BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SBX2 7 (Hernandez) - Tobacco products: minimum legal age
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|Version: July 16, 2015 |Policy Vote: HEALTH 9 - 3 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 24, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB X2 7 would raise the minimum legal age to purchase
or consume tobacco products from 18 to 21.
Fiscal
Impact:
Likely ongoing costs in the tens of thousands to low hundreds
of thousands per year for additional survey activities at
retail stores that sell tobacco products (Cigarette and
Tobacco Tax Surcharge Fund).
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. In addition, it is
likely that under this bill the Department would expand the
SBX2 7 (Hernandez) Page 1 of
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existing survey, to determine the rate at which individuals
between 18 and 21 years of age are able to purchase tobacco
products.
Likely ongoing costs in the hundreds of thousands per year for
enforcement actions relating to illegal sales of tobacco
products to individuals between 18 and 21 years of age
(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 raising the minimum age to purchase tobacco products, the
bill is likely to substantially increase the Department's
enforcement workload, at least in the early years. In order
to continue to comply with federal restrictions on the sale of
tobacco to individuals under age 18, it is likely that the
Department will need to keep much of its existing enforcement
program in place. In addition, the Department will likely need
to take separate enforcement actions against retailers who
sell tobacco products to individuals between 18 and 21 years
of age. Over time, it is possible that the Department will be
able to combine its enforcement activities, reducing overall
costs. The total additional 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.
Reduced total excise tax and sales tax revenues on tobacco
products of $68 million per year in the near term (various
funds). The Board of Equalization projects reduced tobacco
excise tax revenues of about $43 million per year (about $4
million of which would come from the General Fund and the
remainder from special funds that support a variety of public
health programs). The Board estimates reduced sales tax
revenues of about $25 million per year (about $13 million
coming from the General Fund and the remainder coming from
local government sales tax revenues). This tax loss analysis
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assumes a reduction in tobacco use proportional to the share
of the population between 18 and 21.
Additional long-run reductions in tobacco excise and sales
tax, likely over $100 million per year (various funds). In the
long-run, the bill will reduce tobacco tax use both by
prohibiting its use among those 18 to 21 and by reducing the
long-term smoking rate in the adult population, because
delaying initial tobacco use reduces the likelihood of
long-term use. According to the federal Institute of Medicine,
raising the legal minimum age to purchase tobacco products is
likely to reduce the overall long-term smoking rate amongst
adults by 12 percent. This is because most long-term tobacco
users begin using tobacco products before age 21 and a
relatively low number of long-term tobacco product users begin
using such products after age 21.
Unknown, but significant health care cost savings to public
payers (various funds). According to the Centers for Disease
Control and Prevention, estimates of annual direct health care
costs related to smoking are between $130 billion and $180
billion per year, nationally. This bill is likely to reduce
health care costs, by reducing tobacco use rates. If the
long-term reduction in the expenditure of health care costs
relating to smoking is proportional to the reduction in the
use rate, total direct health care costs in the state would be
reduced by as much as $2 billion per year in the long-run. A
significant portion of those savings would likely accrue to
public payers such as the Medi-Cal program and CalPERS.
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. 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
SBX2 7 (Hernandez) Page 3 of
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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
both a specific excise tax on tobacco products as well as the
general Sales and Use Tax.
Proposed Law:
SB X2 7 would raise the minimum legal age to purchase or
consume tobacco products from 18 to 21. The bill would also
apply the 21-year age restriction to the provisions of the STAKE
Act.
Related
Legislation:
AB X2 8 (Wood) is identical to this bill. That bill is pending
in the Assembly.
SB 151 (Hernandez) is substantially similar to this bill. That
bill is pending in the Assembly Governmental Organization
Committee.
AB 221 (Koretz, 2003) was substantially similar to this bill.
That bill failed passage in the Assembly Governmental
Organization Committee.
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.
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