJECT: Electronic cigarettes SOURCE: American Cancer Society Cancer Action Network American Heart Association/American Stroke Association American Lung Association DIGEST: This bill recasts and broadens the definition of "tobacco product" in current law to include electronic cigarettes as specified; extends current restrictions and prohibitions against the use of tobacco products to electronic cigarettes; extends current licensing requirements for manufacturers, importers, distributors, wholesalers, and retailers of tobacco products to electronic cigarettes; and requires electronic cigarette cartridges to be child-resistant. ANALYSIS: SBX2 5 Page 2 Existing law: 1)Authorizes the California Department of Public Health (DPH), under the Stop Tobacco Access to Kids Enforcement (STAKE) Act, to assess civil penalties ranging from $400 to $6,000, depending on the number of infractions, against any person, firm, or corporation that sells, gives, or in any way furnishes tobacco products to a person who is under the age of 18. 2)Establishes "smoke-free laws," which prohibit the smoking of tobacco products in various places, including, but not limited to, school campuses, public buildings, places of employment, apartment buildings, day care facilities, retail food facilities, health facilities, and vehicles when minors are present, and makes a violation of some of the prohibitions punishable as an infraction. 3)Defines "tobacco product" as any product containing tobacco leaf, including, but not limited to, cigarettes, cigars, pipe tobacco, snuff, chewing tobacco, dipping tobacco, bidis, or any other preparation of tobacco. 4)Defines "electronic cigarette" as a device that can provide an inhalable dose of nicotine by delivering a vaporized solution. Prohibits a person from selling or otherwise furnishing an electronic cigarette to a person under the age of 18. 5)Requires the Board of Equalization (BOE), under the Cigarette and Tobacco Products Licensing Act, to administer a statewide program to license cigarette and tobacco products manufacturers, importers, distributors, wholesalers, and retailers. Prohibits selling tobacco products without a valid license, and makes violations punishable as a misdemeanor. 6)Requires a retailer, for purposes of collecting a tobacco tax, to obtain a separate license for each retail location that sells cigarettes and tobacco products and pay a one-time fee of $100. Requires BOE to suspend or revoke a retailer's license upon notification by DPH of certain STAKE Act violations. This bill: SBX2 5 Page 3 1)Recasts and broadens the definition of "tobacco product" to include a product made or derived from tobacco or nicotine that is intended for human consumption, whether smoked, heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, and includes electronic devices that deliver nicotine or other substances to the person inhaling from the device, including, but not limited to, an electronic cigarette, cigar, pipe, or hookah; and any component, part, or accessory of a tobacco product, whether or not sold separately. By broadening the definition of "tobacco products," this bill extends all existing laws that relate to tobacco products to electronic cigarettes. 2)Exempts from the definition of "tobacco product" a product that has been approved by the Food and Drug Administration (FDA) for sale as a tobacco cessation product or for other therapeutic purposes where the product is marketed and sold solely for such an approved purpose. 3)Requires retailers of electronic cigarettes, which are not subject to a tobacco tax, to apply for a license and pay a license fee, in an amount to be determined by the BOE, beginning October 1, 2016. 4)Requires all cartridges for electronic cigarettes and solutions for filling or refilling an electronic cigarette to be in child-resistant packaging, as defined by the Code of Federal Regulations. Comments 1)Author's statement. According to the author, California has invested 25 years and $2.5 billion in public health measures aimed at reducing tobacco use. However, that investment is now threatened by a new tobacco product: electronic cigarettes. According to a DPH report, e-cigarette aerosol contains at least 10 chemicals that are on California's Proposition 65 list of chemicals known to cause cancer, birth defects or other reproductive harm. Despite industry claims that e-cigarettes do not present secondhand smoke concerns, studies have found formaldehyde, benzene, and tobaccospecific nitrosamines (a carcinogen) coming from the secondhand SBX2 5 Page 4 emissions of ecigarettes. Despite these potentially serious risks to public health, e-cigarette use is growing nationwide. The Centers for Disease Control and Prevention found that more than a quarter of a million youth who had never smoked a cigarette used electronic cigarettes in 2013. electronic cigarettes come in enticing flavors such as gummy bear and mango. While California currently bans the sale of e-cigarettes to minors under the age of 18, many youth are still able to access the product. DPH recommends that "[e]xisting laws that currently protect minors and the general public from traditional tobacco products should be extended to cover e-cigarettes." SBX2 5 will do exactly this by including e-cigarettes within California's smoke-free laws and the STAKE Act. 2)What is an electronic cigarette? According to a 2014 report by the World Health Organization (WHO), electronic cigarettes are battery heated devices that deliver nicotine by heating a solution that users inhale. Electronic cigarette cartridges (e-liquids) contain liquid nicotine, and chemicals introduced into a liquid vehicle produce various flavors such as tobacco, cotton candy, and gummy bear. Although some electronic cigarettes look like conventional cigarettes, others take the form of items such as pens and USB flash drives. 3)Electronic cigarette safety. The FDA states that the safety and efficacy of electronic cigarettes has not been fully studied. Some of the uncertainty stems from the wide variety of devices and liquids available, and therefore separate components need to be studied, including the electronic cigarette device, the e-liquid, the inhaled aerosol, and the exhaled aerosol that may be inhaled secondhand. Electronic cigarette devices vary in their engineering, battery voltage, and ability to heat the e-liquid, meaning e-liquids can deliver a different aerosol and nicotine dose depending on the device. E-liquids currently have no requirements for labeling, and The National Institute of Health states "[t]here is poor correlation between labeled and actual nicotine content." A 2014 article in the journal Addiction states that because of device inconsistencies, there is also no correlation between the nicotine content in the e-liquid and the resulting inhaled SBX2 5 Page 5 aerosol. A July 2014 report, "Electronic nicotine delivery systems (ENDS)," by the WHO stated that existing evidence shows electronic cigarettes do not produce merely a water vapor, but an aerosol that poses serious threats to adolescents and fetuses. According to a 2013 study entitled "Does electronic cigarette consumption cause passive vaping?," aerosol exhaled by electronic cigarette users contains nicotine, formaldehyde, and other chemicals. 4)DPH report. The California State Health Officer released a report in January 2015, "A Community Health Threat," about electronic cigarettes that cites, among other things, the concern about the health risks of electronic cigarettes, the growing number of electronic cigarette users, and the unrestricted marketing tactics for electronic cigarettes. Electronic cigarette poisonings increased from seven in 2012 to 154 in 2014. To date, the effectiveness of electronic cigarettes as cessation aids has not been proven or approved by the FDA as such. The report states that a number of studies show that electronic cigarette users are no more likely to quit than regular smokers. Electronic cigarette companies are using tactics previously used by tobacco companies that have since been banned, such as advertising on TV, radio, and social media, and sponsoring sport and music events. The State Health Officer concludes that existing laws currently in place to protect minors and the general public from traditional tobacco products should be extended to cover electronic cigarettes. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: 1)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 DPH (General Fund or tobacco tax funds). 2)Ongoing costs in the tens of thousands to low hundreds of thousands per year for additional survey activities at retail stores selling electronic cigarettes (General Fund or tobacco tax funds). SBX2 5 Page 6 Current federal law requires the state to determine the rate at which minors can illegally purchase tobacco products. DPH 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. There are many retail locations that sell both traditional tobacco products as well as electronic cigarettes. There are also a significant number of retail locations that only sell electronic cigarettes and related products. Because this bill expands the universe of retail locations subject to the inspection requirement, DPH will need to conduct additional visits to newly regulated retail locations which only sell electronic cigarettes. There are about 1,000 retailers in the state that sell electronic cigarettes but not tobacco products. DPH 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. Because retailers that sell both tobacco products and electronic cigarettes are not likely (in the long-term) to sell those products to minors at different rates, DPH will likely be able to combine survey efforts at retailers that sell both types of products. 3)Ongoing costs in the hundreds of thousands per year for enforcement actions relating to illegal sales of electronic cigarettes to minors (General Fund or tobacco tax funds). Under current law, DPH 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 DPH's enforcement program is $1.6 million per year. By adding additional retailers to the current prohibition on sales to minors, the bill will increase DPH'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 SBX2 5 Page 7 rates than traditional tobacco products). The total enforcement cost is unknown at this time, but is likely to be in the hundreds of thousands per year, based on existing enforcement costs. 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. 4)Ongoing licensing costs of about $300,000 for BOE to license retailers who sell electronic cigarettes but are not currently licensed because they do not sell tobacco products (Compliance Fund). Under current law, BOE licenses wholesalers and retailers of tobacco products, to facilitate the collection of tobacco taxes. This bill will require BOE to also license electronic cigarette retailers. Currently, BOE 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. BOE would incur additional licensing costs to license those retailers, which would be offset by the existing initial licensing fee and a new one-time licensing fee on electronic cigarette retailers not currently licensed by BOE. 5)No anticipated change in tobacco tax revenue (General Fund and special fund). This bill does not change the definition of "tobacco product" in the Revenue and Taxation Code to include electronic cigarettes. Thus, this bill does not extend the state's existing tax on those products to electronic cigarettes. SUPPORT: (Verified8/25/15) American Cancer Society Cancer Action Network (co-source) American Heart Association/American Stroke Association (co-source) American Lung Association (co-source) Attorney General Kamala Harris Alameda County Board of Supervisors American Academy of Pediatrics SBX2 5 Page 8 Americans for Nonsmokers' Rights Association of California Healthcare Districts Association of Northern California Oncologists Breathe California California Academy of Family Physicians California Academy of Preventive Medicine California Black Health Network California Chapter of the American College of Emergency Physicians California Chronic Care Coalition California College and University Police Chiefs California Dental Association California Medical Association California Narcotic Officers' Association California Optometric Association California Pan-Ethnic Health Network California Pharmacists Association California Police Chiefs Association California Primary Care Association California Society for Addiction Medicine California State Association of Counties Common Sense Kids Action Community Action Fund of Planned Parenthood Orange & San Bernardino Counties County Health Executives Association County Health Executives Association of California First 5 Association of California Health Officers Association of California Kaiser Permanente Los Angeles City Attorney Mike Feuer March of Dimes, California Chapter Medical Oncology Association of Southern California Planned Parenthood Advocacy Project Los Angeles Planned Parenthood Mar Monte Planned Parenthood Northern California Action Fund Planned Parenthood of the Pacific Southwest San Dieguito Alliance for Drug Free Youth San Mateo County Tobacco Education Coalition Santa Clara County Board of Supervisors SEIU California Sonoma County Board of Supervisors OPPOSITION: (Verified8/25/15) SBX2 5 Page 9 Smoke-Free Alternative Trade Association ARGUMENTS IN SUPPORT: The American Cancer Society Cancer Action Network, the co-sponsor of this bill, the California Primary Care Association, and the California Black Health Network state that defining electronic cigarettes as a tobacco product in the STAKE act tackles the issue of retailers selling electronic cigarettes to minors, which is critical in preventing youth tobacco use. The cosponsor also states that this bill will address the issue of second-hand exposure to electronic cigarette aerosol by prohibiting the use of electronic cigarettes in all places where smoking is currently prohibited. The American Lung Association, another cosponsor of the bill, and Kaiser Permanente, state that SBX2 5 aligns state laws with proposed federal regulations that define electronic cigarettes as tobacco products per FDA oversight. Breathe California states that SBX2 5is the best way to face the threat that electronic cigarettes pose to young people. The California Dental Association states that SBX2 5 will ensure electronic cigarettes receive the same oversight and regulation as other harmful tobacco products sold at the retail level. SEIU California, Common Sense Kids Action, Association of Northern California Oncologists , and the Medical Oncology Association of Southern California state that, although California bans the sale of electronic cigarettes to minors, many youth are still able to access these products due to lack of oversight and enforcement. The California Medical Association states that electronic cigarettes should be classified as tobacco products because they contain derived nicotine. ARGUMENTS IN OPPOSITION: The Smoke-Free Alternative Trade Association states that enactment of SBX2 5 would shut down hundreds of small business-owned vape shops throughout the state, and that the existing statutory definition of electronic cigarettes can achieve the public policy goals of protection of children and minors. Prepared by:Shannon Muir / HEALTH / 8/26/15 17:31:51 **** END **** SBX2 5 Page 10