WSLCB - Board Caucus
(March 15, 2022)

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

My top 3 takeaways:

• Staff gave a short rulemaking review and the board denied a petition for rulemaking to require labeling of cannabis vapor product cartridges as ‘indica’ or ‘sativa.’
  • The prior rulemaking update was on March 8th.
  • Social Equity (audio - 1m, video, Rulemaking Project)
    • Policy and Rules Manager Kathy Hoffman reported that an announcement on a listen and learn forum for March 23rd to provide feedback on the draft conceptual rules had been sent out the previous day. She planned to bring up the subject during the Washington State Legislative Task Force on Social Equity in Cannabis Licensing Work Group on Thursday March 17th. Additional invitations would go to “some of the legislators that are interested in our work” and “other community members as well, directly.”
      • Unrelated to Hoffman’s presentation, I will also be presenting at the WA SECTF meeting on cannabis consumption venue licensing, a talk initially planned for September 2021.
  • Quality Control Testing and Product Requirements (audio - 1m, video, Rulemaking Project)
    • After the CR-103 was adopted on March 2nd, Hoffman described how implementation would involve a “phase-in period for retail sell-down, and then phase-in for processors and producers.” She said a “draft policy statement went out to industry stakeholders and associations” on March 10th, and staff would be accepting public comment through “close of business, March 24th.” Hoffman explained they’d look at whether to incorporate any feedback into the statement before filing it with the Washington State Office of the Code Reviser (WA OCR) in order to have an “effective date that coincides with the rule effective date” of April 2nd.
  • Rulemaking Petition - Vapor Cartridge Labeling (audio - 5m, video)
    • Policy and Rules Coordinator Jeff Kildahl presented a petition received on January 18th from Philip Reimer asking for rulemaking “to require the labeling of individual vaping cartridges, independent of the outside packaging labels.” Reimer proposed labels “should identify the cartridges as either ‘sativa’ or ‘indica,’” Kildahl told the board, raising a question about whether this would be a new rule, or an amendment to current rules “to require cannabis processors to place individual labels directly on” cartridges.
    • He indicated that the board had power to conduct rulemaking on “labeling requirements of cannabis concentrates,” and that WAC 314-55-105(2) “identifies standards that apply to all packaging and labeling of cannabis concentrates.” Kildahl described cartridges as attaching to a “vaping pen” that “applies intense heat to the cannabis concentrate” in order “to atomize the concentrate into a vapor” for inhalation. Given their compact and “streamlined design, exposure to heat, and contact with the user’s mouth,” he relayed that staff felt it might not be feasible for “processors to affix or emboss a label directly to the cannabis vaping cartridge.” If adopted, other rules would need to be changed “for the board to inspect and approve all labeling” on the cartridges, Kildahl suggested, whereas the exterior package offered “significantly more space to label the product with accurate analysis information.”
      • Find out more from WSLCB Labeling Resources and a December 2019 Packaging and Labeling Guide published by the agency. 
    • Kildahl added that vaping cartridges could contain concentrates from “mixed cannabis plant material” with both “indica and sativa types of cannabis” along with “proprietary blends of ingredients that may alter the effect of the product on the consumer.” This meant that labeling for sativa or indica could “convey a false sense of certainty of the product’s effects on the consumer,” he argued. So although the change was within the board’s power, Kildahl said staff advised denying the petition as it could “significantly increase regulatory burden while offering marginal benefit.”
    • Board Chair David Postman said he agreed with the assessment offered by Kildahl even as he appreciated “the question being raised by Mr. Reimer” as the board was “always looking at what is the best way to share information with” consumers. He remarked that if asked what WSLCB leaders did “to label something for the public health, sativa and/or indica might not be at the top of the list in any case” given the “limited real estate there” (audio - 1m, video).
    • The board voted to deny the petition (audio - 1m, video).

• Director of Legislative Relations Chris Thompson briefed on the results of the 2022 legislative session, highlighting budget appropriations and cannabis legislation, successful and otherwise.
  • Thompson’s previous legislative update was on March 8th.
  • Postman said the session was "in the rearview mirror, though clearly not forgotten yet." Thompson agreed his legislative work concluded even as the governor’s office was still taking action on bills, as there were “well over 300…passed this session." He promised to emphasize what lawmakers “did, rather than dwell on…what didn’t happen or what might have been” (audio - 1m, video).
  • SB 5693- Operating Budget Changes
    • Thompson indicated a “very important success was receiving full funding for our request for the [Systems Modernization Project] SMP.” Staff had been “delighted to see that” along with the “major commitment to community reinvestment” (audio - 3m, video).
      • The budget, which initially included $2,065,000 for the SMP for fiscal year 2023, was significantly increased to $20,754,000.
      • The SMP was a long running effort to update licensing and enforcement technological capabilities at WSLCB, and had been a priority for additional funding by agency leaders for several years.
    • Despite the failure of HB 1827, request legislation from the governor to establish a community reinvestment fund, the gist of the bill was included in the operating budget. While they’d been “excited about the $125 million proposed annually,” Thompson said lawmakers had approved $200 million “along with a million dollars for Department of Commerce to do some planning work for distribution of those funds.” A preliminary plan would be due in December and a final plan “on distribution of those funds” by June of 2023. Thompson commented that the purpose of the money was the same as in HB 1827, dealing with “disproportionate impacts from the war on drugs, a focus on economic development, re-entry services, violence prevention and intervention.” Though not certain exactly when the funds would be available, he indicated that Commerce officials would make that decision and the money represented a “major step forward.”
      • Postman was curious about what would happen to the money since HB 1827 failed to pass. Thompson explained that the bill would have set up “ongoing funding” with an appropriation placed in statute. But as things stood, there was $200 million “for fiscal [year] ‘23” and he didn’t read the budget as requiring a “contingent action” to use the funds. He suggested that Commerce leaders had “planning requirements related to topics that came up in the legislation” that would take time to decide and officials were instructed to look at suggestions from “existing work groups,” such as the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) and the Washington Statewide Reentry Council. Thompson said there were “parameters in there” to encourage funding programs which wouldn’t require “on-going support from the state,” but rather “incentivize matching funds being provided, and that sort of thing” (audio - 2m, video).
      • Reviewing the final bill text of HB 1827 and the community reinvestment budget provisos in SB 5693 as passed by the legislature:
        • Section 2(1) of HB 1827 stated "Expenditures from the account may only be made by the department of commerce” in the areas of economic development; civil and criminal legal assistance; community-based violence intervention and prevention services; and reentry services. Whereas SB 5693 section 947(2) stated, "Expenditures from the account may be used by the department of commerce” in those areas. The slight of language may create a difference in interpretation and application.
        • SB 5693 added an example to the types of programs supported by the fund in section 947(2)(c), highlighting "Community-based violence intervention and prevention services, which may include after-school programs focused on providing education and mentorship to youths."
        • HB 1827 required two distinct phases of grant making, beginning with supplemental funding for existing Department of Commerce programs. Under SB 5693, the department was appropriated a million dollars to develop a community reinvestment plan in partnership with the Washington State Office of Equity, "by and for community organizations," and in consultation with the same "relevant task forces and work groups" as in HB 1827.
        • HB 1827 required a report to the legislature on phase 1 spending and the phase 2 community reinvestment plan in December 2023. The final report from Commerce officials under SB 5693 would be due June 30, 2023.
    • Thompson stated that half a million dollars had been allocated to the agency for officials to fund “contracting with an independent entity to prioritize social equity applicants,” which he felt would “certainly support the work” being done by licensing division staff ahead of the “launch of that program” (audio - 1m, video).
      • The draft conceptual rules for social equity rulemaking outlined the role of the contractor “to review and score social equity applications and recommend social equity applicants.”
    • Not mentioned, but the budget also allotted $200,000 to the Washington State Department of Agriculture (WSDA) in Section 311(19) “solely for rulemaking for a voluntary cannabis certification program that is consistent with the department's existing organics program, as authorized by chapter 317, Laws of 2017.” Legislators last heard about the long-delayed organic-comparable cannabis certification program in October 2021.
  • HB 1859 - Cannabis Testing Labs (audio - 2m, video).
    • Thompson talked about how the joint request bill on an interagency coordination team for cannabis laboratory standards with the WSDA “passed almost unanimously” with “no oppositional testimony.” Aside from agency officials, he appreciated that the Cannabis Alliance had "also weighed in explicitly" to back the bill, which had been funded in the budget.
  • HB 1210 - ‘marijuana’ to ‘cannabis’ (audio - 1m, video).
    • Signed into law on March 11th, Thompson said the bill directed the agency to “employ expedited rulemaking to make the same change in terminology within our regulations.” He noted that the requirement had been added “at our request” in order to “use that process for a real expedited completion of the work across” WAC 314-55.
  • SB 5796 - Revision of Cannabis Tax Revenue Intents (audio - 2m, video).
    • Passed by the legislature on March 4th, the bill had yet to be signed by Governor Jay Inslee. Thompson found there “wasn’t as much restructuring of the statute as” had been in the bill at first and that some areas saw notable funding changes while others didn’t. The legislation had been changed to require a Washington State Joint Legislative Audit and Review Committee (JLARC) review “to look at this question again and to consider options or recommendations for how to restructure that statute” for “transparency and clarity.”
  • HB 1668 / HB 2122 / SB 5983 - Cannabinoid Regulation (audio - 2m, video).
    • Thompson briefly talked about the legislative fate of several bills on cannabinoid regulation, saying it had been “a disappointment” none were passed after “many twists and turns.” He noted HB 1668 had been “held up on the floor of the House with 15 amendments when time was running short" to take action on the bill. Thompson said the Senate had several “strong supporters of this effort,” but the introduction of SB 5983 at “the late stage of the session” allowed "very little time” for consideration by members - the same fate suffered by “some alternative proposals [which] were not adequate to achieving…even more limited objectives.”
    • The supplemental budget for WSDA provided $200,000 in Section 311(21) “for a hemp in food task force,” the only attempt by the legislature to further study cannabinoid regulations.
  • HB 2022 - Social Equity (audio - 1m, video).
    • Legislation based upon recommendations from WA SECTF “also did not pass," Thompson commented regretfully, as changes “would have expanded or facilitated implementation of that program.” He indicated this left staff to “proceed with the program that is authorized" under HB 2870. Thompson hoped there would be demonstrable improvement in licensing equity from “the approach that we have, and will develop further, as we…get deeper into the rulemaking process and consult with stakeholders.”
  • Postman brought up HB 1710 and SB 5365, Cannabis Commission legislation, noting WSLCB officials had tried to help advance the bills but were surprised “there was controversy around them.” He pledged to continue working with stakeholders, appreciative of all Thompson had done to lobby for the agency. After staff had a chance to “take a breath and clear our heads,” Postman wanted them to look at “what we do now, and how to do it better” as there was “not a lot of downtime” before vetting of legislative requests had to get underway for 2023 (audio - 2m, video).
    • Thompson also felt it was "worth reminding our audience that we were deeply engaged" on the cannabis commission legislation, but there’d been concern over the commission “being a way to promote use of cannabis” even after removing all “references and mentions and purposes related to anything of that kind.” Since other commodity commissions served that purpose, Thompson felt there was “a template” people were applying to the concept of a commission (audio - 1m, video).
    • The supplemental budget for WSDA provided $20,000 in Section 311(21) for “a hemp commission task force.”
  • SB 5004 - Excise Tax Exemption for Registered Medical Cannabis Patients (audio - 1m, video).
    • Thompson mentioned that staff had also been “very strongly supportive" of the bill temporarily removing the tax, which reached the House floor “and there it sat as the final hours ticked away.”
  • SB 5927 - Retail Robberies (audio - 1m, video).
    • Staff had seen the proposal "run aground over concerns about increased penalties" and "using the criminal justice system in this regard," said Thompson. But he believed a conversation on safety at cannabis stores would remain a concern for regulators and stakeholders “over the coming months” and before the legislative session in 2023.
      • A task force to study the trend in cannabis robberies was in earlier iterations of SB 5693, but was removed from the final version of the supplemental budget.

• The board shared their initial thoughts on the newly announced board member who would serve the remainder of former member Russ Hauge’s term on the board.
  • Hauge announced his retirement from the board in December 2021.
  • On March 14th, the agency confirmed that Jim Vollendroff had been appointed to the board by Governor Inslee.
    • According to the announcement, Vollendroff had “35 years of experience in the behavioral health field” and “currently serves as the Behavioral Health Senior Advisor for Policy and Advocacy for the Department of Psychiatry and Behavioral Sciences at the University of Washington (UW).” He’d also worked as the “founding Director of the Harborview/UW Medicine Behavioral Health Institute” where he worked “to bring researchers and clinicians together to innovate and improve the delivery of mental health and addiction services and to implement and disseminate research-based practices including planning for the development of a crisis stabilization urgent care walk-in clinic.”
    • Vollendroff’s other experience included 16 years “in top leadership roles at the King County Department of Community and Human Services,” including “five years as Director the King County Behavioral Health and Recovery Division.”
    • Inslee was quoted as saying Vollendroff “brings a unique perspective and life experience to the board that is completely new and will be enormously valuable” in relation to how “Washington’s cannabis industry influences the economic, public health and social well-being of our communities.”
    • The announcement indicated the decision had been impacted by “a Jan. 19, letter of support to Gov. Inslee signed by 22 legislators” in which “they wrote ‘In addition to the wealth of professional expertise that Jim brings, we deeply value his lived experience as a person in recovery from both mental health and substance use challenges and as a biracial member of the LGBTQ community. We applaud Jim for his decades of service in behavioral health care in Washington and can think of no one better suited to join the Liquor and Cannabis Board at this crucial time.’”
  • Postman reported that he’d met with Vollendroff, who would start as a board member on May 1st. He spoke with him for an hour, finding Vollendroff to clearly have behavioral health expertise, as well as being a "very engaging, positive, high energy guy." Vollendroff emerged “with incredible support" from lawmakers, Postman added, though Inslee’s staff had considered a "fair number of applicants." He expected Vollendroff to be “a great addition” to the board (audio - 2m, video).
  • Board Member Ollie Garrett indicated she’d also enjoyed speaking with Vollendroff about his new role (audio - <1m, video). Board Assistant Dustin Dickson was similarly impressed by Vollendroff during some brief interactions and was “looking forward to having him on board” (audio - <1m, video).