BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 331 (Padilla)
Hearing Date: 01/19/2012 Amended: 01/13/2012
Consultant: Mark McKenzie Policy Vote: G&F 5-3; Health 6-0
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BILL SUMMARY: SB 331 would prohibit the location of a tobacco
retailer within 600 feet of a school, unless the retail location
was licensed prior to January 1, 2013, as specified. The
California Department of Public Health (CDPH) would be required
to direct the Board of Equalization (BOE) to cancel the license
of a retail location found to be in violation of this
prohibition. The bill would also make specified changes to the
Cigarette and Tobacco Products Licensing Act of 2003 in
furtherance of this new restriction.
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Fiscal Impact (in thousands)
Major Provisions 2012-13 2013-14 2014-15 Fund
BOE administration minor and absorbable costs Special*
CDPH minor costs to coordinate with
BOESpecial*
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* Cigarette and Tobacco Products Compliance Fund, General Fund,
other tobacco tax special funds (see staff comments)
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STAFF COMMENTS: SUSPENSE FILE.
The Cigarette and Tobacco Licensing Act was established by AB 71
(J.Horton), Chapter 890 of 2003, to license and regulate
manufacturers, distributors, wholesalers, importers, and
retailers of cigarette and tobacco products in California. The
Licensing Act is administered by BOE and requires retailers of
cigarette and tobacco products to pay a one-time license fee of
$100 and annual renewal of the license. A retailer is subject
to a $100 reinstatement fee if they allow the license to expire.
Fees collected pursuant to Licensing Act are deposited into the
Cigarette and Tobacco Products Compliance Fund and are available
solely for the purpose of implementing, enforcing, and
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administering the Act. BOE indicates that there are currently
36,612 licensed retailers. Each year approximately 6,000 new
licenses are issued, but a corresponding number are typically
surrendered, so the total number of active licenses has been
fairly stable since the Licensing Act was established in 2003.
Existing law requires CDPH to take primary responsibility for
enforcement of the Stop Tobacco Access to Kids Enforcement
(STAKE) Act, a statewide regulatory program established by SB
1927 (Hayden), Chapter 1009 of 1994, to allow enforcement action
to be taken against businesses that illegally sell tobacco
products to minors. Penal Code Section 308 makes it a violation
to sell or furnish cigarettes or tobacco products to minors.
BOE is required to 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 CDPH.
SB 331 would create a new violation of the STAKE Act by
prohibiting the location of new tobacco retail locations within
600 feet of a public or private elementary or secondary school,
unless a retail location is licensed prior to January 1, 2013.
The bill would require CDPH to direct BOE to cancel a tobacco
retailer license issued in violation of this prohibition, and to
provide BOE with all relevant information relevant to enable the
cancellation of the license. BOE would cancel the license after
providing notice to the licensee.
The bill would also require BOE's tobacco retailer license
application to include a statement by the applicant affirming
that each retail location for which a license is sought is
located 600 feet or more from a school. BOE would deny the
issuance of a new license on or after January 1, 2013 if the
application does not include this affirmation. A license issued
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on or after this date would be cancelled by BOE if the
application is incorrect or incomplete, or the license was
issued in error.
BOE indicates that costs to implement the bill would be minor
and absorbable and attributable to revising applications and
publications, developing procedures for license cancellation,
and staff time associated with license cancellation appeals. In
addition, CDPH costs to coordinate with BOE would be minor and
absorbable.
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 2009-10,
for example, revenues deposited into the Compliance Fund totaled
$648,000, while BOE's costs to administer and enforce the
Licensing Act were approximately $8.3 million. The difference
between revenues and costs were offset with $883,000 in General
Fund revenues as well as the following tobacco tax revenues:
$176,000 Breast Cancer Fund; $2.2 million Cigarette and Tobacco
Products Surtax Fund (Proposition 99); and $4.4 million from the
California Children and Families First Trust Fund (Proposition
10). To the extent that SB 331 results in the issuance of fewer
new licenses and less convenience for consumers, there could be
a minor loss in excise tax and license fee revenues.
Staff notes that the bill currently contains an ambiguity.
Specifically, while a retail location that has been licensed
prior to January 1, 2013 is exempt from the prohibition in the
bill, it appears that the bill would prevent the issuance of a
new license for a previously licensed location if there is a
change in ownership at a retail location within 600 feet of a
school. When concerns about this issue were raised in the
Senate Health Committee, the author committed to resolve this
ambiguity after the hearing. Staff recommends that Section
22973.1(a)(5) of the Business and Professions Code (page 6,
lines 23-30) be amended to read:
(5) The application is for a new license issued on or after
January 1, 2013, for a retail location that is subject to
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the prohibition of subdivision (b) of Section 22960.5 and
that the applicant does not affirm is located 600 feet or
more from a public or private elementary or secondary
school, as required under paragraph (5) of subdivision (a)
of Section 22973. This paragraph shall not be construed to
prohibit the renewal or reinstatement of a license issued
prior to January 1, 2013 for a retail location that is
within 600 feet of any school, or the issuance of a new
license for a retail location that was licensed to a
previous owner for the same location prior to January 1,
2013.
BOE notes that there would likely be new unabsorbable costs
associated with allowing a new license for a retail location for
which a license was issued to a previous owner prior to January
1, 2013. The magnitude of these costs are unknown at this time.
Staff notes that SB 601 (Padilla), which was held on this
Committee's Suspense File in 2009, would have prohibited BOE
from issuing a new cigarette and tobacco products license for a
retail location within 600 feet of a school, unless public
convenience or necessity would be served by the issuance, as
specified. That bill would have placed significant
administrative burdens on BOE related to determining the
proximity of an applicant's retail location to schools, among
other things. SB 331 takes a less burdensome approach by
requiring license applicant's to self-certify that a retail
location is not near a school, and allowing for the cancellation
of a license if CDPH determines that a license was issued for a
retailer in violation of the prohibition.