AB 216
Page 1
Date of Hearing: January 13, 2004
Dario Frommer, Chair
AB 216 (Chan) - As Amended: January 7, 2003

SUBJECT : Alcohol: fee: youth alcohol recovery and prevention.

SUMMARY : Requires the Board of Equalization (BOE) to collect a fee from alcohol manufacturers and importers of up to $100 million and requires the Department of Alcohol and Drug Programs (DADP) to establish youth alcohol recovery and prevention programs in every county. Specifically, this bill :

1)Requires BOE to impose a fee on beer and distilled spirit manufacturers and importers in amounts based on an annual survey of youth alcohol consumption and brand usage.

2)Exempts beer manufacturers that produce 60,000 barrels or less per year from the fee.

3)Creates the Youth Alcohol Prevention and Recovery Fund and requires all fees collected under this bill to be deposited into the fund.

4)Caps first year fees at the lower of $100 million or the total retail revenues generated by underage alcohol consumption, as estimated by BOE.

5)Requires DADP to establish youth alcohol recovery and prevention centers statewide, to be administered by county departments of alcohol programs.

6)Requires that the centers provide voluntary, peer-based prevention and recovery services, including, but not limited to: education support; leadership development; skills assessment and development; vocational training and job placement; meeting space for Alcoholics Anonymous and other self-help meetings; and referral services to other programs.

7)Requires DADP to issue a biennial report to the Legislature that assesses the costs, quality, and effectiveness of the centers' recovery and prevention programs.

8)Provides for this bill to become operative only if no alcoholic beverage surtax bill from this session is chaptered.

9)Provides for this bill's operative effect each year beginning in 2005 only when the Director of Finance certifies by November 1 of the prior year that the General Fund will end the year with at least a three percent reserve.


1)Imposes an excise tax and an excise surtax (in addition to the excise tax) on alcoholic beverages. Funds are not targeted for any specific purpose and accrue to the General Fund.

2)Requires non-age-specific recovery and prevention programs.

3)Creates the Special Fund for Economic Uncertainties, which acts as the general fund reserve, and requires the State Controller to transfer funds from the Special Fund to the General Fund when a budget deficit exists.



1)PURPOSE OF THIS BILL . According to the author, this bill is necessary to stem the increasing problem of underage alcohol abuse among adolescents due to its link to alcohol dependence among adults. According to a 1999 Federal Trade Commission report, alcohol ads appeared on at least three of the 15 television programs that have the largest teen audiences. The Center on Alcohol Marketing and Youth released a study showing that minors are exposed to 45% more beer ads in magazines than are adults. The author contends that marketing by alcohol manufacturers uses images and messages that are highly attractive to young people, and this bill would counteract such tactics and the problems associated with underage drinking.

2)BACKGROUND . Nationwide, the number of adolescents aged 12 to 17 that admit to addiction treatment increased by 20% between 1994 and 1999, of which 47% were due to alcohol abuse (Substance Abuse and Mental Health Services Administration's National Household Survey on Drug Abuse). According to the Parents Resource Institute for Drug Education, people who begin drinking before age 15 are four times more likely to develop alcoholism in adulthood than those who being drinking at age 21. According to the California Attorney General's Office, 26% of California eleventh graders reported consuming five drinks in a row in the past two weeks, which is a standard indicator of heavy drinking. A 2002 report by the U.S. Department of Justice (U.S. DOJ) indicates that youth consumption of alcohol accounts for 12% of all alcohol consumption, which is substantial given that sales to minors are illegal.

3)YOUTH PREVENTION AND TREATMENT PROGRAMS . Currently, there is no statewide alcohol prevention and recovery services system for youth in California. A national study of students by the Department of Health and Human Services found that children lack essential knowledge about alcohol and its effects. Significant numbers of students tend to be unsure of the legal age to purchase alcohol, do not understand the intoxicating effects of alcohol, and do not know the relative strengths of different alcoholic beverages. Evaluations of local and school-based prevention programs have shown that they are effective in increasing awareness and reducing alcohol and drug use. The California Attorney General's Office reported in 2001 that over half of seventh grade youth surveyed indicated that they learned about harmful effects of drugs and alcohol and reduced their use as a result of alcohol and drug education. The percentage of youth reporting these changes declined as age increased, with 30% to 46% reporting the same changes in the eleventh grade.

4)EXISTING ALCOHOL TAX . The existing state surtax on alcoholic beverages was imposed in the 1991-92 state budget to bridge the gap between state revenues and expenses. Prior to that tax increase, excise taxes on most alcoholic beverages had remained the same since the 1950s, with the exception of an increase in the excise tax on distilled spirits in 1967.

5)FEE-BASED PROGRAMS . This bill creates a new program by imposing a fee on alcoholic beverages. Fee bills can be enacted with a majority vote rather than the two-thirds vote necessary for a tax measure. The issue of whether a revenue raising measure imposes a fee or tax has been subject to litigation. The California Supreme Court, in Sinclair Paint Company v. the State Board of Equalization (1997) 15 Cal.4th 866, held that the state may collect fees to mitigate the past, present or future adverse impact of a particular industry's product, as long as there is a causal connection between the product and its adverse effects. It appears that the fee assessment structure contained in this bill was modeled after the fee requirements in the Child Lead Poisoning Prevention Act of 1991, which was the basis for the decision in Sinclair Paint . The Sinclair Paint decision permits "remediation" fees to be collected from producers of products to compensate for the adverse social effects generated by those products. To be a classified as a fee, the funds collected must be used exclusively to address those social effects and the funds cannot exceed the reasonable costs of the cleanup effort.

6)RELATED LEGISLATION . SB 5X (Romero) and SB 108 (Romero) currently in the Senate, both of which levy a $.05 per-drink fee on alcohol and wine wholesalers and direct funds to be used for trauma center funding, passed out of the Senate Health and Human Services Committee on March 26, 2003. SB 248 (Romero) and SB 928 (Romero) were introduced in the 2001-02 legislative session and were essentially the same as the Senate bills introduced this year. Both measures failed passage. AB 2744 (Thomson and Chan), which would have created a surtax on alcohol and wine to pay for health services (including alcohol and substance abuse services), failed in the Assembly Health Committee in 2002. AB 1298 (Wesson) Chapter 288, Statutes of 2001, increased the annual licensing fees by specified amounts through 2004 and permitted the ABC to annually adjust fees beginning in 2005, by an amount not to exceed an inflation factor based on the Consumer Price Index for the west region.

7)SUPPORT . The sponsor of this bill, Trauma Foundation (a San Francisco-based organization whose mission is to reduce injuries and deaths due to injuries) states that underage drinking is a major health issue affecting California's youth and this bill will combat the trend and curb the incidence. Supporters contend that preventive measures are necessary for adolescents to avoid unhealthy consumption behavior that could lead to addiction in their adult years. For adolescents that already have developed dependence and/or abusive patterns, treatment programs targeted at teens are necessary, but virtually non-existent in many communities. The California State PTA, California Psychological Association, Youth Leadership Institute, California School Nurses Organization, and various local youth related programs indicate that alcohol is a contributing factor to three leading causes of death among youth: homicides, suicides, and unintentional injuries such as automobile accidents. Supporters also contend that because this bill mandates that the fee assessed is based on the youth market share of each alcohol producer and will only be used to address youth alcohol problems associated with the use of their products, this bill does not impose a tax.

8)OPPOSITION . Opponents argue that this fee proposal comes at a time when the state is facing an unprecedented budget deficit, and the earmarking of new revenues for any specified purpose is inappropriate until the deficit is resolved. Several opponents, including Anheuser-Busch, Miller Brewing Company, California Beer and Beverage Distributors, and various distribution companies contend that the fee is not designed to measure actual consumption by underage persons, but rather measures brand awareness, which punishes major brewers for legal television advertising. The California Taxpayers Association and numerous other opponents believe that alcohol products are already heavily taxed and that another fee will make California a more expensive and less desirable place to live and operate a business.

9)POLICY QUESTIONS . The basis for the fee proposed under this bill is the consumption of alcohol by a subset of the drinking population. It may be difficult to determine the use of the target consumers in this scenario because of the fact that the purchase and possession of alcohol by minors is illegal. Background material provided by the author's office indicates that a random sample of California youth will be conducted regarding consumption patterns and brand preferences, BOE is not directed by the bill to use this approach. Are there ways to ensure that the data collected to assess the fees are a valid measure of the behavior of this subset of consumers? Should there be more direction given to BOE in its assessment of youth alcohol consumption given that it may be difficult to measure, especially when relying on self-reported data?

10)DOUBLE REFERRAL . This bill has also been referred to the Committee on Governmental Organization.

11)RECONSIDERATION . This bill failed passage in the Assembly Committee on Health on April 8, 2003 and was granted reconsideration. The author has since amended the bill to: 1) require the BOE to assess and collect the fee; 2) specify that the bill would not be operative if legislation from this session imposing or increasing alcoholic beverage surtaxes is enacted; 3) specify that the bill would be operative only in each year for which the Director of Finance certifies that the General Fund will end the year with at least a three percent reserve; 4) make additional findings and declarations; 5) permit counties to use 3% of funds for existing youth alcohol programs; 6) permit funds to be used for youth drunk driving prevention efforts; and 7) to name the legislation the Casey L. Goodwin Memorial Law, after a leader of underage drinking programs who was killed by a drunk driver.



Trauma Foundation (Sponsor)
Alameda County
Alcohol Policy Network
American Federation of State, County, and Municipal Employees
Aptos High School Friday Night Live
Boys and Girls Club of Santa Cruz
California Council on Alcohol Policy
California Federation of Teachers
California Psychological Association
California School Nurses Organization
California State PTA
City of San Fernando
City of Santa Cruz
Committee on Moral Concerns
Community Action Resource Exchange - Ventura County
Community Prevention of Alcohol-Related Problems (CommPre)
Community Wellness Partnership of Pomona
County Alcohol and Drug Program Administrators Association of California (CADPAAC)
County of Santa Cruz
Day One of Pasadena / Altadena
Drug Policy Alliance Network
Freedom Bound Center
Glendale Adventist Medical Center
Harbor High School Friday Night Live
Latinos & Latinas for Health Justice
Los Angeles County Friday Night Live Partnership
Mariposa County Friday Night Live Partnership
Mothers Against Drunk Driving (MADD)
North Inland Community Prevention Program
Oxnard Police Department
Project Eden
San Diego County Council on Alcohol Policy
San Diego County Policy Panel on Youth Access to Alcohol
San Diego County Policy Panel on Youth Access to Alcohol
San Diego Youth Council
San Lorenzo Valley High School Friday Night Live
Santa Cruz County Friday Night Live Youth Council
Santa Cruz County Together For Youth
Santa Cruz High School Friday Night Live
Scotts Valley High School Friday Night Live
Scotts Valley Middle School Club Live
Soquel High School Challenge Club
The Marin Institute for the Prevention of Alcohol and other Drug Problems
Trauma Research and Education Foundation
Vallejo Alcohol Policy Coalition
Vallejo Alcohol Policy Coalition
Ventura County Alcohol and Drug Advisory Board
Ventura County Rainbow Alliance's LGBT Coalition and Youth Empowerment Program
Webster Tract Neighbors Association
Youth Leadership Institute
Five individuals


Ace Beverage Company
Anheuser-Busch Companies, Inc.
Bay Area Beverage Company
Beauchamp Distributing Company
Beauchamp Distributing Company
California Association of Winegrape Growers
California Beer and Beverage Distributors
California Chamber of Commerce
California Restaurant Association
California Retailers Association
California Small Brewers Association
California Taxpayers' Association
Capital Beverage Company
Coors Brewing Company
Distilled Spirits Council of the United States
Family Winemakers of California
Gate City Beverage
Golden Gate Restaurant Association