BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 643 (McGuire) - Medical marijuana ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 6, 2015 |Policy Vote: B., P. & E.D. 7 - | | | 0, GOV. & F. 5 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 643 would establish a licensing and regulatory framework for medical marijuana, to be administered by a new bureau within the Department of Consumer Affairs and enforced primarily by local governments. Fiscal Impact: Ongoing costs, likely over $20 million per year to license medical marijuana cultivators, transporters, and dispensaries by the new Bureau of Medical Marijuana Regulation (special fund). For comparison, the California State Board of Pharmacy, which licenses and regulates pharmacists and pharmacies in the state has an annual budget of about $20 million per year. SB 643 (McGuire) Page 1 of ? The bill would create a new Bureau dedicated to licensing and enforcing licensing requirements on the medical marijuana industry. The annual costs to operate the new Bureau are highly uncertain. For example, the number of medical marijuana cultivators, transporters, and dispensaries that would apply for licensure under the bill is not known, in part because it is difficult to know how the licensing and regulatory requirements in the bill will change current practices in the medical marijuana industry. Unknown costs for enforcement of the bill's requirements by local governments (local funds and special funds). The bill requires both the new Bureau and local governments to take responsibility for enforcement activity. How those responsibilities will be divided between levels of government and how much funding the state will make available to local governments for enforcement activity is unknown at this time. Because local governments have the legal authority under the bill to prohibit the operation of medical marijuana facilities in their jurisdictions, local governments can essentially opt out of the enforcement responsibilities required under the bill. Thus the state is not likely to be required to reimburse local governments for enforcement costs. Unknown costs for the Department of Justice to conduct criminal background checks of licensees (special fund). Under current practice, applicants for a criminal background check are required to pay the $65 cost to conduct a criminal background check using fingerprint databases. Unknown fee revenues to offset the costs to implement the bill (special fund). The bill gives the new Bureau broad authority to set licensing fees sufficient to pay for the Bureau's costs to operate the licensing program, costs incurred by the Bureau or the Department of Justice to enforce the bill, costs incurred by local law enforcement agencies to enforce the bill, and costs incurred by state and local environmental agencies for enforcement costs relating to cultivation facilities. The fee revenues generated under the bill would depend both on the allowed costs that are incurred at the state and local level as well as the feasibility of collecting sufficient fees from the medical marijuana industry. The bill would continuously appropriate the fee revenues deposited in a new special fund to implement the bill. SB 643 (McGuire) Page 2 of ? Background: Under the Compassionate Use Act of 1996 (a voter approved initiative measure), state law prohibits the criminal prosecution of a patient with specified illnesses or a caregiver for possession or cultivation of marijuana upon the recommendation of a physician. Under current law, the Department of Public Health operates a program under which individuals can apply for an identification card for the use of medical marijuana. Proposed Law: SB 643 would establish a licensing and regulatory framework for medical marijuana, to be administered by a new bureau within the Department of Consumer Affairs and enforced primarily by local governments. Specific provisions of the bill would: Prohibit physicians who prescribe medical marijuana from receiving compensation from licensed medical marijuana facilities; Prohibit a physician from prescribing medical marijuana, unless the physician is the patient's attending physician; Create a new Bureau of Medical Marijuana Regulation within the Department of Consumer Affairs; Authorize the new Bureau to issue and revoke licenses for marijuana cultivation, manufacture, transportation, storage, distribution and sale; Require the Department of Consumer Affairs to provide an initial loan to cover startup costs of the new Bureau, to be paid back with subsequent fee revenues; Authorize the new Bureau to adopt regulations, issue licenses, set fees for application, licensing and renewal, and certify laboratories for testing marijuana; Require the new Bureau to develop standards for licensing, protection of environmental, agricultural, consumer protection, and food and safety requirements; Provide that the bill does not supersede local ordinances or regulations; Require medical marijuana to be grown, transported, and sold only under license; Specify the requirements for licensure; Require a criminal background check of an applicant as part of SB 643 (McGuire) Page 3 of ? the licensure process; Prohibit the issuance of a license if the applicant has one of a specified list of convictions; Prohibit a licensed facility from operating in a jurisdiction that prohibits the establishment of that type of business; Require the new Bureau to establish licensing fees sufficient to pay for the costs of the licensing program, costs incurred by the state for enforcement, costs incurred by local law enforcement for enforcement, and costs for several state agencies and local agencies to enforce regulations relating to the environmental impact of licensed cultivation sites; Create a new special fund for deposit of licensing fee revenues and continuously appropriate those funds; Require deposit of penalty revenues in the General Fund; Specify the standards for transportation of medical marijuana; Require local governments to enforce the statutory and regulatory requirements of the bill; Specify the standards for cultivation of medical marijuana; Specify the licensing requirements for licensed facilities; Require annual audits of all licensed facilities; Specifically authorize a local government to impose a tax measure relating to medical marijuana (local governments would still need to receive voter approval for such tax measures); Specify regulatory requirements for edible marijuana products; Require the Board of Equalization to report on tax revenues relating to medical marijuana. Related Legislation: SB 1262 (Correa, 2014) was similar to this bill. That bill was held in the Assembly Appropriations Committee. AB 604 (Ammiano) would have required the Department of Alcohol Beverage Control to regulate the cultivation and sale of medical marijuana. That bill was held in the Senate Public Safety Committee. AB 1894 (Ammiano) is substantially similar to AB 604. Failed passage on the Assembly Floor. Staff Comments: Prop 26 limits the imposition of fees by legislative action. Under Proposition 26, state agencies may impose fees on regulated entities to perform licensing activities and enforce SB 643 (McGuire) Page 4 of ? licensing requirements. As noted above, the bill requires that the duty of enforcing and administering the bill be vested in the chief of the new Bureau of Medical Marijuana Regulation. However, the bill also requires that cities and counties shall have the full power and authority to enforce the provisions of the bill. How the new Bureau and local governments share responsibility for enforcement activities and the level of grant funding that the Bureau makes available to local governments for enforcement activity will have a significant impact on how the bill's provisions will be enforced. The bill mandates that local governments enforce the requirements of the bill (both explicit statutory requirements and requirements in regulations adopted by the new Bureau of Medical Marijuana Regulation). The bill also explicitly allows local governments to prohibit medical marijuana establishments in their jurisdiction. Because local governments can opt out of the enforcement requirements of the bill by prohibiting medical marijuana facilities in their jurisdiction, the bill does not impose a reimbursable mandate on the state. (Note, however, that the bill does authorize the new Bureau to establish licensing fees sufficient to cover both the Bureau's licensing and enforcement costs and local enforcement costs.) The only other costs that may be incurred by a local agency relate to crimes and infractions. Such costs are not reimbursable by the state under the California Constitution. -- END --