The American Lung Association of California opposes Assembly Bill 1666, a "budget trailer bill" that would establish a new tobacco licensing program with the intent of addressing tobacco smuggling and black market cigarettes. We have several concerns:

AB 1666 BYPASSED LEGISLATIVE REVIEW AND PUBLIC HEARINGS. Assembly Bill 1666 is a major new tobacco policy that was buried in the budget package adopted by the Senate and bypassed the entire legislative review process. There has not been one public hearing on AB 1666. AB 1666 is not simply a "budget trailer bill," but rather a complex 28-page bill that establishes a new administrative and enforcement scheme for licensing tobacco retailers. Unfortunately, AB 1666 cannot be amended to address any of the important policy concerns raised by the lung association and other health groups opposed to the bill. Any changes to the intent of AB 1666 would have to amended into "single joining" legislation, which may or may not pass should AB 1666 be adopted with the entire budget package.

AB 1666 PREEMPTS LOCAL CONTROL. AB 1666 carries no specific anti-preemption language to allow cities and counties to adopt local laws to license retailers in order to reduce illegal sales of cigarettes to kids. Currently, there are approximately 25 local tobacco retail licensing/permitting laws to address illegal sales of tobacco to minors. And, there are cities and counties now considering adopting licensing ordinances. In the absence of anti-preemption language, we believe that the courts would interpret AB 1666 as preemptive of these local laws and future licensing ordinances.

AB 1666 SIPHONS PROP. 99 AND PROP. 10 TOBACCO TAX FUNDS. AB 1666 does not provide sufficient revenues to pay for the costs of the program, and instead relies on Prop. 99 and Prop. 10 funds to cover the costs for administration, enforcement, and the tobacco wholesaler subsidy. AB 1666 says that the Board of Equalization (BOE) "shall recover funds necessary for the administration and enforcement" of this new licensing program with funds from Prop. 99 and Prop. 10.

AB 1666 includes one-time only fees on retailers and tobacco manufacturers that won't generate enough revenues for the on-going administration and enforcement of this new program. The BOE already has the authority to recover its costs associated with tax collection, tax evasion and smuggling related to the Prop. 99 and Prop. 10 tobacco taxes. Under AB 1666, Prop. 99 and 10 funds would not only be responsible for costs associated with collecting their own taxes, but for collecting all the other tobacco taxes, and for the expanded administrative and enforcement programs created by AB 1666.

BUT, WON'T AB 1666 BRING A WINDFALL TO PROP. 99 AND PROP. 10 PROGRAMS? Not necessarily. Under AB 1666, any funds over the 2002 base year shall be used to offset the costs of the program. Remember, after August 1, 2004, there will be no money left from the one-time only license fees to pay for the program. Therefore, even if this new enforcement program recovered additional revenues from smuggling and tax evasion, above the 2002 base year, these funds would be preferentially used for administration and enforcement of the program. It is conceivable that no new funds would actually go toward the public health programs established under Prop. 99 and Prop. 10.

AB 1666 WON'T PUNISH RETAILERS WHO SELL TOBACCO PRODUCTS TO CHILDREN. AB 1666 fails to address the issue of illegal sales of tobacco to children, which is a continuing problem throughout the retail industry. There is no mechanism in AB 1666 to revoke or suspend a tobacco retailer license for selling cigarettes to kids. This is a huge missed opportunity, especially at a time when Big Tobacco is spending nearly $1 billion annually in the California to market, advertise and promote their products.