Senate Standing Committee on Revenue and Taxation

The announcements. Good morning and welcome to the Committee on Revenue and Taxation. We have 11 bills today, two of which are proposed for consent. The consent calendar will consist of file item 3, AB 40, by Assemblymember Quirk-Silva, and file item 8, AB 1076, by Assemblymember Schiavo. Oh, did I say that wrong?

I will correct—file item 7, AB 1076, by Assemblymember Addis. And now we will move. We do not have a quorum, so we will begin as a Subcommittee, and we'll establish a quorum once we have sufficient membership on the Committee present. First author present is Aguiar-Curry. Ready? Please approach and present yourself and present your Bill.

You can begin when ready.

Still ready?

Good morning, Mr. Chair and Members. Thank you to you and your staff for working on this complicated issue. I started working on the hemp issues because of the 2018 Farm Bill left an unregulated industry. My previous legislation, AB 45, was the most strict hemp law in the country, when it was enacted in 2021.

It was an effort to legalize non-intoxicating hemp products like CBD. So, today, I'm here to make sure that the law can be properly enforced and interpreted. As the hemp market grows, we're seeing more intoxicating hemp products sold outside of dispensaries without age limits, which should be illegal.

This Bill is another big undertaking. It focuses on three issues. First, it will expand enforcement to better control the sale and distribution of illegal hemp products. This will give state agencies and local governments the tools they need to protect our kids from synthetic products.

Second, it will close loopholes that allow intoxicating hemp products and make it clear that all synthetic THC is banned. Third, it integrates hemp into the legal cannabis supply chain. This will make sure all products with any level of THC are treated like cannabis, meaning full registration, regulation, and taxation.

This will bring new products under the Cannabis Excise Tax to maintain tax revenue. I will continue to work with stakeholders, state agencies, and committees as we address concerns about the best way to implement these changes. With me today, I have Kristin Heidelbach, Legislative Director at UFCW Western States Council, and Ryan Sherman, with the California Narcotics Officers Association.

And Amy Jenkins, just on behalf of the California Cannabis Operators Association, is available for technical questions.

Good morning. I'm clearly not awake yet. Kristin Heidelbach, here on behalf of UFCW Western States Council. We proudly represent thousands of cannabis workers across California who are employed under a UFCW contract.

I'm here today to express our strong support for AB 8 and to thank Assemblymember Aguiar-Curry for her continued leadership on behalf of both the cannabis and hemp industries. This Bill is a critical step towards ensuring that any intoxicating hemp-derived product is sold exclusively through licensed dispensaries, just as voters and the Legislature intended for intoxicating cannabinoids.

Today, California's regulated cannabis industry faces enormous headwinds—high taxation, intense competition from a thriving illicit market, and now a surge in unregulated intoxicating hemp products that exist outside the regulatory framework. This imbalance places a licensed cannabis industry and thousands of union workers at supports at serious risk.

The unregulated intoxicating hemp industry, easily available online and without age verification, siphons money from the Cannabis Tax Fund. This was never the intent of state or federal lawmakers. The hemp market was intended to support wellness products made from non-intoxicating cannabinoids derived from low THC plants, not to serve as a loophole for intoxicating substances to bypass regulation.

AB 8 will help correct this by aligning the cannabis and hemp markets, ensuring tax and testing parity across all intoxicating cannabinoid products, and limiting the sale of hemp derived products to licensed dispensaries. We appreciate letting us speak today. We urge your aye vote.

Good morning, Mr. Chair and Members, Ryan Sherman, with the California Narcotic Officers Association, in support of the Bill.

Also, I wanted to read a list of a number of other police officer associations that are in support as well: the Riverside Sheriff's Association, the California Reserve Peace Officers Association, the Police Officer Associations of Riverside, Arcadia, Culver City, Pomona, Corona, Nevada, the LA School Police Association, Claremont POA, Palos Verdes, Murrieta, Burbank, Brea, Fullerton, Newport Beach, Placer County Deputy Sheriff's Association, LA School Police Management Association, and California Association of School Police Chiefs, all in support of the Bill.

Our biggest concern with these intoxicating hemp products is that they aren't. Well, that they exist. I mean, our guys are not all that excited about cannabis to begin with.

We've been kind of slow to embrace the legalization of cannabis, but we know better than most that a well regulated industry with state oversight is preferable to the dangerous and often deadly outcomes associated with the illegal cannabis products and the international cartels and black market cannabis that associate with that.

So, AB 8 addresses many of our concerns by implementing prohibition on the sale of synthetic cannabis products, which I think is key. We've had a lot of problems in the past with spice and related items.

It bans inhalable cannabis products containing cannabinoids derived from hemp, requires out of state hemp manufacturers to register with the state, and expands authority for agencies to inspect, seize, and destroy unlawful cannabis products. We believe AB 8 will better protect our youth, public safety, and health by requiring intoxicating hemp products to comply with the Medicinal and Adult use Cannabis Regulation and Safety Act.

And for these reasons, we support the Bill. Thank you.

Thank you for wrapping that up in two minutes. Very good. So, is there any other witnesses in favor? Would you please approach and give your name, organization, and your position?

Yes. Good morning, Mr. Chair and Members. Amy Jenkins, on behalf of the California Cannabis Operators Association, proud co-sponsor of the Bill, and also, March and Ash and Canacraft, individual cannabis operators in California. Thank you.

Good morning, Mr. Chair. Matt Robinson, with Shaw Yoder Antwih Schmelzer & Lange, on behalf of the County of Marin, in support.

Good morning. Sarah Ursinow, on behalf of the California Cannabis Industry Association, in support. Thank you.

Josh Lewis, on behalf of Embark. We're a statewide family of cannabis retailers, in strong support. Thank you.

Dale Geringer, on behalf of California Normal and California's cannabis consumers, in support.

Good morning. Shanta Paikian, on behalf of the Cannabis Distribution Association, in support.

Good morning, Mr. Chair. Sam Rodriguez, on behalf of Good Farmers and Great Neighbors, representing sun-grown and greenhouse cannabis cultivators based in Santa Barbara County. We also want to recognize the majority leader's tireless advocacy and support for cannabis farmers over the last seven years. We're in strong support, AB 8.

Jared Kyllo, on behalf of the United Cannabis Business Association, 10 yearlong trade organization representing cannabis retailers in California. Thank you.

Chair and Members, Alicia Priego, on behalf of Kiva Confections, one of the few remaining California manufacturers and also, Kiva Sales and Services, also a California distributor.

Good morning. Ben Triffo, with the League of California Cities, in support.

Rich Miller, from American Alliance for Medical Cannabis, a volunteer patient organization, in strong support. Thank you.

Thank you. Are there any other members of the public in favor of the Bill? Seeing none. Are there any principal witnesses in opposition? You have two minutes.

Yes. Good morning, Mr. Chair. Good morning, Mr. Chair and Members of the Committee. I'm Jim Keddie, the Executive Director of Youth Forward, a state policy organization based here in Sacramento. I'd like to start out by responding to some of the misinformation we'd heard in the hearing earlier this week. AB 8 is not revenue neutral.

The $1 billion tax cut it gives to recreational drug businesses will result in major reductions in child care and youth programs. This will take place at the same time child and youth services are being significantly cut by the Trump Administration.

The Bill analysis in the Department of Tax and Fee Administration clearly shows that AB 8 will result in losses of $186 million annually, while we may only be able to anticipate new revenue from hemp sales of 8 million to 33 million.

These numbers do not add up to revenue neutral. We will see massive losses in funding for children and youth.

Secondly, AB 8 fails to apply the same voter-enacted water quality, pesticide, and habitat protections to hemp cultivation is now applied to cannabis, even though we are dealing with the same plant. AB 8 also cuts funding for environmental cleanups of toxic waste sites created by cannabis grows.

You will be hearing from tribal leaders shortly about the impact on their lands. And finally, according to an independent report by—commissioned by—the Department of Cannabis Control, the cannabis industry is, in fact, gradually growing. The report clearly shows that every year, people are purchasing more legal cannabis products.

This boils down to a choice between supporting child and youth services or making recreational drug businesses more profitable. I've been involved in Development of Prop 64 Grant Program since 2018 and I've served on the DHCS Prop 64 Advisory Commission since its inception.

I have also served as a reviewer of the Prop 64 law enforcement grants administered by the Board of State and Community Corrections. Because of the policy work we do at Youth Forward, my organization does not receive any funding from cannabis tax revenues at the state or local levels.

For the reasons I've stated, we urge you to vote no on AB 8.

Thank you.

Good morning, Senator McNerney and other Senate. My name is Toni McNeil. I am the Executive Director and Founder of organization named Concrete Development Inc. We have programming and we're—and received funding from the Elevate Youth California through the Cannabis Tax Revenue and so, I come before you today in strong opposition of AB 8 and any effort to cut, reduce, and/or reallocate cannabis tax revenue away from communities most harmed by cannabis criminalization.

For decades, cannabis laws devastated black, brown, and low-income communities in California. Families were torn apart. Over 1,600 people were incarcerated alone—just in 2009 alone—for cannabis offenses and taxpayers have spent over $85 million annually funding our prison systems. Meanwhile, children have lost parents, caregivers facing trauma, instability, and reduced opportunities.

Proposition 64 marked a turning point, generating over a million—1 billion—in annual tax revenues to back into our communities through programs like ours, Emerge, that run through our programming. The Emerge Program serves system impacted youth and young adults, particularly those affected by incarceration. We work with those who are—who are reentry that were youth offenders.

And we are one of 23 organizations that actually receive EYC fundings, in the San Joaquin County alone. San Joaquin County receives over $14 million in EYC, Elevate Youth California funding, that is generated through the Cannabis Tax. That tax bracks that come through our community.

And so, what we wanted to really just point out is if just in the San Joaquin County alone, if we have 23 organizations, that there are hundreds of organizations throughout the State of California that are going to be directly impacted, it's going to impact our staffing, it's going to impact the youth that we serve in our programming.

And most of these organizations that are on this list that I work with, the Amelia Whole Life Center, Asian Pacific, EMAC, Be Smooth.

Please wrap up...

Yes, sir. Most of these organizations work directly with juvenile probation and with the public health services in order to ensure wraparound services for our youth that are impacted by substances abuse.

Thank you. Are there any witnesses in the public that wish to speak in opposition?

Thank you, Mr. Chairman and Members of the Committee. Cory Brown with the Resources Legacy Fund. We appreciate the author's effort on hemp. We oppose the Bill because it removes $900 million for children and the environment that the cannabis industry promised voters would be there when Proposition 64 was approved in 2016.

We urge this Committee to remove the provision that removes $900 million from kids in the environment. Thank you.

Alex Loomer on behalf of California Trout, Trout Unlimited, Pacific Forest Trust, the Environmental Protection Information Center, California Native Plant Society, Sonoma Land Trust, Mojave Desert Land Trust, and Defenders of Wildlife, in opposition. Thank you.

Sarah Nocedo, on behalf of Origins Council. We represent small cannabis cultivators. We remain opposed unless amended but look forward to continued conversations with the author's office.

Maya Steinhart. I'm a California Educator representing my students who benefit from Prop 64 programming, in opposition. Please don't cut my students' funding.

Good morning. Leticia Aguilar, CEO of Native Sisters Circle, on behalf of Tribal Youth, we oppose unless amended. Thank you.

Cinta Mana. Hello, friends and relatives. My name is Angelina Hinjosa. I'm with Native Sister Circle. I'm also a Sacramento State student here and I am also in opposition unless amended.

Hello, my name is Alina Sanchez. I'm a Native American advocate, part of many Native American youth programs, and I am in opposition.

Hello, my name is Alyssa Sanchez, and I am in opposition unless amended.

Hello, I'm Gianna Ramirez. I'm with the Native Sister Circle and I'm opposition.

My name is Journey. I'm with Native Sister Circle and I'm in opposition.

My name is Ignacio Taylor and I'm here on behalf of Rios to Rivers, Save California Salmon, true north tribal organizations from Humboldt County, and they oppose AB 8 unless amended. Thank you.

Good morning. Stacey Anderson with Pro Youth and Families. We're a nonprofit organization serving youth in Sacramento and we are really opposed to this, and we are receiving a lot of money from the Cannabis Prop 49—64.

My name is Virginia Luna and I'm with Passion and Purpose Ministries, the See Youth Program in Stockton, California, and we oppose. Thank you.

Good morning. My name is Alexandria Contreras. I'm the Founder and Director, Passion and Purpose Ministries and See Youth Program, and we are in opposition of AB 8.

Good morning. Guerra Gonzalez Garcia, on behalf of Getting it Right from the Start at the Public Health Institute, in opposition unless amended. Please put our children, youth, and environment first. Listen to the youth that are here today in opposition. Thank you for your time.

Hi, good morning. My name is Kamaya Quibb. I'm here with Passion and Purpose, See Youth Program. And I would just like to say can you guys put our youth first and make sure our priorities are straight? Thank you.

Hi, my name is Julia, with Passion and Purpose, See Youth, in Stockton. We oppose. Thank you.

Hello, my name is Angel Serrano. I am with Passion and Purpose, the See Youth Program. We oppose. Thank you.

And as a reminder, we are in the land of my ancestors. I'm a local tribal member and representative. I am also the Deputy Director of an organization that provides services to fathers and their families, which means youth, Native Dads Network.

This funding cut will impact our program, which the title is Indigenous Mentors Protecting Ancestral Cultural Tribal Traditions, is a youth leadership development program. And so, we are in opposition.

Constituent from Lake County, we are representing—I'm the Executive Director of Konoka Tai Native Wellness, representing tribal communities that occupied the shores of Clear Lake for over 20,000 years that science gives us credit for. We are in opposition unless this Bill is amended. We represent serving our young people.

We're tired of broken promises to help healing our people and we're just getting started and now we're worried about funding being cut for our young people. So, please listen to the voices of opposition in working to make this Bill help our young people to heal. Thank you.

Hello, my name is Alvina Bill. I'm the Mental Health Clinician for Konoka Tai Native Wellness. Our organization serves black, brown, and low-income youth and this funding being cut would definitely impact our program. So, we're in strong opposition. Thank you.

Good morning. My name is Mike Duncan. I'm the Executive Director of Native Dads Network. I'm also a Round Valley Tribal Member. I was born here locally in Sacramento. So, I know that some of the things that are going on, you know, just by on a personal level, but having a program that develops tribal youth here in the city has really been helpful for a lot of tribal youth that we work.

We're a statewide program, and so, cutting funding for our tribal youth will really impact our communities and our future generations. We oppose AB 8. Thank you.

Hi, my name is Nico Arizate, and I'm an opposition of AB 8.

Buenos Dias. Good morning. My name is Carlos Hernandez, on behalf of Milpa Collective and the communities we serve in the Santa Cruz County and Monterey County, we are an opposition unless amended. Thank you.

Hi, my name is Morgan Jackson. I'm with Concrete Development, Inc. I oppose this. And, yeah, it would definitely affect our youth.

It has saved their lives, kept them out of jail, kept them off the streets, and has actually employed a lot of our staff to be able to mentor and be there for them and advocate in the courts and justice and mentorship and case-by-case managing. So, yes, we are opposed.

Thank you. We're going to pause this for a minute to establish a quorum. Would the secretary please call the roll?

[Roll Call]

We have a quorum. We will now move from Subcommittee to Committee, and that allows us to vote on your Bill. So, having heard public testimony, we now turn to Members of the Committee. Senator Valladares is recognized.

Thank you, Mr. Chair. So, I want to start off by saying that, you know, these bills are oddly challenging for me. I'm on the record, you know, not a big fan of cannabis by any means, but I am a big opponent of the illicit market.

And the illicit market that we see, whether it's in retail or in grows in my district is pretty prolific. So, I have a few questions, and I also, one, want to state that I support our youth.

I understand the impact and the importance of funding programs for youth and children in early education, and that's near and dear to me. I've spent a career being an advocate for youth and understanding the impacts, especially on our underserved community and needing those resources. So, I'm with you. I hear you.

But I have major concerns about the illicit market. So, to our witness in support here, what are you seeing in terms of the growth of the illicit market in California?

Through the Chair. Thank you, Senator. Yeah, we've had a lot of challenges trying to keep up with the exploding illicit market. There was just some activity down in Riverside County a couple weeks ago where a lot of illegal roads were cleared out. It just seems to be almost whack a mole.

You smack one down and, you know, three others pop up somewhere else. So, anything that we can do to, you know, curtail the illicit market and reduce the benefits that they seem to be deriving, especially if there's a—I'm kind of in a weird position because my members aren't, you know, big fans of the cannabis industry either.

However, they much prefer a regulated and state overseen market and they'd rather see that succeed than have the illicit market continue to flourish.

This Bill will cut funding, though, for law enforcement actions against the illegal market. As I mentioned earlier, I served on the BSCC Committee that distributed grants to police departments all over the state and in counties to work against the illegal market.

I don't disagree that we're going to see some cuts, but the issue, the bigger issue here is the actual market, right? And in the great words of the Economist, Art Laufer, eventually, with high enough taxes, you will see a reduction in tax revenue. And as we see this, the legal industry taxed you will get—you'll see cuts anyways.

So, I think this Bill aims to address that so that we can make sure that we have revenues for the programs that we need for enforcement and to serve youth. So, again, I struggle with this because I love the tax cut, but I understand the importance for the legal industry.

I feel for where you're at as well. I will be supporting this. And the only other question I do have is there's another Bill by one of your colleagues that is very similar. I think the timelines are a little bit different. Are you going to reconcile that or?

We have not had that conversation as of yet, but that doesn't mean that we won't. So, we'll see how the bills get out today and we'll have those conversations.

Great, thank you.

Thank you very much.

Senator Grayson is recognized.

Thank you, Mr. Chair, and I align my comments with my colleague. I been around long enough now to be able to say that I went through something a bit similar where fees on a driving ticket were being addressed and it was very much that underserved communities were being hit harder by those fees.

So, a Senator ran a bill and eliminated much of those fees. I say that because there were a lot of groups that were impacted by the elimination of those fees on a driving ticket. One in particular was air ambulance for the entire State of California.

All air ambulance providers were hit really hard because that's where they received a lot of their funding. I will tell you that in the process of all that, people were able to land, they found other sources of funding. They did this and that.

Being a huge supporter of community programs and believing that that's where solutions really are found and those nonprofits and the youth groups that are out there that I greatly, greatly support, I do believe that we are addressing something that is very dangerous for the state of California and that is a flourishing black market or market—illicit market—for cannabis.

My question would be—that was a lot of commentary for a single question. Chair, I apologize.

But my question would be, have we run the numbers or is it possible that even though it would be—the tax base would be lowered—a few percentage points, is it possible that we could make a turnaround by enforcement on the illicit and increase our licenses, increase the sales?

And what would the sales have to increase by for the tax that we collect now to be status quo?

So, I want to start by saying, first of all, Senator, thank you for the question. I'm not a tax professional or expert, so I want to start there. I will just add, for the Committee, some optics on what how the hemp industry right now is operating in California.

So, we currently have CDPH emergency regs that were enacted in October 2024 that make any intoxicating hemp product essentially illegal for sale in California, but hemp can cross state lines. Cannabis is not supposed to cross state lines.

And so, you have out of state operators, huge ones in Kentucky and other areas, that will tell you that their most profitable market for a 10 milligram gummy, which is not a wellness product, is sold here in California. So, we are then siphoning away the cannabis taxes. Right? And it is another opportunity, obviously, to potentially collect more.

All right, so basically, you're saying we can increase the size of the market to make up for lowering the rate and our goal. And by the way, it's not a permanent action, so our goal is to actually make more or create more revenue for our, our nonprofits and those that are working.

And it may take a little dip at the beginning, but the end result will be much better than where we are today. Well, I'm asking the question here for right now, and then I will turn to opposition for response. But is that correct?

Is that kind of the intent behind what we're doing here is to decrease illicit market and increase the regulatory market, which I believe is a much safer way for us here in California to operate with a regulated market rather than illicit—is that right? Okay, just out of response to the question that I asked.

Yes. Thank you, Senator. You know, the Department of Tax and Fee Administration did an analysis. They did the ruling to increase the Cannabis Excise Tax from 15 to 19% in order to make the earlier cultivation tax cut revenue neutral.

So, the Tax and Fee Administration folks do not believe that by lowering the tax on cannabis we will see increased revenue over time for the youth programs, for law enforcement, and for the environment.

Did they state why that was? Did they state or did they address the fact that by enforcement on illicit that it would cause more—why didn't they translate that into more licensees? Do you know? Did they have a reason?

Yeah, I'm not—I don't know the answer to that question. Yeah. As I mentioned earlier to Senator Martinez Valladares, there is funding from Prop 64 revenue that goes to local law enforcement agencies to work against the illegal market. And I've read, you know, 22 proposals from local law enforcement and scored them.

And I saw rural counties using those dollars for drones to fly over and identify where their illegal grows. I saw funding for officers. I saw funding for code enforcement, folks.

Okay, thank you very, very much. It is a very complex thing. I don't think the intent here is to defund youth groups across California. I think the real intent here is to address a very dangerous illicit market that is putting dangerous product out on our streets and fostering crime.

So, with that, I will be supporting the Bill today.

I thank the Senators for their comments. I want to thank the Assemblymember for bringing this Bill forward. You do tend to bring complicated, difficult issues up. So, that's very much appreciated. And you have worked extremely hard. You've taken amendments and you improved the Bill. I realize there's quite a bit of opposition.

Basically, what I've heard over the last—this is a new issue to me—in the last, say, one month, I've heard a lot of contradictory information. You know, if you raise taxes, fewer people are going to be in the market. The revenues go down. But if you don't raise taxes, you don't get that increased revenue.

I mean, to me, it's not clear which one of these arguments is going to prevail. The data is a little bit cloudy on that. And I think the thing that drives me, and I'm building off some of the comments from Senator Grayson, is that the tax reduction is not permanent and it's not immediate.

So, there's going to be time to decide if this is going to be worth it. And I agree entirely with both my colleagues, getting illegal, unregulated product off the street would be a high priority. And so, I hope this does create successful tax regulatory framework for these products. I'm going to be supporting the Bill today.

And with that, I will ask the secretary to call for—well, I want to ask the author for closing remarks.

You know, I appreciate the opposition being here and their concern. Those that know me, know that I work really, really hard for children. I work really hard for our law enforcement. I work hard for all of our people. And I know and I feel confident that this is all going to balance out.

We have to believe in the system. We have to believe that our children are going to be safer. And that is why this Bill really came forward, because I had families coming to me that their children were getting these products and using them in the bathrooms at the high schools, on the corner stores, and buying them online.

We cannot have that continue to happen. I truly understand why everybody that's in here is concerned about programs. Of course, I am too. But I cannot let this continue. This elicit drugs go through our system and that we as Californians aren't standing up to those that are not following the rules.

So, with that, I respectfully ask for your aye vote.

Okay. Do we have a motion?

So moved.

We have a motion. Would the Secretary call the roll?

[Roll Call]

Thank you very much, Senators. I really appreciate your input.

Moving on. Next, we have file item 2, AB 245, by Assemblymember Gipson. Please approach and present your Bill.

Thank you very much, Mr. Chairman and Senators, thank you for allowing me to present Assembly Bill 245 today which provides urgent.

Now I want to underscore urgent and lasting property tax relief for victims of the 2025 wildfire that took place in the City of Los Angeles and the County of Los Angeles at a time where hurricane forces, winds and drought conditions created environment that causes serious complications for the first responders.

Not only our first responders, but for also Los Angeles County as a whole. This environment led to numerous blazes that surrounded Los Angeles County in January.

As the true devastation of these fires came to light, we gained a greater insight on a greater insight into the extent of these Devastations these fires fueled by again hurricane force winds and droughts causing unprecedented dangerous fires that estimated between 761.0 billion billion 1.0 to estimated to 131 billion in losses far exceeding previous numbers including possibly the camp fires that took place.

Although the campfires devastation was devastating in itself and don't want to underestimate those fires that took place as well. But I want to be honest these extent of these fires that took place in Los Angeles County was devastating in January in response to these catastrophic fires.

When we watched it it was actually something that for those who didn't live in the affected area we thought it was something that we were watching as a movie. It was a surreal moment for those of us who didn't live in an affected area. We thought Hollywood was filming a movie during that particular time.

Realizing that people's lives were affected and people lost, not only lost their homes but also they walked away with their shirts on their backs. Me personally, my family Member lost everything. Lost 20 Grammy Award baby grand piano. She walked away with literally the clothes on her back in that devastated fire.

Since then I have been coordinating very closely with Los Angeles County Assessor Jeffrey Prang to better understand the difficulty and the experience those victims of the Los Angeles County fire.

That's the reason why we came up with Assembly Bill 245 as a result of those discussions that contain two very very critical proposals providing the relief for those victims of Los Angeles fire.

Assembly Bill 240 fires offer two key measures and I want to go and walk you through those two key measures Extending for the rebuilding deadline by three years allowing victims more time to rebuild while maintaining their property base year value similar to what we've already provided including the campfires automatically downward property values adjustments for fire damaged homes so owners aren't penalized or over taxed if they can't respond properly or don't reside at the property.

These provisions will help prevent unfair tax burdens and support the recovery efforts.

I want to thank you in advance for your consideration urge and I vote on Assembly Bill 245 with me as my primary witness who will testify in support of 245 as a representative who self introduced representative from the California Assessors Association and I will ask him to take it away.

Thank you.

Thank you. Good morning Mr. Chair Members Rob Gross Glazer on behalf of the California Assessors Association as well as our President Jeff Pring the LA County Assessor and strong support appreciate the measure. The Committee analysis did a very nice job articulating the administrative burdens for this size and scope of disaster that we've experienced.

And so yes, it is a new approach, but one that we think is the most fair and balanced and equitable approach for all those that have been impacted by the fires. And here to answer additional questions. But thank you for consideration.

I thank the witness. Are there any other Members of the public that wish to speak in support of the bill? Please give your Name and your Mr.

Chair Members Amy Brown on behalf of the California Charter Schools Association in support.

Thank you.

Good morning. Mr. Chair Members Amy Garrett on behalf of California Association of Realtors in continued support of the measurement. Thank you. Thank you.

Good morning. George Kavinta on behalf of the Independent Insurance Agents and Brokers of California here in support. Thank you.

Are there any other witnesses in support? Is there any principal witness in opposition? Any Members of the public wish to voice opposition? Seeing none, I will turn to Members of the Committee for comment.

Thank you.

Seeing none, I first want to ask the author, has the amendment, the technical Amendment, comment number 9 been accepted?

Yes.

Thank you. The motion is do pass amendment to the Committee on appropriations with the secretary caller roll.

[Roll Call]

It's on call. The bill is now on call. Thank you very much. Thank you for your worship.

Like to move the consent calendar.

To accept the consent calendar. Will the secretary call the roll?

Motion is to adopt the consent calendar. This is file items 3 AB 480 by Assemblymember Quirk Silva and file item number 7 AB 1076 by Assemblymember Addis.

[Roll Call]

3 0. This consent calendar is on call. Thank you, Vice Chair. For that motion we now ask file item 5 AB 573 Rogers.

Begin when ready. All right. Good morning chair and Members. We're here today to present AB 573. Currently in California, about 40% of all tobacco sales are still illegally flavored tobaccos that have been banned. 20% of all sales still continue to go to youth. CDTFA is charged with the enforcement of the existing laws.

And right now There are about 30,000 total retailers for them to enforce upon. And they only have the funding to enforce proactively on about 11% of total retailers.

The tobacco retail license, the business fee that is paid by the retailers is about $256 a year, far below its counterparts for alcohol and for cannabis, which I know you just heard quite a bit about.

This bill would actually increase that by giving CDTFA the ability to go as high as $600, again, still below where alcohol and cannabis is, with a starting point at $450 for that retail license fee.

That would increase enforcement to about 30% proactively, which not only will help protect our children, but will also protect the good operators who are having a disadvantage when they know that some of their counterparts are selling these illegally flavored tobaccos as well as to children.

With me today to talk about the bill is Tim Gibbs on behalf of the American Cancer Association.

Good morning, Members and chair. My name is Tim Gibbs and I'm with the American Cancer Society Cancer Action Network. You know, flavored tobacco is still widely available at retail chains, retail store chains. CDPH found that flavored E cigarettes still represent 40% of all E cigarette sales at these locations. And kids are still getting access.

Among high school students surveyed in 2023 38.5% perceived that it was easy to obtain flavored tobacco from a store. And among those that used any tobacco, nearly 90% used flavor flavored tobacco products. When expanded to youth and young adult tobacco users, nearly 70% still think it's easy to get flavored e cigarettes.

And I just wanted to make the point about how relentless the tobacco industry is. You know, this body, the California Legislature, passed the flavors law nearly five years ago. You've had a referendum, you've had numerous court challenges and attempts to find loopholes with things like menthol, like cigarettes, you name it.

The industry has done it to try and keep luring kids with minty menthol and other candy flavored products. This bill is necessary to ensure a level playing field, to ensure that businesses who follow the law are not ceding a competitive advantage to retailers who are bad actors. We respectfully ask for your aye vote.

I thank the witnesses. Are there any other principal witnesses in favor? Any members of the public wish to voice support for the bill?

Good morning. Judith Gutierrez with the American Heart Association. We are proud co-sponsors and ask for your aye vote. Thank you.

Excuse me. Kisa Bruce with the American Lung Association. Proud co-sponsor and strong support.

Thank you. Any other witnesses in favor? Can I put the campaign for tobacco free kids on the record?

I'm strongly in favor of this bill because I have kids and grandkids and I don't agree with it.

All right, any principal witnesses in opposition? Any Members of the public wish to speak up in opposition by seeing none. I now turn to Members of the Committee for comment. Seeing none. My comments are brief too as with any industry, the cost of regulation should be borne by the businesses whose activities create the need for the regulation.

And your bill does that. And, in fact, there's no opposition, so, good Mark. For your bill, Assemblymember Rogers and I will be supporting the bill today. Would you like to close? Yeah.

Just an additional thank you to CDTFA for working so closely with us on the bill. With that, respectfully ask for an aye vote.

Okay. The motion is do pass. Is there a motion? Motion is do pass. To the Committee on Appropriations. Will the secretary call the roll?

[Roll Call]

The vote is 2 0. The measure is on call. Thank you. Any other authors ready to present to recess?

File item 10 AB 1377. The author is Mckinnon, but that author is not able to be here now. And we will be hearing the Bill presented by my colleague, Senator Grayson. Senator Grayson, proceed when you're prepared.

Thank you, Mr. Chair and colleagues.

On behalf of Assemblymember Mckinnon, AB 1377 builds on the important work of expanding the state's film and television tax credit program by requiring studios who opt in to participate in optional diversity, equity and inclusion and accessibility tax credits to actually complete the plans that the studios themselves develop and submit to the California Film Commission. It's simple math.

If a studio chooses to apply for additional DEIA tax credits, they actually need to do the work they are committing to do currently. Studios only have to demonstrate a good faith effort to accomplish diversity goals in order to receive these additional tax credits. And frankly, just a good faith effort is not good enough.

It is a false choice for anyone to say that California has to choose between retaining and growing jobs in the film and television industries and increasing the diversity of its workforce. The film industry can and must do both. With that, I respectfully ask for an aye vote at the appropriate time.

I thank the author of the Senator. Are there any principal witnesses in support? Any members of the public wish to voice support? Seeing none. Are there any principal witnesses in opposition? Seeing none. Are there any members of the public that wish to voice opposition? Seeing none. I will turn to Members of the Committee.

I do have a very technical question for the author.

Please.

Actually I'll be abstaining from this bill. But I will move the bill when appropriate.

Thank you.

Thank you.

I'll be nice.

I think the Vice Chair and I want to thank the Senator for presenting this bill. The author's. I admire the offers of the author's advocacy to advance diversity in the entertainment industry. It's a good cause. I hope the bill helps the industry to be more inclusive and more representative of the State of California.

And I will be in support of the bill. Senator, would you like to close?

Okay, the bill's been moved do pass to the Committee on Appropriations. Will the Secretary call the roll?

Just respectfully ask for an aye vote. Thank you so much.

[Roll Call]

The vote is 2-0. The bill is on call. Summary. Member Macedo on item 11. AB 1485. Please present your bill.

Very exciting. My first time standing to present my bill on the Senate side. So. Good morning Chair and Senators. Thank you for the opportunity to present my bill. AB 1485. I want to start by thanking the Committee for their Hard work on this bill and accepting the amendments.

Under current law, nonprofit and charitable organizations qualify for tax exemptions when they acquire land for public use, preservation or conservation purposes. Simultaneously, Native Indian tribes across California are working to reclaim and preserve lands that have deep ancestral, cultural and environmental significance.

When land is returned to California's first people for conservation, we should be affording them the same tax treatment that non profits receive. And that is exactly what this bill addresses. AB 1485 closes the gaps by adding federally recognized tribes to the list of entities eligible for the welfare exemption when land is held for conservation.

This will exempt land return transactions from the documentary transfer tax when that land is transferred to a tribe for non commercial preservation purposes. This bill is about fairness and consistency in our tax code.

It ensures that tribes engaged in land conservation and stewardship are treated federally, are treated equally under law, and it removes barriers that stand in the way of cultural and environmental restoration. I respectfully ask for your support of AB 1485 and I'm pleased to be joined by my two expert witnesses.

Michelle Lee, a tribal attorney who can speak to what this bill would mean for tribes and answer any technical questions, and Benjamin Clark, tribal Chairman of Mooretown Rancheria, who will speak to what this bill will mean for Native tribes like his. Let me turn it over to Michelle.

And I'm going to defer to the Chairman to start us off.

Good morning everybody. Yes, thank you for the opportunity to provide testimony today. AB 1485. I would also like to thank Assembly Member Macedo for sponsoring and introducing this legislation. I present this testimony, my official capacity as tribal Chairman of Mooretown Rancheria. Maidu Indians.

We are descendants of the Northwestern Maidu stewards of the Mooretown Ridge between the Middle Fork and South Fork of the Feather River. Although our tribe sought to protect its homeland on the South Fork of the Feather river during colonization, it lost ownership and control over everything except 280 acre parcels.

The tribe was unlawfully terminated in 1979, effectively making the tribe landless. It wasn't until 1992, with the purchase of nearly 35 acres just south of Oroville, that my tribe was able to meaningfully begin to rebuild our homeland.

Since that time, we have constructed nearly 100 homes for our tribal citizens, a community center which houses tribal offices and a library, a daycare center and an after school classroom. We have also been fortunate to have economic development opportunities and have worked diligently to provide for our people.

Moretown Rancheria's mission is to improve the quality of life for our Members, employees and the community in which we live in. By preserving our cultural and heritage, maintaining a positive Native American image, protecting tribal sovereignty and supporting tribal self reliance.

When land is returned into the hands of Indigenous communities, we can begin to implement long standing change and restoration. Healing the Land for The Next Generations AB 1485 advances California's climate, Environmental Policies we have been reacquiring our aboriginal lands that we were unjustly and illegally taken from us during the 1800s.

However, we often are required to pay a very high purchase price to buy back our traditional lands. More recently, our land acquisition efforts are for environmental and cultural revitalization. We believe in participating, practicing traditional land stewardship and restoration of our former ecosystems. AB 1485 would create a new exemption from transfer tax for such land acquisitions.

Unfortunately, we seek to buy our homelands. When we seek to buy our homelands, the owners usually demand that we pay a higher price that exceeds the appraisal value. They know our land is important to us. The inflated purchase prices result in a much higher property tax.

Nonprofits, churches, schools can already apply for the welfare exemption for properties that are limited to certain uses. AB 1485 would allow federally recognized tribes to utilize the same welfare exemption for lands reacquired for stewardship purposes. The welfare exemption has existed for other entities for quite some time.

Tribes should be on equal footing with these other entities and it makes sense to include tribes in the list of entities eligible to apply for the exemption today. State policies and programs aim to provide measures of restorative justice to California Indian tribes.

Programs such as the Nature Based Solution Grant Program promote California's effort to return tribal land to tribes. My tribe has sought to utilize that program and we are now working to finalize a land acquisition project. However, the grant. Please wrap up his testimony. Yeah. However, the grant agreement requires us to keep the land undeveloped.

Despite this restriction, we are still required to pay high state and local property tax after the acquisition. AB 1485 is necessary step to provide financial relief for tribal land stewardship.

AB 1485 is a common six common sense extension of an exemption that already exists under law and is a step in the right direction for California as it seeks to address historical wrongs. I hope you join me in supporting and advocating for the adoption of AB 1485. Thank you for your consideration of my testimony.

Any other principal witness in support?

Yes, thank you. My name is Michelle Lee and I'm here today to present this AB 1485.

I do want to thank Assembly woman Macedo for her leadership here as Chairman stated, the state is currently in a process of creating new measures of restorative justice for California's role in the genocide of California Indians taking tribal lands without due process or fair compensation, and its previous prejudicial policies that harmed California Indians.

1485 helps California fulfill its commitment to tribal sovereignty and environmental conservation, allowing tribes to continue their roles as stewards of California's land. AB 1485 will include federally recognized tribes as a category of entity that will qualify for the state's existing welfare exemption for some tribal land return transactions.

It will also create a new documentary transfer tax exemption for qualifying land return transactions. As you've heard, tribes are required today to pay very excessive prices for the land acquisitions for the return of their ancestral lands.

And at that point, the tax assessor reassesses the value at a much higher rate, requiring Indian tribes to pay higher taxes for the property than the previous owners had to pay. Currently, there is an exemption for lands that are owned by nonprofits where they're used for cultural, educational and environmental benefits to the community.

The property must be used exclusively for those qualifying purposes. And under this Bill, tribes will be able to qualify as an organization and receive an organizational clearance certificate from the Board of Equalization to then go to the assessor's office and apply for the welfare exemption. And the assessor will have the authority to grant that exemption.

At this 0.0 is a step in the way of.

Witnesses have exceeded the allotted time. Please wrap up quickly. Yes.

We thank you for the opportunity to present on this very important topic and appreciate your support.

Thank you. Any Members of the public wish to support the Bill?

Yeah. Good morning, Mr. Chair and Members. Alex Alanis, on behalf of the Upper Lake Viejas and Chukchansi tribes in support of AB 1485.

Thank you.

Good morning. Sebastian Torres on behalf of the California Assessors Association in support.

Good morning. Lilly Mckay on behalf of the Yurok tribe and support. Thank you.

Good morning. Pamela Lopez, on behalf of the Tule River Tribe in support.

Good morning. My name is Kamai Quip with the Youth Program, and I do support and I believe that all Native Americans should receive reparations and be not have to pay taxes for land that they've owned for centuries. Yes. Yes. Thank you.

Thank you. Any other witnesses in support? Are there. Do you wish to voice your support? Are there any Members. Are there any principal witnesses in opposition? Any Members of the public wish to voice opposition? Seeing none, I will turn to comments from the Committee. I recognize the Vice Chair.

Thank you, Mr. Chair. I just Want to welcome the Assembly over to the Senate on her first bill she's presenting to us and it's a good bill I understand coming from a non profit business background to see how much saving those property tax resources you can reinvest that into your company into our child care center.

It's so vital and important. So this is a no brainer. It should be extended to our tribes and happy to support and move the bill when appropriate.

Thank you Senator.

Any other Members of the Committee wish to comment or question seeing? None. I want to thank the Assemblymember Macedo for presenting the bill. It's an important bill that recognizes some of the fundamental injustices that tribes in California have suffered.

Taxation should not be a barrier to reclaiming the lands that were fostered and cared for by for thousands of years and I will be in support of the bill. Assembly Member, would you like to close?

Thank you so much Mr. Chair and Senators and respectfully ask for your Aye vote.

The motion. Would the author accept Comment number 6 To clarify the adaptive dates, the operative dates. The amendment is accepted. The motion now is due pass as amended to the Committee on appropriations with Secretary call roll.

[Roll Call] 4-0.

The vote is 4-0. The bill is on call.

Thank you very much.

Next we have File Item Six: AB 761 by Addis.

Thank you, Mr. Chair and members. As you said today, I'm here to present AB 761, which will give the Monterey-Salinas Transit District the opportunity to fund and continue vital programs and operations that serve vulnerable populations across Monterey County.

It is a very simple bill that would allow the transit system to put a measure on the ballot to increase their funding, and just--I know you've had long testimony this morning, so I'm going to pause and turn it over to my witness, and I'm absolutely available for any questions. We have Matt Robinson, here on behalf of MST.

I thank the author for her brevity and I recognize the first personal witness in favor.

Thank you, Mr. Chair, and I will try to echo that brevity. Matt Robinson, on behalf of the Monterey-Salinas Transit District. As the author said, this is a pretty straightforward bill. We have an existing eight cent sales tax measure that is set to sunset. We need legislative authority to extend that, existing sales tax measure.

The original measure was very popular in Monterey County. It passed with 73% of the vote. Those funds go to transit service for the elderly, for the disabled, and for our veterans in Monterey County. We're pretty confident that the voters will once again be there when we look to extend that measure, and we're also giving ourselves a little wiggle room should, down the road, we need additional operations, funding, support.

This would give us another eight cent if the voters are willing to move that forward at the appropriate time. So with that, as Assembly Member Addis said, I'm happy to answer any questions and would appreciate your support today. Thank you.

Are there any other principal witnesses in favor? Seeing none, are there any members of the public that wish to voice support for the bill? Please state your name, position, and organization, and position.

My name is Jeff Tartagia, an advocate, Sacramento Regional Transit and also sactru and various other organizations. This needs to be supported.

Thank you, chair and members. Eric Thronson for Corey Consulting, on behalf of Transportation Agency for Monterey County, in support. Thank you.

Any additional witnesses--the public would like to show support for the bill? Any member--is there any principal opposition? Is there any members of the public that wish to voice opposition? Seeing none, now I turn to the members of the committee for comments or questions. Seeing none, I will make a comment here. Thank you for the bill.

I think you've worked hard on it, and the bill does grant flexibility. It's not a tax increase at this point. It just allows the voters to decide and that's appropriate, and I will be supporting the bill today. Would you like to make closing statements?

Thank you, Mr. Chair. I'll just reiterate your point that this does not impose a tax itself; it simply allows a ballot measure for the voters to decide if they want to add the one eight cent that would help with transportation for low-income people, for veterans, and for all of us who love public transportation. And with that, I respectfully ask for your aye vote.

Do I hear a motion?

So moved.

The bill is moved. Do pass to Senate Floor. With that, the secretary will call the roll.

[Roll Call].

The count is three to one. The bill is now on call. Thank you. Next, we have File Item Nine: AB 1223 with Assembly Member Nguyen.

Yeah, I thought she had another bill today. Okay. Perfect. I asked the same question.

And Senators, I want to start by accepting the Committee's amendment and thank the Committee staff and Chair for their work on this bill. AB 1223 modernizes STA's legal authority to better meet Sacramento County's transportation needs. It allows STA to propose sales tax measures in specific parts of the county instead of requiring a countywide vote.

The bill also clarifies that STA can issue bonds and partner with the Capital Area Regional Tolling Authority for infrastructure financing. These changes ensure more local control and accountability without changing STA's public process or oversight rules. Here to testify in support is Kevin from Sacramento Transportation Authority.

Thank you. Thank you, Chair and Committee. Kevin Bewsey, the Executive Director of Sacramento Transportation Authority, here in support. This is a bill that we took to our board back in October. Our board is made up of 16 elected officials, all from Sacramento County and all seven of its cities. We took this concept forward in October.

They wanted to see a little more detail. We brought some detail to them on some specific language in November, and ultimately the STA board supported moving forward this bill. And now we've gotten to this Committee meeting today, and we would appreciate your support. Thank you.

Thank you. Are there any other witnesses or members of the public in support?

Hello again. I'm Jeff Tartagia. I am a rider of regional transit and part of SacTRU and other organizations and definitely want to be support of this.

Any other members of the public wish to voice support for the bill? Is there a principal witness in opposition? Any members of the public in opposition?

Yes, I'm in disagreement of this opposition because they're using all this tax money, but us paying customers don't get respect or disability appreciation when we ride the bus. We're getting mistreated more than the people that ride the bus that ain't got no problems. So I'm in disagreement of anything that has to do with Sacramento public transportation. They're very abusive. Thank you.

Thank the witness. I now turn to Members of the Committee.

Okay. All right. I just have a question for STA. First of all, applaud the author. Tough to get transportation dollars to be able to expand transit. That's why we don't have light rail to the airport. A number of things that the region's been trying to do for some time.

My only concern on this bill is I just worry a little bit about taxation without representation dialogue. And I know the Chair took a swing at this and that there was an amendment that I think you took that sounded a little bit like a compromise position to me from the outside. And I just want to gauge. I know what she's trying to do, which I totally understand and support. But I want to gauge you on moving forward, obviously going to vote for the bill. And I'm the Sacramento Senator, so love the idea of more resources.

But I just want to make sure that we're not going to run into an argument here where parts of Sacramento County say we were taxed and you spent our money elsewhere without engagement with them. If you have any concerns around that issue because it certainly can become an issue for us down the line if we're not careful. And it's really speaking to the amendments that you took on the bill from the Chair. I'm assuming there was a whole conversation around how far we would go on that.

Yeah, I think the amendments that we took essentially require us to essentially identify, you know, that the tax if applied in a part portion of the county shall benefit, primarily benefit that portion of the county. Right. And there's some additional controls that we put in place in this bill that were not in prior bills that limited who can vote on specifically the expenditure plan itself as well as any amendments to the expenditure plan. So only those agencies who are part of the tax actually have the ability to vote on that tax, which is different than prior bills.

And so I think the other thing I would add is we've also ensured that essentially those, how we determine the primary benefit is actually documented and identified in the transportation expenditure plan, which is available to the public as part of either the voter information guide or on our website. So it's very clear, you know, essentially when the voters are going to look at this, how we're determining how those funds will be used and how we determine primary benefit.

Just going back to the very first part of your answer there speaking to the Chair's amendments, can you just talk a little bit more about that? About where the part of the county in which you collect the tax versus the part of the county in which you spend the tax.

Yeah. So the original bill that we proposed when we talked about who could vote on, which I think you're getting to, isn't part of the amendment. That was actually part of the original bill, which is... So we basically set it up so that an example would be if there's...

Actually, I'm sorry. I don't mean to cut you off. I'm not actually talking about that part. I'm talking about his specific amendment which you talked about. That was the first part of your statement about where you allocate the dollars, the resources, versus where you gather the resources. Not so much the voting component. I understand that.

And STA does a great job of putting information out online and making your plan available and also circulating it through all the other organizations like Regional Transit and Saigon. You do a really good job of that. So I think people will be well informed. My question is more about as you expend the dollars.

Can I take a stab at it? It's a really good question, Senator. And I think the amendments and the conversation we had with Committee staff and our staff and the organizations that are part of this is exactly that. Is that there was a concern that those cities or those areas that voted for this and then the money being spent isn't necessarily being spent in the cities or the areas, the districts that voted for this sales tax and that it actually benefited another city or another area.

It's a great question. It's a great concern. And I think we had talked about that and said that we took the amendments and said that the cities and the areas in which voted for this sales tax and wants this to happen, it would benefit just that area and it wouldn't expand into the other areas. I hope I...

Exactly. That's what I'm getting at. That's the issue that I think the staff tried to go after here that I appreciate. Because in Sacramento, as you know, and it's the county, I'm not speaking just of the city. It's one thing to do a tax in a city like Elk Grove or Sacramento and, you know, you spend it where you want in that. Sacramento County's big. And many things are different in different areas. So, for example, in Natomas, they're already paying into the RT system, the STA system, and they have a local transportation system.

They have the North Natomas Transportation Authority that they pay into. So they'll probably see fewer of these resources because they have additional resources in another way. So that's what I'm getting at is how do we ensure that... Or benefits. It doesn't necessarily have to be spent, but it benefits all of the people in the system.

Who are paying into it. And you are 1000% correct. Is that. And as the Senator of the area, you know this very well. Natomas, Sacramento, Elk Grove. There's parts of the county that are willing to invest and pay for this tax. And we want to make sure that they benefit off of it because this is their tax money being put into this. We don't want them to have to pay for it and see the adjacent area benefiting from it when the adjacent area isn't paying for it. So you were 1,000% correct. And I think we worked through that with the Chair and the Committee staff on the amendments.

You feel confident that that piece is resolved?

I do because the city that I'm from was one of those. When we put this out there, the city...

The two communities that we come from are probably the two that will be the most irritated with this if they don't get what they want. So that's why I'm asking the question. I will support it today. I just wanted to ask the question out loud. I have no doubt it's her intention. I just want to make sure that that's STA's intention as well.

Yep. Thank you.

And I just want to follow up on the Senator's question by reading a portion of the amendment. All revenues generated from the tax shall be expended for the primary benefit of the portion of the county in which the tax is imposed and the transportation expenditure plan, including those, shall be made readily available and accessible to the voters in a manner required by the code.

So we did do our best to ensure that the voters that adopt this bill and pay for it will be the major beneficiaries of this. So there was an amendment accepted. I think it's appropriate to move forward with this, and I will be supporting the bill. Would the author wish to close?

I respectfully ask for your aye vote.

Okay. I like that closing. The motion is do pass as amended to the Senate Floor. Do we have a motion? Well, now that we have a motion, the motion is do pass to the Committee as amended to the Senate Floor. And I will now ask the Secretary to call a roll.

[Roll Call]

The vote is 3-1. The bill is on call. Next, we have in file order AB 4. I'm sorry. File order 4, AB 564 by Haney. This is going to be a good one. Please present your bill.

All right, shall I begin?

All right, thank you, Mr. Chair and Members. I appreciate the Chair and the Committee staff's work on this bill and will be accepting the Committee amendments today to delay implementation to October 1st. AB 564 will provide tax relief to California's struggling cannabis industry by reversing an unprecedented 25% excise tax increase.

Begin when ready.

With me today in support is Khalil Ferguson, President of United Core Alliance, and Josh Thubei, an employee with Perfect Union. Amy Jenkins with the California Cannabis Operators Association, is also here for technical questions.

California has been at the heart of America's cannabis economy and culture. But since voters passed Prop 64, California has not given the legal cannabis industry a chance to grow into its potential. The legal cannabis industry, which is subject to state and local taxes and fees, is constantly at a threat of being overtaken by illegal and untaxed industry.

Fully licensed legal businesses in California capture just 40% of the state's entire market, while the underground illegal market accounts for 60% of the overall market. This means that California is missing out on millions, likely hundreds of millions in lost potential revenue from illicit on tax sales.

The folks who are not following the rules, not following health and safety regulations, not paying taxes, are winning. And they're winning in part because we are making it harder and harder to operate a legal, regulated, successful cannabis business in California.

And the numbers show that in 2024, active cannabis licenses decreased by 18%, meaning more and more cannabis small businesses are succumbing to the pressure over taxation. If you look at the numbers over the past few years, the State of the Industry is in a state where it is tumbling in the wrong direction.

Since 2021, we have lost over half $1.0 billion in quarterly sales. Legal cannabis sales dropped from 1.56 billion in quarter two of 2021 to just 1 billion in quarter four. This has also led to a 37% decrease in tax revenue.

And at every single level, this is an industry that is struggling, that needs our support, that needs a lifeline, not more and more taxation, which is going to lead more businesses to close and more jobs lost. Compare California with states like Michigan, which last year surpassed California's cannabis market in per capita sales.

If we were on par with Michigan, we we'd be generating $13 billion in annual sales as opposed to the 4.6 billion we generated last year. The legal cannabis industry needs a lifeline to stabilize.

This Bill will help keep small businesses open, hundreds of thousands of workers employed, and keep the promise we made to voters to make cannabis legal and accessible. That is critical for all of these folks, and it's also critical to ensure that we fight back against the dangerous illicit illegal market.

Yes, Good morning Chair McNerney and Committee Members. My name is Khalil Ferguson. I am the owner of several cannabis businesses along California's supply chain and I'm here today in support of AB 564. Briefly, about myself I graduated from Sac State in 2018 with degrees in Economics and Poli Sci.

I recently graduated from McGeorge School of Law here in Sacramento in May. So I took a break from studying for the July bar exam to impress upon you the need for this Bill. Many Cannabis Businesses so our cannabis businesses are not treated as legitimate businesses here in California despite paying an enormous amount of taxes to the state.

Not only are cannabis businesses subjected to high excise tax rates, city and county sales tax rates, as well as corporate income tax rates, we are subjected to landlords who charge rents at least three times the market value simply because we operate cannabis businesses. Additionally, we are constantly under the threat of robberies and burglaries.

Compounding this harm is the limited willingness of insurance companies to insure cannabis products unless we meet the narrowly tailored and impractical, sorry, impracticable definitions of a vault. My dispensary was burglarized two times in six months. It took three months for the insurance proceeds to be recovered and they only covered the damage to the Premises.

At the same time, a smoke shop less than 500ft from my dispensary was cited at least five times for for selling cannabis flour illegally. At that same time, my business partner and I were battling a landlord who was attempting to increase our rent from the commercial rate of $2,600 per month to $7,500 per month.

The fact of the matter is, cannabis businesses are underwater and business owners are under immense stress. Allowing the excise tax to increase by 25% will accelerate the decline of an already contracting market. In all candor, I predicted this would occur several years ago. We are here today because of the current tax framework.

I stated that the tax base for these important programs would falter if the current tax scheme continued. Logically, increasing the excise tax by 25% will result in more businesses closing and less revenue coming into the state to support these needed programs. But to be clear, this is not because cannabis business owners are unwilling to pay their taxes.

It is because the current tax framework is regressive. By increasing this excise tax rate by 25%, a business would statistically lose a percentage of our customer base, especially in light of a readily available and lower priced substitute product in the illicit market. This relationship is well understood by economists as a concept of price elasticity of demand.

So today you all have the opportunity to support legislation that would at least ensure the status quo is maintained. And for these reasons I respectfully request that Aye vote on this bill.

Thank you. The witnesses are reminded to keep your remarks to two minutes if possible.

Good morning Chair and Members. My name is Joshua Thubei. I'm a bud tender at Perfect Union, which is one of the USCW unionized dispensaries here in Sacramento. I am here today in support of AB564, which would provide a lifeline that stabilizes the legal cannabis market and protects both consumers and small businesses from further economic strain.

Every Every day I see the real world impact of cannabis taxes on our customers, many of whom rely on cannabis for medical relief, mental health, or simply just a safer alternative to other substances.

Since the increase in the excise tax on July 1, my customers have been forced to make smaller purchases averaging $30 worth of product instead of their typical $50. I've had to look at customers in the eye and admit I don't have a clear answer for why their purchases more expensive.

I wish I had a better answer than just tax policy, state tax policy. It's hard to be the face of a system that's making essential relief unaffordable. I recently had a customer who manages their chronic pain with cannabis share with me. I never thought I've had to choose between groceries and pain relief.

One of our regulars, a combat veteran, relies on cannabis for sleep and ptsd. He recently left the store empty handed because he could not afford his typical order.

This tax increase is pushing my customers out the door and into the illegal market, putting them at risk because they cannot afford to keep up with the rising cost of the legal market. I've witnessed how even the small price increase can push people away from legal dispensaries.

We've had customers come in after bad experiences with street products, some with contaminants or incorrect dosages because they could not afford the tax. Legal options this is why AB 564 is so important, because it keeps the safe legal cannabis affordable while supporting the businesses that provide it. AB 564 doesn't get rid of cannabis taxes.

It simply delays the increase until 2030, giving the industry some time to stabilize and grow against the legal market. Do not let taxes become the barrier that drives people back to the illicit market. Let's keep cannabis accessible, safe and fair. I urge to support AB 564, please.

I thank the witnesses. Are there any members of the public that wish to voice their support? Please state your name, your organization and your position.

Clifton Wilson, on behalf of the Board of Supervisors for the counties of Humboldt and Nevada, both in support, thank you.

Ellen Brittingham, with Full Moon Strategies here on behalf of Alameda County in support.

Chair, Senators. Dean Grafilo, of Capital Advocacy here on behalf of Steezy in support of AB564. Thank you.

Sarah Nocedo, on behalf of Origins Council. We're a proud co sponsor of AB 564 and urge your Aye vote.

Gail Gehringer, for California Normal on the 50th anniversary of Governor Brown's signature of California's landmark marijuana decriminalization law. In proud support of this bill.

Jared Kylo here on behalf of United Cannabis Business Association. When there are lost jobs, there are. Children and families in the cannabis industry that are also being harmed by the. Movement into the illicit industry. So please take that into account.

My name is Sharon and I'm an advocate for the Compassion program Members and low income. And I strongly agree with this tax. Because I can't afford my Marijuana no more. And I would appreciate it if you. Guys lowered the taxes because it is. An agriculture that's processed just like the meat we're eating. It's killing us.

We need a break. Thank you.

Good afternoon. My name is Nina Parks. I represent an organization called the Equity Trade Network. We are about 47 equity operators all across the state. If this bill does not pass, we will see a complete decimation of what's left of the cannabis equity programs. We were already struggling to stay in the game as it was.

Without tax relief, our businesses will be completely run into the ground. I understand that there's a need to balance out the social justice promises that were given to community, but this was also a social justice program that has been completely neglected.

And we're seeing lawsuits coming up from all sorts of local jurisdictions and this is a very necessary bill for us to just keep going.

Good morning, Mr. Chair, Members of the Committee, Sam Rodriguez on behalf of NUG Wellness dispensaries based in the East Bay with one story here in Sacramento Midtown. Also on behalf of Good Farmers, Great Neighbors representing cannabis cultivators based in Santa Barbara county and in strong support of AB 564 and also want to present special.

Recognition for Senate Member Matt Haney for his leadership both as a state lawmaker and as A former San Francisco supervisor. Thank you.

Good morning. Jared Schwass, attorney representing cannabis businesses since. The inception of the regulated market. It's time to get back to the written intent of Prop 64 of supporting small businesses within the regulated market. You cannot support small businesses by raising taxes. Strongly support this bill. Thank you.

Kristen Heidelbach, here on behalf of UFCW Western States Council, proud co sponsors in support.

Angelica Sanchez, on the behalf of Perfect Union and strong support.

Iana Vasquez Garcia, Social Equity out of City of Sacramento. Business owner and strong support.

Hi, I'm Mindy Galloway. I'm representing small business and equity operators as the owner and operator of the Pocket Dispensary in Sacramento. I also have a manufacturing incubator that I am three months away from closing down because the margins are very slow. We are not able to be successful even before we're able to start.

Good morning, My name is Nicole Redler with K Street Consulting. I am here on behalf of San Francisco Brownie Mary Democratic Club, Compassionate Veterans and Recompass and very strong support. Thank you.

Pam Lopez on behalf of Jade Nectar. Thank you Assemblymember Haney for your leadership.

Good morning. Jared Moss, on behalf of the city of Long beach and the San Diego Chamber of Commerce and support.

Chair, Members. Alicia Priego, on behalf of Kiva Confections and Kiva Sales and Services, a California manufacturer and distributor. In support.

Good morning. Sarah Ursinow, on behalf of the California Cannabis Industry Association and Strong Solutions, thank you.

Good morning. Shane Levine, on behalf of the California Statewide Law Enforcement Association, the California Association of Criminal Investigators, which includes the state's. Cannabis agents and weed maps all in support, thank you.

Amy Jenkins, on behalf of the California Cannabis Operators Association as well as individual companies Canacraft, March and Ash and Spark in strong support. Thank you.

Morning, Senators. Jason Bryant, on behalf of The Cannabis Distribution Association, we're in support. Thank you.

Rich Miller, on behalf of Americans for Safe Access, the American Alliance for Medical Cannabis volunteer patient organization and strong support, please give us safe, affordable access. Thank you.

Good morning. Shannon Horn, representing Uproar Farms in strong support.

Any other witnesses in favor? Are there principal witnesses in opposition? Please respect the 2 minute limit that we've been trying to live with.

Hello, can you guys hear me? Hello, Members of the Committee, My name is Clonesca and I'm from the Pascua Yaqui tribal nation and a part of the Executive team at Youth Forward based in Sacramento.

According to the Department of Tax and Fee Administration and the bill analysis, if state policymakers approve the cannabis industry tax cut in AB 564, state leaders will essentially cut 180 million annually for childcare and youth services, for environmental restoration land and for law enforcement. Over seven and a half years, this will be a loss of over $1 billion.

This means fewer lower low income families with access to child care. Fewer low income youth will have access to summer programs and youth development supports programs for prevention substance abuse. This means far fewer environmental cleanups of toxic waste sites caused by cannabis grows in rural areas and on tribal lands.

And this means less funding for local law enforcement to crack down on the legal market. These cuts will take place at the same time child and youth services for funding are being cut for the environment by the Trump Administration.

The funding from the state cannabis tax revenue is the only funding that was created to repair the damages that have been done on tribal lands and youth. The industry has thrived and pillaged our bipoc and tribal communities for generations since its inception. Please stand with our children and our environment and vote no on AB560.

Thank you Mr. Chairman, Members of the Committee. My name is Corey Brown. I'm an attorney with the Resources Legacy Fund. I wrote some of the environmental provisions in Prop 64. This measure would result in a net loss to kids to the environment and law enforcement of $900 million over the five year period that's impacted by the bill.

Even with the 4% increase in the tax which the cannabis industry supported because it was tied to the loss of the cultivation tax. Even with that, the taxes are lower than they would have been just if Prop 64 as voters enacted it, was implemented. Now what does that loss of the $900 million mean?

60% of that money cuts programs for childcare, cuts programs for youth drug dependency prevention that voters were promised when the Proposition 64 was on the ballot. It also cuts $180 million in grants to local governments to enforce the cannabis laws. In the previous discussion there was discussion about law enforcement.

This measure's net impact is you're going to have less enforcement of the cannabis laws because you're having less money to local governments for grants. It also reduces funding to eradicate legal grows on tribal lands, on habitat lands and other areas.

The problem needs to be dealt with in both the urban areas as well as where the illegal growing occurs. The illegal growing as well as legal growing that causes environmental damage. The illegal grows often use carbofuran to ban pesticide that a capful will kill a bear that's getting into drinking water supplies.

These funds are needed to stop those illegal grows clean up the toxic mess that they create and restore the property. Unless those properties are restored, the cartels go back into those properties and restart their legal operations. So this measure is a problem.

Now, in the previous discussion on AB8, there was a hope that cutting the taxes would increase revenues. Our demonstrated experience is that doesn't happen. There was a $500 million tax break to the industry when the cultivation tax was eliminated. As part of that deal, the excise tax was increased by 4%.

When the cultivation tax was eliminated and that $500 million tax cut was made, we lost $200 million per year to programs that benefit the kids, benefit the environment, benefit law enforcement. Now, what's the health of the industry? If you look at the paper I just passed out, that is a page from the Department of Cannabis Control.

The Department of Cannabis Control, in looking at the market, concluded that the market is growing. Total production increased 11.8%. The nominal wholesale value of cannabis increased by 7.5% and retail units sold increased by 5.2% just last year. Production has gone up 70% since 2020. The truth is that the industry is growing. Sales are up.

Their problem is they're over producing basic market and demand. If you're producing too much product, the prices drop and they're not making the vast profits that they hope to protect law enforcement funding, protect the environment, protect our kids. Vote no on this measure. Thank you.

I think the witness. Are there any Members of the public that wish to speak in opposition of this measure?

Hello again. My name is Kamai Quip and I'm here on behalf of the Passion and Purpose CE Youth program. And I'd just like to say that I oppose on the effects that this lowering tax does to to our youth and our environment. But lowering the taxes for small businesses, it doesn't.

I just don't understand why this business in particular is their mass tax is going towards us and not bigger businesses and people who pay larger taxes and have more money can provide for our programs and our benefits. You know, that's all I have to say. Thank you.

Purva Bhattacharjee with the California Alliance of Child and Family Services in opposition.

Hi, my name is Julia. With passion and purpose CE Youth program we oppose. Thank you.

Hello, my name is Angel Serrano. I am the outreach and engagement specialist for a nonprofit in Stockton, California where we primarily focus on on substance misuse and prevention with the youth. Cutting funds for youth programs like this would be devastating for communities of color. So I ask that we strongly oppose. Thank you.

Senator McNerney. Hello, my name is Rodolfo Buonrostro, I'm stock in California nonprofit Voice of Hope. Acting as passion and purpose and I strongly oppose this bill. Thank you.

Good Morning Chair McNerney, Members. Megan Cleveland, with the Nature Conservancy in respectful opposition.

Good morning. Alex Loomer, on behalf of California Trout, Trout Unlimited, Pacific Forest Trust, the Environmental Protection Information Center, California Native Plant Society, Sonoma Land Trust, Mojave Desert Land Trust and Defenders of Wildlife and opposition, thank you.

John Garcia, with the Sacramento LGBT Community Center in opposition.

Good morning Chair and Members. Jeanette Carpenter, on behalf of Child Action and respectful opposition. Thank you.

Leticia Aguilar, Pinoleville Pomo Nation CEO of Native Sister Circle born and raised in Sacramento and I strongly oppose. Thank you.

Cintamana 109 KMA Kashe hello Summer friends and relatives. My name is Angela Nahosa. My tribes for illegal Palm Nation. I grew up here in Sacramento. I'm a Sacramento State student. I'm also part of Native Circle in many different organizations that on behalf of tribal youth I am here and non tribal youth.

Our kids are sinking and I am strongly in opposition and asking you guys to please consider our children that are in the streets.

...Alina Sanchez. I am Ewok from the Wilton Rancheria Tribe, and I am strongly in opposition of AB 54, due to the fact that this jeopardizes fundamental community programs and youth funding. Prioritize our youth and whom are the future. Hear our voices and be the change.

...Hello again. I'm Gianna Ramirez. I am Miwoka Nisinan and I am a part of the Native Sister Circle and many other youth organizations, and I'm with opposition.

Alyssa Sanchez. Hello, my name is Alyssa Sanchez and I strongly oppose. Thank you.

Manahu. My name is Journey Monteo. I'm with Native Circle and we strongly oppose.

Good morning, Chair and Members. Guerra Gonzalez Garcia, on behalf of Getting it Right from the Start at the Public Health Institute, in strong opposition, joining over 100 youth and children serving in environmental organizations. Please listen to us. Please oppose. Thank you.

Hello, my name is Noel Loessa with Milpa Collective, also constituent of Sacramento. Are we really discussing a tax break versus child care? I strongly oppose.

Buenos Dias. Good morning. My name is Carlos Hernandez, with Milpa Collective, on behalf of the community we serve in Monterey County, Santa Cruz County, Solano County, and Yolo County, in strongly opposition.

Hello, my name is Fabian Martinez, here with Milpa, and I strongly oppose this Bill.

Good morning, my name is Luis Martinez. I'm with Milpa, and I respectfully oppose this Bill.

Jesus Robles, with Milpa, and respectfully opposed.

My name is Ignacio Taylor. I'm a millennial descendant of the Witchita and affiliated tribes residing in present day Anadark, Oklahoma, and I'm here on behalf of Rios to Rivers, Save California Salmon, true north tribal organizations from Humboldt County, and we strongly oppose AB 564. Thank you.

I'm Richard Flores and I'm with Indigenous Justice here in Sacramento, and I oppose.

Hello, my name is Mike Duncan, a member of the Round Valley Indian Tribe—Indian Reservation—and the Executive Director of Native Dads Network, a statewide program serving tribal youth and communities under Prop 64 funding. I'm in full opposition of AB 564. We are here to ensure equity and accountability to cannabis taxation.

These bills will strip more than 2 billion from prevention, healing, and cultural restoration programs. That's not reform. We're asking to keep your promises. The cannabis industry must not be allowed to profit while indigenous communities are left behind again. We want to give our future generations a chance. Again, we oppose AB 564.

My name is Luigi McGill. I'm a Round Valley Tribal Member. I work for Indigenous Justice in Sacramento, and we strongly oppose this Bill too.

My name is Morningstar Galley. I serve as Executive Director for Indigenous Justice and I'm a Member of the Pitt River Tribe. We are in strong opposition. We have held tribal youth listening sessions where our youth are able to address the crisis of opioids and work on the efforts of tribal leadership within our tribal territories.

And these programs and the funding has made such an impact on our tribal youth. We are in strong opposition.

Hello again, relatives. My name is Albert Tippmann, senior local tribal person, Miwook Ancestry, Nisenan Maidu, and also a descendant from the Pitt River Nation. My mother is also a descendant from the lands they call Mexico and before borders, we existed here, since the beginning of time. We believe our creation started here.

And throughout that history, there have been impacts that have ethnically cleansed us. Acts of genocide, right? Forced removal, all of these things. Alcoholism, the introduction of drugs as chemical warfare. We know that. We have relatives incarcerated right now as a result of illegal cannabis industry. I see my brother sitting here right now.

I don't oppose you making a living. What I oppose is marketing towards our kids. The illegal and legal growths impact tribal communities generationally, multi-generationally. I am the Deputy Director of an organization, co-founded the Native Dads Network.

And we are working to grow reclaim our role as Native fathers and our families as a result of the impacts of the history of California genocide.

Support or opposition?

So, it's pretty clear that I am opposing because what this opposition will do is almost instantly, almost instantly remove funding from our program that we've worked over the past few years to develop in the City of Sacramento, in the urban centers, the ghetto, the barrio, where our people have been relocated and we see our kids incarcerated in juvenile justice.

100% in opposition.

Good morning, I'm Jim Keddie with Youth Forward. Also here representing the Wakchumnee Tribe and the Native Star Foundation from the Central Valley, in opposition.

I thank the witnesses in support and in opposition. Clearly a tough issue. With that, I will—seeing no more members of the public—I will turn to the Members of the Committee for their comments. Any questions?

Thank you, Mr. Chair. And thank you to all those that came out, whether it be in opposition or whether it be in support of the Bill. This is what making policy is all about and hearing. And this is something we should all be proud of, that we have the opportunity to do, so.

I do want to ask a clarifying question, if I may, to the author, and just to clarify that we are not reducing the tax rate that currently exists. Is that correct?

Correct, so.

What exactly is that?

This is a Bill that will freeze the tax at 15%. Was 15% excise tax last year, fiscal year, we want it to continue to be 15%. So, this isn't a cut to anybody's revenue. This isn't a cut to anybody's program.

It is keeping this current rate of 15% in place, that was in place last year, for five years so that we can stabilize in industry that we're seeing year over year losing more revenue and losing more sales that will help to protect.

So, if the rate stays the same, then if there's no losses in the, in the licensed sector, where we're losing more stores and the sales stay the same, then the revenue should be expected, as it was this past year, the same revenue would come in.

Therefore, I just want to make sure our nonprofits, the really good work that's happening in our community, can still expect the funding to come in as they have been most recently.

Correct, yes. If the sales were the same as they were last year at the same tax rate that we're keeping in place, we're not doing a tax cut from what was in place this past year, which was reflected in revenue that folks were receiving.

In fact, this is the one industry that's having a huge tax increase put on it. So, we're trying to freeze the tax as it is, not give them a tax cut, so that we can stabilize it.

And any of the revenue that was received over this past fiscal year, if the sales were the same, the revenue would be the same and the funds would be the same.

All right, thank you very much. And then, I just wanted to kind of reveal here the same paper that we received that opposition talked about, as far as showing the market, is looking good. On that exact same form or same report, it says taxes and fees are a substantial share of licensed business cost.

Lowering local taxes, fees, and restrictions can increase the number of retail locations, which can help pull consumers into the licensed market. And so, I just want to also say that with a healthy market, we also need to make sure that we do our part on our end. And I think that's what you're trying to accomplish is stabilization.

Because if we can stabilize—address—the illicit market, then the licensed market will begin to grow. And as it grows, the revenue grows, which means that's even more help that we can provide to our, to our friends in the community that are doing great work amongst our youth and other parts of our community.

So, thank you for that. I do want to give a chance for our opposition to respond to what I just said.

Thank you, Mr. Grayson. I wanted to correct for the record, the current tax is 19%. This Bill reduces it to 15%. So, that is the—so, if you want to—we support freezing the existing tax at 19%.

Let's clarify that. It went from 15 to 19 when?

On July 1st, as part of the agreement that the industry.

Last week?

Yes.

That the industry agreed to when the cultivation tax was eliminated. That replaces about 70% of the revenues. Not 100%. 70% of the revenues at the rate.

Than it was prior to July 1st?

Yes.

Because we couldn't have this hearing and get a Bill signed before then.

But all this was agreed to in 2022, by the industry as well as youth groups and environmental groups. We only agreed to that because included that 19% rate that started July 1st. This Bill cuts funding from the kids, from the law enforcement and from the environment. And so, it's not correct to say this freezes taxes.

The whole deal in 2022 was that there'd be some replacement revenues. And this takes away those replacement revenues for the 2022 negotiation that we agreed to—the cannabis industry agreed to.

Okay.

And it breaks that deal.

I appreciate those comments. Mr. Chair, I'll give it back to you.

Thank you. Any other members? Vice Chair is recognized.

Well, first of all, I absolutely love that we're acknowledging that taxes have a direct correlation to the growth of industry. I love this conversation. We had a Bill earlier. Thank you. And I actually, you know, appreciate the market outlook from the opposition here because as I look at these numbers—numbers of active licensing are down 18%.

That's a major warning sign that legal players can't survive in this market. And then again, it says units sold plus 5.2% total retail cannabis sales are down 4.4%. And what I'm assuming that means is that there is more supply in the market.

And so, the price of cannabis is going down, and I'm assuming that that supply is the illegal supply. So, I would love to hear from our business owners here. What are you having to do to compete with this illicit market?

As a business owner, I can state that, you know, we offer discounts, but the discounts still aren't enough. Again, we compete with a smoke shop who has been cited for selling, illegally, cannabis flower at the prices that don't incorporate taxes into it. And they're less than 1,000 feet from us. They remain open today.

And you know, we've been aware when they have been rated by the local sheriff in the county in which we sit. And the day that they're shut down, our sales increased by at least 25% that day.

And if they're shut down for more than two days, I walk at the books, you know, these sales every day and I see stark increases to our, to our numbers, just alone from them being shut down. So, you know, with candor, our dispensary is located in El Sobrano. We're outside of Richmond and San Pablo.

And if you're familiar with the area, then you know there's a lot of enlisted activity on the retail side that goes on in Richmond, California, and in San Pablo. In San Pablo, there's several unlicensed smoke shops that we have engaged with the Local Police Department to identify and help shut down.

I have taken labor and assisted the San Pablo Police Department in identifying if the smoke shops have had licenses, revealed to them that they do not, they do not appear in California's database as having licenses to sell tobacco or any other products similar.

And they are working on getting them shut down, but they still remain active players within a five mile radius to our dispensary. So, as much as we can reduce prices while even maintaining a breakeven point, we're trying to do so. But the taxes and the surrounding illicit activities are not helping.

So, I'll come to the opposition in just a second here.

I understand the struggle that business, all small business have, and when taxes go up, you know, I really fear that the legal cannabis market is on the brink of obliteration because of how prolific illicit grows are, illicit retail is, and revenues may not exist at all if the, if the legal market disappears.

So, that's a major concern for me and why I'm going to be supporting this Bill. I do want to just bring up to the author and I asked your Assembly—or Assemblywoman—Aguiar-Curry about this earlier as well. You have very similar bills, different timelines. Are you guys going to try and reconcile these, these two bills?

Yes. So, I'm happy to talk to her about that. Certainly, you know, our view is that we don't, we want to see the Excise Tax stay at 15% right now for, because of the situation that you're describing and what they're facing. And so, I know that her Bill has a different kind of timeline in it.

I don't know, it sort of has in some ways a broader application as well, focusing on hemp as well. So, happy to continue that conversation with her and work to make sure that the two bills are aligned.

Thank you. Thank you, Mr. Chair.

Can I—I'll turn to the next Senator. Senator?

Okay, thank you very much, Chairman. Just a few comments and maybe some of it's repeat from my colleagues here, but I think it's important to point out, but most of us, including the author, I think everyone who's in this room that's a Legislator served on local governances.

So, we've been involved in this conversation for a really long time and have a lot of history with the initial. You were there, Khalil. Congratulations on law school. Really proud to hear you were able to do that. You were there for those conversations. Mr. Keddie, you've been there for all of those conversations, many of these organizations.

Mr. Brown, you were involved in those conversations for the City of Sacramento as well. I've been involved in this dialogue since we were just talking about medicinal marijuana and then how we would stand up the market and then in Sacramento how we would do the equity piece, which I would argue we botched statewide.

And then, you know, now I find myself in the Legislature still trying to kind of catch up with how fast this particular industry came out of, out of the ground. And one observation I would make is that for sure in Sacramento, we oversaturated the market by a long shot.

I mean, the number of permits that went out in Sacramento was like insane. How many people we gave these permits to. There's no way. I don't even—we don't even have that many communities. It was a total over saturation.

So, one thing we always knew would happen that really is reflected in your chart here is the market correcting itself, meaning which businesses are going to make it and which ones are not? And how we tax people really does play into that dialogue. I know everyone in this room can know that, you know, 15%, 19%.

That's really—that's a lot. That's a lot of tax. If you had a business and you were taxed at 19%, think about that. You know, it's like 20 cents out of every dollar. That's really a lot of taxes.

There's no argument that can be made, at least not to me, that that money's not going to a good cause. It most certainly is—to youth, to the environment. Absolutely right. Absolutely right use of the dollars, especially the component to the natives, because it's a big deal there.

But I think it's really important to understand what we're talking about. I know that Mr. Brown's making the argument that the tax went up last week and that's true, but that's only because we didn't move fast enough to get this done ahead of it. We're talking about leaving it the same. We're not talking about reducing it.

I wouldn't vote to reduce it. I don't know what anybody else would do, but I would not vote to reduce this. I would not vote to lower the amount that you're getting right now. I wouldn't support that. And those of you who are from Sacramento know that for dang sure, because I barely even supported legal cannabis.

Right, Khalil, you got me on this? I mean, I was literally the hardest vote on that City Council to even agree to do this at all. So, there's no way I would reduce the responsibility of paying that out into the community. But what we're really talking about here is still correcting that market.

And the last people into the market were the equity people, like Khalil. And so, they're the last ones to see the benefits of that market correction, which we deeply, deeply need. So, we're in bad budget times as it is. But even if we weren't in bad budget times, this particular industry needs a chance to form.

Otherwise, if we don't do this, if we don't give it a breath, what will happen is exactly what happened to tobacco. And tobacco taxes are a declining resource, and all of the programs like literacy and early education, are all receiving declining revenue because they're reliant on tobacco tax, and it's never going to come back up.

I think cannabis can be different than that.

And then, the second thing which should not be ignored in here, that Senator Grayson talked about, is by righting the market, you know, there's two equations that go into how much money you guys are getting, how big is the tax, but also how big is the pool for which the tax is applied?

Actually doing this is going to grow the pool. I don't know if that'll be—give you more money—than if we increase the tax on a smaller pool. I'm not smart enough to do that math in my head sitting right here, so, I went to law school instead of like, you know, math school or whatever they do for math people, like Mr. McNerney, who's actually good at that.

But what I can tell you is I think growing the pool offers you the longevity that you need for these programs, because the youth need to be able to rely on these programs. You cannot pull the carpet out from underneath them. You cannot give them an after school program and then take that from their moms.

You cannot do that. And so, this gives us some more stability than we would have if we continued to pry pressure on that industry.

Secondly, Assemblymember Aguiar-Curry's Bill should not be ignored in this hearing because what her Bill does, and it came through my Committee, in Business, Professions, and Economic Development, so I've studied it extensively, is it adds another group that will receive this tax—hemp, all of hemp will now get this tax, if her Bill passes and the Governor signs it.

That also grows the pool, substantially, of who will pay this 15% tax. And by the way, she's a mom. She's amazing. She also wants that money to go to you.

So, we're trying some other ways to make sure, A, that your money is stable, B, that the pot grows, and C, that we continue to focus on young people and the environment as a priority, while stabilizing a really important economic driver in the State of California. And for those reasons, this Bill will have my support today.

Okay, thank you Members of the Committee for your comments. I want to thank—pardon? The motion to move the Bill, but I'm going to make some comments first. Assemblymember Haney, you're showing a lot of courage here bringing this up and I appreciate that.

And you have been willing to work with the Committee on issues, specifically to delay the reduction to October 1st, beginning of the fourth quarter. But there's a history here. Three years ago, the Legislature and the Governor agreed to a compromise that nobody liked but nobody really opposed.

Subsequently, tax rates went up because that was a part of the compromise. The three tier—the tier three funds—are valuable. I mean, we know, whether it's enforcement, whether it's environmental protection, whether it's social services, or environmental remediation, these are essential services. And I hear it from my district; I hear it from around the state.

People want these services. Whether you're on one side or the other, people want these services to continue. They're essential. And I'm determined to see that. And I want to make it clear that I will support the Bill. But with the amendment today, this conversation is not over. We're going to continue.

We want to make sure that the tier three organizations get funding. And I'm going to ask you a specific question about that in a minute. In fact, I'll ask it now. Why do you believe that tier three, that lowering the taxes is going to not reduce revenues? I mean, that's the central point here, right?

People on one side thinks, well, if we raise the taxes, it's going to reduce legal participation and that's going to reduce revenues. On the other side, well, if we raise taxes, it's clearly more revenue. So, how do you answer that?

What do you—makes you think that this is going to, is not going to reduce revenues to the tier three—three tier—program?

I appreciate the question. I think one of the reasons why it's so important that we stabilize this industry is to ensure that the revenues are still there to fund these very critical and important programs and fulfill the promises of Prop 64.

I think if you look at what has happened in particular over the last few years, legal market losing half a billion dollars since 2021, having a situation where sales are down, revenue is down, business is closing, we are at a place where we are moving on every indicator rapidly in the wrong direction in this industry.

And I don't know the theory of economics, I don't think there is one that says at a time when an industry is struggling clearly to stay afloat, that's a time to slap a 25% tax increase on them. That is obviously going to make it harder.

It's going to make it harder for them to have sales, they're going to lose more customers and businesses are going to close. And so, a 19% tax on a non existent business, one that has closed, is zero. That's $0 for tier three. So, this is about a five year stabilizing this industry.

We just took a very different approach that all of us supported for the film industry. We saw that the film industry was having less and less projects come about. They were losing revenue, they were losing jobs, and so, we provided tax relief and tax support.

Many of the indicators that this industry is experiencing right now also deserve our support. This is the opposite of it. And I think if we keep going in this direction, we see where it's going. Revenue plummeting.

And over the next five years, if we increase taxes, more of these businesses will close, they'll have less sales, and there will be less money for these critical programs. Anyone who wants to protect the funding for these programs and these services should want to stabilize and support this industry.

Having a pause on a tax increase feels very reasonable to me to help do it. It's common sense that if you slap a 25% tax increase on a struggling industry, that is going to make it harder for them and they're going to struggle more.

Well, I'm going to disagree with one thing you said is that all indicators are down. And I've met with groups, the legislative LAO, for example, indicates that there is an increase in legal participation. So, I wouldn't say that this is a universal accepted fact.

In fact, that's what makes this issue so confusing, is that—members of the audience, please restrain themselves. So again, this is going to be a contentious issue, but one thing I wanted to insist on is that you continue to work to make sure that the tier three folks continue to get their money.

We need enforcement, and if that isn't the case, then I will not be supporting it on the Senate Floor.

Thank you. And I agree that...

The author can.

In order for us to address what is really our goal, which is to ensure that this industry can thrive and it can be successful and we can get revenue from it and it can be stabilized, it's going to take both tax relief and competitive tax structure, which we don't have overall, even in its current structure.

It's also going to take us looking at access to the market. As you said, there are some opportunities to expand access to a market where it doesn't exist right now, that can lead to more revenue coming in. And it's going to take us truly taking on the responsibility of cracking down on illegal operators.

If you are paying high taxes, which, in some cases, combining state and local taxes can be over 50% of the retail cost, which is unsustainable. You're paying high taxes. You're also not able to benefit from some of the small business tax relief that the Federal Government offers.

You have all of these additional barriers and challenges that add costs, that you heard about from our business operators. And on top of all of that, you're competing against an illegal market that has to do none of those things, that doesn't have to pay anything. It's an impossible situation that we put these folks in.