STATE OF CALIFORNIA Budget C h a n g e Proposal - Cover Sheet DF-46 (REV 08/16)

Fiscal Year 2017-18

Business Unit 1045

Department Cannabis Control Appeals Panel

Priority No. 1

Budget Request Name 1045-401-BCP-2017-MR

Program 1045- Cannabis Control Appeals

Panel

Subprogram

Budget Request Description Cannabis Control Appeals Panel

Budget Request Summary The Cannabis Control Appeals Panel (Appeals Panel) is requesting 8 positions and $1,045,000 Cannabis Control Fund in fiscal year 2017-18 and $1,142,000 ongoing to fund the development of the Panel's operations. The Appeals Panel was established through a voter initiative in November 2016, Proposition 64, approving the adult recreational use of marijuana. The objective of the Appeals Panel is to hear appeals from individuals affected by a decision of the state's regulatory agencies.

Requires Legislation

• Yes M No

Code Section(s) to be Added/Amended/Repealed

Does this BCP contain information technology (IT) components? • Yes |EI No

If yes, departmental Chief Information Officer must sign.

Department CIO Date

For IT requests, specify the project number, the most recent project approval document (FSR, SPR, S1BA, S2AA, S3SD, S4PRA), and the approval date.

Project No. Project Approval Document: Approval Date:

If proposal affects another department, does other department concur with proposal? • Yes • No Attach comments of affected department, signed and dated by the department director or designee.

Prepared By Date Reviewed By Date

Department Director Date Agency Secretary Date

Department of Finance Use Only

Additional Review: • Capital Outlay • ITCU • FSCU • OSAE • CALSTARS • Dept. of Technology

BCP Type: • Policy • Workload Budget per Government Code 13308.05

PPBA Original Signed By- Date submitted to the Legislature

Tiffany Garcia

BCP Title: Cannabis Control Appeals Panel

Budget R e q u e s t S u m m a r y

Personal Services Positions - Permanent

Total Positions

Salaries and Wages Earnings - Permanent

Total Salaries and Wages

Total Staff Benefits Total Personal Services

Operating Expenses and Equipment 5301 - General Expense 5302 - Printing 5304 - Communications 5322 - Training 5324 - Facilities Operation 5340 - Consulting and Professional Services

External 5344 - Consolidated Data Centers

Total Operating Expenses and Equipment Total Budget Request

F u n d S u m m a r y Fund Source - State Operations

3288 - Cannabis Control Fund Total State Operations Expenditures

Total All Funds

Program S u m m a r y Program Funding

1045 - Cannabis Appeals Panel Total All Programs

BCP Fiscal Detail Sheet BR Name: 1045-401-BCP-2017-MR

FY17 CY BY BY+1 BY+2 BY+3 BY+4

0.0 8.0 8.0 8.0 8.0 8.0 0.0 8.0 8.0 8.0 8.0 8.0

0 539 612 612 612 612 $0 $539 $612 $612 $612 $612

0 274 310 310 310 310 $0 $813 $922 $922 $922 $922

0 36 24 24 24 24 0 12 12 12 12 12 0 12 12 12 12 12 0 6 6 6 6 6 0 54 54 54 54 54

0 106 106 106 106 106

0 6 6 6 6 6 $0 $232 $220 $220 $220 $220

$0 $1,045 $1,142 $1,142 $1,142 $1,142

0 1,045 1,142 1,142 1,142 1,142 $0 $1,045 $1,142 $1,142 $1,142 $1,142

$0 $1,045 $1,142 $1,142 $1,142 $1,142

0 1,045 1,142 1,142 1,142 1,142 $0 $1,045 $1,142 $1,142 $1,142 $1,142

BCP Title: Cannabis Control Appeals Panel BR Name: 1045-401-BCP-2017-MR

P e r s o n a l S e r v i c e s Detai ls

Salary Information Positions Min Mid Max C Y BY BY+1 BY+2 BY+3 BY+4

0020 - Executive Officer 0.0 1.0 1.0 1.0 1.0 1.0 1282 - Legal Secty 0.0 1.0 1.0 1.0 1.0 1.0 5157 - Staff Svcs Analyst (Gen) 0.0 1.0 1.0 1.0 1.0 1.0 5795 - Atty III 0.0 2.0 2.0 2.0 2.0 2.0

VROO - Various 0.0 3.0 3.0 3.0 3.0 3.0

Total Positions 0.0 8.0 8.0 8.0 8.0 8.0

Salaries and Wages

0020 - Executive Officer 1282 - Legal Secty 5157 - Staff Svcs Analyst (Gen) 5795 - Atty III

VROO - Various Total Salaries and Wages

CY BY BY+1

0 144 144 0 45 45 0 47 47 0 231 231 0 72 145

$0 $539 $612

BY+2 BY+3 BY+4

144 144 144 45 45 45 47 47 47

231 231 231 145 145 145

$612 $612 $612

Staff Benefits 5150350 - Healtfi Insurance 0 107 122 122 122 122 5150600 - Retirement - General 0 167 188 188 188 188 Total Staff Benefits $0 $274 $310 $310 $310 $310

Total Personal Services $0 $813 $922 $922 $922 $922

Budget C h a n g e Proposa l - C o v e r Sheet DF-46 (REV 08/16)

A. Budget Request Summary

The Cannabis Control Appeals Panel (Appeals Panel) is requesting 8 positions and $1,045,000 Cannabis Control Fund in fiscal year 2017-18 and $1,142,000 ongoing to provide the initial resources for the Appeals Panel. The Appeals Panel is responsible for providing administrative review of a penalty, a license issuance, denial, or other adverse action by any of the state licensing authorities for cannabis.

B. Background/History

The Medical Marijuana Regulation and Safety Act (MCRSA) enacted in 2015 created a regulatory framework for the licensing and enforcement of the cultivation, manufacture, transportation, storage, and distribution of medical marijuana in California. Further, the MCRSA of 2016 refined the process by which the State would implement the regulation of medical cannabis.

In November of 2016, voters approved Proposition 64, the Adult Use of Marijuana Act (AUMA). Under Proposition 64, adults 21 years of age or older can legally grow, possess, and use cannabis for non-medicinal purposes, with certain restrictions. In addition, beginning on January 1, 2018, AUMA makes it legal to sell and distribute cannabis through a regulated business. AUMA also requires recreational cannabis businesses to obtain state licenses in categories similar to those in MCRSA. Given the inconsistencies between the MCRSA and AUMA, specifically in the areas of license restrictions, taxes and license types, the Administration has proposed Trailer Bill Language, which makes amendments to ensure the laws are compatible and preserve Legislative intent under MCRSA as well as the intent of the AUMA.

AUMA established the Appeals Panel, consisting of three members appointed by the Governor and subject to confirmation by the Senate. The Appeals Panel will be responsible for appeals from any decision by cannabis licensing authorities r e l a t i n g to t h e order of any penalty assessment, issuing, denying, transferring, conditioning, suspending or revoking any license provided under AUMA.

0. State Level Considerations

As the state moves forward with the regulation of both medicinal cannabis and adult use of cannabis activities across California, the Administration's first priority is to protect public and consumer safety. ,

The State's licensing responsibilities are split between three entities, the Department of Food and Agriculture is responsible for issuing cultivation licenses; the Department of Public Health is responsible for issuing manufacturing licenses; and the Bureau of Cannabis Control within the Department of Consumer Affairs is responsible for issuance, distribution, transportation, laboratory testing, and dispensary (sale) licenses.

With the proposed Trailer Bill Language, the Administration proposes to extend the review of the Appeals Panel to all licensing decisions relating to cannabis. Any applicant or licensee can appeal to the Appeals Panel to review decisions relating to a penalty, a license issuance, denial, or adverse action by any of the licensing authorities. The Appeals Panel will streamline the appeals process and bring needed expertise and due process to the review of any licensing decision. The language allows a party to appeal the decision of the Appeals Panel directly to the Court of Appeals, which is similar to how the Alcoholic Beverage Control Appeals Board operates.

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Budget C h a n g e Proposal - Cover Sheet DF-46 (REV 08/16)

D. Justification

Beginning January 1, 2018, the state will begin issuing licenses for the cultivation, manufacture, transportation, storage, testing, and distribution of cannabis in California. The Bureau of Cannabis Control, has the sole authority to create, issue, deny, renew, discipline, suspend, or revoke licenses for microbusinesses, transportation, storage unrelated to manufacturing activities, distribution, testing, and sale of cannabis and cannabis products within the state. The Department of Food and Agriculture shall have the authority to create, issue, deny, and suspend or revoke cultivation licenses. The Department of Public Health shall have the authority to create, issue, deny, and suspend or revoke manufacturing licenses.

Given the thousands of license applications that will be received across three entities it is vital to have an Appeals Panel established and staffed to handle the inevitable appeals. In order to ensure adequate resources are provided to assist with this new workload, the following positions are being requested.

One Executive Officer position, responsible for oversight and general direction of the day-to-day operations and activities of the Appeals Panel. The Executive Officer provides direction, in consultation with the Appeals Panel, on a wide variety of regulatory, legislative, community, and appeal issues. This position is responsible for ensuring that the Appeals Panel's goals and objectives are accomplished by developing and interpreting broad policy into strategies and operational procedures to be implemented.

Two Attorney III positions are needed to: conduct legal research and prepare summaries of the facts and arguments of all parties and the applicable law, and prepare an analysis of pertinent law needed to further explain or explore particularly complex issues of law or procedure. The positions will provide: legal advice and direction to the Appeals Panel on appeals during oral deliberations, prepare the Appeals Panel's written decisions with orders affirming, reversing, and/or remanding the licensing entities decisions, provide written legal analysis and advice to the Executive Officer and Appeals Panel Members of new or pending laws and legislation that could impact the Appeals Panel and its functions, as requested by the Executive Officer and the Appeals Panel, provide the Appeals Panel with written legal summaries of appellate proceedings involving the Appeals Panel as needed, attend meetings with the Executive Officer and legal staff concerning caseload, processes, and work flow, provide peer review of legal analyses, written summaries of pending cases, and final drafts of proposed orders and decisions of the Appeals Panel to help validate legal research and quality control, assist the Appeals Panel and Executive Officer in the development of policy and regulations for the Appeals Panel and ensure compliance with the Administrative Procedure Act, review records for disclosure to the press and public under the California Public Records Act, and perform work on special projects at the direction of the Executive Officer.

One Legal Secretary is needed for the intake and process of new appeals, which includes requesting certification of decisions from licensing entities, preparing appeal folders, setting forth pertinent case details for review by the attorney and Chief Executive, and reading the decision appealed to determine the issues, parties, and final determinations. In addition, the Legal Secretary will be responsible for preparing, proofreading, and issuing final decisions with proper certification and proof of service. As well as preparing documentation for the Court of Appeal.

One Staff Services Analyst position is needed to perform various analytical functions in support of the Appeals Panel. The position will provide analytical support, including the tracking of the appeals process and caseload management, preparation of documents, under instruction, for administrative proceedings before the Appeals Panel, prepare and maintain office files, and assist with phones, document tracking, legal filings, travel, and other projects.

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Budget C h a n g e Proposal - Cover Shee t DF-46 (REV 08/16)

At this time we are unable to provide an estimate on the number of appeals the Appeals Panel will received and as such have modeled the workload based on similar Boards. Resources will be reevaluated once workload data is available.

E. Outcomes and Accountability

Beginning in July 2017, the Appeals Panel will be established and handle the appeals of any person aggrieved from a decision of any cannabis licensing entity, relating to penalty assessments, issuing, denying, transferring, conditioning, suspending or revoking any license. The Appeals Panel shall review the decision subject to such limitations as may be imposed by the Legislature. In such cases, the Appeals Panel shall not receive evidence in addition to that considered by the licensing authority. The review by the Appeals Panel of a decision of the licensing authority is limited to the following questions: (1) Whether the licensing authority has proceeded without or in excess of its jurisdiction. (2) Whether the licensing authority has proceeded in the manner required by law. (3) Whether the decision is supported by the findings. (4) Whether the findings are supported by substantial evidence in the light of the whole record.

The Appeals Panel will provide a streamlined appeals process and bring needed expertise and due process to the review of any licensing decision.

F. Analysis of All Feasible Alternatives

Alternative 1: Provide 8 positions and $1,045,000 Cannabis Control Fund in fiscal year 2017-18 and $1,142,000 ongoing to provide the initial resources for the Appeals Panel.

Pros: The resources will be provided to establish an Appeals Panel as required by statute. Cons: Requires staffing and funding.

Alternative 2: Do nothing.

Pros: No costs. ^

Cons: No Appeals Panel would exist to oversee licensing disputes and enforcement actions, as required by law.

•/

G. Implementation Plan

The Appeals Panel will work with the California Department of Human Resources to secure the necessary paperwork to establish and advertise in June 2017, to recruit and aggressively fill these positions effective July 2017.

H. Supplemental Information

NA

I. Recommendation

Approve Alternative 1

P A G E 11-3