WA Senate LCTA - Committee Meeting
(February 1, 2021)

Here are some observations from the Monday February 1st Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) meeting.

My top 3 takeaways:

• A staff briefing on SB 5365 prompted several questions from a committee member before the bill sponsor, Vice Chair Derek Stanford, conceded the legislation was “very much a work in progress."
  • Predecessor legislation during the 2019-2020 biennium, HB 1974, received policy and fiscal committee hearings but was not advanced beyond the House. Cannabis Alliance Government Affairs Liaison Lara Kaminsky encouraged senators to adopt similar legislation during a November 2020 work session.
  • WA Senate LCTA Session Counsel Matt Shepard-Koningsor reported on the effects of the bill which would establish a Washington State Cannabis Commission “to, among other things” (audio - 2m, video):
    • “Advise local, state, and federal agencies on cannabis related matters,”
    • “Conduct reviews, surveys, and inquiries regarding market metrics,” 
    • “Inform and advise on cannabis related education,” 
    • “Limit youth access and exposure to cannabis,”
    • “Assist producers in cannabis related research.”
  • To achieve these objectives, Shepard-Koningsor said the commission could “adopt rules, elect a chair and other officers, employ and discharge employees, acquire real property, enter into contracts and agreements, and speak on behalf of state government with regard to cannabis producers and processors.” The commission would be required to “submit a research plan, training plan, and annual budget” to the Washington State Liquor and Cannabis Board (WSLCB), he told the committee.
  • Shepard-Koningsor reported the commission would be composed of “13 voting members that include cannabis producers and the Director of the LCB” and an “advisory council” which would “assist the commission with members appointed by the LCB Director.” He then said that aside from the agency director, commissioners “must meet certain eligibility requirements. The initial members’ terms vary from one, two, and three year terms.” The bill stated that the WSLCB Director “must consider appointments based upon maintaining a balanced and diverse distribution of members based on race, ethnicity, geographic location, gender identity, sexual orientation, and age, where practicable.” Seats were subsequently replaced through election “by a vote of active cannabis producers in each district for three year terms.” The bill exempted commission “officers and employees” from Washington State Civil Service Law.
  • Shepard-Koningsor said SB 5365 would also create a “commission account” for funds to be expended “after appropriation.” Starting in October 2021, he explained that there would be “a surcharge on wholesale sales of marijuana in the amount of .29% on the gross proceeds of sales of mature marijuana plants, immature plants or clones, plant tissue cultures, and seeds.” There would be another “surcharge on wholesale sales of marijuana products ready for a consumer” in the amount of .15%, Shepard-Koningsor said, with revenue from the surcharges put into the commission account, “and in addition to the surcharge, wholesalers must pay a business and occupation tax of .48%.” Shepard-Koningsor stated that “liabilities of the commission must only be enforced against the assets of the commission.” He added that a fiscal note for the bill was not yet available.
    • The legislation had a partial fiscal note added on January 31st, and the final fiscal note was published just before the hearing on February 1st.
  • Noting his past involvement in state commodity commissions, Senator Mark Schoesler had three questions for committee staff.
    • Schoesler explained that taxation typically occurred “at the first point of sale” and wondered if the same method was being used for the proposed commission. Shepard-Koningsor responded that the bill didn’t speak “exactly to that” as it was focused on “wholesale sales.” Schoesler felt there was ambiguity, asking “why is this called a [Business & Occupation] tax instead of a commodity assessment like we would see” in other agricultural commissions. Shepard-Koningsor was uncertain as to why the language was chosen (audio - 2m, video).
    • Schoesler next asked if the bill included “a mechanism to raise the increase” that was comparable with the referendum process among other commodity producers like the Washington Grain Commission (WGC). Shepard-Koningsor replied that a method of modifying the tax was “not addressed in the bill.” Schoesler wanted to know if changes would need to be made by the legislature and Shepard-Koningsor said he would “get back to” the senator with an answer (audio - 1m, video).
    • Schoesler finally asked staff whether the bill permitted spending on “market promotion” from the commission account. Shepard-Koningsor promised committee members he’d follow up with them after reviewing the bill further (audio - 1m, video).
  • Stanford introduced his bill and promised to speak to some of the questions raised by Schoesler. The bill was “very much a work in progress” and he welcomed stakeholder input (audio - 3m, video).
    • Stanford acknowledged the word “marketing” had “unfortunately” appeared in the bill, adding that it was “a mistake and that will be removed” because the bill’s intent was “to have most of the focus be on agricultural practices.” With no federal guidance on cannabis, he wanted the State “to be focusing on best practices” for cannabis “agricultural processes.” 
    • Stanford was amenable to a referendum system to modify taxation, calling it “a good idea” worthy of inclusion in the bill “because that would show widespread industry support for the idea, which I think we should have.”
    • Section 14 of the bill covering civil service exemptions was “a concern raised by some stakeholders” that he “plan[ned] to remove.”
    • Stanford apologized for a "lack of outreach to the Black community" which was brought to his attention, remarking that it was “something that we need to do before moving forward with this.” He was nonetheless happy for “the input and the feedback so far.”
      • Paula Sardinas, Co-Chair of the Washington State Legislative Task Force on Social Equity in Cannabis (WA Task Force on Social Equity in Cannabis), sent an email addressing her position the morning of SB 5365’s hearing. She strenuously objected to having the WSLCB Director lead the group, as the agency still needed to “build trust” with the Black community. Sardinas wrapped up her suggestions by stating “we think a Cannabis Commission is a great idea. We believe the leadership should NOT be the current status quo. The Director should be appointed by the Governor after receiving recommendations from the community, then confirmed by the Senate.”

• Several cannabis industry members backed the bill along with the executive director of two existing commodity commissions.
  • Alan Schreiber, Executive Director of the Washington blueberry and asparagus commissions (audio - 2m, video, written comments). Schreiber began by celebrating “the value that a commission can provide to growers having a common interest.” He noted in Washington “400 different crops worth billions of dollars” could get “extensive support from Washington State University (WSU)” and “other state and federal agencies - except for cannabis.” Other crops in the state benefitted from pesticide worker protection training, while it was “considered illegal” for the U.S. Department of Agriculture (USDA) to fund or support such training in the cannabis sector. Schreiber described the industry’s pest management practices as being “in disarray,” with expertise that “ranges from world-class to minimal at best." He concluded that “of all the crops grown in Washington there’s no crop that’s more in need of...a commission than cannabis” as licensees had the right to grow the plant “but not the right to grow it properly.”
    • Schreiber testified during the 2019 hearing on HB 1974.
  • Shawn DeNae Wagenseller, Washington Bud Company Co-Founder (audio - 3m, video, written comments). Wagenseller testified that 32 commissions had been established through statute, including for hops, wine, and beer.
    • “You may hear from some lobbyists...that the cannabis producers in the state cannot take on the financial cost of the commission” she argued, but Wagenseller intended to “debunk that unfounded fear.” She noted recent rulemaking from WSLCB “would’ve added $42,000 in testing costs to my bottom line, and it had no science behind it.” In contrast, the commission would cost her company “just under $2,000 annually, and give us actual science.”
    • Wagenseller described how the tax assessment would add “4/100ths of a penny to each gram that we produce” or approximately “two cents average per package,” a cost her business was “ready to absorb in exchange for research that I can depend on.” Disputing the notion that the bill represented a new tax, she called it “an assessment based on sales on a surcharge on B&O tax. An assessment is not a general tax to be spent broadly, an assessment is collected from farmers and used 100% for the benefit of those farmers.”
    • Wagenseller said the legislation would be “by the farmers, for the farmers” and benefit the “entire supply chain” through improved products. She summarized that cannabis was “a high-value crop that needs the support of science.”
  • Steve Walser, Buddy Boy Farms Owner (audio - 2m, video). Walser said he came from a “large organic farmer” family before becoming involved in cannabis agriculture. Having paid blueberry and potato assessments in the past, he was very receptive to paying a similar fee for cannabis “because I realize the great benefits” that would result for farmers like himself. Walser indicated that with the WA Task Force on Social Equity in Cannabis looking to expand diversity in the state’s market, a commodity commission “will benefit them most of all” as social equity applicants would include “new and emerging farmers” who would “need the research.” As most commodity commissions conducted “basic organic research” that supported best practices for that industry, he called for a cannabis equivalent.  
  • Several people signed in to support the bill:
    • Greg Ballew, Washington Bud Company
    • Joy Beckerman, Hemp Ace International Principal
    • Charlene Bohbot, Deepflower
    • Jared Claghorn
    • Dawn Darrington, D&S Sales
    • Sheilah Eddy
    • Janet Ensign, OnPointe Consulting President
    • Matthew Friedlander, Skagit Organics Founder
    • Debra Hansen
    • Bailey Hirschburg, Washington chapter of the National Organization for the Reform of Marijuana Laws (WA NORML)
    • Nicole Hollandsworth
    • Lara Kaminsky, The Cannabis Alliance
      • Following the hearing, Cannabis Observer was contacted by representatives of the Alliance who signed in too late to testify to their suggested markup of the bill. Kaminsky explained that she missed the deadline to sign up to testify and the bill presented was “erroneous in some areas” compared to what they’d lobbied for during drafting.
      • Most prominently, the industry group “never intended” to involve WSLCB, as the commission was planned to be part of the Washington State Department of Agriculture (WSDA) similar to other commissions. Kaminsky and Interim Executive Director Caitlein Ryan conveyed that Stanford and representatives of WSDA and WSLCB had been contacted about that change.
      • Ryan and Kaminsky argued that even among those opposed to the commission there was “more consensus” around the benefits of the bill than in the past. The Cannabis Alliance scheduled a webinar for February 10th for stakeholders to discuss the commission.
    • Herb Krohn, SMART Transportation Division
    • Ormond Lai
    • Steven McCombs, MC2 Supply
    • Patrick McDermott
    • Crystal Oliver, Washington SunGrowers Industry Association (WSIA) Executive Director was unable to connect during the hearing (audio - 1m, video).
    • Vito Perillo
    • Danielle Rosellison, Trail Blazin’ Productions
    • Caitlein Ryan, The Cannabis Alliance Interim Executive Director and Board President
    • John Stacy
    • Donal Strandwold
    • Bill Wagenseller, Washington Bud Company

• State officials testified on a panel as “other” while some industry stakeholders were joined by substance abuse prevention and labor lobbyists in opposition to formation of a commission at this time.
  • Seth Dawson, Washington Association for Substance Abuse and Violence Prevention (WASAVP) Lobbyist (audio - 2m, video). Dawson testified as ‘other’ on the bill and would “oppose the bill in its current form,” but was confident his problems could “be addressed with some fairly simple amendments.”
    • He found the duties given to the cannabis commission "fairly broad" and advised the addition of new members from:
      • The “Department of Behavioral Health”
      • A substance abuse prevention professional
      • WSDA
      • Law Enforcement
    • Dawson said WASAVP was “largely neutral” on cannabis worker safety and was encouraged to learn that the “marketing provision will be removed.”
    • He articulated that his group’s “main concern” with SB 5365 was that the commission would “help advocate for legislation and regulation favorable to the industry.” WASAVP members viewed further representation of the cannabis industry as unnecessary because “there are many marijuana organizations active in Olympia” that were “supported by very capable lobbyists” that he considered “reputable.” Dawson said the group should only be allowed to lobby for cannabis policies after “taking into account sometimes countervailing considerations like the youth access or exposure.”
  • Kelly McLain, WSDA Policy Advisor to the Director (audio - 1m, video). McClain explained that WSDA did not “actively support the creation of any commodity commission” even though “the majority of them are housed within our statute.” Nonetheless, she provided suggestions for “technical issues.”
    • First, McClain advised removing the jurisdiction of WSLCB so the commission could “be administered and supported by WSDA.”
    • Next, remove language around “marketing and promotion” so the commission “primarily focused on research.”
    • Lastly, as “there’s not yet industry consensus on the creation of a commission,” McClain testified that it was “beneficial going forward that there is more efforts by the proponents to create consensus and find value-added measures to include in the commission’s work so that they can bring opponents along with them.”
  • Chris Thompson, WSLCB Director of Legislative Relations (audio - 2m, video). Also speaking as ‘other,’ Thompson said it was not “appropriate for [WSLCB] to serve in the dual role of our current regulatory oversight” while also working “in any capacity that involves the work of this Commission.” He added that the surcharge in the bill should be “assigned to the [Washington State] Department of Revenue” as it would be “costly for us to setup new relationships” with wholesale producers and processors.
  • Ezra Eickmeyer, Producers NW (audio - 1m, video). Opposing the bill, Eickmeyer stated that there was “definitely not consensus within the industry.” He claimed Washington was “about to get thrust into interstate commerce where we’re going to be competing for shelf space from other states.” He predicted that farmers were “about to get steamrolled” by the more favorable “regulatory environment” in other legal cannabis states and “a lot of the people who are in the industry now aren’t even going to survive this upcoming tidal wave of national competition.” Eickmeyer said Producers NW supported "no version of this bill" for the rest of the legislative session.
  • Paige Berger, Hygge Farm Co-Owner (audio - 1m, video). Berger advised the committee to oppose the bill, saying its “shortcoming is that despite the passion for it there is little to no understanding from many of us within the industry what exactly this commission will do.” She had concerns about “what they could set out to achieve without broad support from all of us.” Berger said her experience began with medical cannabis but that “if the commission isn’t set up to tell these stories credibly and in a representative way, it could set us all back.”
  • Matt Zuvich, Washington Federation of State Employees Lobbyist (WFSE, audio - 1m, video). Zuvich said he opposed the bill because of section 14 dealing with civil service exemption status. “We believe that it’s appropriate for policymakers and people that have hiring authority to be exempt, but we believe that the staff of a commission should have the ability to have a collective bargaining contract and be represented by a union if they choose to be.”
  • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director (audio - 1m, video). Christophersen told lawmakers the formation of a commodity commission was “something that the entire industry needs to be involved in, especially those that will pay fees." She said WACA “appreciates the spirit” of the bill but conceded that her organization combined with The Cannabis Alliance and WSIA “represent less than 20% of the entire industry.” Christophersen believed there was “more work to be done to bring the rest of the industry on board and have this conversation.” The central questions around a cannabis commodity commission, she explained, were “when and how it is implemented in a way that is inclusive and really does forward the industry in a responsible way.” Christophersen suggested leaving the issue alone “for the year” while supporters built consensus. 
  • Two people signed in ‘other’:
    • Chris Mulick, WSU Director of State Relations
    • Paula Sardinas, FMS Global Strategies Managing Partner
  • And one person signed in opposed while another opponent was unable to connect.
    • Jian Malihi, Clarity Farms Co-Owner, unavailable to testify (audio - <1m, video).
    • Joy Hollingsworth
      • Hollingsworth did not specify an organizational affiliation along with her opposition to the bill.
      • At publication time, Hollingsworth was Co-Owner of Hollingsworth Cannabis and Hemp Company and Chief of Staff at FMS Global Strategies, Sardinas’ lobbying company.
      • Hollingsworth spoke at two of the WSLCB BIPOC outreach engagements in 2020. Her brother, Raft Hollingsworth, was appointed to serve with Sardinas on the WA Task Force on Social Equity in Cannabis.