BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 727 (Mitchell)
Hearing Date: 8/25/2011 Amended: 5/27/2011
Consultant: Bob Franzoia Policy Vote: G O 7-5 Health 6-3
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BILL SUMMARY: AB 727 would require, beginning January 1, 2014,
at least 50 percent of food and beverages offered by a vendor in
a vending machine on state property to meet accepted nutritional
guidelines. This bill also would revise the definition of
acceptable nutritional guidelines for this purpose, increasing
from 35 percent to 50 percent of food, and 50 percent of
beverages, that must meet these guidelines. This bill would
additionally require, beginning January 1, 2014, or upon
expiration of an existing contract, whichever occurs later, any
food sold in a state owned or state leased building to meet the
standard criteria for food and nutritional guidelines for
concessions as determined by federal guidelines. This bill
would require the Department of General Services (DGS) when
approving contracts for the purchase of food sold in state owed
or state leased buildings to give preference to items that are
grown, packaged or produced in California or that meet
sustainability standards and shall not include contract
provisions that provide disincentives to these items.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Department of Rehabilitation $100 Up to $150Up to
$300 General*
oversight
DGS contract compliance$80 $75 Up to
$150Special**
and oversight
Assessment of nutritional Likely minor costs, contingent
upon revision General
guidelines of federal guidelines
State vending machine Unknown increase or decrease in
vendorSpecial***
AB 727 (Mitchell)
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nutritional standards sales resulting in potentially increased
or
decreased deposits in vendor specific
programs
* 21.3 percent General Funds and 78.7 percent federal funds
** Service Revolving Fund (General Fund and special fund
reimbursements)
*** Vending Stand Fund (5160-001-0600) and Business Enterprise
Vending Machine Account (0942-001-905)
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STAFF COMMENTS: SUSPENSE FILE.
The Department of Rehabilitation administers the operation of
vending machines located on state property through the blind
vendor Business Enterprise Program (BEP) and through a
contacting program. Portions of operating profits (including
vending machine and other income) and net profits are deposited
into the Vending Stand Fund and the Business Enterprise Vending
Machine Account in the Special Deposit Fund. Pursuant to
Welfare and Institutions Code 19629, six percent of gross sales
are deposited in Vending Stand Fund to support the maintenance
and replacement of equipment and the construction of new vending
facilities under the jurisdiction of the Department of
Rehabilitation and for pension, life and health insurance
obligations.
The department enters into contracts based on sales with
approximately 200 non BEP vendors at other state facilities.
Welfare and Institutions Code 19651 provides that, from
commissions collected on vending operations at state facilities
where the operators do not participate in the BEP, the
department, upon a finding that the BEP vendors' retirement
program is actuarially sound and fiscally solvent, shall
contribute to an annuity plan for BEP vendors licensed by the
department. The BEP manages vending and food services at
federal facilities in the state.
The impact of requiring vending machines to offer food and
beverages meeting specified nutritional guidelines on vending
machine sales is unknown. Sales could decrease where customers
may not be able to find items that might be displaced by
AB 727 (Mitchell)
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alternatives in compliance with the guidelines. The opposite
could be true. Initial studies and personal experience are
conflicting, showing both little impact and lower vendor
profits. Vendor profits may decline from reduced sales, higher
merchandise costs, and merchandise expiration. Changes in sales
would impact deposits funding the capital facilities maintenance
program and pension and health obligations.
SB 441 (Torlakson) Chapter 597/2008 set initial nutritional
guidelines for food and beverages in vending machines at 35
percent of acceptable nutritional guidelines. This bill would
increase the percentage that must meet these guidelines from 35
percent to 50 percent of food, and 50 percent of beverages. DGS
will incur one-time costs of approximately $80,000 to modify
food contract specifications and to disseminate nutritional
guidelines for food purchasing and annual costs of $150,000 or
more regarding enhanced oversight and compliance with food
purchasing and vending contracts, including vendor and
contractor protests concerning compliance. The Department of
Rehabilitation will incur similar, though higher, costs to
assess acceptable nutritional guidelines, ensure compliance with
the guidelines, and respond to consumer complaints and inquiries
at 335 vending locations.