BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
602 (Padilla)
Hearing Date: 05/28/2009 Amended: 05/18/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 5-3
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BILL SUMMARY: SB 602 would prohibit the Board of Equalization
(BOE) from issuing a new cigarette and tobacco products license
for a retail location in an "area of overconcentration," as
specified. The bill would also authorize BOE to take action
related to the licensure of retailers who have violated the Stop
Tobacco Access to Kids Enforcement (STAKE) Act at any time. The
Department of Public Health (DPH) or other enforcement agency
would be required to notify BOE of any conviction of a violation
of either the STAKE Act or provisions that prohibit the sale of
tobacco products to minors.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
BOE: STAKE Act Unknown administrative costs, likely in
the Special*/
range of $250-$500 annually
General
DPH: tracking/reporting $89 $178
$178Special*/
of STAKE Act violations
General
Law enforcement reporting Unknown reimbursable mandate
costs, General
(local mandate) likely in the range of $300-$500
annually
STAKE Act: penalties Unknown penalty revenue gains,
potentially Special*
in the range of $1,000 - $2,000
annually
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* Cigarette and Tobacco Products Compliance Fund; also General
Fund, other tobacco tax special funds (see staff comments)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Tobacco retail license restriction
This provision is intended to prevent further proliferation of
tobacco retailers by requiring denial of new tobacco retail
licenses in areas of overconcentration. (these provisions
deleted from bill by suspense amendments)
STAKE Act revisions
This provision is intended to reduce illegal sales of cigarette
and tobacco products to minors by strengthening penalties on
retailers convicted of furnishing these products to a person
under the age of 18.
Existing law requires DPH to take primary responsibility for
enforcement STAKE Act, and to enlist the assistance of persons
who are 15 or 16 years of age as decoys for the purpose of
attempting to purchase cigarettes. Penal Code Section 308 makes
it a violation to sell or furnish cigarettes or tobacco products
to minors. BOE is required to
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SB 602 (Padilla)
warn, suspend, or revoke a retailer's license for sales to
underage persons or related offenses under the following
circumstances:
First conviction: warning letter and training
requirement.
Second conviction in 12 months: $500 fine
Third conviction in 12 months: $1000 fine
Fourth to seventh conviction in 12 months: 90-day
suspension of license
Eighth conviction in 24 months: revocation of license.
BOE's authority to suspend or revoke a license for underage
sales violations is limited to periods when the underage sales
rate in California is 13% or more, as measured in an annual
Youth Tobacco Survey conducted by DPH.
SB 602 would delete the restriction on BOE enforcement action
(13 percent trigger), thereby authorizing BOE to levy penalties
against a license holder for violations of underage sales at any
time. This bill also revises the penalty schedule as follows:
First conviction: warning letter, training requirement,
and an unspecified fine.
Second conviction: unspecified fine and 25-day license
suspension.
Third conviction within any three-year period: license
revocation.
This bill would also require DPH and state and local law
enforcement agencies to notify BOE of any convictions of
violations in a timely manner, and require BOE to take
appropriate action. BOE would be authorized to take action
against a retailer if other enforcement agencies fail to provide
timely notification, as defined.
SB 602 would increase the Department of Public Health's (DPH)
workload and resource expenditure by requiring mandatory
reporting of information not normally tracked or evaluated. DPH
would to develop and maintain an enforcement reporting system in
order to comply with the proposed reporting requirements. This
would require 2 PY of additional staff as follows: one
full-time Program Analyst position at a cost of $86,000 per
year, and a contract for 1 PY of Information Technology support
at a cost of approximately $92,000. Funding for these positions
would need to be allocated from the Cigarette and Tobacco
Products Compliance Fund.
Staff notes that any costs to local law enforcement agencies
related to the tracking and reporting of information for
convictions of the STAKE Act and Penal Code Section 308 (illegal
sales of tobacco products to minors) would likely be
reimbursable by the state. Reimbursable costs are unknown, but
previous assessments for similar legislation estimated a
mandated cost of $300,000 to $500,000 annually.
With respect to the requirements of the STAKE Act provisions of
SB 602, BOE would incur some costs for suspending or revoking
retail licenses, processing appeals filed for a suspended or
revoked licenses, inspecting suspended or revoked retail
licensee locations, and seizing, storage, and destruction of
cigarettes or tobacco products from retailers whose license has
been suspended or revoked. These unabsorbable costs are unknown
at this time, but likely in the range of $250,000 to $500,000
annually.
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SB 602 (Padilla)
Compliance Fund deficiencies
Up until 2005-06, all BOE costs to enforce and administer the
Licensing Act were fully covered by license fee revenues,
penalties, and fines deposited into the Compliance Fund.
However, since the retail license revenues were predominantly a
one-time revenue gain, the Compliance Fund does not have
sufficient revenues to cover BOE's ongoing costs. In 2008-09,
for example, revenues deposited into the Compliance Fund totaled
$1.1 million, while BOE's costs to administer and enforce the
Licensing Act were approximately $10.2 million. The difference
between revenues and costs are currently offset with $1.1
million General Fund and other tobacco tax revenues: $209,000
Breast Cancer Fund; $2.6 million Cigarette and Tobacco Products
Surtax Fund (Proposition 99); and $5.2 million from the
California Children and Families First Trust Fund (Proposition
10). Staff notes that the administrative costs associated with
this bill would place further strains on the General Fund and
other tobacco tax funds. To the extent that the restrictions in
SB 602 results in fewer overall licenses and less convenience
for consumers, there would be a net loss in excise tax and
license fee revenues.
Proposed amendments would delete provisions that prohibit BOE
from issuing a new cigarette and tobacco products license for a
retail location in an "area of overconcentration," and specify
penalty amounts for violations of the STAKE Act ($750 for a
first conviction and $1,500 for a second conviction).