WA Senate LC - Committee Meeting
(January 31, 2023)

Here are some observations from the Tuesday January 31st Washington State Senate Labor and Commerce Committee (WA Senate LC) Committee Meeting.

My top 3 takeaways:

• WA Senate LC Counsel Matt Shepard-Koningsor went over a proposed substitute and five amendments to SB 5080, “Expanding and improving the social equity in cannabis program” (audio - 3m, video).
  • Based in part on recommendations from the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF), the Washington State Liquor and Cannabis Board (WSLCB) request bill to alter the social equity program was heard by committee members on January 10th. The measure would change definitions, allow for one-time fee reimbursement for any licensee submitting a social equity plan, establish a third-party contractor to review and score applications in statute, and allow WSLCB officials “to increase the number of available cannabis retailer licenses for the Program based on population data, and contains provisions regarding portability of Program licenses.”
  • Shepard-Koningsor detailed changes to SB 5080 within a proposed substitute by the bill sponsor and WA SECTF Co-Chair Senator Rebecca Saldaña which would alter the language of the bill. He then went over the effects of five amendments to the proposed substitute:
    • Includes up to 100 cannabis producer and 65 cannabis processor licenses that have been subject to forfeiture, revocation, or cancellation by the Liquor and Cannabis Board (LCB) as licenses authorized to be issued or reissued under the Social Equity in Cannabis Program (Program).
    • Removes the requirement that a social equity applicant submit a social equity plan as part of their application to be considered for a forfeited, revoked, or cancelled cannabis producer, processor, or retailer license.
    • Amends the definition of “disproportionately impacted area” to include census tracts or comparable geographic areas in the top 15th percentile in at least two of the following demographic indicators:
      • (1) the area has a high rate of people living under the federal poverty level; 
      • (2) the area has a high rate of people who did not graduate from high school; 
      • (3) the area has a high rate of unemployment; or
      • (4) the area has a high rate of people receiving public assistance.
    • Amends the definition of “social equity applicant” to include applicants who are both a socially- and economically-disadvantaged individual, as defined by the Office of Minority and Women’s Business Enterprises.
    • Specifies that, except for the process of LCB increasing the number of cannabis retailer licenses for the Program, the process for creating new cannabis retail licenses under the Uniform Controlled Substances Act remains unaltered.
  • Amendment A1 by ​​Saldaña - Extends the deadline from July 1, 2029, to July 1, 2032, after which the Liquor and Cannabis Board (LCB) may no longer issue or reissue cannabis retailer, processor, and producer licenses that were forfeited, revoked, canceled, or never issued under the Social Equity Program (Program). Authorizes LCB to issue up to 100 cannabis processor licenses under the Program rather than up to 65. Permits LCB to issue up to 52 additional cannabis retailer licenses for the Program between January 1, 2024, and July 1, 2032.
  • Amendment A2 by Senator Curtis King - Removes the [LCB]'s sole discretion to increase the number of cannabis retailer licenses for the Social Equity Program (Program) based on specified data and instead, requires the Legislature to approve any increases in cannabis retailer licenses for the Program through the passage of a bill. Limits the increases to occurring every three years between January 1, 2023, and July 1, 2032.
    • King was also a legislative appointee to WA SECTF.
  • Amendment A3 by Senator Drew MacEwen - Requires the [LCB] to assess cannabis retailer licenses based on one license per 15,000 residents statewide. Requires LCB to conduct and publish certain analyses and request the legislature increase retailer licenses if it determines new licenses should be made available. Limits expanding cannabis retailer licenses to counties that exceed one license per 10,000 residents.
  • Amendment A4 by King - Requires LCB to adopt rules ensuring any increases in the number of cannabis retailer licenses account for adequate dispersion of such licenses and whether there is a sufficient market to support new licenses.
  • Amendment A5 by King - Provides that the annual fee waiver for a license issued, reissued, or renewed under the social equity program applies until December 31, 2025, rather than December 31, 2029.

• Committee members debated and voted on amendments to a proposed substitute of the bill, including additional equity licenses with legislative approval, the formula and processes for retail license allotment, and an extended end date for the social equity program.
  • First, Saldaña moved for adoption of her proposed substitute (audio - 1m, video). She then moved to incorporate Amendment A1 into the proposed substitute, and explained the amendment “extends the date to 2032 since there's been a delay…in actually creating the social equity program.” The measure would also add more processor licenses, as well as “allows LCB to add up to…52 licenses for retail…to make sure that we have a good, reasonable amount for the social equity program” (audio - 1m, video).
    • The committee adopted the amendment without objection (audio - <1m, video). 
  • King moved for Amendment A2 to be added to the proposed substitute. He said the change brought “discretion back to the legislature for approval of any increases in cannabis retail licenses, and it also limits the increases to occur every three years” through 2032 (audio - <1m, video).
    • Saldaña considered the change a “very friendly amendment and one that improves the bill” (audio - <1m, video).
    • Amendment A2 was added to the proposed substitute by voice vote (audio - <1m, video). 
  • Next, MacEwen moved for Amendment A3 to join the revised bill language, commenting that it supported a “controlled expansion" of cannabis stores which he feared were “gonna see a lot of failures” because there were already “more per capita probably than what the demand is.” He explained his amendment as “limiting one license per 15,000 residents statewide” (audio - 1m, video).
    • State population estimates from April 2022 would indicate that one retailer per 15,000 residents would be 524 stores, with WSLCB leaders testifying that the state had 482 retailers operating on January 19th.
    • Saldaña spoke against the change, feeling the law provided both WSLCB and local governments ability to restrict licensure so that excessive "saturation is not a possibility." She was concerned the proposed allotment method would leave some equity licenses that were “not be able to be used at all”  (audio - 1m, video).
      • Analysis in a 2021 article in Politico found Washington had 6.6 cannabis retailers per 100,000 residents.
    • The committee voted not to incorporate the change (audio - <1m, video).
  • Then, King moved for his second proposal, Amendment A4, to join the proposed substitute. This change would require WSLCB “adopt rules showing that the increases in the number of cannabis retailer licenses are adequately dispersed, and that there is a sufficient market to support these new licenses” (audio - 1m, video).
    • Saldaña recognized there were “real concerns that current retailers are experiencing…around the fear of saturation” of the market. She was counting on the “goodwill of this body to make sure that the social equity program applicants can be successful,” but didn’t support the amendment’s wording. She promised to work with King and others “to make sure that we do address this issue” (audio - 1m, video).
    • Senator Derek Stanford shared his “concern around all of these licenses being over focused, and oversaturated in smaller areas, leading to both these licenses and the ones in the areas already existing having issues.” But he joined with Saldaña in opposing while also “look[ing] forward to continuing” the discussion (audio - 1m, video). 
    • The amendment wasn’t adopted by the committee (audio - <1m, video). 
  • King’s third addition to the proposed substitute, Amendment A5, was moved and then debated by members. King said limiting the fee waiver for any licensee submitting a social equity plan (SEP) through 2025 was about "trying to be fair to everybody's that there;" adding he didn’t favor of going “as far as this bill wants to take us in regards to having to pay those license fees” (audio - 1m, video).
    • Saldaña acknowledged that starting a retail operation was “very costly” but the bill itself allowed the fee waiver to be available to all cannabis businesses submitting a SEP the first time. “The way that this is set up is that we expect licenses to go out and first time applicants to become licensed owners, and throughout the ten years…each time that there's a person coming in to give them a fair chance and to have one less barrier into entry,” she said (audio - 1m, video). 
    • Senators voted not to add the amendment (audio - <1m, video). 

• After a couple of final remarks, the committee voted to recommend the amended substitute bill for passage, and sent it to the Washington State Senate Ways and Means Committee (WA Senate WM).
  • Saldaña moved for a final vote to recommend passage of the newly-changed proposed substitute before sending it to WA Senate WM for further action (audio - 1m, video). 
  • “I want to also express my concern about saturation here and the need to ensure that the new licenses are successful,” commented Vice Chair Steve Conway, indicating that “hopefully we can get this issue resolved before this bill moves out of Ways and Means” (audio - <1m, video). 
  • King gave his support to the bill on the condition that "there needs to be some….further changes made to this bill before it passes off the Senate floor” (audio - 1m, video). 
  • The proposed substitute was recommended for passage in a voice vote with MacEwen and Senator John Braun signing a report as opposed to the bill, and Senator Mark Schoesler signing without recommendation (audio - <1m, video).