WSLCB - Board Caucus
(February 22, 2022)

Here are some observations from the Tuesday February 22nd Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• Director of Legislative Relations Chris Thompson reviewed several cannabis-related bills which remained active.
  • The board and staff previously reviewed legislative activity on February 15th.
  • HB 1859 - Cannabis Testing Labs (audio - 1m, video).
    • Thompson said the joint request bill, which would establish the interagency coordination team (ICT) for “lab quality standards,” was recommended by the Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) unanimously on February 17th. He relayed that leadership of the Washington State Senate Ways and Means Committee (WA Senate WM) gave an “affirmative response” to his request to schedule a public hearing on the bill,  adding it to their agenda for February 24th. Thompson considered odds for successful passage by the legislature to be strong, as were the chances it would be “fully funded” as the state supplemental operating budget took shape.
      • On Monday February 21st, the finance committee chairs released proposed substitutes for the house and senate versions of the supplemental operating budget in advance of public hearings in the Washington State House Appropriations Committee (WA House APP) and the WA Senate WM later that day.
      • PSHB 1816 - Section 139 - WSLCB - p. 182
        • “(6) $316,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely for implementing House Bill No. 1859 (cannabis analysis labs). If the bill is not enacted by June 30, 2022, the amount provided in this section shall lapse.”
      • PSHB 1816 - Section 222 - Washington State Department of Health (DOH) - p. 435-6
        • “(57) $777,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely to implement House Bill No. 1859.”
      • PSHB 1816 - Section 311 - Washington State Department of Agriculture (WSDA) - p. 587
        • “(23) $790,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely for implementation of House Bill No. 1859.”
  • HB 1827 - Community Reinvestment (audio - 1m, video).
    • Thompson stated the governor request bill that reflected recommendations by the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) was passed by the house on February 12th and had been heard by the Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) on February 21st. He said the agency would support the measure to provide “a $125 million program, annual[ly], for reinvestment in communities” to be administered by the Washington State Department of Commerce.
      • PSHB 1816 - New Section 764 - Washington State Office of Financial Management (WA OFM) - p. 811, Account Creation
        • “The [GF-S] appropriation [of $125M] in this section is subject to the following conditions and limitations: The appropriation in this section is provided solely for expenditure into the community reinvestment account created in Second Substitute House Bill No. 1827. If the bill is not enacted by June 30, 2022, the amount provided in this subsection shall lapse.”
      • PSHB 1816 - Section 126 - WA Commerce - p. 115
        • “(138) $125,000,000 of the community reinvestment account—state appropriation is provided solely for implementation of Second Substitute House Bill No. 1827 (community reinvestment).”
    • Board Member Ollie Garrett expressed her commitment to helping further the bill, and Thompson thanked both board members for their participation (audio - 1m, video).
    • At publication time, HB 1827 was scheduled for an executive session in the WA Senate LCTA on February 24th.
  • SB 5004 - Excise Tax Exemption for Registered Patients (audio - 1m, video).
    • Thompson told the board the legislation was a “pilot project” to remove the excise tax for registered medical cannabis patients purchasing DOH certified products, and that he was due to testify in support of the bill before the Washington State House Finance Committee (WA House FIN) later in the day. He considered the prospects for the bill to be “pretty good.”
      • PSSB 5693 - Section 140 - WSLCB - p. 142
        • “(6) $11,000 of the general fund—state appropriation for fiscal year 2023 is provided solely for implementation of Engrossed Substitute Senate Bill No. 5004 (medical marijuana tax exemption). If the bill is not enacted by June 30, 2022, the amount provided in this section shall lapse.”
    • At publication time, SB 5004 was scheduled for an executive session in the WA House FIN on February 24th.
  • HB 1210 - 'marijuana' to 'cannabis' (audio - 1m, video).
    • Introduced in 2021, the bill would modify references to ‘marijuana’ in statute into ‘cannabis,’ Thompson said, and featured a call for “expedited rulemaking” to enact the change in WAC 314 at the request of the agency. He described how the bill had been passed by the house on February 2nd, was recommended by WA Senate LCTA on February 21st, and had “a stock of momentum behind it.”
      • PSHB 1816 - Section 139 - WSLCB - p. 182
        • “(7) $20,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely for implementing Second Substitute House Bill No. 1210 (cannabis terminology). If the bill is not enacted by June 30, 2022, the amount provided in this section shall lapse.”
  • SB 5927 - Cannabis Retail Robberies (audio - 1m, video).
    • Thompson reviewed the sentencing enhancements, reporting, and consultation requirements of the bill heard by the Washington State House Public Safety Committee (WA House PS) on February 18th.
      • The legislation was advanced during an executive session just prior to the board caucus on February 22nd. An amendment was added removing premeditation as a condition to activate the sentencing enhancement.
    • Chair David Postman asked about a cannabis retail robbery task force provision pitched by Washington CannaBusiness Association (WACA) Deputy Director Brooke Davies in the hearing and the possibility it could be “redundant” to the bill’s existing effects. Thompson replied that he hadn’t seen updated language on a possible budget provision on the topic, and therefore lacked a “definitive answer if there’s any duplication or overlap.” Postman noted the senate proposed substitute version of the operating budget included “$250,000 of the general fund—state appropriation for fiscal year 2023 is provided solely for the board to convene the prevention of robberies in cannabis businesses task force to identify strategies to reduce robberies of cannabis businesses.” Thompson reasoned that a task force couldn’t be a substitute for a sentencing enhancement, but would look into possible duplication of effort and, alternatively, “discussions over the interim about potential best practices, or other safety measures” (audio - 3m, video).
      • PSSB 5693 - Section 140 - WSLCB - p. 142-3
        • (10)(b): The task force shall conduct a comprehensive review of the impact of robberies of cannabis businesses in Washington state and make recommendations related to, at a minimum, laws in other jurisdictions within the United States of America; methods of interagency coordination to reduce cannabis business robberies; strategies to assist local police departments and governments; and strategies that can be deployed to assist affected businesses.
  • SB 5796 -  Revision of Cannabis Tax Revenue Appropriations (audio - 1m, video).
    • Thompson said the impacted statute amounted “to a statement of legislative intent” rather than budget appropriations, and the bill included “some larger shifts” that could clarify and “signal a desire for additional activity in certain areas.” He indicated the bill would have a hearing in WA House APP later in the day after having been passed by the senate on February 14th.
      • Staff for the Washington State House Office of Program Research (WA OPR) released a table comparing differences in appropriations, looking at existing statutory language and appropriations under SB 5796.
      • PSSB 5693 - Section 127 - WA Commerce - p. 108
        • “(181) $1,191,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely for implementation of Engrossed Second Substitute Senate Bill No. 5796 (cannabis revenue). If the bill is not enacted by June 30, 2022, the amount provided in this subsection shall lapse.”
      • PSSB 5693 - Section 402 - Washington State Patrol - p. 500-1
        • “(17) $370,000 of the dedicated marijuana account—state appropriation for fiscal year 2023 is provided solely for the implementation of Engrossed Second Substitute Senate Bill No. 5796 (cannabis revenue).“

• Thompson spent some time going through a new cannabinoid regulation bill, HB 2122, that may receive extra time for consideration by lawmakers due to a temporary fee on some license types to pay for illegal cannabinoid product enforcement (audio - 4m, video).
  • Thompson began by saying a “more complicated” situation had developed with the other agency request bill, HB 1668, which “did not move out of the house prior to cutoff.” However, he said there remained “a great deal of interest in enacting this legislation, or something similar to it.”
  • HB 2122 was a new version of HB 1668 again sponsored by Representative Shelley Kloba, Thompson reported, and “mirrors most” provisions of the original legislation, using the text as passed by the WA House APP “with a few additions.”
    • A new exemption from WSLCB regulation for “unadulterated hemp flower products” based on a floor amendment that had been proposed by Kloba.
    • Another change based on a Kloba floor amendment “added a notification that the LCB…would be required to provide to legislators…when embarking on rulemaking efforts related to the bill.” The language replaced a legislative oversight panel included for rulemaking in the previous version of HB 1668 “that the LCB had…some concerns about.” Following notification, legislators could “recommend a review by the Joint Administrative Rules Review Committee.”
    • The most notable addition was a “new, temporary surcharge on certain license renewal fees of convenience stores [and] tobacco and vape shops.” This $50 charge would be applied from July 1st, 2022, until June 30th, 2024, to “partly fund a new effort” in the bill for a proactive WSLCB “enforcement project” in retail outlets to see if there were unauthorized hemp-derived “products that are impairing” for sale. As written, licensees paying the temporary fee would include:
      • “(a) Off-premises beer and wine retailers licensed under RCW 66.24.360. However, licensees holding a spirits retailer license under RCW 66.24.630 or a combination spirits, beer, and wine license under RCW 66.24.035 are exempt from the license fee surcharge established in this section;
      • (b) Any vapor product licensee holding a license issued under RCW 70.345.030 who conducts any retail sales of vapor products; and
      • (c) Any entity licensed under chapter 82.24 or 82.26 RCW to sell cigarettes, tobacco, and other tobacco products at retail.”
      • Separate legislation, HB 1359, proposed halving “liquor license fees for specific liquor retailers and for distilleries, and distillery off-site tasting rooms” through 2023.
  • Thompson said the new legislation was a response to “folks who are quite concerned about these products being out there” and wanted the original bill to involve a more “direct” response from regulators. Mentioning that it was referred to WA House APP, he confirmed that he’d requested a hearing by the committee. 
    • Fiscal requirements may empower legislative leadership to designate the bill "necessary to implement budgets" (NTIB) enabling its movement irrespective of formal legislative cutoff deadlines.
  • Unmentioned went HB 2123, also titled "Concerning cannabinoid products," from Representative Drew MacEwen, sponsor of several unfriendly amendments to HB 1668 mentioned by Thompson on February 15th, and Deputy Majority Leader Larry Springer. The bill, dropped one day after HB 2122, more narrowly focused on removing products "exceeding a THC concentration 0.3 percent" from unregulated markets, convening a cannabinoid regulation research panel at the Washington State University Center for Cannabis Policy, Research, and Outreach (WSU CCPRO), and having the Washington State Department of Health (DOH) administer a grant program for local health departments to enforce THC product bans. Several of the ideas were adapted from amendments rejected by WA House APP which Springer had spoken favorably of.

• Board Members had several inquiries about HB 2022, which aimed to encode several social equity task force recommendations, but failed to reach a floor vote in the house (audio - 2m, video).
  • Thompson confirmed that the legislation had not made it past the house of origin cutoff, “but there are discussions continuing about ways to salvage portions of that bill through attachment to other legislation or the budget.” He said formal steps had not been taken, but the bill sponsor, Representative Emily Wicks, had reached out and “discussions were still going on” in order to “get some legislative progress this year” on equity within the cannabis sector. Thompson had suggested Wicks pursue language in HB 2022 which “allow[ed] for the social equity licenses to be used in any local jurisdictions where it would be permitted,” which stood to make existing allotted equity retail licenses “more usable.”
  • Garrett wondered about prospects for parts of the “mobility” privilege to be amended elsewhere. Thompson didn’t have further information, but suspected it could be added to the budget (audio - 1m, video).
  • Garrett next asked about amending additional parts of the bill. Thompson answered it was possible that more licenses could be approved, though in an amount lower than the bill proposed. He didn’t have an idea what legislation such a change could be added to, but some cannabis bills could have “a broad enough scope in title and object” to accept it (audio - 1m, video).
  • According to Thompson, adding bits of a “bill that died” to other legislation could hurt their odds, saying such “paper hanging” on other bills could increase controversy or diminish support for the amended bill. He hadn’t reviewed cannabis legislation for this potential, but “the budget is pretty forgiving as an instrument of…accommodating additions from bills that didn’t pass.” Thompson wondered aloud about how possible changes impacted the chance legislation would pass, “will it work, or will it backfire?” Options were limited and “each one of ‘em carries risk,” he added (audio - 3m, video).
  • Postman drew attention to what was “going on at the agency” regarding social equity regardless of legislative action, pointing to the criminal history rule changes adopted in September 2021, and another social equity rulemaking project undertaken the following month (audio - 2m, video).
    • “The LCB still has work it can do and is doing,” he observed, led by Garrett, the agency appointee for WA SECTF, and Policy and Rules staff. While it would have been nice to get lawmakers to approve “key pieces that we might need,” he didn’t see failure of the bill as leaving the agency “high and dry” with regards to increasing equity and inclusion in the regulated market.
    • Thompson called attention to the continuing “fiscal” role of the department of commerce, making any financial support portions of the bill germane to the supplemental budget. He agreed there were “steps the agency can take toward implementation of the already authorized program” even if nothing from HB 2022 were enacted elsewhere.
    • Postman concurred they remained committed to the work, even absent further “statutory assistance, we’re ready, willing, and able.”
  • Postman brought up how amendments to legislation could stop its progress, whether offered in good faith, or as a way to “love a bill to death.” He appreciated Thompson being watchful, “cause you just never know,” as people had “attempted to attach things” to HB 1827 unrelated to community reinvestment (audio - 1m, video).
    • The first substitute version of HB 1827 included an amendment which enabled funding in support of “statutory priorities for 911 funding, 911 emergency communications systems procurement, operation, management, administrative costs, modernization, training, public education, hardware, software, technology, and support for public safety answering points.”
      • HB 1703, “Modernizing the statewide 911 emergency communications system” and addressing the same statutory priorities, was passed by the house and awaited second reading in the senate.
      • The 911 funding language attached to HB 1827 was subsequently removed in the second substitute.