WA House RSG - Committee Meeting
(February 16, 2023)

Here are some observations from the Thursday February 16th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 4 takeaways:

• Although votes on the bill were mixed, committee members advanced HB 1614, "Concerning the home cultivation of cannabis," without changes.
  • Committee Counsel Peter Clodfelter swiftly reviewed the legislation that was heard by committee members on February 2nd, along with an amendment by Co-Chair Shelley Kloba that (audio - 1m, video):
    • (1) Specifies that the production, possession, delivery, and acquisition of plants or cannabis capable of being processed into cannabis products "in compliance with this section" may not form the basis of a seizure or forfeiture action, instead of specifying that the production, possession, delivery, and acquisition of plants or cannabis capable of being processed into cannabis products "under this subsection" may not form the basis of a seizure or forfeiture action.
    • (2) Specifies that cannabis plants must be grown within a locked or secured closet, room, greenhouse, or other enclosed area that is equipped with a lock or other security device that allows access only by an authorized person. Removes proposed language that says nothing in the proposed requirements mandates how or where home-produced cannabis must be stored.
  • Kloba asked that her amendment be withdrawn (audio - <1m, video) and then called for passage of the bill, explaining that home cultivation was among the recommendations of the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF), she argued her proposal “moves us toward an evolution where we can start looking at this plant as a plant; it is legal to purchase products in the store, so it should also be legal to grow it at home with some sensible sideboards” (audio - 1m, video).
  • Representative Greg Cheney stated that because Kloba withdrew her amendment, “I'm gonna change” a vote recommending passage “to a ‘no without recommendation,’ and hopefully we can work with the sponsor around some of the security issues if it gets to the floor” (audio - 1m, video).
  • In the vote on HB 1614, Ranking Minority Member Kelly Chambers and Assistant Ranking Member Eric Robertson voted not to pass the bill, and Cheney and Representative Jim Walsh voted without recommendation. With approval by the Democratic majority and Representative Kevin Waters, the bill was passed by the committee.
    • Though the destination of the bill wasn’t named directly, the previous home grow bill received a fiscal hearing by the Washington State House Appropriations Committee, and the fiscal note suggested costs well over the $50,000 for fiscal hearing.

• A divided vote along party lines on HB 1650, "Requiring voter approval for local government prohibitions on cannabis businesses," resulted in a narrow recommendation to pass the proposal.
  • After a staff briefing on the bill to alter policy around local prohibitions on cannabis businesses which the committee heard on January 31st, sponsor and Co-Chair Sharon Wylie described her leadership on the bill “even though I have a long history of working for local government and being heavily in favor of local control…we have an alcohol system where communities can vote to opt out of serving and selling alcohol.” She felt since cannabis retailers didn’t create “problems that a lot of people have been worried about,” letting voters decide if their city or county maintained a ban or moratorium could diminish the illegal cannabis market, allow “more opportunity for unsaturated areas for equity licenses, and may be able to reflect their community more accurately” (audio - 2m, video).
  • Walsh shared that he would be opposing the legislation, acknowledging that "matters of preemption are always difficult" but his caucus “still stand by local control in this matter,” and a vote on what local governments decided was "prescriptive.” He added that members of his caucus “feel that the time is not right, and that local jurisdiction should be able to operate in their representative manner to set policy for whether they want this industry in their communities or not” (audio - 2m, video).
  • Representative Kristine Reeves urged support for HB 1650, referring to a local ban in Federal Way that had constituents “struggling with the disadvantages that are presented to local communities like mine when our leadership in our community doesn't always trust the voters to make decisions for themselves.” She equated this to a continuation of “disparate harms of the War on Drugs. We continue to deal with the disparate impact of a lack of generational wealth in our community, and I think this is really just not about preemption. It's about giving voters back their voice” (audio - 1m, video).
    • City officials in Federal Way banned cannabis businesses in 2015, and a  2019 advisory vote supported the restriction.
  • Robertson explained his ‘no’ vote on the bill as a concern of local government preemption, commenting that with alcohol policies “communities can vote on it, but that's at the discretion of the elected local officials. We here today are telling all of our city council members, and all of our mayors that we know better for their community.” He called this approach “preemption by any standard” (audio - 1m, video).
  • The bill was passed along party lines, with only the Democratic committee members recommending passage, and was expected to go to the Washington State House Rules Committee (WA House RUL) for further action.

• Three lawmakers voted against HB 1822, “Concerning complimentary products provided by short-term rental operators to guests,” but most of the committee backed the bill moving forward.
  • Heard by committee members two days earlier, Clodfelter pointed out an amendment offered by Representative Tina Orwall would redirect “money received from the new permit…to the domestic violence prevention account where it could be used for domestic violence services for victims of domestic violence, for prevention and intervention services for children who have been exposed to domestic violence; and outreach and education efforts by community-based domestic violence programs” (audio - 1m, video).
  • Orwall stated that she’d presented her amendment to primary sponsor Representative Melanie Morgan as a way to support domestic violence survivors, feeling “this would be a good mechanism to help a much-needed area of our state” (audio - <1m, video).
  • Cheney appreciated the need for programs to help domestic violence survivors, “however, it doesn't seem that there is a nexus between this bill and victims of domestic violence. We would suggest that a better alternative would be for substance abuse projects and programs,” he added, explaining expected opposition to the bill within his caucus (audio - 1m, video).
  • After the committee voted to adopt the Orwall amendment, Morgan laid out her justifications for HB 1822, indicating it was about (audio - 1m, video):
    • “Parity, and making sure that all of our regulated substances that people who wish to use those substance have the same access.”
    • “Tourism, and making sure that people who visit our state, or those who in our state that'll go to…short-term rentals have the same access to cannabis as they do with liquor.”
    • “Making sure that our current…short-term rental business owners know that they are not breaking the law.”
  • Morgan indicated, “I do look forward to working on some more amendments and making sure that we're practicing safety and security and making sure that the fees are going to the proper account,” she commented (audio - 1m, video).
  • Cheney reiterated a view that “substance abuse programs” were a more appropriate recipient of any fee revenue, but also voiced concerns that the permits would cost more for WSLCB to administer than they’d bring in, and that most short-term rentals were non-smoking. He then added that he was troubled “about the potency of the cannabis that may be left at the Airbnb rental side as well as the size of serving,” unsure “what exactly Airbnb operators are getting into” by offering pre-rolled cannabis to guests (audio - 2m, video).
    • Airbnb policy states that with regards to “Possession and personal consumption of cannabis: In locations where it is legal and does not violate any house rules, adults may consume cannabis,” but adds that this doesn’t allow hosts to “sell, gift, traffic, or distribute drugs including cannabis, even if it is legal to do so in your area.”
    • Written testimony from Ramsey Doudar, Patients and Users for Reasonable Policy (PURP) Founder, expressed “doubt that this bill would inspire a change in this private companyʼs policy.”
  • Orwall reported that she “look[ed] forward to working with the sponsor because I do share some of the concerns that have been voiced about how this is distributed [and] labeled” (audio - <1m, video).
  • The committee voted to recommend adoption of HB 1822, with the exceptions of Chambers, Robertson, and Cheney, sending it to Washington State Senate Ways and Means Committee (WA Senate WM).

• HB 1790, “Expanding and improving the social equity in cannabis program,” drew only supportive public testimony as a "remedy for past wrongs," as well as one ‘other’ comment presenting concerns, as lawmakers raised questions throughout the hearing.
  • Another bill based on WSLCB social equity request legislation, SB 5080, was heard by the WA Senate WM on February 13th.
  • Clodfelter briefed the group from the bill analysis and the fiscal note (audio - 3m, video):
    • Modifies the Cannabis Social Equity Program (Program) including: (1) extending the Program's expiration; (2) adding cannabis producer and processor licenses to the Program; (3) authorizing additional cannabis retail licenses to be issued through the Program; (4) requiring a third-party contractor to score applicants; and (5) amending definitions.
    • Authorizes licenses issued through the Program to be initially located in any city, town, or county that allows cannabis retail or processing business activities at the proposed location.
    • Encourages all cannabis licensees to submit a social equity plan and provides a one-time reimbursement for the annual cost of a cannabis license for licensees submitting a plan.
    • Waives annual license fees for licensees in the Program through December 31, 2029.
    • Fiscal estimates by staff of the Washington State Office of the Attorney General (WA OAG) and Office of Administrative Hearingspredicted the equal amounts of cash receipts—$2,280,000—as expenditures for fiscal years (FY) 2023-25, and continuing receipts and costs of $86,000 cancelling each other out. Revenue to the Washington State Liquor and Cannabis Board (WSLCB) was indeterminate, but costs were projected to be:
      • FY 2023-25 - $4,959,656
      • FY 2025-27 - $2,326,924
      • FY 2027-29 - $2,308,924
    • Chambers inquired about the prospective population data being used for assessing a need for additional equity retail licenses (audio - 1m, video).
  • 47 individuals registered their support, 24 individuals registered their opposition, and three individuals indicated a position of ‘other’ on the bill (testifying, not testifying).
  • Representative Debra Entenman, legislative appointee to the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF), said the legislation "will lead us to a remedy from past wrongs called the War on Drugs.” She called equity programs a “tool” to "undo unfair activities" that had been and in some cases continued to be government policy. Policing "had a disproportionate impact on Black and Brown communities,” yet, “many large communities use some sort of recreational drugs” (audio - 4m, video).
    • Following cannabis legalization, Entenman observed there were “few to no Black or Brown retail cannabis licenses that have been issued,” contrasting this with medical cannabis dispensaries before legalization that included an “adequate number of distributors and licensures who were Black and Brown people. But as we've moved to the retail license programs, they were left out.”
      • Prior to legal cannabis retail, some dispensaries operated with local business licenses, but no state-level medical cannabis licensure was implemented before officials merged the adult use and medical cannabis markets in 2016. By that point, local authorities shut down many dispensaries as media reports alleged hundreds of locations operated without licensure or oversight.
    • Entenman planned to let others explain how that had occurred, but “I can just tell you about the outcome. The outcome is Black and Brown people were not able to have cannabis licenses, very few women have cannabis licenses.” Calling this “unfair,” she saw the bill as policy “that is fair, no, everyone is not happy with this bill….but what we hope to do is to have a remedy for past wrongs and as we move forward have a fairer, distribution of resources, and support, and retail cannabis licenses” as one way of “building generational wealth.”
    • Walsh wanted to know "how will this additional program be implemented in an effective way." Entenman answered that the WSLCB licensing process had denied licenses to qualified applicants based on “some unfair practices that have gone on and been admitted to” by the board and what WA SECTF had been established to address. She summed up the bill as “putting some guide rails on [WSLCB] and we are trying to hold people accountable to simply make the process fair for those who would like to compete” (audio - 1m, video).
    • Morgan, a former WA SECTF Co-Chair, asked Entenman “would you say it's true that when people of color, especially Black African Americans, finally get access and pathways to something that we were always shut out of, that we are expected to hurry up overnight, and get on board and be able to participate at a level that…other communities have had ample time, years to perfect?” Entenman agreed with that sentiment, remarking that the federal prohibition on cannabis meant “people who were…able to receive loans, or have generational wealth that they can use to invest in these businesses have had an easier time in starting retail” stores (audio - 1m, video).
    • Kloba mentioned the histories of banking and lending discriminationbased on race, seeing “a lot of venture capital” available to cannabis startups, she wondered “do you think it would be helpful if there was removal of the in-state requirement for folks who invest in these types of business[es], would that be helpful or harmful?” Entenman responded that she considered it harmful to have “anyone from outside of the state coming in to invest in social equity licenses when we have people here who are ready and willing to invest,” and that remaining financial barriers wouldn’t be remedied through venture capital from outside the state (audio - 2m, video).
      • Legislation to allow ownership of cannabis licenses by those outside the state had been considered by the committee on January 23rd. The companion bill, SB 5377, was scheduled for a public hearing by the Washington State Senate Ways and Means Committee on February 20th.
    • Robertson had heard there’d been “practices at the LCB that were targeted to minority communities, and eliminat[ed] them from the process. So, if you could share with me exactly what those are…and how does this legislation change” those practices. Entenman referred to dispensary owners “following all of the rules” for medical cannabis, and that WSLCB leaders had responded to those business owners “strong with enforcement…and not as strong with education.” She next mentioned “evidence” that dispensary owners were “sent a notice that said you don't need to rush to apply for a retail license, and many of them made the assumption that that meant that they were going to be grandfathered in because they were already in the business, and they were doing well.” However, Entenman argued the “cannabis licenses that were available were quickly picked up and the folks who were in the medical business were left out of the game, and most of the folks who were in the medical business were people of color” (audio - 2m, video).
    • Reeves asked if WSLCB was still “rooted in a law enforcement culture, and” whether agency leaders continued to have “operated from an enforcement / prevention culture rather than an access / equity culture?” Entenman concurred with her argument (audio - 1m, video).
    • Chambers inquired about required social equity plans for licensees, “wondering if the goals are defined somewhere; is it a metric that can be measured and how you know that the goal has been met.” Entenman noted the criteria for social equity plans were defined in statute”  (audio - 1m, video).
      • The definition states it “means a plan that addresses at least some of the elements outlined in this subsection (6)(d), along with any additional plan components or requirements approved by the board following consultation with [WA SECTF] in RCW 69.50.336. The plan may include:
        • (i) A statement that the social equity applicant qualifies as a social equity applicant and intends to own at least fifty-one percent of the proposed cannabis retail business or applicants representing at least fifty-one percent of the ownership of the proposed business qualify as social equity applicants;
        • (ii) A description of how issuing a cannabis retail license to the social equity applicant will meet social equity goals;
        • (iii) The social equity applicant's personal or family history with the criminal justice system including any offenses involving cannabis;
        • (iv) The composition of the workforce the social equity applicant intends to hire;
        • (v) Neighborhood characteristics of the location where the social equity applicant intends to operate, focusing especially on disproportionately impacted areas; and
        • (vi) Business plans involving partnerships or assistance to organizations or residents with connection to populations with a history of high rates of enforcement of cannabis prohibition.”
  • Paula Sardinas, Washington Build Back Black Alliance (WBBA) President and “former co-chair of the social equity task force,” testified that in developing cannabis policy, “absent often is the conversations about equity and making whole the disproportionately impacted community whose lives and neighborhoods were decimated by the War on Drugs.” She termed HB 1790 an “economic development tool that will lift communities out of poverty and we know when the black community does well, all the other communities do better.” Sardinas argued that under social equity policies in other states, “revenues generated by social equity stores take care of issues like food insecurity; affordable housing. They donate to your Boys and Girls Clubs and your YMCA, that house those children whose parents are currently incarcerated due to the unfairsentencingdisparities.” Sardinas felt the bill “seeks to build upon the incredible work done…and propels us forward in the right direction” (audio - 2m, video).
    • Chambers asked what Sardinas thought about sending more cannabis revenues to local governments “as a way to incentivize where new licensees could open because…some cities have had tremendous population growth and have indicated that they would like to raise that cap on the number of licenses that they have.” Sardinas felt this was a “wonderful idea…if we want to really have equity we have to also look at our rural communities” and “when you add those dollars and increase that incentive…it can help some of those communities today that have a prohibition because they don't receive those cannabis dollars to lift their bans and moratoriums” (audio - 1m, video).
      • WSLCB staff who looked into this approach in 2021 found few local governments receptive to ending their policies for equity licensees.
      • Legislation to increase cannabis revenue distributions to local governments was proposed on January 16th, but not given a policy hearing.
    • Reeves asked Sardinas for input on convincing reluctant local officials to end prohibitions and help people who “still find barriers at the local level from being able to realize that social equity?” Sardinas favored lobbying municipal governments while respecting local control over zoning and businesses, predicting through this “advocating we're going to see across the state bans and moratoriums being lifted because the population is changing, communities are changing, they're becoming more diverse” (audio - 3m, video).
  • Additional favorable testimony on HB 1790 was offered by:
    • WSLCB Board Member Ollie Garrett, a WA SECTF appointee, who indicated that a lack of licensing equity language in the original legalization campaign coupled with "fierce competition" for cannabis licensing had resulted in lagging racial diversity of licensed holders even as racial minorities endured disproportionate enforcement of cannabis laws (audio - 5m, video).
    • Black Excellence in Cannabis (BEC) Co-Founder Peter Manning, Vice President Mike Asai, and Executive Secretary Ahmed King spoke in favor of the bill, feeling leadership at WSLCB was "heading in the right direction."
      • Reeves wanted to know “does this bill…get at fixing the cultural aspects of an agency that is not working for everybody, and if so, can you describe for me how?” Asai stated that because the bill added to the licenses available to equity applicants it would help beyond “licenses that have been” already allocated. Manning explained that he had more confidence in the current leadership at WSLCB. Having met with them, he felt they were “sincere in what they're doing, and I think they want to make this work” (audio - 2m, video).
    • Albert Sardinas, WBBA and FMS Global Strategies, LLC Vice President of Public Policy & Community Engagement (audio - 2m, video).
  • Sheley Anderson, Craft Cannabis Coalition (CCC) Deputy Director, provided a position of ‘other’ on the legislation, commenting that there were “a few more pieces that our members share concerns with" in the bill, though she thanked Entenman for including senate bill language requiring legislative approval of additional cannabis retail stores. But the group’s members were still troubled by "market concentration," she said, and had “been receiving concerning information related to the scoring rubric…we strongly feel that 44 licenses [have] yet to distribute in their existing social equity program, they need a chance to be awarded to prospective applicants” and examine if the program worked “to increase Black and Brown retail ownership in the cannabis industry?” Anderson hoped that Entenman would continue to work with CCC members on the topic (audio - 2m, video).
    • A 45th license was added to the list on February 16th, the first listed in Skagit County.
  • In order for HB 1790 to continue advancing during the 2023 session, the bill would have to be passed the day after the hearing, February 17th. At time of publication, WA House RSG was not scheduled to meet that day.
    • Legislation can be declared "necessary to implement budgets" (NTIB), an informal procedure leadership can exercise around any bill with a fiscal impact. The criteria for NTIB status and the decision making around the designation hasn’t been set in law or rule, allowing for a bypass of the cutoff calendar which is agreed to by both chambers through the legislative process.