WSLCB - Executive Management Team
(September 14, 2022)

Here are some observations from the Wednesday September 14th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

• Chief Financial Officer Jim Morgan brought the board up to speed on the status of the Cannabis Central Reporting System (CCRS) including which bugs were fixed, which would be tackled next, and how it was "already much more usable" than earlier traceability systems (audio - 6m, WSLCB video, TVW video).
  • Morgan last briefed on the implementation of the system on April 13th. Director of Communications Brian Smith discussed the way CCRS was impacting his staff on June 22nd. A planned update on progress at the July 13th EMT meeting was delayed when the event was cancelled without explanation that morning. There had been complaints about the system from cannabis licensees and software integrators - as recently as the same day as the EMT meeting.
  • In the meeting, Morgan reported “continued good progress” on CCRS, commenting that his office had “completed phase 1…focused on bug fixes” to improve the technology “behind the scenes” in a way mainly visible to agency staff. He elaborated that their classification of issues had been put into “three categories: phase 1, 2, and 3 in order of importance.”
  • According to Morgan, the first phase included issues of concern to Enforcement and Education staff and were completed “quite a few months ago.” Phase 2 and phase 3 had been completed the previous week.
    • He mentioned that during phase 2 the “project team” shifted from agency staff to a contracted third-party. But his information technology (IT) team was once again “back in house” with Jackie Scolaro as the new Project Manager, a move he claimed cut those “costs in half” with “no impact” to the project’s schedule.
  • Morgan brought up how, “parallel to that, we had been working on…the external facing part of the system” including cannabis transportation manifests. Solutions were “completed” but still being tested, and all but one of “19 issues” recorded had been resolved by IT staff. After the final bug in this update was resolved, he told WSLCB leaders that it would be made available to integrators and outside users for testing. Morgan expected the revised manifest interface would be launched statewide "before the end of the year."
    • On April 13th, Morgan told the board that phase 1 fixes were scheduled to go into production the following week and staff had nearly completed the “scoping effort for phase two” which Smith mentioned during his remarks on June 22nd.
  • Acknowledging Enforcement and Education Director Chandra Brady “and her team,” Morgan spoke about the “great training video” her staff made “that explains what’s going on in the system, how it’s used” and gave an overview of required reporting that would significantly help agency staff. He felt that CCRS, which was “specifically for us, is already much more usable” for WSLCB employees.
    • In testimony to the King County Council Committee of the Whole on September 7th, Policy and Rules Manager Kathy Hoffman reviewed revised pesticide regulations and claimed CCRS “allows our Enforcement and Education staff to see quality control failures earlier."
    • However, OpenTHC and WeedTraQR CEO David Busby claimed the opposite during public testimony on the morning of the EMT meeting and alleged multi-day delays receiving feedback on failed submissions to CCRS. In response to an email inquiry by Busby, WSLCB staff relayed that “The LCB does recognize the value of these emails being more timely; we are undertaking efforts to improve processing time. With that said, this is not an outage: CCRS is still functioning as it was built.”
  • Intending to work with Smith’s team “to develop the overall communications plan” to convey changes in how licensees would “use the manifest process and the system they’re going to engage with,” Morgan had an expectation that outreach through multiple channels that would be “similar” to when CCRS went live in December 2021.
  • Board Chair David Postman described having received a “good walkthrough” of the system by Enforcement Captain Jeremy Wissing and had been told that they’d gotten “a connection to 100% of licensees” using CCRS. However, he noted that didn’t comport with what Busby told them earlier that day. Morgan acknowledged that he hadn’t seen Busby’s remarks (audio - 1m, WSLCB video, TVW video) .
  • Postman asked about other comments on CCRS from licensees, to which Morgan attested he hadn’t heard “anything from licensees” (although most licensees relied on integrators for these types of communications). He identified the sole “active” communications were from tribal governments that had encountered difficulties with some of the reporting changes. He continued, saying one tribe was telling them that CCRS reporting was “more than what they’re required to share with us according to their compact.” Morgan’s team was looking into modifying the interface used by this tribe’s cannabis businesses so that it no longer “errored out” (audio - 2m, WSLCB video, TVW video). 

• The retiring Director of Legislative Affairs, Chris Thompson, provided a briefing on new revisions to 2023 agency request legislation under development, prompting a long discussion about the implications of social equity license portability.
  • Most recently, Thompson talked about three draft request bills proposed to  Governor Jay Inslee’s office on August 30th.
  • He told agency leaders that they were approaching the September 16th deadline for entering potential request legislation into the Washington State Office of Financial Management (WA OFM) Bill Enrollment and Agency Request System (BEARS) which Inslee’s office used to receive ideas from state agencies. He added that he hadn’t encountered “any glitches with the new animal we’re using,” and that one request bill was submitted while the other two would have their documentation finalized by the end of the day (audio - 1m, WSLCB video, TVW video). 
  • Subpoena Authority (audio - 1m, WSLCB video, TVW video) 
    • Thompson reported that officials had reached out to the leaders of the Washington Association of Sheriffs and Police Chiefs (WASPC) about the prospective measure to establish investigative subpoena powers around cannabis licensees and had confirmation they supported the move. “We were really glad to see” a top law enforcement interest group in favor of the concept, he added.
  • Tetrahydrocannabinol (THC) Regulation (audio - 2m, WSLCB video, TVW video) 
    • Explaining that there were "basically two revisions" from the initial draft, Thompson called one “a technical fix, if you will, suggested by the State Patrol" around the definition of “cannabis,” noting that it included “another comma.” The second alteration “reverted back to current law on the definition of hemp” after representatives for the Washington State Department of Agriculture (WSDA) “and numerous stakeholders suggested that we not change the definition of hemp.” Morgan stated that staff removed the attempt to revise the definition of hemp to mean “the plant Cannabis sativa L. with a tetrahydrocannabinol concentration of not more than 0.3 percent THC on a dry weight basis during the growing cycle through harvest.”
    • Thompson said that Finance Analyst “Colin O'Neil and the whole fiscal note team” had revised the fiscal note to show “a little more than $400,000 for the next biennium…for enforcement staff to do education with licensees." He would be completing a “statement of need," a "summary of provisions," and "stakeholder feedback" document by the end of the day.
  • Social Equity (audio - 7m, WSLCB video, TVW video) 
    • Changes to the proposed language came about following “stakeholder feedback as well as internal conversations,” said Thompson. A top concern, including for stakeholders speaking earlier that day, was adding “portability to the already authorized social equity licenses” and Thompson outlined how the bill would allow for a one-time transfer between jurisdictions. He noted equity licenses already available, “by about a two thirds to one third ratio, are currently stuck in a jurisdiction locally that won’t allow operation.”
    • Additionally, Thompson talked about a change around social equity plans which were statutorily required of those applying for an equity license, but not expected of any other cannabis licensees. “Our initial draft circulated with stakeholders envisioned requiring all cannabis licensees to submit a social equity plan in order to…renew their license after the beginning of 2024,” he explained. After “pushback around that,” Thompson remarked that staff “realiz[ed] the importance of broadening awareness and focus on social equity across the community” without imposing “undue burden” on existing businesses. Thompson credited Board Member Jim Vollendroff for voicing the idea of providing a “an incentive, not a mandate,” that “encouraged” non-equity licensees to make an equity plan in exchange for “a one-time waiver…of their license renewal fee,” amounting “to $1,381.” He relayed that staff expected such an accommodation “to gain buy-in” and “further the whole agenda around social equity.”
    • Thompson said the legislation was anticipated to cost the state “a little more than $5,000,000 for the next biennium” covering staffing costs across several state agencies including the Washington State Office of the Attorney General (WA OAG) which expected to cover “appeals” of licensing decisions.
    • He remarked that their calculations hadn’t accounted for what staff were “pretty confident” would be the “more than offsetting revenue impacts of awarding these licenses, opening these businesses, and collecting more taxes” through “expanded cannabis sales.”
    • Board Member Ollie Garrett wanted to know whether changes to the potential request bill portability provisions had “any impact on what authority we already currently have?" (audio - 15m, WSLCB video, TVW video)
      • Thompson answered that their existing power to move licenses was “constrained by county population," meaning they could “somewhat” move licenses between jurisdictions within a county. Garrett didn’t feel her question was understood as she sought to know whether the bill text allowed more or less power than the board already possessed, and felt it was “debatable” what power they would gain under the drafted measure.
      • Postman’s understanding was that this “wouldn’t impact licenses that we have today, that we’re going to start to process” but he saw how there could be concern over “the gray area there” about whether allowing this change for social equity retail applications would “diminish any authority that exists today.” He believed the request bill was “a different piece” of authority from existing law.
      • Thompson summed up the change in powers for WSLCB as “a limited expansion” with no “reduction” to other authority he had seen in the wording. He said the portability of equity licenses “adds authority” in two ways:
        • “The existing [licenses] can move from where they’re currently assigned;”
        • “The new licenses the board would be authorized to create could be created without an attachment to any particular local jurisdiction until the licensee has selected a location.”
      • Director Rick Garza concurred with Postman and Thompson’s assessment that the request legislation doesn't "harm existing authority," and that equity applicants would have confirmation of licensure before they had to pick a jurisdiction for their store. Once the license holder picked a county or municipality willing to let them open, the licensee would be "locked in after that," he indicated.
      • Postman pointed out that the social equity rulemaking project was progressing, and he anticipated an application window beginning before the end of the year, or “maybe first thing in January “ 2023. If they began an application window, Postman wondered if those applying would be able to take advantage of the portability options if the request bill became law during the 2023 legislative session. Garza hadn’t “considered it before,” but he understood the portability envisioned under the request bill would only apply to licenses added after it was enacted. He promised to “go back and look at" the implications.
      • Thompson called attention to the fact that since their legislation didn’t have an emergency clause, “it would take effect in late July.” Garrett asked what would happen if there was an emergency clause, and Thompson responded it would take effect immediately with the governor’s signature. Postman recognized this would land after they concluded their social equity rulemaking. Director of Policy and External Affairs Justin Nordhorn contributed that if equity applications were still being processed after the bill took effect they could be designated as portable, but until then moving licenses would be limited within the county. Postman believed this could be a “gray area” brought up by Garrett, observing that "the timing of these is interesting." 
      • The board and staff continued to debate the exact impact the timing of the bill could have on applicants and whether people would be more likely to wait on portability to apply for licenses in areas with moratoriums or bans in place. Thompson noted, “who's going to want to apply for a social equity license in a city that has a ban?” This meant “12 or so” of the “around 40” existing equity licenses would be viable, he stated. Postman viewed their conversation as further evidence that more needed to be done by lawmakers.
      • Thompson shared that request legislation in 2021 “on the alcohol privilege extension,” HB 1480, included an emergency clause which made the bill take effect around ten weeks sooner, and that this was added “subsequent to initial submittal.” He saw no reason not to do the same thing here “if that’s important to the board.” Nordhorn contributed that any changes in the request bill made by lawmakers could involve additional rulemaking to implement, possibly further delaying the laws’ applicability.
      • Garrett saw that applicants had “a longer timeframe” to pick a location anyway, meaning applicants could “take their time.”
    • Thompson brought up cannabis retail title certificate holders, and whether the board wanted them to have license portability. Postman indicated there were public remarks opposed to the idea. Thompson found it difficult to involve them in the bill as the certificates were created in rule by way of “administrative action by the LCB” (audio - 1m, WSLCB video, TVW video) 
  • Thompson commented that the deadline for request bill materials was Friday September 16th and reiterated that Morgan and staff had nearly completed the “decision packages” for the potential legislation (audio - 1m, WSLCB video, TVW video). He further added that there were no work sessions scheduled for the near future since most legislators were “on the campaign trail” for the November general election (audio - 1m, WSLCB video, TVW video). 
  • Garrett wondered if WSLCB representatives would be meeting with lawmakers before the 2023 session to bring up their request legislation. Thompson replied that it was dependent on the governor’s approval but they would be reaching out to legislators after that. Garrett stressed that she wanted to be part of that engagement once it was permitted (audio - 2m, WSLCB video, TVW video).
  • Garza reported that candidate interviews for Thompson’s successor would likely take place over the next two weeks. He emphasized that the Tribal Liaison role which Thompson had held would become a separate position which could be announced as soon as “in the next few days.” Garza felt since most federally-recognized tribes in Washington had entered into cannabis compacts, the post of liaison would become "more holistic and realistic" and not cannabis-specific (audio - 2m, WSLCB video, TVW video). He appreciated hearing the comments from Postman and Garrett about the request legislation, and felt the changes mentioned by Thompson helped their chance of approval by the governor’s office (audio - 1m, WSLCB video, TVW video).

• An Enforcement and Education division briefing from Director Chandra Brady covered a few cannabis topics like CCRS, training, and trends suggested by some of the WSLCB enforcement data.
  • Brady said there were "a couple of things going on this month" regarding cannabis, primarily “some pesticide things that we’re taking care of” as pesticide testing rules were changed on March 2nd. She provided education contacts made by her division comparing 2021 and 2022, and stated that her staff were “ramping up” their educational work to possibly exceed the 2021 numbers (audio - 4m, WSLCB video, TVW video, presentation). 
    • Postman asked for additional clarification on warnings issued (audio - 1m, WSLCB video, TVW video).
  • Brady explained how Enforcement contacts with licensees had spiked earlier in 2022 in response to a series of robberies of cannabis businesses which led to more direct outreach by her team. Looking at the types of complaints the division was receiving, she identified “the fifth highest” issue was “unauthorized pesticides” as rule changes came into effect. Brady mentioned the increasing use of notices to correct (NTC) for cannabis violations not posing a threat to public safety nor necessitating an administrative violation notice (AVN), “most” of which never progressed to formal adjudicative hearings, which she attributed to changes in Enforcement brought about following legislative reforms in 2019 (audio - 6m, WSLCB video, TVW video). 
    • Postman felt that “alternate avenues” avoiding formal hearings were increasingly popular, which Brady agreed with (audio - 1m, WSLCB video, TVW video). 
  • Brady reported that although there had been only two compliance checks of minors going to cannabis stores in August, neither store let them in. For the “year-to-date, our cannabis team has been to 72% of our cannabis licensee locations,” she told the group. Brady conveyed that when it came to requests fielded by the cannabis examiners unit, “CCRS is still our top item.” She acknowledged a single “lower level conduct complaint” against an officer had been received in August and was ultimately “addressed through coaching and counseling.” Among the new hires that would be joining WSLCB in the next month was “a second Chemist” as part of the interagency coordination team on cannabis lab standards created by legislation passed on March 24th. Brady concluded by citing the educational video brought up earlier by Morgan as evidence of her staff’s commitment “to do better at education and communication, internally and externally” (audio - 9m, WSLCB video, TVW video). 
  • Postman requested a follow up with more data about the CCRS complaints Brady’s division had been seeing. She agreed to come back to him with a better summary (audio - 1m, WSLCB video, TVW video).
  • Garza encouraged an expanded historical chart showing both formal hearings “as it relates to the number of violations and citations that were issued in those years” as a way to show agency staff had “refocused attention” on compliance over punitive enforcement. He thought it was powerful evidence to counter anyone “still making complaints about our enforcement actions” being excessively dependent on issuing violations. Brady agreed with his reasoning, and thought including education and AVNs with the formal hearing statistics would show “education increasing and AVNs decreasing” (audio - 2m, WSLCB video, TVW video).