California ABC announces big changes at annual Stakeholder Meeting

With very little fanfare, the California Department of Alcohol Beverage Control (CA ABC) is making some pretty big changes. The changes to the department are a direct result of a two-year review process rolled up into a multi-year plan. The Program Performance Improvement Initiative or PPII provides structure and guidance for the CA ABC overhaul.

Director Jacob Appelsmith of the CA ABC recently led a 2019 Stakeholder Meeting in Sacramento to share the modernization plan. According to Jacobson, “This meeting changes course from past events with a focus on the future vision for the department’s modernization, not a review of the past.”

Division Chief of Administration Randall Deems shared the outcome of the department’s review of the structural deficit and the gaps in services offered. The review team proposed amendments to the ABC Act, which included increasing licensing fees and sought a multi-year investment from the state. The 2019 ABC budget proposal was submitted to the legislature in April 2019, approved in late June, and signed by the governor with an effective date of July 1, 2019.

With newly committed funds the department is actively working on the Program Performance Improvement Initiative. The department faces four key challenges:

1. Enforcement and licensing capacity: The size of the CA ABC is only slightly bigger than it was in 1955 when it was started. In 1955, the department had 445 staff members to regulate 44,925 licenses. Currently, the department has 459 staff members to regulate 92,277 licenses. 
   
   The ratio of staff to licenses created workload challenges, resulting in a backlog of regulatory issues and industry questions. Very little energy was directed toward modernizing the licensing process and regulation enforcement to ensure public safety. Now, the CA ABC seeks to address these issues.
   
   The modernization program provides a multi-year staff increase and software implementation to keep pace with the beverage alcohol industry. The licensing division will undergo changes designed to enhance and develop expertise. The increase in enforcement staff will provide a higher level of service in curbing youth access to alcohol, enforcing criminal laws in and around licensed premises, and responding to community complaints.
   
   
2. Diminishing expertise and consistency in licensing program: With changes in the roles of staff members, expertise across teams within the ABC has disappeared. Currently more than 50 percent of the top tiers of ABC staff are eligible to retire within five years, compounding this loss of knowledge and experience. As for concerns surrounding the consistency of services, the most frequent complaint to the ABC has been the lack of uniform experiences between the same departments at different offices across the state.
   
   Marcie Griffin, Interim Division Chief of Licensing, outlined the four-year bifurcation plan separating out licensing agents statewide to focus on the development of leadership and deep expertise in licensing. This activity will drive and unify the customer experience across locations.
   
   The ABC’s Licensing Department will also establish a Non-Retail Licensing Unit. This will allow for deeper expertise in this very specific area of licensing. The unit will centralize all of the applications statewide and act as a resource for the Trade Enforcement Unit.
   
   
3. Lack of modern services to the public: The CA ABC is still a paper form, check, and file cabinet operation. A technology upgrade requires the largest technological lift and greatest financial investment by the state to achieve the initiative, but is essential moving forward. The development of an IT department began a few years ago to map and deploy online services for CA ABC.
   
   Jeff Obrecht, the ABC’s Chief Information Officer, outlined the multi-year path to modernize the ABC’s website and online system. While the new website is viewable on mobile devices and sports a modern look and feel, it lacks many reference documents industry professionals are used to accessing as a result of ADA website requirements.
   
   On the IT upgrade roadmap: ePayments, price posting automation, online applications, and online renewals submissions.
   
   
4. Financial difficulties: The annual budget approved by the California Legislature each year includes the fees from the licenses the ABC processes. For the past few years the department has operated at a loss. The Legislature and ABC leadership have been aware of the structural deficit and have taken the time to calculate the gaps and understand the true cost for each license. This process resulted in the creation of a statute to amend the ABC Act. The amendment secured the expedited rollout of a new fee structure on July 1, 2019, and October 1, 2019, along with additional funding by the state.
   
   Most of the fees, which were recently updated in the new price structure, had been established between 35 and 50 years ago. The new fees are calculated to cover the true cost for the agency to process each application. The average overall increase is 29 percent, according to the ABC’s website.

Transactional license fee changes (began July 1, 2019): Transactional license fees include new licenses, person to person transfers or ownership changes, premise to premises changes, operating permits, temporary licenses, and catering and events permits. The new license application fee is a nonrefundable $905, which is a significant increase from the former fee of $100. The new application requires applicants to sign an acknowledgment that this fee is now nonrefundable, another change from the previous refundable fee. 

Other transaction license fees have changed as well, as outlined in the tables below:

Annual renewal fees (new rates start October 1, 2019): Annual Renewal Fees must be paid each year in order to keep a license active for the following year. Licenses may be based on the gallonage produced, the city location, or season (in three-month minimum increments).

Annual renewal fee change comparison (begins October 1, 2019)

The CA ABC states it mostly changes fees in January with aim to provide more notice to its constituents of the upcoming changes. The downside of the zero-dollar budget looming at the end of this calendar year inspired the agency to act now to avoid further deficits. It has worked diligently to get the information together to make the needed case for the 2019 Legislative session. Within four years, the PPII program should be complete and the department should move into a self-funding status once again.

If your application was submitted prior July 1, 2019, the fees and forms used should not change even if updates are required by the applicant. If an application has been started but not submitted, use the forms you  started, but include payments from the new fee structure. After October 1, 2019, all applications must be submitted on the updated version of the form and payments should reflect the new fee structure. For more information, please visit the CA ABC website or reach out to the Beverage Alcohol team at Avalara.