WA Governor - Bill Action
(March 31, 2020)

Here are some observations from the Tuesday March 31st Washington State Office of the Governor (WA Governor) Bill Action.

My top 3 takeaways:

• Governor Jay Inslee signed the WSLCB’s cannabis social equity legislation, HB 2870 - “Allowing additional marijuana retail licenses for social equity purposes.”
  • Maintaining his socially distant bill signings, Inslee offered remarks and added his signature alone with minimal staff support, one of many efforts to limit the spread of the COVID-19 pandemic in Washington.
    • See other COVID-19 announcements in Governor Inslee’s news archive and coronavirus.wa.gov, the State’s main portal for information on the pandemic.
  • The Governor said that HB 2870’s equity program “provides business opportunities to people from disproportionately harmed communities so they can benefit economically from the cannabis industry and become a cannabis retailer.” He thanked WSLCB, retiring Representative Eric Pettigrew, and Senator Karen Keiser for “this far-sighted bill” which he expected would bring “more equity and diversity and opportunity in this industry.” (audio - 1m, video)
  • Inslee signed the legislation into law. In the absence of an effective date within the text of the legislation, it would become effective 90 days after the adjournment of the legislative session on June 11th, 2020.
  • Should the supplemental biennium budget be signed by the Governor without change to section 140(13), the WSLCB would be allotted $348,000 from the Dedicated Marijuana Account (DMA) for fiscal year (FY) 2021 to implement the new law, over $20,000 more than the agency asked for in the bill’s final fiscal note prior to passage. The Washington State Department of Commerce (COM) would receive $1,100,000 as a new annual appropriation from the DMA in section 916(1)(i) of the supplemental budget “to fund the marijuana social equity technical assistance competitive grant program.”
    • A final fiscal note was added on March 23rd following the bill’s passage with revised costs for the WSLCB, the Office of the Attorney General (OAG), and the Governor’s Office. The latter two offices incurred new expenditures for task force responsibilities.
  • See Cannabis Observer’s coverage of the bill’s House policy committee public hearing and executive session; the House fiscal committee public hearing and executive session; and the House session when the chamber passed the bill. We also covered the legislation’s Senate policy committee public hearing and executive session, and observed the Senate session which resulted in a final bill rewrite.
    • HB 2870 was not considered by a fiscal committee in the Senate as the scope of the bill, in one of its many drastic revisions, was narrowed down to the task force provision by the Washington State Senate Labor and Commerce Committee (WA Senate LBRC) during executive session on February 25th.

• The WSLCB’s concept for the social equity bill emerged in early 2019 and its development could be traced through the agency’s public meetings into the 2020 legislative session.
  • The agency first discussed having a hand in developing a social equity program publicly at a January 2019 meeting of the Cannabis Advisory Council (CAC, audio – 16m).
    • Director Rick Garza broached the topic after mentioning Massachusetts’ Social Equity Program, California’s local and state equity policies, and Labor Peace Agreements.
    • Danielle Rosellison, a Bellingham producer representing The Cannabis Alliance, noted the general whiteness of the Council and wondered if they were the best group to weigh in on equity issues. She said the Council could support social equity experts and legislative champions, but should not imply they understood the problem best (audio – 11m).
    • Board Member Ollie Garrett responded, “when you’re sitting here at this table, you’re representing not just yourself but your members. And your members should be inclusive of all… You don’t have to be a minority to represent a minority if you’re head of an association.”
  • In May 2019, WSLCB’s Executive Management Team (EMT) heard a “collaboration project report” on social equity:
    • Director of Licensing Becky Smith described available cannabis retail licenses and discussions with the Office of Minority and Women’s Business Enterprises (OMWBE) on how many licenses were considered minority-owned (audio – 7m).
    • Policy Analyst and Tribal Liaison Brett Cain offered research on social equity practices in other states and cities (audio – 4m, handout).
    • Agency leadership considered the potential for a new round of licensing for “small, minority-owned businesses.” (audio – 36m)
  • At another EMT meeting on July 10th, 2019, Director of Legislative Relations Chris Thompson confirmed he was in “early stage discussions” with Cain and Garza to develop social equity request legislation. Garrett mentioned Portland’s equity efforts and staff suggested including COM in a possible technical assistance grant program (audio – 37m). The July 2019 CAC meeting focused more heavily on the topic, including the views of Aaron Bossett, founder of the Black Cannabis Commission, in his first meeting (audio – 20m, video).
  • Thompson confirmed “creation of a social equity program” was part of the agency’s 2020 legislative agenda in August 2019 (audio – 4m). Later that month, the board touched on social equity when considering how to assist smaller operators (audio – 13m) while Thompson sent an email to cannabis stakeholders which included descriptions of potential agency request bills, including one on social equity. Thompson reviewed the draft social equity bill at the end of August (audio – 28m).
  • Throughout autumn 2019, discussions on the developing request legislation received regular mention as the agency submitted, revised, and resubmitted their proposal to the Governor’s Office. On September 4th (audio – 1m) and September 10th (audio – 4m), Garrett briefed on her meetings with leadership from COM which included discussions of the bill. Near the end of September, Garza shared updates on the agency’s request bills. It was at this time the Washington CannaBusiness Association (WACA) proposed a Cannabis Capital Equity Act to fund a state equity program through a 1% fee on investments greater than $500K into licensed cannabis businesses (audio – 3m). Garza also noted that he’d broached the topic with Keiser, Chair of WA Senate LBRC (audio – 4m).
  • In October (audio – 8m) and November (audio – 3m), Thompson briefed the board on deliberations with the Governor’s Office to “narrow the scope” of WSLCB’s request bill. On November 19th, he confirmed that the bill had been held up and was unlikely to be “pre-filed” ahead of the session.
  • The December 2019 CAC meeting---one month before the start of the 2020 legislative session---featured an update from staff and extensive questions about the status of the agency’s, at that time unsponsored, request bill (audio – 35m).
  • On January 8th, 2020, Thompson said the request bill had not yet received gubernatorial approval due to “fiscal issues” involving the WSLCB and COM fiscal notes (audio – 8m). But by January 29th, the legislation had both gained approval from the Governor’s Office and found sponsors for the bill (audio – 8m).
  • Garrett discussed the legislation with panelists and heard public comment during the Cannabis Equity in Our Community Forum hosted by the City of Seattle on February 22nd.
  • The last extended discussion on HB 2870 by agency leadership occurred on March 3rd during a precarious moment for the bill. Garrett’s experience advocating for the bill prompted her to question the agency Director and staff about her perception of “mistrust of LCB” at the Legislature.

• The final bill created a social equity program, a competitive grant program, and task force while enabling WSLCB to eventually accept new applications for at least 34 available retail licenses.
  • See the final House Bill Report on HB 2870 and the bill text as passed by the Legislature.
  • Marijuana Social Equity Program. The law authorized the WSLCB “to issue previously forfeited, cancelled, revoked, and unissued marijuana retailer licenses to eligible applicants adversely impacted by the enforcement of marijuana prohibition laws.”
    • “From December 1, 2020, through July 1, 2028, marijuana retailer licenses that have been subject to forfeiture, revocation, or cancellation by the LCB may be issued or reissued” to approved applicants under the bill. At the time of publication, the licenses would have to remain in the jurisdiction to which they were originally allotted. The additional fiscal note created subsequent to the bill’s passage included expenditure calculations by the OAG which stated, “According to the LCB, out of 569 existing marijuana retail licenses in the state, LCB currently has 34 licenses available.”
    • Valid applicants “must be a social equity applicant and submit a social equity plan along with other marijuana retailer license application requirements to the board.”
    • Valid applications would have “majority ownership and control by at least one individual who: (1) has resided in a disproportionately impacted area for at least five of the preceding 10 years; or (2) has been convicted of a misdemeanor marijuana offense or is a family member of such an individual.”
    • A "disproportionately impacted area" was defined as “a census tract or comparable geographic area with a high rate of: (1) poverty and unemployment; (2) participation in income-based or state programs; and (3) arrest, conviction, or incarceration related to the sale, possession, use, cultivation, manufacture or transport of cannabis.”
      • The draft request bill initially defined equity applicants as “members of the community who belong to a class of persons described in RCW 49.60.030(1) and who are underrepresented in the marijuana industry.” This distinction created enforceability questions and, according to Thompson, led to pushback from the OAG which indicated it “wouldn’t be easy to tie directly to disproportionate impacts in the case of all classes of persons.”
      • The bill as filed was revised to state, “The board must give priority to those applicants who represent communities of color.”
      • This language was subsequently changed to the final quantitative socio-economic measure.
    • Under the bill, the new retail license application period would start in December 2020. However, agency rulemaking in 2020 had undergone significant delays. Implementation of the bill and incorporation of task force recommendations could push the start of the application period into 2021.
  • Technical Assistance Competitive Grant Program. Established through COM to “provide technical assistance grants to marijuana retail license applicants under the Program.”
    • “Technical assistance activities eligible for funding” included, but were not limited to:
      • Assistance “navigating the marijuana retailer licensure process; marijuana-business specific education and business plan development;”
      • Training for regulatory compliance, financial management, and assistance in seeking financing;
      • Connecting applicants “with established industry members, tribal marijuana enterprises, programs for mentoring, and other forms of support approved by the LCB.”
    • The Department was granted authority to undertake rulemaking to more specifically define the program.
  • Marijuana Social Equity Task Force. Established “to make recommendations to the LCB on the Program, including recommendations to establish and develop” the bill’s equity program.
    • The task force must “submit a report, or multiple reports, of recommended policies to the Governor and the Legislature by December 1, 2020.”
    • WSLCB was allowed “to adopt rules to implement Task Force Recommendations” while requiring that proposed increases in the number of retail cannabis stores “must be approved by the Legislature.”
    • Staff support for the task force would initially be provided by the Governor's Interagency Council on Health Disparities but could be switched to a new Washington State Office of Equity on request should legislation creating it be signed into law. Costs for staff support were estimated in the bill’s additional fiscal note.
    • The membership of the legislative task force would be decided by the President of the Senate, Lieutenant Governor Cyrus Habib, and the Speaker of the House of Representatives, Laurie Jinkins, who would each “appoint one member from each of the two largest caucuses” of their respective chambers. Jinkins and Habib would jointly appoint the following task force members:
      • A member of the Washington State Commission on African American Affairs (CAAA)
      • A member of the Washington State Commission on Hispanic Affairs (CHA)
      • A member of the Governor's Office of Indian Affairs (GOIA)
      • “A member from an organization representing the African American community” and one “from an organization representing the Latinx community”
      • One “labor organization involved in the marijuana industry”
        • The addition of a seat for a labor organization was considered very contentious by Republican Senator Curtis King and others during the bill’s Senate committee meetings and floor activity.
      • Members from WSLCB, COM, OAG, and “a member of the Association of Washington Cities.” 
      • Two members who “currently hold a marijuana retail license” and another two who “currently hold a producer or processor license, or both.”
        • Originally, the bill specified seats for three retail license holders. It’s Cannabis Observer’s understanding that the Washington SunGrowers Industry Association (WSIA) advocated for inclusion of producer/processor representation.
      • In addition, any number of additional members may be invited to participate in a non-voting advisory capacity.
    • The bill includes a provision mandating a “public comment period must be provided at every meeting of the task force.” Cannabis Observer intends to observe all meetings of the task force.
    • The first meeting of the task force must be held “by July 1, 2020.”