WSLCB - Board Caucus
(February 15, 2022)

Here are some observations from the Tuesday February 15th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 4 takeaways:

• Thompson identified four cannabis bills moving forward with little to no controversy, in addition to two medical cannabis proposals further advanced.
  • Thompson’s last legislative update to the board was on January 18th.
  • HB 1859 - Cannabis Testing Labs (audio - <1m, video)
    • Thompson commented that following passage of the bill by the Washington State House of Representatives (WA House) on February 12th, the Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) was “skipping the public hearing and just going straight to bringing it up for passage” during an executive session scheduled for February 17th.
      • The bill text of HB 1859 remained identical to its companion SB 5699 as heard by WA Senate LCTA on January 20th and recommended on January 26th. At publication time, SB 5699 had not been advanced beyond its house of origin.
      • According to senate rule 49, with a “majority vote of the committee members present at any executive session, the public hearing requirement may be dispensed with when the committee is considering a bill whose companion has already been heard.”
  • HB 1827 - Community Reinvestment (audio - 1m, video)
    • The proposal “passed the House” on February 12th, Thompson explained, noting it had “been a really interesting bill in terms of the votes” with bipartisan support in the Washington State House Appropriations Committee (WA House APP) but a “straight party line vote on the floor.” He confirmed the bill had been sent to the Washington State Senate (WA Senate) and was subsequently referred to WA Senate LCTA.
  •  SB 5796 - Revision of Cannabis Tax Revenue Appropriations (audio - 1m, video)
    • Thompson told the board the legislation "passed pretty easily" out of the WA Senate on February 14th, and would provide “clarity restructuring as well as some substantive” alterations to standing appropriations from the dedicated marijuana account, a statute he called “a declaration of legislative intent ongoing.”
    • He cautioned that “with the demise of the social equity bill,” a question had emerged over “how many funds are available…and for what,” potentially impacting money for technical assistance and grant programs at the Washington State Department of Commerce (WA Commerce).
  •  SB 5927 - Cannabis Retail Robberies (audio - <1m, video)
    • The bill was passed by the WA Senate on February 10th, “and is scheduled for a hearing over in the house” on February 18th, Thompson said.
    • Board Chair David Postman asked about the impact of the bill. Thompson noted the legislation established a “sentencing enhancement for robbery…in conjunction with another person,” required reporting of robberies by retailers to WSLCB, and had Enforcement and Education Division leadership “sitting down regularly with the [Washington] State Patrol” to discuss any trends or approaches in responding (audio - 1m, video).
    • Take a look at a spreadsheet of cannabis store robberies and burglaries in the state since February 2017 compiled by the owners of Uncle Ike's. Q13 FOX covered the issue in an extended spotlight segment on ‘Pot shop robberies’ which included an interview with wounded Dockside Cannabis budtender Huckleberry Kid.
  • Medical cannabis legislation wasn’t mentioned by Thompson, but had also been advanced.
    • SB 5004, providing a tax exemption for medical cannabis patients, was passed by the senate on January 19th and referred to the Washington State House Finance Committee (WA House FIN).
    • HB 1105, concerning arrest protections for patients, was passed by the house on January 26th. After a public hearing in the Washington State Senate Law and Justice Committee (WA Senate LAW) on February 8th, the bill was scheduled for executive session on February 17th. 

• Thompson named four bills, including the far-reaching social equity legislation, which were unlikely to be advanced further in 2022.
  • HB 2022 - Social Equity (audio - <1m, video)
    • The bill, which was narrowly passed by WA House APP members on February 7th and sent to the Washington State House Rules Committee (WA House RUL), "appears to be dead, there doesn’t sound like there’s any viable path to resurrecting the bill,” according to Thompson.
  • HB 1710 - Cannabis Commodity Commission (audio - <1m, video)
    • Passed by the Washington State House Commerce and Gaming Committee (WA House COG) on January 21st, Thompson remarked that it “looks like” the bill wouldn’t be moved further.
  • HB 1855 - Craft Cannabis Endorsement (audio - <1m, video)
    • Thompson stated that the legislation to allow on-site sales by endorsed producers was “dead” after no action was taken by WA House COG members following a public hearing on January 14th.
  •  SB 5951 - Cannabidiol (CBD) Truth-in-Labeling (audio - <1m, video)
    • Thompson indicated that the bill was “amended significantly at our request” before being approved by the Washington State Senate Agriculture, Water, Natural Resources, and Parks Committee (WA Senate AWNP) on February 3rd and “still was sitting in” WA Senate RULE. He expressed doubt about the potential “for moving that bill forward.”

• HB 1668, the request bill intended to increase agency authority to regulate cannabinoids, was discussed at length by board members and staff who described “hostile” amendments and disinformation sown along its path to becoming law.
  • On the cusp of the house of origin cutoff later that day, Thompson admitted to "saving the best for last": the WSLCB cannabinoid regulation bill recommended by WA House APP on February 7th and pulled by the chamber on February 11th - but “sitting on the [WA House] floor calendar” since then (audio - 3m, video).
    • Although 30 proposals were listed, he explained that the bill “has 15 amendments on it” as most had “two versions,” one for the substitute bill and another for the second substitute. Thompson found a “couple of ‘em” were “potentially friendly amendments” that the agency could agree to, but "most of them [were] not, most of them are hostile amendments that present any number of problems."
    • Thompson promised staff were working “to determine...is there a will" among WA House leadership to take up a “substantive bill in the face of these amendments and try and get it out of the house by five o’clock today.” He noted lawmakers could take up “one last bill at just before five” and continue debate as long “as it takes.”
    • His impression was that “there's some pretty hard feelings" in the chamber about “filibustering legislation last night” by the minority Republican Caucus, which would “color how they think of any bill that might burn a lot of floor time today.”
  • Postman was grateful for the lobbying of Thompson and HB 1668 sponsor Representative Shelly Kloba, but evinced disappointment that the bill hadn’t already been taken up on the floor (audio - 3m, video).
    • Given amendments from legislators “not trying to perfect the bill,” progress would be “problematic,” he said. Postman noted “law enforcement supports this bill, public health supports this bill, huge chunks of the industry that we regulate support this bill. Is that not going to help?”
    • “What’s at stake, really,” Postman alleged, was the ability of regulators to stop “infiltration…of these derivatives outside of the regulated” cannabis sector, something they’d heard was necessary “from every corner of the industry…really, since the day I got here.” He then bluntly asked, “how can that die?" 
    • Board Member Ollie Garrett asked what the board could do to improve the bill’s odds for advancement. Thompson said it was a “big question” and staff were “looking into whether there is,” but it remained “a question of will" by lawmakers. WA House leaders could get the bill through, he believed, but only at the expense of other bills.
  • Postman brought up a “misinformation campaign” against the bill, saying legislators were hearing about “a drop in cannabis revenues” as proof that regulators “weren’t doing their job” (audio - 5m, video).
    • He asserted that the “numbers just are not right…they take a small snapshot, in some cases it’s just wrong, some cases it’s exaggerated.” He said a “small dip in revenues that we’re seeing” was only in relation to the year before, when there was “an extraordinary spike, brought on by both the pandemic” and “people having extra spending money.” He emphasized the sector was “25% above where we were two years ago.”
      • Legislators received an email opposing HB 1668 from Brooke Davies, Washington CannaBusiness Association (WACA) Deputy Director, which declared an 8% decline in Washington cannabis sales year-over-year (YOY) based on information collected by Headset, a cannabis data analysis firm. The information included five high-level statistics for 11 of 13 states with adult use cannabis sales, excluding Maine and Alaska.
    • Garrett asked about their response and Postman replied that Thompson had forwarded some information “to the chair.” After speaking with Chief Financial Officer (CFO) Jim Morgan, he believed “what [lawmakers were] told is just not true” and the “underlying analysis” built from the cited data “is false.” He remarked that the Washington State Economic and Revenue Forecast Council (WA ERFC) “predicted a dip” in their November 2021 revenue review of cannabis taxes (see page 18) and “we’re ahead of that forecast.” Postman said he’d heard from Morgan that January cannabis revenue was “1.4% less than they were last year. But last year they were up 20% over the year before.” He suggested the state’s market was also being compared to California, with an adult-use cannabis market he termed “brand new” and in a stage where revenue was “go[ing] from nothing to huge.”
    • Postman also said that “statistics show that we have a more diverse set of products available…than in some of these other states.” He alleged “bigger businesses…want to dominate” and he expected their representatives would argue that a diversity of products from many companies was “a bad thing.” He was confident that the sector had been managed by WSLCB as voters, lawmakers, and the Governor’s office intended, allowing for a range of cannabis business sizes and structures. His sense that this was being used as “a sign that we need to stop this regulatory move is obviously bothering me,” Postman observed. Thompson concurred that there was “a lot of misinformation out there right now.”
    • Another email opposing HB 1668 was sent by Rebecca Burghardi, Northwest Cannabis Solutions Vice President of Compliance and Packaging and WACA Board of Trustees President, which presented several arguments against the bill:
      • “[L]eaves the definition of ‘impairing’ to be extremely broad and makes minor cannabinoids seem more harmful than they are… It dismisses the fact that most consumers seeking out minor cannabinoids…are not looking to get high, rather they are attempting to aid sleep, relieve PTSD, enhance their mood, etc.”
      • “It would take a minimum of 18 months for the LCB to complete the rulemaking, a timeline that we know could be extended.”
      • Would allegedly place the state market “behind the rest of the country, pigeonholing WA to be at a disadvantage when federal legalization and interstate commerce inevitably pass.”
  • Garrett wanted legislators to hear “everything that you’re saying, right now” and have their perspective reach “the top of the thinking process to wherever this bill is sitting” (audio - 7m, video).
    • Thompson said it was a matter of responding to misinformation like that identified by Postman, in addition to “a claim that it takes us 18 months to do any rules, that’s flat false.” Incorrect information was “being twisted further to spin this narrative” against the legislation, he argued.
    • “Avenues open to us at this point in the process are extremely limited," Thompson admitted. Representatives were either “on the floor” or caucusing in private “basically all day,” he said, making texting their only option for engaging legislators. Kloba was “a champion on this" and had been “very responsive to us,” he commented, but it was “much more difficult” for anyone to influence the leadership in the chamber.
    • Thompson explained that they had reached out to stakeholders and “they are sending messages to key members.” This effort included medical cannabis patients, law enforcement, public health, “industry that supports us…and nobody knows whether any of it is going to make any difference.”
    • Postman agreed with Thompson but said, “we’re really close, there was growing support” and legislators needed to be told when arguments against the legislation were “demonstrably false.” He was grateful to Morgan for tracking and responding to concerns in more detail, but wanted legislators to understand that “if this bill doesn’t pass, what we lose is the ability to stop the public health crisis growing with these unregulated products…everybody agrees with us about that." Postman sounded shocked that elected officials would fail to act because of “what is essentially an internecine battle in the industry over hemp-derived [tetrahydrocannabinol], and let these stores keep selling this phony stuff,” calling the situation “really outrageous.”
    • As staff were “staring into the abyss," Thompson said he could draft a message for all WA House members to make clear “if this bill dies, here’s what we’re looking at…if this bill, as we’ve requested it, passes…here’s what we…can see as the consequences of that.” Garrett wholeheartedly agreed, wanting to reach out to lawmakers since “sometimes, the last thing a person hears is what sticks the most." Postman insisted that “we’ve been doing it,” crediting Thompson and other staff, but agreed to a last attempt at offering comment on the proposal. He was grateful to the stakeholders who had stayed engaged, advising that while “not everybody in this industry gives us that courtesy, let’s include the cannabis trade associations…and make sure they see our message today, too…we're not saying anything secret."
  • Thompson added that WSLCB officials had provided “our take on all 15 of those amendments” and remained hopeful that, “at some level, the policy still matters, and it isn’t just optics, and how this feels, and which lobbyist is for it, or against it.” He felt the “self-interest underlying” misinformation on the legislation “is really hard to combat,” citing the adage that “a falsehood is halfway around the world before the truth has got boots on.” In the end, Thompson felt staff could only “do what we can do” to provide honest information to policymakers - “and that’s it”  (audio - 1m, video).
  • Postman closed the discussion by pointing out that “some of these amendments…designed to drag this down…cannabis lobbyists are involved in,” but WSLCB leadership operated “in the public realm" and their staff knew “what we’re up against.” He thanked Thompson, and promised to send notes on his final communication to representatives about HB 1668 (audio - 1m, video).

• The house of origin deadline passed later that day without representatives taking up debate on HB 1668, leaving few avenues for the statutory changes requested by agency leaders.
  • Postman had previously described the request bill as a “package deal” when talking about a THC rulemaking project in December 2021.
  • The email sent by Thompson later that afternoon forecast some effects staff expected absent passage:
    • “Intoxicating, untested, unregulated and potentially unsafe consumer products (such as Delta-8 Gummies) continue to be sold outside the regulated 502 system and will remain on the shelf in gas stations, convenience stores, etc.
    • Minors have easier access to these products.
    • Adverse health reactions continue, such as happened in the 660 cases of Delta-8 ingestion reported to FDA over the first 7 months of 2021”
  • HB 1668 could be declared "necessary to implement budgets" (NTIB), an informal procedure legislative leadership can exercise around any bill with a fiscal impact. The criteria for declaring NTIB status and the decision making around the designation isn’t formally set in law or rule, allowing for a bypass of the cutoff calendar which is agreed to by both chambers through the legislative process.
  • The governor is empowered to call special sessions of the legislature to consider specific issues.
    • Learn more about special sessions from legal opinions of the Washington State Office of the Attorney General.