BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1301 (Hill) - Retail tobacco sales: penalties for STAKE Act
violations.
Amended: June 18, 2012 Policy Vote: G&F 7-0; Health 6-1
Urgency: No Mandate: No
Hearing Date: July 2, 2012 Consultant: Mark McKenzie
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 1301 would repeal and recast the Board of
Equalization's (BOE) existing penalty structure for violations
of the Stop Tobacco Access to Kids Enforcement Act (STAKE Act),
a statewide enforcement program related to the illegal sales of
tobacco products to persons under the age of 18.
Fiscal Impact:
The BOE indicates that one-time administrative costs,
including modifications to computer systems and developing
forms related to the assessment of a new $200 civil penalty,
as well as ongoing assessment and collection costs, would be
minor and absorbable (STAKE Act funds: Sale of Tobacco to
Minors Control Account).
The BOE indicates that ongoing administrative costs related
to the suspension and revocation of retailer licenses would
also be absorbable (less than $10,000 per year), assuming
the number of STAKE Act violations reported to BOE remain
less than 20 per year (Cigarette and Tobacco Products
Compliance Fund).
Minor revenue increases related to new $200 civil penalties
assessed upon third, fourth, and fifth STAKE Act violations
within a five year period (Cigarette and Tobacco Products
Compliance Fund).
Department of Public Health (DPH) costs of approximately
$120,000 annually for legal staff workload related to an
anticipated increase in retailer appeals of STAKE Act
violations (Sale of Tobacco to Minors Control Account).
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Background: Under the STAKE Act, any person, firm, or
corporation that sells or furnishes a minor with any tobacco
paraphernalia, tobacco, cigarette, or cigarette papers is
subject to the following civil penalty schedule:
For the first violation, a $400 to $600 fine.
For the second violation within five years, a $900 to $1,000
fine.
For the third violation within five years, a $1,200 to $1,800
fine.
For the fourth violation within five years, a $3,000 to $4,000
fine.
For a fifth or subsequent violation within five years, a
$5,000 to $6,000 fine.
Existing law requires DPH to take primary responsibility for
enforcement of the STAKE Act, and to enlist the assistance of
persons who are 15 or 16 years of age to act 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. A violator of this section is
subject to either a criminal action for a misdemeanor, or a
civil action, punishable by a fine of $200 for a first offense,
$500 for a second offense, and $1,000 for a third offense.
The Cigarette and Tobacco Products Licensing Act, which is
administered by the BOE, also prohibits any person, firm, or
corporation from selling, giving, or otherwise furnishing
cigarettes or tobacco products to any person under the age of
18. BOE is required to warn, suspend, or revoke a retailer's
license for sales to underage persons or related offenses
according to the following penalty schedule:
First conviction of either a STAKE Act or Penal Code Section
308 violation: 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. The underage sales rate
has only exceeded 13% in two years since the Licensing Act
became law, but BOE did not conduct an of the enforcement
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activities because of the syntax related to "convictions."
Technically speaking, STAKE Act violations that result in a
penalty assessed by DPH are not convictions, and there is no
existing mechanism for reporting convictions of Penal Code
Section 308 violations. As a result, the BOE has never taken
enforcement actions pursuant to the penalty schedule in existing
law.
Proposed Law: AB 1301 would revise the penalty schedule for
STAKE Act violations subject to a BOE-imposed penalty.
Specifically, this bill would:
Delete BOE's current schedule of actions against a retailer
convicted of either a STAKE Act or Penal Code Section 308
violation, including existing appeal procedures and the
requirement that BOE may only take enforcement action when the
underage sales rate is 13% or more.
Require DPH to notify BOE of third, fourth, and fifth
violations of the STAKE Act within 30 days of the final
administrative adjudication or payment of existing civil
penalties.
Require BOE to assess an additional $200 civil penalty and:
suspend the retailer's license for 45 days upon notification
of a third violation within five years; suspend the license
for 90 days upon a fourth violation within five years; and
revoke the license for a fifth violation within five years, as
specified.
Require the $200 civil penalty to be deposited in the
Cigarette and Tobacco Products Compliance Fund and used
specifically for license suspension and revocation purposes,
upon appropriation by the Legislature.
Require BOE to provide a licensee with at least 10 days
written notice of a pending license suspension or revocation
and an opportunity to appeal the suspension, revocation, and
civil penalty, but only to correct a mistake or clerical
error.
Provides immunity from prosecution for a person under the age
of 18 who purchases, receives, or possesses tobacco products
or smoking implements, if that person is participating in law
enforcement activities related to the STAKE Act.
Related Legislation: SB 602 (Padilla), as approved by this
Committee on May 28, 2009, included provisions that would have
deleted the restriction on BOE enforcement action related to
violations of the STAKE Act and Penal Code Section 308 (the 13%
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trigger), and revised the penalty schedule. These provisions
were subsequently amended out of SB 602.
SB 433 (Ortiz, 2004) and SB 400 (Kuehl, 2005), both of which
were held on this Committee's Suspense File, included provisions
to delete BOE's penalty structure subject to the youth survey
results trigger and impose stricter penalty actions for underage
sales of tobacco products to minors. These bills also included
reimbursable mandate provisions requiring local law enforcement
agencies to notify BOE of final judgments for convictions
related to illegal sales of tobacco products to minors.
Staff Comments: DPH has conducted the following enforcement
actions for violations of the STAKE Act in recent years:
858 violations in 2008, including 17 cases of a third
violation within five years, and one case of a fourth
violation within five years (no cases of a fifth violation).
673 violations in 2009, including 3 cases of a third violation
within five years, and one case of a fourth violation within
five years (no cases of a fifth violation).
717 violations in 2010, including 9 cases of a third violation
within five years, and one case of a fourth violation within
five years (no cases of a fifth violation).
Current law provides for an appeals process for STAKE Act
violations enforced by DPH, the Attorney General, and other
local enforcing agencies, as specified. Specifically, a person,
firm, or corporation that violates the STAKE Act and subject to
civil penalties may appeal the violation through an
administrative hearing with an administrative law judge. Under
AB 1301, it is only after final administrative adjudication or
payment of the civil penalty for an uncontested violation that
DPH notifies BOE of a third, fourth, or fifth STAKE Act
violation within five years that would be subject to BOE
suspension or revocation of the retailer license.
DPH anticipates that AB 1301 would result in an increase in the
number of appeals of enforcement actions related to STAKE Act
violations because repeat offenders would be subject to
disciplinary action against a retailer's license, which would
have an adverse impact on their revenues. The expected increase
in appeals of STAKE Act violations would increase DPH legal
workload, including conducting legal research and preparing
cases, briefing investigative staff for hearings, and litigating
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cases on behalf of DPH. The department anticipates a need for
an additional Staff Counsel position at a cost of approximately
$120,000 annually.
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. BOE estimates that any costs would be
minor and absorbable, assuming the number of third, fourth, or
fifth violations reported to BOE by DPH remains below 20 per
year. Staff notes that if the number of cases exceeded this
amount in the future, the new civil penalty revenues may be
insufficient to fully cover BOE's costs.
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 were 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). BOE notes that
the gap between Compliance Fund revenues and BOE Licensing Act
costs have narrowed somewhat in recent years. The current
budget for BOE Licensing Act activities is approximately $8
million and Compliance Act revenues are about $1.6 million per
year.