WSLCB - Executive Management Team
(April 13, 2022)

Wednesday April 13, 2022 1:30 PM - 3:30 PM Observed
WSLCB Enforcement Logo

The three-member board of the Washington State Liquor and Cannabis Board (WSLCB) and agency leadership meet weekly as the Executive Management Team to facilitate coordination between the appointed Board and staff.

https://lcb.wa.gov/boardmeetings/2022apr_schedule

Observations

Broad ranging conversations between the board and staff touched on retail safety, the cannabis reporting system, Healthy Youth Survey (HYS) data, and regulation of cannabinoids.

Here are some observations from the Wednesday April 13th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

  • Staff shared more details on cannabis retail safety, including improved information by state financial regulators and more discussion of cashless payment options.
    • Board Chair David Postman noted that “a fair amount of time” had been spent reviewing the topic earlier in the day during the board meeting but invited Director Rick Garza to share his assessment (audio - 1m, video).
    • Garza said “good understanding” of WSLCB activity on the matter had been conveyed at the board meeting as well as a forum between licensees and law enforcement representatives from “King County, Bellevue, Pierce County, Tacoma, [and] Olympia” the day before. However, there hadn’t been “as many licensees present as we would like” in attendance (audio - 8m, video).
      • Garza indicated agency staff were looking into partnering with “potentially a security firm or company that could provide assistance to us with training for our licensees, and maybe more importantly, assessments” of business premises to determine whether they could “be more secure.”
      • Describing the “rash” of armed robberies as centered in Pierce and King Counties, specifically Seattle and Tacoma, Garza suggested beginning training and security assessments on cannabis businesses in that area. He said Tacoma Mayor Victoria Woodards had contacted his office and “the idea is for us to work [in coordination with] the City of Tacoma and Pierce County” to host a community event on “ways and best practices that we can use to assist them right now.” Garza brought up that some other police agencies were proactively meeting with retailers in their jurisdictions as well.
      • Additionally, Garza touched on information Chief Financial Officer (CFO) Jim Morgan had shared during the board meeting regarding “cashless systems out there that are available for our licensees to use.” He hoped to increase understanding about the services, and was communicating with Washington State Department of Financial Institutions (WA DFI) staff, representatives of state credit unions and banks, as well as customers of two cashless payment services. Garza mentioned POSaBIT, remarking that the company was “being used by a large number of our licensees.” Garza addressed licensee concerns around “high transaction fees, some of the information we’ve learned in the last couple weeks…it’s more like what you might pay to use a debit or credit card…we need to do a better job of educating our licensees to what’s available.”
      • Any tax incentives or “deferral” by WSLCB officials would need legislative approval in 2023 “or, authorization as far as budget,” Garza stated.
      • He reminded the board of the legislative and government official participants at the agency forum on March 29th who reinforced the need to contact Washington Senators Patty Murry and Maria Cantwell about the federal SAFE Banking Act and push for their support of the bill in the U.S. Senate. Garza reported that WSLCB officials met with Murray the previous week, and were still scheduling time to meet with Cantwell. He said the conflict was around “other proposals like the MORE Act” and what cannabis reform step Congress wanted to pass first. According to Garza, the Washington State Office of the Governor (WA Governor) was considering composing “a letter that will go from state elected officials, including our governor, attorney general, and our lieutenant governor, our treasurer” to the state congressional delegation “and others” about the importance of passing the SAFE Banking Act.
      • Staff for the Washington State Department of Labor and Industries (WA LNI) were continuing to look at worker safety concerns for licensees, Garza mentioned, and noted that raised a question of "what about our own staff’s safety, as far as our officers?" He summed up WSLCB staff efforts as focused on communicating what licensees were able to do to address fears of armed robbery, and expected there would be more to share in the near future.
    • Postman conveyed he’d been “heartened” by the willingness of others to engage and find solutions, pointing to the work of local government officials and licensees. He stated that WA DFI staff had been “sharpening their pencils" to look into “whatever could be done to help.” Postman’s understanding was that questions about financial services had been a recurring topic in the cannabis sector and that legislative solutions at the state level “very quickly come up against the federal issue, there’s only so much the state can do.” While hopeful there would be Congressional action in the coming years on cannabis banking options and “perhaps national legalization,” he knew that regulators couldn’t wait for “the perfect answer.” Postman assured them that work would continue, but it would need “buy in” from all stakeholders, including cannabis consumers who “have to buy into this, in a literal way” (audio - 5m, video).
    • In his update, Director of Communications Brian Smith said WA DFI would expand its cannabis banking resources with more information on available cashless payment options. He planned to use their input in his public messaging on the subject “this week” (audio - 3m, video).
      • Board Member Ollie Garrett wondered why there wasn’t more direct outreach to licensees by cashless service providers. Smith did not have an answer, but promised to help draw attention to alternatives to cash payments.
      • Garrett asked if there were less obvious obstacles to the systems they weren’t recognizing. Morgan indicated that the cashless service vendors were reaching out to cannabis licensees, but "it's not universally known…that it’s OK for them to do that in some cases." He assured the board their education work would continue and Postman said the board would help amplify their messaging.
  • Chief Financial Officer (CFO) Jim Morgan went over progress on the agency Cannabis Central Reporting System (CCRS) which was “stable” despite lingering difficulties.
    • The last EMT update on CCRS was on February 9th and regulators met with software integrators to discuss CCRS 2.0 on March 1st.
    • Morgan told the team that “work continues to happen behind the scenes,” but that overall, CCRS had “work[ed] as expected.” He said there were “issues and challenges and suggested changes” to the system from WSLCB staff and other stakeholders that were being considered, but the “highest priority report” would go “into production next week” (audio - 7m, video).
      • Morgan reported that “the team ran into some…challenges. As more and more data was entered into the system they discovered some performance issues” around how “reports were constructed.” However, he stated those issues had been “worked through” and the system would be “usable to our enforcement staff and others who need to avail themselves of those reports.” He didn’t view it to be a big “setback that reports are only becoming available now because as we’ve been developing reports, that’s also the time where the licensees have…been entering data.”
      • Morgan also mentioned the team was almost done on the “scoping effort for phase II." The following week, they’d present their findings to the business owners “to evaluate” and then bring the proposal to the internal CCRS Steering Committee. After this, a calendar and “communications effort” for the phase would be created so licensees know “what changes impact them” with ample notice and detail.
      • A specific change to the manifest process incorporating suggested improvements approved by the CCRS team would be part of the scope of phase II, Morgan reported, but would be developed separately from “changes to the standard upload.”
      • Morgan said “about 83% of licensees have logged into the system” and the remaining 17% were “the focus of” Education and Enforcement staff. A few were inactive businesses, but the division would move to “an enforcement posture” for licensees they’d already contacted and informed about the migration to the CCRS, following regular “enforcement steps.” Morgan called attention to the fact that since “about 78% are actively uploading data,” there was a gap between those who had accessed the CCRS and those who were utilizing it as expected. This group would also get attention from agency enforcement officers, as leadership at WSLCB started looking for 100% usage of the CCRS.
      • Postman wanted to see a demonstration of the reporting updates and understand what changes would “do for us.” He further wanted to know about inquiries for help from licensees. Morgan believed that some requests were still coming in but had “minimized to the point where it’s not something that’s being reported to me as a…key indicator of how we’re doing” (audio - 2m, video).
    • Enforcement and Education Director Chandra Brady subsequently explained that CCRS related requests to the Cannabis Examiners unit in her division had been their predominant issue for the first quarter of 2022. She said the unit was “looking forward to having that transition technically complete” (audio - 9m, video, presentation).
  • Policy and Outreach Director Justin Nordhorn would provide updates during future EMT discussions, and raised topics like the Healthy Youth Survey, work on tetrahydrocannabinol (THC) regulation in the legislative interim, and future outreach activities (audio - 9m, video).
    • Nordhorn began by complimenting staff attention to rules inquiries as well as his team’s work with the Enforcement and Education division. Having seen some information was only shared internally once it was made public, he commented there had been improvements in looping in relevant offices “before the public announcements have gone out so that we can have consistency and also confidence in answering questions as they come from all over the state.”
    • Nordhorn described “doing some other outreach" during the legislative interim, indicating Public Health Education Liaison Mary Segawa was involved in the HYS survey for 2023 along with other agencies. He’d also engaged with the Washington State Department of Health (DOH) Medical Cannabis Program Manager Shannon Angell on issues like “medically compliant product, availability of such” as well as what information budtenders could share, remarking that additional public resources would be released in the future.
    • Stakeholders in the cannabis and alcohol sectors were being contacted about their outreach needs and “how to set up some more informal problem solving.” He distinguished these efforts from listen and learn forums as more about enlightening the agency staff on topics and challenges so they could be “in consideration when we’re going through policy development.”
      • Nordhorn said interim policy work for his team would address “the THC compound issue that’s continuing from last session” which he said included “issues around the definitions” of compounds like delta-8-tetrahydrocannabinol (delta-8-THC). This effort would inform “what do we need to do for [the] legislative session next year,” which could be made easier by having “a number of those rules done by the year’s end.”
      • He noted there was going to be a deliberative dialogue with an expert panel on THC compounds on Wednesday April 27th, and other events would be scheduled “in May and June around similar topics.” In July, Nordhorn relayed there’d be more listen and learn sessions on agency rule projects.
        • In 2021, WSLCB hosted dialogues on Cannabis plant chemistry in June and July.
    • Postman committed to having the policy work of Nordhorn become a regular facet of EMT meetings.

Legislative, licensing, communications, and director updates contributed to the discussion amongst WSLCB leadership about activity towards social equity in cannabis.

Here are some observations from the Wednesday April 13th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

  • Director of Legislative Relations Chris Thompson mentioned HB 1827, a bill to set up a recurring community reinvestment fund, to indicate that while the legislation wasn’t passed by lawmakers, parts of the bill were “addressed through the budget.”
    • Thompson relayed that the original bill dealt with the subject of “disproportionate impacts from the war on drugs” by providing economic reinvestment in areas damaged through drug prohibition policies (audio - 1m, video).
    • Board Chair David Postman asked how the community reinvestment money allocated in the supplemental operating budget, SB 5693, could be spent by state officials. Thompson explained that “the money was sent over to [the Washington State Office of Financial Management] OFM to make available” through the Washington State Department of Commerce (WA Commerce). That agency, he said, received $1 million in the budget “for developing plans for that” and his impression was that OFM staff would attempt to “utilize existing programs currently until that plan comes together” (audio - 2m, video).
    • Board Member Ollie Garrett asked whether HB 1827 had a different description for the “use of those funds” than the budget. Thompson replied that the budget had been "a little bit less detailed" but the "broad outlines…are the same." One difference was that the budget wasn’t “permanent law,” but rather effective through June 2023. He speculated that “there will be a desire" by lawmakers to return to the subject and pass legislation with a “more permanent statutory structure for this,” but it could also continue to be promulgated through the budget (audio - 2m, video).
      • A visual comparison between the final bill text of HB 1827 and the budget proviso in SB 5693 as passed by the legislature showed several key differences:
        • HB 1827 section 2(1) stated "Expenditures from the account may only be made by the department of commerce," whereas SB 5693 section 947(2) stated expenditures “from the account may be used by the department..."
        • The four focal areas for reinvestment were identical, but SB 5693 added an example in section 947(2)(c): "Community-based violence intervention and prevention services, which may include after-school programs focused on providing education and mentorship to youths..."
        • SB 5693 had no provisions for multiple phases of grant making, starting with existing WA Commerce programs as in HB 1827.  Instead, WA Commerce was budgeted $1 million in fiscal year (FY) 2023 for staff to develop the community reinvestment plan in consultation with the Washington State Office of Equity and "relevant task forces and work groups."
        • In SB 5693, a WA Commerce preliminary report was due December 1st, followed by a final report on June 30th, 2023, the end of FY 2023. HB 1827 included a report on phase 1 spending and the community reinvestment plan which would have been submitted to state lawmakers in December 2023.
        • The total for reinvestment in SB 5693, $200 million, was $75 million higher than envisioned under HB 1827. Along with this boost, more leeway was built in for WA Commerce officials to fund existing programs under a tighter timeline.
    • Postman inquired as to whether there’d be an “opportunity for social equity license applicants to get some assistance through this program” if they were granted a license. Thompson was unsure, feeling it was “a question for Department of Commerce, but I will say there is a requirement for” that agency to do “consultation” on their plan with groups that included the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF), where Garrett represented WSLCB. He suggested she could make recommendations to WA SECTF for them to pass on to Commerce representatives, whom he’d heard were interested “in economic development especially.” Economic development of social equity businesses “might be a fit,” Thompson said, but stressed it wasn’t the decision of the board or WSLCB staff. Postman pointed out that the department was also building the mentor roster as part of the social equity technical assistance grant program. Thompson called attention to how the grant program and community reinvestment were “motivated by…the same set of conditions and history” around the uneven application of drug prohibition policies in Washington and nationwide (audio - 4m, video).
    • Thompson went on to speak about SB 5693, noting that social equity grant funding was “almost double” the previous amount, going from $1.6 million annually to $3 million. He said there was a “more modest increase” in money for “a roster of mentors” which would be available for “technical assistance” to equity licensees. The WSLCB budget featured $500,000 “to contract with a third-party” to prioritize applications, Thompson added, along with money for the agency systems modernization project (SMP) and implementation of HB 1859 concerning cannabis laboratory quality standards. He concluded by noting $290,000 for academy training through the Criminal Justice Training Commission for limited-authority law enforcement agencies included WSLCB (audio - 2m, video).
  • Director of Licensing and Regulation Becky Smith talked about staff work on a “draft system” for accepting applications for social equity licenses (expecting it would “be ready to go this fall”) and mentioned local bans/moratoriums.
    • Smith began her briefing by remarking that her division had coordinated with the information technology (IT) department and the Washington State Department of Revenue Business Licensing Service (BLS) on the revised process. She told the group that job postings for a senior Licensing Specialist to conduct investigations for WSLCB and a Social Equity Case Manager had been published and were part of her goal for an autumn application window (audio - 2m, video).
    • Postman asked what the case manager would do. Smith described how the manager would be “building and monitoring, like, relationships with the community members, the social equity applicants, licensees, the task force, local governments, going out there with stakeholders and doing education about what the program’s about.” She considered the role to be an “ombudsman” for her division’s investigators and equity applicants, even other state agencies, throughout an applicant’s licensing process as well as after they received a license (audio - 1m, video).
    • Smith brought up her presentation with Garrett about the equity program to the Seattle City Council Finance and Housing Committee on April 6th. Her impression was that the meeting was “well attended” and had been informative for the members. She stated that the third-party company the agency would contract with to prioritize applications would be decided through a request for proposals (RFP) to be published at the end of the month (audio - 1m, video).
    • Postman was curious when applications could be accepted by the agency, mindful that the board needed to adopt the results of the rulemaking project on the topic. Smith responded that staff were aiming for September and hoped to have a contractor pre-trained on the application process before opening an application window. She added that her office and the Policy and Rules staff would help prospective applicants on what they’d need to prepare ahead of applying. Postman mentioned that a challenge applicants would likely face was “how do you find a place where you can open one of these stores.” Smith commented that some of those rules were likely to change, including no longer needing a location in order to apply. Still, Postman stressed that an equity license was not “a guarantee you'll have a place to open” (audio - 2m, video).
    • Garrett followed up, wanting more details on the process for identifying a business location by equity applicants. Smith said they’d no longer have to list a set address for their business when applying, and would have “no time limit” to get a location once licensed. Applicants could also move anywhere within a county, “so eight people could go into the city of Seattle, or none at all” while control of siting businesses remained in the hands of local authorities (audio - 2m, video).
    • Next, Garrett wanted to understand if there’d been “miscommunication” in previous licensing windows over the requirement to have a secured business address versus having entered a lease. Smith wasn’t certain “how it happened…I can just tell that that wasn’t the case.” She said there’d been instances where landlords promised multiple applicants space if their application was successful, but others saw an address requirement and “jumped to that assumption, that they had to have a lease.” Smith found this fact underscored the need for preemptive education on the equity application system (audio - 2m, video).
    • Smith mentioned that staff had “a reach out from Okanogan County," where officials had “recently put a moratorium on all new producers and expansions” as they reviewed existing licensed producers. The officials wanted to ensure “their list matched our list, and then for those folks who aren’t operating with a license, they’re going to go in and take action.” She stated that the Education and Enforcement division would be assisting the county in action against any “illicit grows” (audio - 2m, video).
    • Smith’s final update was that a second cannabis research license had been approved by her staff and other agencies, “a huge process.” She further noted improvement in the packaging process at WSLCB where several forms were combined into “a one-pager” rather than several documents. Postman thanked her staff for doing “a lot of heavy lifting” (audio - 1m, video).
      • At a WA SECTF work group meeting on February 10th, Jim Makoso, Flowe Technology CEO, Lucid Lab Group Director, and task force appointee, reported having obtained a processor license “primarily just to do research” and that he was in the “final stages of getting our research license just to make a statement of how difficult it is to get a license to do research.” He was eager to partner with academic researchers and companies “interested in some of the data that we’re starting to create.” Makoso subsequently confirmed he'd been granted a research license.
  • Director of Communications Brian Smith and the director’s office mentioned social equity and anti-racism efforts at WSLCB as well as retail robberies and the 2021 Healthy Youth Survey (HYS).
    • Smith indicated there continued to be a high volume of media contacts about retail robberies, along with additional inquiries around “synthetically-derived cannabinoids" and the equity program at WSLCB (audio - 4m, video).
    • Deputy Director Toni Hood described how the agency would implement Executive Order 22-04 on a Washington State Pro-Equity Anti-Racism (PEAR) Plan and Playbook. She said the order outlined an expectation for the agency to develop “a PEAR team” which would have an EMT member, staff, “external stakeholders,” and be led by Diversity, Equity, and Inclusion Manager Jim Weatherly. Hood planned to finalize a “team roster by the end of the month” who would report to WSLCB leadership on the creation of a PEAR plan. She indicated that they expected to receive “templates and other guidance” from the Office of Equity soon (audio - 4m, video). 
      • Referencing the SMP, Hood said an “organizational change management firm,” Liberum, had been hired and would begin the following week. An RFP would be published in the near future and the next step would be approval for release of initial project funding by the Washington State Office of the Chief Information Officer (WA OCIO).
    • Garza stated his intention to have Weatherly come to future EMT meetings to provide the board with “information of the work that we’re doing as an agency” on equity and inclusion. Postman welcomed the addition. Garza then mentioned the Seattle Times article, encouraging the board to review it. He suggested Public Health Education Liaison Mary Segawa may want to brief them on the “bizarre” 2021 HYS survey results which suggested “almost a 50% drop in drug use” compared to the prior survey, but overdose “deaths among youth skyrocketing,” largely attributable to the opioid Fentanyl (audio - 2m, video).

Engagement Options

Webinar

https://teams.microsoft.com/...2%3a%224bb5cd1e-4347-4ae1-b13b-813c9fbc89c0%22%7d

Livestream

https://www.tvw.org/watch/?eventID=2022041088

Phone

Number: 1.564.999.2000
Conference ID: 726 541 532#

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