WSLCB - Board Caucus
(March 8, 2022)

Here are some observations from the Tuesday March 8th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 4 takeaways:

• Policy and Rules Manager Kathy Hoffman shared a revised schedule for social equity rulemaking (audio - 2m, video, Rulemaking Project).
  • Hoffman reported there’d been “about a week's delay in getting our draft conceptual rules ready to go for the listen and learn session.” Her team was getting “additional detail” in the draft, she stated, and would release it for public review on Monday March 14th. The listen and learn forum had been rescheduled for March 23rd, Hoffman said, and presentation of a CR-102 with proposed changes would occur “on April 13th.”
  • This delay wouldn’t “prohibit us from being able to get a final rule package done by the first part of June,” she commented, nor impact “the overall timeline” for WSLCB social equity work. The goal was “a product that we’re hoping people can understand,” Hoffman indicated.

• Director of Legislative Relations Chris Thompson gave his final legislative update during the 2022 regular session covering five bills and prospective budget provisos.
  • Thompson’s last legislative affairs update was on March 1st.
  • HB 1859 - Cannabis Testing Labs (audio - 1m, video)
    • According to Thompson, the joint agency request legislation hadn’t “passed the legislature yet, but it’s just one concurrence step” from doing so. He noted that it was passed by the senate after being amended to “remove the specific appropriation from the dedicated marijuana account,” meaning that funding for the interagency coordination team (ICT) created through the bill would be part of agency operating budgets, which would designate “which account the funds come from.” Thompson called this “a routine maneuver in the legislature,” and felt there was only “one easy step left” before sending the bill to the governor.
    • The House voted to concur with the senate changes to the bill later that day.
  • HB 1210 - ‘marijuana’ to ‘cannabis’ (audio - <1m, video) 
    • The bill changing terminology in statute “has passed the legislature,” Thompson told the board, adding that it instructed WSLCB to make a similar change in rule through “expedited rulemaking.” The measure was now “on the way to the governor’s desk.”
    • Delivered less than five days before the conclusion of the legislative session, Governor Jay Inslee had 20 days to sign, partially veto, or completely veto the enrolled bill. Otherwise, the bill would become law without his signature.
  • SB 5796 - Revision of Cannabis Tax Revenue Intents (audio - 2m, video).
    • Thompson described how the bill was passed by the House on March 4th and the Senate concurred with changes to suggested appropriations on March 7th. He reported being unsure why the appropriations had been “stripped out in committee" in favor of a study by the Washington State Joint Legislative Audit and Review Committee (JLARC), but that the “bulk of the current statute was put back into the bill” by an amendment on the House floor which included a few changes just before passage. JLARC would still study “ways of improving the transparency” and the “understandability of the information in that statute,” Thompson said. 
    • He acknowledged “a slight reduction” in the amount of cannabis revenue going “to the general fund” (from 35% to 32%) and an increase in funds for the Washington State Health Care Authority (WA HCA). Thompson said that “other minor adjustments” reflected amounts that were currently going to state agencies. The last change he pointed out was the removal of “references to a loan program for the social equity in cannabis program, so that’s not in there.” Thompson mentioned that the bill had passed the legislature, but not yet been formally delivered to Inslee’s office. 
  • SB 5004 - Excise Tax Exemption for Registered Medical Cannabis Patients (audio - 1m, video).
    • Calling the legislation “viable to consider,” though it had yet to be passed by the legislature, Thompson said it was on “the House floor calendar” and as it “affects state revenue, so it should be exempt from cutoff.”
    • Cannabis Observer designated the bill as inactive in our Week Ahead as it hadn’t been passed by the opposite chamber in time, and would take a dedicated effort by House leadership to advance the bill in the remaining hours of the session.
  • HB 1827 - Community Reinvestment (audio - 1m, video).
    • Thompson noted the measure was on the Senate floor calendar while “my understanding is the $125 million appropriation is in the budget.” He speculated that if the money remained allocated in the budget “it may not be necessary” to pass the bill “depending on how legislators decide to proceed.” Thompson was uncertain “how necessary the statute is” to establish the fund, but the legislation was “viably before the Senate,” and likely exempt from other deadlines.
  • SB 5693 - Operating Budget Changes (audio - 2m, video).
    • Thompson brought up the supplemental operating budget and two appropriations impacting the agency as passed by the Senate on February 25th:
      • $150,000 for WSLCB staff to “study cannabis retail outlets,” which had been previously discussed
      • $250,000 for a “task force to look at cannabis retail outlet security issues” requiring an initial report by December and then “a final report June 30 of” 2023
        • Thompson noted that SB 5927, legislation to create a sentencing enhancement for those convicted, had failed to be passed by house representatives, making the proviso the only response to cannabis licensee robberies this legislative session.
    • Board Chair David Postman wanted to know more about the status of budget negotiations and whether the allocations were still there. Thompson responded that negotiations were continuing, highlighting that the House hadn’t passed a budget which “is a little bit unusual in terms of process.” He believed the leadership in both chambers would be considering what the House had passed “out of committee, and what the Senate passed” (audio - 1m, video).
      • Later that day, senators refused to concur with changes to SB 5693 made in the House, and requested a conference committee to settle differences between the bill drafts. The senators appointed were Democrats Christine Rolfes, June Robinson, and Republican Lynda Wilson. The House appointed members were Democrats Timm Ormsby and Nicole Macri and Republican Drew Stokesbary.

• Board Chair David Postman had lots to say about the changes to SB 5983, the final cannabinoid regulatory bill to be considered by lawmakers, expressing an openness to having no bill rather than one that he alleged wouldn’t accomplish the stated public health goals.
  • SB 5983 was heard on March 5th by the Washington State Senate Ways and Means Committee (WA Senate WM), then amended by that committee with substitute language from Senator Ann Rivers on March 7th.
  • Thompson relayed that once WA Senate WM approved Rivers’ amendment, the substitute language from the bill sponsor, Senator Karen Keiser, was deemed “out of order" and not considered. Thompson was unsure of the bill’s future, admitting “we don’t know what’s going to happen” now that the bill was in the​​ Washington State Senate Rules Committee (WA Senate RULE, audio - 1m, video).
  • Postman called out how the Keiser substitute language was what staff had “been working on” and supported. He explained that officials worked with Keiser as chair of the Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) on SB 5547, the senate companion to HB 1668, which received a hearing alongside alternative legislation SB 5767 on January 20th. He said the request bills had “gotten a lot of attention, and a lot of broad support, though it’s been controversial,” whereas Rivers’ substitute featured language “we’ve not really seen before” (audio - 3m, video).
    • Thompson replied that the Keiser substitute offered “perhaps half a dozen differences” from the initial draft, and “included…in light of requests for suggestions from stakeholders, to accommodate their…requests and suggested changes.” He confirmed Keiser had listened to both WSLCB staff “and did work with stakeholders on making some compromises, accommodations in the bill, but it was substantially, largely what had originally been proposed by the LCB.” Thompson said he’d been “disappointed that the committee did not” consider her proposal, but that staff made their case, and during caucus majorities for each side resolved to support Rivers’ amendment with the understanding “parliamentary procedure made [Keiser’s substitute] out of order” once they did.
    • Staff was still going through the new version of the bill, he commented, and would have more comments in the future. Thompson clarified that WSLCB staff "haven't been part of any…development of that proposal," which effectively switched out the bill for a slightly tweaked version of SB 5981, the companion bill to HB 2123 which Rivers co-sponsored earlier in the session after the failure of SB 5767.
      • Rivers herself criticized request legislation authors for lackluster stakeholder inclusion.
  • Postman commented he’d been speaking with agency staff and Inslee’s office about the bill and wanted to know what Thompson believed would happen next. Thompson answered that they’d been getting questions from lawmakers and stakeholders about “what to make of the proposed sub," but his team didn’t have responses ready. He knew people were "expressing disappointment" and wondering what's next, but his candid view was that bill passage “given the process and the amount of time left” in the session was “a real long shot no matter what is in the bill." It was unclear if there was enough support in the other chamber to pass a bill “even if [House leadership] wanted to enact that bill, even unchanged,” Thompson explained. However, he acknowledged that the 21-3 vote in WA Senate WM to move the bill was “a strong vote” (audio - 2m, video).
  • Postman shared his thoughts on the situation, mentioning that he’d been getting asked about the bill as well. He felt Rivers’ substitute would move “us backwards from where we are today" and was “shocked to see that happen." If the “goal is to protect the public’s health” then it was preferable “to have no bill than the bill the Ways and Means committee supported last night” (audio - 9m, video).
    • Feeling that “we’ve talked about this a lot, but obviously not enough, because people last night were still saying things that were untrue about the process,” Postman argued the proposed substitute “runs counter to the position of the Washington Association of Sheriffs and Police Chiefs, of public health organizations around the state,” and “prevention organizations around the state.” He also believed “the industry groups, almost all…had a different vision of what this should be,” as did the chairs of the relevant policy committees, Keiser and Representative Shelley Kloba, chair of the Washington State House Commerce and Gaming Committee (WA House COG).
    • Admitting his initial evaluation of the substitute language was the “opinion of a layman," Postman nonetheless read it “as an attack on the regulatory authority" of WSLCB to “preserve public health.” He was concerned that if SB 5983 became law as written, it "would deprive the state of the ability to regulate synthetically derived, and artificially produced, cannabinoids. And to keep them out of the [Initiative-]502 marketplace without the review and the science needed to prove they’re safe." Moreover, Postman noticed it “comes in the middle of an investigation into the very substances and processes that this bill covers.”
    • Keiser’s initial bill and proposed substitute reflected “a nearly a year long public process” that involved scientific and industry experts and “more than 200 members of the public,” leading to legislation "crafted by people who work for us" including those who “literally wrote the book on cannabis law in America.” Postman pointed out cannabis organizations and trade groups had signed in supporting the board’s concept of cannabinoid regulation, finding “you don't get that kind of coalition of people without a lot of work on a bill.” He credited several divisions of the agency for their effort, bristling at the idea the measure was “about picking winners and losers in the industry" but was instead "responding to health warnings from the federal government and others." After “almost a year” as chair of WSLCB, Postman pointed out the work on cannabinoid regulation predated his tenure, listed some of the public activities staff had undertaken before any legislation was introduced, and concluded, “you just couldn't have done much more outreach than we did."
      • Postman previously suggested other legislation to reorganize the board constituted an attack on their power.
    • Postman understood people could disagree with WSLCB policy perspectives, such as “a powerful lobbying group that doesn’t like what we’re doing,” but industry members disapproving of regulators was nothing new. However, he found it “disturbing” to hear “disparaging remarks about the staff of the LCB” along with “false assertions that we did not do outreach, or that we ignored certain things, or that somehow this was predetermined.” Those acts he regarded as insulting to the integrity of agency representatives, and discounted support from an array of stakeholders. Postman concluded that “the voices that were heard, unfortunately, were those of the well-connected and the well-capitalized," those who wanted “fewer companies dominating more of this marketplace,” and those advocating to replace a “successful agricultural product…with a laboratory product.”
    • Compared to the work of the agency and the board, Postman alleged that the WA Senate WM “approved a bill that was written over the weekend and mirrors what the…synthetics industry wants.” He stated the Rivers’ substitute was language which had “never been the subject of any public meeting” before it was presented as an amendment, and the hearing on SB 5767 addressed a bill “not worked with stakeholders, it was not an open process.”
  • Thompson agreed that neither SB 5981 nor its companion in the House, HB 2123, had received a public hearing leaving him to conclude that public debate had been “quite limited.” He was also skeptical that the "primary stated intent" of “getting the impairing, unregulated, and untested products off the shelves in the general retail market in this state” could be achieved under the wording, even as that goal appeared to be a “primary focus of most of the members.” Thompson conveyed that his sentiment had been passed on to the committee members, who got “a walkthrough of why and how” the agency was dubious on the Rivers’ amendment “before the vote last night” (audio - 2m, video).
  • Postman continued sharing his concerns about the new version of SB 5983, believing that it “weakens” agency powers to do what legislators “said they all wanted to do.” He repeated that the board might be “better off with no bill” as the current text left the market “open to basically any derivative” (audio - 8m, video).
    • While an evaluation of the legislative process for the session would occur, Postman was “proud of the work that the staff did,” asserting it had been transparent and consistent, though “if people choose not to believe it there’s nothing we can do.”
    • Without adequate authority, he was likely to tell legislators to “put it down.” Postman thought that could be easy considering “when it was our version of the bill that had some energy we were told over and over again: ‘Unlikely. No time left.’” He added, “we’ll see what happens now that…it’s a very different bill…that really goes after the state’s authority.”
    • Postman reiterated that with stakeholders from health, safety, and multiple cannabis organizations, the disagreement on the legislation wasn’t a “personal thing,” or a matter of “LCB versus one lobbying group, there’s something else going on here." Yet he speculated that influence on the legislation came from "a small group [with] a very, very powerful organization and they were able to turn this vote last night."
    • He conceded that he didn’t think “our bill was gonna get approved last night - but I didn’t think that other version would!” He “was blown away" by an “overwhelming vote” that ran “counter to everything that we’ve heard all session long.” Postman indicated that he’d been in communication with the governor’s office so they understood it “goes the other way” on regulating cannabinoid products, and said he’d been “thinking about this non-stop…since hearing the vote last night.”
    • Thompson responded that he was similarly surprised and credited Postman for being “in the trenches with us." He mentioned some highlights from their stakeholder dialogue, responsiveness to input, and was equally amazed to see so many stakeholders "got forgotten, got overlooked" by committee members, save for “a couple of” trade associations. Postman lamented how the compromises they’d sought out “grew support over session” and resulted in more alignment “within the cannabis industry as this bill moved on than where we started with on day one.” He mentioned that some of those who had signed in opposed were concerned with lesser technicalities yet were against converting “hemp into [tetrahydrocannabinol] THC”, making him wonder if the legislation had been “too complicated.” He hoped they’d have another chance, provided SB 5983 didn’t become law.

• Later in the day, SB 5983 was included in a package pull of bills moved to the senate floor calendar and was ready for senators to debate when they reconvened for floor activity at 10am on Wednesday March 9th.
  • During the brief WA Senate RULE meeting on Tuesday afternoon called specifically to move the two bills referred by WA Senate WM on Monday evening, Majority Leader Andy Billig stated the chamber “may take action…tomorrow or Thursday” (audio < 1m, video).
  • The bill still had several deadlines to meet before midnight on Thursday, when the legislative session would formally conclude. At publication time, no floor amendments had been published.
  • However, a new compromise draft was distributed late on Tuesday. According to an email from Democratic Caucus staff, the draft:
    • “Creates a new definition of THC
    • Removes delta 9 from the existing definition of THC concentration
    • Explicitly allows sales outside of the 502 system for 20:1 CBD:THC, with limits
    • Clarifies existing definition of synthetic cannabinoids in [RCW] 69.50.455 only applies to consumer protection
    • Creates a temporary scientific panel to advise on cannabinoids, with recommendations to the legislature
      • Leadership of the panel would shift from the Washington State University Center for Cannabis Policy, Research, and Outreach to the board.
    • Creates an ongoing quarterly internal advisory committee for LCB
      • Members would be tasked with reviewing “issues related to enforcement of this act.”
    • Creates a temporary agency table to discuss enforcement, with recommendations to the legislature
    • Adds a temporary $25/annual fee on tobacco and vape licensees to fund additional enforcement”