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 --