WA House RSG - Committee Meeting
(January 19, 2023)

Here are some observations from the Thursday January 19th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 5 takeaways:

• Director Rick Garza opened the work session with some background on the agency’s history with cannabis enforcement before touching on the cannabis tax structure, funded activities, and the state Healthy Youth Survey (HYS).
  • Garza pointed out that the board’s history with cannabis was “much shorter" than for alcohol and that staff would outline the system of legal cannabis with detail “for the members that are new” (audio - 1m, video, presentation).
  • After mentioning the 1998 initiative legalizing medical cannabis, Garza identified a 2011 law modifying the medical system which would have set up more licensing structure but was partially vetoed over “concern[s] about the federal prosecution of state employees.” He commented the veto removed some regulatory activities which would eventually be put in place for adult-use cannabis (audio - 9m, video).
    • Garza explained that in 2012 voters legalized cannabis through Initiative 502 (I-502). He identified the author and campaign manager of the measure as Alison Holcomb, a Washington Chapter of the American Civil Liberties Union (ACLU WA) leader, and at time of publication, their Director of Political Strategies. He brought up a conversation he’d joined in with Holcomb near the tenth anniversary of passage of I-502 in November 2022. She described basing the legal cannabis system on state alcohol restrictions, making Washington “different than many of the states in that we don't allow vertical integration,” leaving owners of production or processing licenses barred from owning retail licenses. “I think for purposes of passing it, she wanted a very strict comprehensive system for regulation,” said Garza. He also mentioned state officials waiting on federal guidance in 2013 on whether states could implement any legal cannabis system.
    • Because I-502 didn’t modify medical cannabis statutes, Garza explained there was an unregulated dispensary market, with individuals he claimed were “not interested in [adult-use cannabis licensing] because it didn't allow for vertical integration.” After officials passed a law in 2015, “medical and recreational were brought together” in 2016 as a “tightly controlled and regulated marketplace,” he stated.
    • Garza named “three parts” of the regulatory system considered crucial by state and federal authorities:
      • “How do you prevent youth access?”
        • This involved advertising restrictions, packaging and labeling (PAL) requirements, warnings, and compliance checks by WSLCB to ensure cannabis wasn’t being sold to those under 21.
        • Garza later commented how cannabis revenue supported “programs for prevention and treatment and…media-based education campaigns” with “very little” going towards research by state institutions of higher education (audio - <1m, video).
      • “Preventing the licenses or revenue to be part of the cartels, or the gangs, or the criminal enterprises that existed before legalization.”
      • “How [are] you going to keep this product from being diverted to other states?”
        • Because at that time 48 states had only illicit markets for adult-use cannabis, “we set up a comprehensive seed to sales system…that requires our licensees…to provide information to us daily on any movement of product.”
    • Another 2015 law permitted the State to enter into cannabis compacts with federally-recognized sovereign tribes, Garza said. He reported that 22 tribal governments had entered into such agreements, with all having retail shops, but “only one or two of those tribes currently grows cannabis.”
    • Garza identified the number of licenses “scattered throughout the state, even though we continue 10 years later to be in a situation where many of our counties and cities still have bans and moratorias [sic].”
      • 170 Producers
      • 878 Producer/Processors
      • 236 Processors
      • 482 Retailers 
      • 10 Transportation licenses
      • 10 Accredited cannabis testing laboratories
  • While I-502 directed a 25% excise tax on cannabis at the production, processing, and retail level, Garza relayed that lawmakers changed that to a single 37% tax on retail sale in 2015. When he’d asked Holcomb about the high tax rate, Garza said she had looked to the “past of what we have, and how we tax alcohol, one of the highest in the country, tobacco one of the highest in the country, and she kind of followed that policy.” Having no income tax, Garza felt state officials “rely upon property tax, sales tax, and these sin taxes to pay for running our state” and that Holcomb followed a “past course that the state has taken with respect to these…intoxicating drugs” (audio - 6m, video).
    • According to Garza, sales showed a "small dip in 2022" after an "uptick when the [coronavirus] pandemic began" in 2020. He speculated the increase in sales “probably wouldn't have been there had it not been for the pandemic,” and that some industry members felt inflation concerns among consumers was leading to a preference for “less expensive product.”
    • Board Chair David Postman chimed in to note that cannabis sales had steadily increased over the first 8 years of the market “every year except for this most recent…overall the growth is…what you would want to see” though he didn’t expect sales to stay “at the height of the pandemic levels.”
    • Garza mentioned “where the money goes” from cannabis, including to local governments, the general fund, healthcare, policing, and WSLCB. He believed a low level of direct disbursement to local governments in I-502 was why “some of the cities and counties imposed bans and moratori[ums] because they didn't feel good about the fact that…the revenue wasn't being shared with cities and counties.” He noted an increase in disbursements to local governments, and mentioned that in fiscal year 2023, elected officials “appropriated 25 million for distribution to local jurisdictions…based on the sales of cannabis products that occurred within the individual jurisdictions.” This had been done partly to respond to “concern[s] for those that had bans and moratoriums” while sharing in cannabis revenue, he told lawmakers, so this distribution formula was split along with the traditional alcohol model based on the “population of the jurisdictions.”
      • Cannabis taxes always included both local sales taxes—which vary by jurisdiction—and a .065% sales and use tax that has gone to the state.
      • Check out the most recently published spreadsheet on cannabis distributions to local governments from WSLCB.
      • SB 5404, “Increasing cannabis revenue distributions to local governments,” proposes to double the amount of these distributions.
  • Turning to HYS, Garza commented that a top question after legalization was “would we see a spike in youth access of cannabis?” He identified this as an issue “where public health and prevention was concerned,” but an overall uptick in youth use hadn’t materialized in the “last seven and eight years,” and in fact “use in the last 30 days actually decreased in some instances, which is obviously positive” (audio - 1m, video).

• Board Chair David Postman added details to the agency cannabis history, as well as specifics on social equity and tetrahydrocannabinol (THC) regulation before responding to a question on the role race played in prior licensing windows.
  • Postman acknowledged his own history with WSLCB began with his chairmanship in March 2021, “an interesting almost two years” more focused on cannabis regulation than alcohol (audio - 4m, video).
    • He noted the anniversary of voters passing I-502 and the opening of retail stores in 2014, saying they had “spent some time at the board studying those…years,” hearing from Holcomb, public health researchers, as well as industry members. The main impression he’d gotten was that a “parade of horribles that people worry about just never showed up,” and though that “doesn't mean there's been no impact, or no negative results from this,” predicted “unintended consequences” around youth use and safety hadn’t emerged.
    • As a former Chief of Staff for Governor Jay Inslee, Postman knew that state officials had been opposed to I-502, and Inslee told legislators that “it was their job…to make it work” with federal counterparts. He viewed the adult-use market as having “matured nicely,” explaining that he had a habit where he would “Google a different state's name and cannabis problems and see what pops up, and I do it for ours as well.” His impression was that it was a “difficult” industry in all states for businesses and regulators, and that “Western states” had “terrible problems with oversupply, California is really struggling” to control their production. “It's just tough, but I think we've done well,” remarked Postman.
  • Viewing the cannabis market in Washington as having “evolved as it should,” Postman credited the “entire ecosystem” from legislators to WSLCB, where staff “really have to make it work.” He recognized this “doesn't mean it's perfect” but he found the system had “done really well,” because the “industry has overwhelmingly operated in a responsible manner. They have…understood the pressures they’re under to perform” (audio - 4m, video).
    • Postman hadn’t encountered the “sort of criminal activity some worried about,” in the cannabis sector. There were violations and enforcement actions, he stated, and the “board is always very disappointed to see cases of sales to minors.” But he’d found the “cannabis industry…ha[d] been better than” the other industries they regulated on “a percentage basis.” Postman said “many times the sale happens even after the budtender is looking at the driver's license…these are totally avoidable violations” and he felt “all our industries need to do better on that.”
    • Touting the Washington-specific research from University of Waterloo School of Public Health Sciences Professor and University Research Chair David Hammond, Postman said it showed the “best numbers in terms of people who are buying from the regulated market, not from the illicit market” which was a “key piece of data that shows that it's working.” However, “I don't think we'll ever have a system that feels like alcohol in the way that it sort of is accepted by all players until the federal government acts,” Postman remarked, complaining they hadn’t made reforms such as the “SAFE Banking Act that would help get cash out of these stores and protect people's live.” Postman acknowledged a “trigger bill or other things” would be welcomed by the board (“anything that helps us get started”) but “I don't think we should be regulating today as if it's going to be legal tomorrow…the evidence just isn't there.”
  • Earlier, Representative Melanie Morgan pointedly asked Postman “given the micro-managing, the strictness of…this industry would that be a reason that people of color were cut out of the industry in the beginning because that's the way status quo moves.” Postman answered, “I don’t believe so” (audio - <1m, video).
    • Morgan was a former Co-Chair of the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) who resigned following reported accusations of hostility towards task force staff.
  • Postman called increasing social equity in cannabis licensure the “most important thing we can do" and returned to Morgan’s question. Cognizant that he wouldn’t “ever be able to extract race from these calculations,” he hadn’t seen “anything done purposeful on the part of regulators or in the authorizing environment to say ‘we don't want people of color in this industry,’ but things did happen” (audio - 4m, video).
    • He said when merging the adult-use and medical markets, a “huge number of those medical facilities, there were people of color…running those stores” relating that to Morgan’s comments on exclusion. “When we're told ‘you need to shut down medical stores’” by Washington’s U.S. Attorney, who he noted “at the time, was very serious about it and went after them strongly.” Postman continued, stating that “over a thousand” medical dispensaries had to compete among applicants for “only 200 licenses that would be available” in the merging of the markets.
      • The U.S. Attorney for Western Washington at that time was Jenny Durkan, who went on to serve a term as Mayor of Seattle.
    • An announced window for social equity applications beginning on March 1st had led to a “surge of interest” online, Postman told lawmakers, due to “pent-up demand.” He commented that the process awarded additional points to “people in the medical business who didn't make that transition.” Consideration of those disproportionately impacted in the drug war was part of the 2020 legislation establishing the equity program, and Postman indicated, “we make that reflection as well in our rubric.” He was “optimistic” the program would improve equity in licensure, and that request legislation before the committee would be an “important next step” to further that objective.
  • On the topic of THC regulation, Postman described agency staff as having “largely been unable to get to" what he called an “outlier” problem of products with hemp-extracted cannabinoids being sold outside of I-502 stores. He argued the risks with youth access and safety made expanded authority for WSLCB a “key piece…in hemming in THC” products and keeping his agency “nimble” in regulating cannabinoids. A “big issue and we hear it from local governments, and I bet you do too, is ‘how can this store at the gas station be selling cannabis,’” said Postman (audio - 2m, video)

• Director of Licensing Becky Smith offered a review of patterns her staff were seeing around cannabis licenses including fewer ownership changes, the number of discontinued licenses, and the agency map of retail stores (audio - 4m, video).
  • Smith reviewed her team’s work, indicating they were handling fewer transfers of ownership. “Licensees may sell their business, but it does require approval of LCB” which had responsibility to “verify all of the requirements” were met by a prospective licensee. These requests had increased after a limit on how many retail licenses individuals could own was raised in 2017, she explained, but had been declining.
  • Since the adult-use system was set up, Smith’s office dealt with 341 discontinued producer processor licenses, including seven licenses denied during renewal, 109 discontinued voluntarily, 68 for administrative violations, and 157 for not maintaining a location (since cannabis businesses "can't just get up and move without notifying LCB”).
  • Responding to an earlier question from Ranking Minority Member Kelly Chambers about whether the WSLCB map of retail stores featured tribal retailers (audio - 1m, video), Smith indicated that those locations weren’t included.

• A trio of other leaders from the Washington State Liquor and Cannabis Board (WSLCB) addressed licensee enforcement and education in addition to stakeholder outreach and request bills for 2023.
  • Former Director of Legislative Relations Chris Thompson provided a similar update to legislators in October 2021.
  • Director of Policy and External Affairs Justin Nordhorn talked about changes within the enforcement due to SB 5318 in 2019, which featured policies recommended by independent firm Hillard Heintze in 2018. He thought WSLCB employees “did a lot of things right, and we did a lot of things that…could have been done better.” The report had weighed in not only on enforcement practices, but “​​looked at our organizational structure, as well as our overall management interactions” (audio - 12m, video).
    • Nordhorn explained that “three of the themes that came in from this is the inconsistency around legal interpretations,” the “lack of transparency and understanding by stakeholders about agency decisions and interpretations,” and a “stronger communication, education, and collaboration with industry.” He said it had been a conscious choice by leadership to start cannabis regulation “with a very strict approach and then we could loosen over time” but they had not “loosened quick enough when we're looking at how the industry was developing and maturing.” There had been changes to cannabis penalties and their structuring, which Nordhorn noted “reduced the number of areas…that are subject to cancellation” and “aligned some of this with the alcohol industry” rules which meant more consistency for cannabis businesses, including violation deferrals and issuing less punitive Notices to Correct before violations.
    • “Consultation and education programs…have not necessarily [borne] the results that we were anticipating” when it came to licensees seeking consultations with agency staff, indicated Nordhorn. There were “very few” requests, but this could reflect the effectiveness of increased educational outreach by compliance staff, he reasoned. 
    • “The other area that we had a recommendation on was to have the more neutral area of [WSLCB Human Resource] looking at some of the complaints,” Nordhorn told lawmakers, continuing to say that office was now the “lead” office for reviewing complaints. He explained that his position reflected the reorganization in the “director's office to increase that consistency component” across divisions, taking a “broader-based approach” that was also “keeping an eye out for the social equity impacts and barriers” in their policy actions. Changes to the rules on ‘criminal history’ of applicants had been approved by the board in September 2021, Nordhorn commented, after identifying it as a potential barrier to equity applicants.
    • Policy statements were being leveraged by WSLCB as another practice that “forecasts where we're going with rule development” while still “incorporat[ing] stakeholder input into the policy area,” Nordhorn said.
  • Enforcement and Education Director Chandra Wax gave more details from enforcement data, testifying that since 2021, improvements in the division included her hiring, outreach surveys and more visits to licensees, and collaboration with other WSLCB divisions as well as representatives of the Washington State Office of the Attorney General (WA OAG, audio - 7m, video).
    • In 2022, “leadership statements” were developed to “focus on public safety and education,” Wax remarked, along with internal newsletters for more consistent communications. She highlighted the retail safety outreach by WSLCB following a “large number of robberies in our cannabis retail stores.”
      • Learn more from Wax’s November 2022 Enforcement presentation.
      • SB 5259, “Ensuring commerce and workplaces are safe from product theft,” received a public hearing by the Washington State Senate Labor and Commerce Committee on January 26th.
    • Systems modernization was a priority for Wax, who also cited the traceability changes through Cannabis Central Reporting System (CCRS) as one program she tracked and reported on to the board regularly. A high number of education contacts to cannabis licensees in 2022 was another measure of success for Wax, pointing out that some education had led directly to other administrative actions, though “less than one percent” of these contacts led to a violation being issued. Most of the licensee education conducted by staff was “regulatory in nature,” she added, and of the violations issued by officers in 2022, the majority were “for furnishing…product to somebody under 21.”
    • “Formalizing our education program” was a top goal for Wax in 2023, which she mentioned would be done by getting outside input, having “our messaging inside of our division [be] consistent with the rest of the agency,” and “looking at some mentorship and succession planning.”
  • Policy and Rules Manager Kathy Hoffman lauded the stakeholder outreach by WSLCB staff as a process “that fosters and supports public participation, which we believe should be an inclusive process.” Staff had started to “harmonize our practice with research and theory in our stakeholder engagement approaches by centering diversity, equity, inclusion, and belonging as critical metrics in our policy and rule development” (audio - 3m, video).
    • Hoffman named various ways outreach events were used by her team, including Deliberative Dialogue, Listen and Learn Forum, and World Cafe models. Beyond policy and interpretive statements, she described “work groups and panels” which had been set up by the agency.
  • Nordhorn briefly went over three request bills from the agency:
    • THC Regulation (audio - 1m, video)
      • Nordhorn relayed that with a “lot of folks from local jurisdictions and elected officials coming to us” looking for regulatory action on unlicensed cannabis items, “we're trying to develop that regulatory structure.” The concept was a “cutoff” similar to alcohol, where “anything above one half of one percent alcohol by volume is regulated and age-gated,” he said. The legislation would propose “THC levels in products,” and any items above that level would be regulated by the agency, along with a “strong licensing component” so that manufacturers couldn’t sell in stores or online without approval, Nordhorn stated.
      • A House companion bill was introduced on January 26th and referred to WA House RSG, while the senate bill was set for executive session in WA Senate LC on January 30th.
    • Social Equity (audio - 2m, video)
      • The bill from the agency was awaiting recommendation by the committee, and Nordhorn commented that it was the “top priority” for WSLCB. He testified about the inclusion of portability of equity licenses to any jurisdiction in the state that allowed for them, additional equity retail licenses, and a “voluntary program for social equity plans for other licensees” since equity applicants were already legislatively mandated to submit such a plan. There was a requirement to maintain “51% [qualifying equity applicant] ownership that we have for five years. We don't want to limit social equity applicants from being able to sell their business and make a profit on those, but we also don't want people to take advantage of applicants in trying to get around the social equity front.”
    • Subpoena Authority (audio - 1m, video)
      • “In liquor statutes, the board has the authority to ask for books and records of alcohol, tobacco, vapor products, and we don't have that for cannabis,” Nordhorn established. The bill about “administrative functions” would allow for “more flexibility around those regulatory versus criminal approaches” of seeking a warrant to obtain records.

• Throughout the agency panel, new and returning committee members posed both specific and hypothetical questions on oversight around hemp, access by minors, taxation, public safety, and changes at WSLCB.
  • Representative Tina Orwall brought up product packaging for hemp and cannabis products and whether they were “in child-proof containers or packaging.” Garza confirmed cannabis products in I-502 stores were, but hemp items were “totally unregulated” and the reason the agency had proposed request legislation. Postman included that “within the 502 regulated system, each gummy for example is individually packaged in a very heavy plastic wrap” which had “a regulated thickness that makes it…too difficult to open” for many people. Nordhorn felt the rules were effective, “when we look at the poison control numbers across the state we're seeing a very low level” in the “accidental exposures from the toddler group. Now, we have a lot more in the teenage group, but, of course, they know how to use scissors” (audio - 3m, video).
    • Find out more from a presentation on “Youth's Perceptions of Cannabis Product Packaging” the board received in October 2022.
  • Representative Kevin Waters sought clarification on why hemp items needed regulation. Nordhorn said hemp harvests were “not necessarily being utilized for industrial hemp” as much as for extracting cannabidiol (CBD) which could be used to chemically synthesize other cannabinoids, including THC or other compounds which could “get you high at different degrees.” He mentioned tetrahydrocannabiphorol (THCP) could “be three times as potent” as THC so regulators saw a need for stronger control over these items, but lacked statutory authority to act. He shared stories from other states of people becoming impaired from unregulated hemp products “because there's no product packaging, labeling, consumer safety requirements, or anything like that.” Nordhorn insisted WSLCB leaders had no interest in restricting “CBD product without the THC high doses.” Garza faulted a lack of action to regulate the hemp market at the federal level as a compounding problem in several states after passage of the 2018 Farm Bill legalized hemp, something he’d discussed with the board the week before (audio - 4m, video).
  • Committee Co-Chair Sharon Wylie was curious that reports about “incidents with toddlers and toxic ingestion” of cannabis “seems to be in other states,” how packaging standards in Washington compared with other states, “and whether there's data showing showing some differences” in places with “more lax” standards. Nordhorn considered their rules “fairly strict” but hadn’t seen a comparison like Wylie described. Garza noted the agency partnership with the Washington Poison Center (WAPC) whose staff “shared that there were issues with respect to kids getting into [hemp] products; the problem was it didn't appear to be in the regulated market.” He promised to follow up with Wylie with more detailed WAPC information (audio - 2m, video). 
  • Orwall asked about “fatality wrecks,” having seen data on a “spike in people that were using both cannabis and alcohol and there are some theories there's a multiplier effect. What are your thoughts on that, and are we doing any kind of warnings on that?” Nordhorn offered that there was a “continuing trend” of fatalities with both cannabis and alcohol present, but “historically, we didn’t have good data” so it’s unclear how “new” that overlap was. Alcohol wasn’t allowed to be sold alongside cannabis, he added, “when you have too much alcohol, and you have too much cannabis, it keeps the alcohol in you and that's where alcohol poisoning can happen.” Additionally, Postman perceived an “alarming trend…of the blending of the alcohol and cannabis world and you see it on both sides in the cannabis world there's certain labels and marketing ploys being used” such as “margarita flavored cannabis something, or a Fireball label on a cannabis flower” or “cannabis-infused versions” of existing alcoholic products. He noted how this pattern concerned “public health advocates,” and guessed the combination “must be attractive to consumers” (audio - 3m, video).
    • 2018 data from the Washington Traffic Safety Commission (WTSC) suggested increasing polydrug driving under the influence (DUI) offenses. During an October 2022 meeting, WTSC staff shared that although there’d been some overreporting of cases involving cannabis, cases where the drug was considered a contributing factor had been rising.
  • Chambers wondered if there was any tracking of hemp items. WSLCB leaders stressed hemp products were not tracked at all, with the exception of CBD being imported as an ingredient for I-502 products. Postman acknowledged a settlement with licensee Unicorn Brands in September 2022 over a violation alleging that the processor had been converting CBD into THC products for the I-502 market, believing that “they've stopped that and…we don't believe that process is allowed” (audio - 2m, video).
  • Representative Kristine Reeves inquired if “at some point are you gonna talk about the economic analysis of the industry and what the impact has been over the last decade given the regulatory market.” Garza said that hadn’t been “something we were asked to bring forward,” and agreed to follow up with her once he had more information (audio - 1m, video). 
  • Next, Reeves noted that her district included communities where cannabis businesses had been banned or were under a moratorium. She wondered how those licensees “have been made whole in the process” or “what you might suggest we could do to help make them whole.” Nordhorn shared that retail title certificate holders had been set up for businesses allotted to those areas to maintain a licensing status without the costs of maintaining a non-operable business. He continued by saying social equity licensing included several such licenses allotted to places not allowing them and this was part of why their agency request bill on social equity include a one-time portability for those licenses to relocate. Garza faulted I-502 for not featuring clear opt-out provisions for local governments, leading officials to get asked “why in the world are you licensing folks in a community that has local ordinances that ban it?” (audio - 2m, video)
  • Representative Greg Cheney wanted to know if cannabis business buffer zones meant they needed to move in the event a child care facility entity opened near them, with Garza replying such licenses were likely “grandfathered in” (audio - 1m, video). 
  • Chambers asked for clarification about which jurisdictions had bans or moratoriums, and Garza pointed out that “there have been very few cities and counties that have lifted their moratoriums even after ten years.” Postman said license allocation was a “population calculation” and couldn’t consider local ordinances against cannabis businesses. Garza noted that some licensees were trying to get local officials to change their policies and agency staff had previously been told to “just wait” before allowing licenses to change jurisdictions (audio - 3m, video).
  • Reeves wanted to know if those shut out of operation due to local restrictions could get refunds on fees or investments they’d made securing licenses. Nordhorn replied that licensing fees were returned, but they couldn’t return “investments into …some real estate, or something” which WSLCB “wouldn't have had any control over.” Reeves made sure this process wouldn’t be repeated in social equity licensing, with Nordhorn assuring her that the social equity program intended to “get the applicant in a position that…you're going to be qualified for the license, now you can go find a location so they have a little bit more flexibility” (audio - 3m, video). 
  • Vice Chair Chris Stearns was curious why interest in cannabis products hadn’t followed a “bell curve” with gradually decreasing interest in the items from youth. Postman speculated that, as a new product, being “normalize[d]” was a contributing factor but more research was warranted. He felt the “worst scenarios that we all thought might come with this just haven't happened among youth usage.” Garza called attention to “concerns…with respect to the high potency of these products that are being used by folks between the ages of 21 and 32,” hypothesizing that “maybe you haven't seen an increase in youth use, but those that are using, are using more potent product.” Co-Chair Shelley Kloba relayed that for “youth access broadly, we have some good numbers here, but there's a small segment of youth who are” engaged in “high potency, high frequency use; we're seeing an increased risk and presentation of early onset psychosis” (audio - 4m, video).
    • Chambers and Robertson have sponsored HB 1595, “Modifying the cannabis excise tax,” which proposes to apply tax rates based on product cannabinoid concentration.
  • Representative Melanie Morgan asked whether emergency room visits involving “overuse of cannabis” could be circumstances “not necessarily about overusing, but actually it's the actual effect of cannabis.” Postman thought that was possible for “people who are not experienced consumers” and had been more prevalent “early in the legalization,” adding, the “unregulated market in any place is more dangerous than the regulated market” (audio - 2m, video). 
  • Following up, Morgan wondered if it was “fair” to compare the impacts of cannabis and alcohol, as the former was a “plant,” and the latter was “derived from chemical based products.” Postman viewed the goals in regulating the products as similar, though the substances themselves were “very different.” He believed “we may have been regulating cannabis more strictly than alcohol…and our Licensing Division...has done a great job recognizing that evolution now, and easing up on some of those things.” Postman stressed that this stringency arose because “there was a real concern that the federal government not only would say ‘no,’ but could enforce federal law against us.” He explained they’d heard it was possible state officials “could be arrested if they're taking in money from cannabis.” Though he now felt this “seems a little bit ridiculous,” at that time it was a real fear of authorities. Nonetheless, he considered the market to have reached a different place after years where “we had to browbeat the federal government to let us even do what we're doing” (audio - 4m, video). 
  • Representative Jim Walsh wanted to hear more about a governor’s ability to implement an initiative they were opposed to. Postman offered the example of former Governor Gary Locke in regards to Initiative 601 in 1993 (audio - 2m, video). 
  • Morgan asked whether the limited 30-day window to apply for social equity licenses was “typical.” Smith explained that the window was similar to the initial licensing process after I-502 was approved. When a window for applicants was left open during merging of the medical and adult use markets, “what we found was there [were] a lot of folks that applied, and there [weren't] enough licenses. There [were] 222, and we received over 2,500 applications.” The equity window wasn’t a “race for an application,” commented Postman, as there were 42 licenses available, but all applications would be reviewed and scored by a third-party contractor “then there's the double blind lottery…to choose those” successful applicants (audio - 2m, video). 
  • Reeves inquired whether the agency engaged in reissuing “licenses to new folks, or is it kind of a one and done” process where a license “goes away” if the business closes. Smith reported that equity licensing would limit sales of licenses to individuals who qualified as equity applicants. WSLCB would “receive applications from Business Licensing Services” and supporting documentation would be requested by, and submitted to, contracted firm Ponder Diversity Group. Postman added that if a social equity applicant returned a license, it stayed in a social equity “pool” and wouldn’t be reissued as a regular cannabis license (audio - 2m, video). 
  • Reeves then wondered if existing licensees could sell “their license into the equity market.” Postman said although licensees could sell to an equity applicant, there “isn't a process today that would convert [a] current license to the social equity pool.” Reeves felt this constituted “protection to prevent social equity licenses from being sold…into the dominant culture market, but there's no…incentives for dominant culture licenses to sell their license into the equity market” (audio - 2m, video).
  • Wylie responded to the enforcement portion of the presentation to ask whether there was an outside “change consultant” providing input to WSLCB, given that “we overlooked the equity impacts on the way we were…doing things.” Nordhorn reported that WSLCB hadn’t contracted with any consultant for that purpose since the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) was created in 2020 and officials had been “trying to incorporate and participate with the task force” (audio - 6m, video).
    • "Bureaucracies are designed to resist change, and change is hard," Wylie acknowledged, but she wanted a consultant with "expertise in transforming an organization to reflect those needs and directions.” Postman mentioned their Diversity, Equity and Inclusion (DEI) Director Jim Weatherly was “involved in every conversation we've had," Hoffman was applying an “equity test" during their policy development, and they were collaborating with leaders at the Washington State Office of Equity.
  • Chambers asked about whether policy interpretations were available for licensees. Nordhorn affirmed they were (audio - 3m, video).
  • Walsh was curious to hear what “metric of success" was being used for the enforcement reforms at WSLCB. Nordhorn answered that there were internal employee surveys, rule evaluations with input from licensees, and internal work groups. “We're not going to wait five years and then look back to see what we did wrong,” Postman stated, explaining a goal for more “real time” consideration of their activities which “licensees seem to at least appreciate the opportunity. We'll see what happens and how successful it is.” Wax promised to forward a “matrix” of enforcement recommendations they’d received from Hillard Heintze to help show the status of those reforms (audio - 2m, video).
  • Reeves had several thoughts on how WSLCB might implement organizational changes, asking “who is actually implementing and executing the design of that survey” of staff and “how are you integrating your survey results?” She was further concerned after licensees were being surveyed; “we just had a whole discussion about there's a subset of the population that is not currently licensed, has been left out of the market and I didn't hear you once mentioned that you were actually doing a survey conversation with any of those folks, nor have I heard that you've hired any of those folks to actually engage professionally” in changing the organization or culture within WSLCB (audio - 5m, video).
    • Nordhorn replied that “traditionally we've taken a look at licensees as the predominant stakeholder.” The WSLCB Public Health Education Liaison tried to engage, “but one person by [themself] can't do all the outreach.” He added that a Tribal Liaison had been previously combined with the Director of Legislative Relations, but had become its own role with the hiring of Liaison Marla Conwell, and would help them understand “how our state policies, or agency policies” were impacting Tribal nations.
    • Postman perceived outreach by WSLCB to stakeholder groups to be “extensive” and complimented Smith and Hoffman for their work in that area, noting “we've done more in the last year to hear from people who are not licensees, than ever before.” He viewed their equity program efforts to have accomplished “much outreach and discussion with people who are not part of the system…and I would say on par with what any state agency’s been able to do when you're forming a program.”