WA Governor - Bill Action
(May 16, 2023)

Here are some observations from the Tuesday May 16th Washington State Office of the Governor (WA Governor) Bill Action.

My top 3 takeaways:

• The presence of legacy environmental pesticides in cannabis products produced or processed near the City of Brewster had emerged as a concern for the Washington State Liquor and Cannabis Board (WSLCB) and other agency leaders late in the biennium budget process (Information Set).
  • On April 6th, WSLCB Director of Enforcement and Education Chandra Wax sent an announcement to all licensees titled “Notice of Pesticide Contamination in Region of Okanogan County” reporting that testing done by staff of the Washington State Department of Agriculture (WSDA) revealed the presence of dichlorodiphenyldichloroethylene (DDE)---a remnant compound of the banned pesticide Dichlorodiphenyltrichloroethane (DDT)---above the default action levels in rule of 0.1 parts per million (ppm). The bulletin noted how “18 licensees in the geographical area” within Okanogan County would be placed under an administrative hold while officials tested products for DDE above 0.1ppm, potentially prompting product recalls.
  • On April 11th, WSLCB staff and board members heard how emergency rulemaking language on the matter was ready, and were promised additional information at the April 12th board meeting. However, at that meeting, board members announced they had switched course and wouldn’t move the rules ahead. Wax shared more information on what agency personnel had been doing to investigate the matter and, following the board meeting, leadership talked about the situation during the April 12th Executive Management Team meeting, specifically the need to fund the WSDA testing lab which was excluded from one version of the operating budget.
  • On April 14th, WSLCB, WSDA, and DOE representatives met with affected licensees, testing laboratories, legislators, and trade associations. After meeting with stakeholder groups, agency staff published an update standing by their actions to that point and reiterating that no new rules on the subject were planned.
  • By April 18th, agency officials confirmed that lawmakers would approve funding for WSDA testing and for a dedicated remediation effort. The 2023 operating budget legislation was expected to include cannabis businesses in a soil and water cleanup effort for “agricultural producers whose products test higher than 0.1 parts per million for DDT and DDT remnants.” The board and Wax also talked about test results, stakeholder meetings, pathways to compliance, the communications plan, and “continuing to work on investigations and partner with folks as we look at potential solutions.”
  • On May 2nd, WSLCB officials noted that a rulemaking petition had been submitted requesting the definition of specific action levels for “additional pesticides that the WSDA test for.” Staff indicated that options for the petition would be presented for board action on June 7th.
  • By May 10th, Licensing staff mentioned providing information to impacted licensees “who may want to relocate,” and planned to “expedite those applications for a change of location.” Additionally, an Enforcement Captain brought up how complaints had “increased for the Cannabis Unit and that was a direct result of the DDE pesticide testing complaints that we received and are currently working through.”
    • The same day, cannabis testing laboratory Confidence Analytics announced they were the first lab to develop standard methods to test for the presence of DDx compounds in cannabis products in Washington state.

• Although rarely containing cannabis-specific spending, the 2023 capital budget signed by Governor Jay Inslee took on increased significance after millions were allotted for remediation of soil contaminated with legacy pesticides (audio - 5m, video).
  • SB 5200, “Concerning the capital budget,” was heard by the Washington State Senate Ways and Means Committee (WA Senate WM) on January 12th and March 20th, with a substitute version recommended on March 22nd, before being passed as an engrossed substitute unanimously by Senators on March 24th. In the other chamber, SB 5200 was amended by members on the floor and passed unanimously on April 21st.
  • Section 3038 provided $5M from the Model Toxics Control Capital Account for a DOE pilot program “located in Okanogan county to remediate soil contaminated with dichlorodiphenyltrichloroethane (DDT) and DDT remnants…subject to the following conditions and limitations
    • (1) The appropriation in this section is provided solely for the department to implement a pilot program located in Okanogan county to remediate soil contaminated with dichlorodiphenyltrichloroethane (DDT) and DDT remnants, if the liquor and cannabis board determines the soil in the pilot program location produced cannabis products that meet or exceed state action levels under WAC 314-55-108. If the board determines that soil in the pilot program location does not produce cannabis products that meet or exceed these levels, the amount provided in this section shall lapse. 
    • (2) If the department implements the pilot program under subsection (1) of this section, it shall provide a status report on remediation efforts to the legislature by December 1, 2023, and a final report on the outcome of its remediation efforts and any recommendations related to the implementation of a statewide remediation program for DDT-contaminated soil by December 1, 2024. 
    • (3) The department shall coordinate implementation of the pilot program created under this section with the Washington department of agriculture and the liquor and cannabis board.”
    • Find out about the account which funds the pilot program from a 2013 report compiled by DOE staff: Model Toxics Control Act Regulation and Statute. The program helps authorities regulate and fund environmental cleanup in Washington state through a hazardous substances tax.
      • Read DOE policies and guidance for site cleanup as well as projects already funded through the program according to a ten-year-plan for the department listed with the Washington State Office of Financial Management.
    • Learn more from studies on environmental remediation of DDT, DDE, and Dichlorodiphenyldichloroethane (DDD):
      • The Bioremediation and Phytoremediation of Pesticide-contaminated sites (2000)
      • Remediation of DDT and Its Metabolites in Contaminated Sediment (2015)
      • Bioremediation of Agricultural Soils Polluted with Pesticides: A Review (2021)
      • Environmental factors influencing DDT–DDE spatial distribution in an agricultural drainage system determined by using machine learning techniques (2023)
    • The Governor remarked that the capital budget would help the State in various ways, including environmental priorities, “boosting behavioral health services and strengthening public safety,” and helping state agencies hire and retain workers. Among the attendees of the event were WA Senate WM Capital Budget Vice Chair Senator Mark Mullet and Capital Budget Ranking Minority Member Senator Mark Schoesler.

• Though not explicitly mentioned during the signing, Inslee made a partial veto of the capital budget that had no effect on section 3038 and the budgets would take effect on July 1, 2023—even as more voluntary cannabis recalls related to pesticides were announced.
  • As explained in the Guide to Lawmaking: “Actual line-item vetoes are only permitted in the budget. In order for the Legislature to override a veto, a two-thirds majority vote is necessary in both chambers.” Inslee’s partial veto of the budget had no impact on the remediation project.
  • As a July 2019 document on the budget process noted, the biennial budgets take effect at the beginning of the fiscal year on July 1st.
  • The following day, May 17th, WSLCB posted four new recalls which had been made in addition to five others announced in early April. All four licensed producers had “certain products” recalled due to “Pesticide action levels above WSLCB requirements,” though the pesticide wasn’t disclosed. None of the facilities facing recalls were located in Okanogan County, which was specified in the pilot program language, and instead were from cities located in Snohomish, Skagit, and Whatcom Counties.
    • May 2nd - Mt. Baker Homegrown, LLC
    • May 5th - Banano Buds
      • The type of recall for this company was left blank, while all others were licensee initiated recalls, also termed a “voluntary recall” by WSLCB staff.
    • May 9th - Mutual Benefit Agriculture, LLC and WAWD, LLC
    • It's Cannabis Observer's understanding that extracts from some of the usable cannabis products impacted by the DDx administrative hold were sold to other licensees prior to the WSLCB Enforcement investigation. It's possible that these licensees which have voluntarily implemented recalls may have purchased those extracts at wholesale for incorporation into their own products. If true, then these vendors may counterintuitively be some of the more responsible actors in the sector taking action to protect their customers despite the potential for impacts to their brand reputations. It's our understanding that the actual distribution of extracts which concentrate DDx contaminants is more widespread than has thus far been publicly acknowledged by WSLCB staff.

Here are some observations from the Tuesday May 16th Washington State Office of the Governor (WA Governor) Bill Action.

My 17 takeaways:

• Governor Jay Inslee signed the biennial operating budget after praising lawmakers’ balance of important priorities and commitments for the State.
  • SB 5187, “Making 2023-2025 fiscal biennium operating appropriations,” was heard by the Washington State Senate Ways and Means Committee (WA Senate WM) on January 10th and March 24th, with a proposed substitute recommended on March 27th. That version was amended to fund one year of “laboratory analysis of pesticides in cannabis that was previously funded through the dedicated cannabis account” and passed by the Senate on March 29th.
    • The amendment would fund the interagency testing agreement which identified several cannabis product tests which showed amounts of legacy pesticide dichlorodiphenyldichloroethylene (DDE) above the action level set in rule.
  • Once in the Washington State House of Representatives (WA House), SB 5187 was immediately added to the chamber’s second reading calendar, and members passed it on April 3rd after incorporating a striking amendment. When the Senate opposed the House changes on April 13th, budget committee leaders were appointed to a conference committee and on April 22nd they released a final version of the operating budget approved by the House and Senate on April 23rd.
  • Prior to signing, Inslee offered remarks on how the operating budget reflected legislators’ prioritization of “investments in our people. These are investments in housing, and climate change, efforts in mental health. Our state's going to be better because of this; people are going to have more opportunities.” He noted “the numbers are large, but the individual achievement is profound” for programs such as homelessness, education, and law enforcement. Inslee praised the result as a bill which “really translates into people's lives…I'm happy to sign this budget and let's thank the legislators for what I believe is their good work” (audio - 6m, video).
    • Inslee vetoed a variety of sections and subsections of the budget, but none with a direct impact on cannabis spending.
  • Among the attendees were legislators involved in the budget process:
    • Representative Steve Bergquist, Washington State House Appropriations Committee (WA House APP) Vice Chair
    • Representative Joe Fitzgibbon, WA House Democratic Majority Leader
    • Representative Mia Gregerson, WA House APP Vice Chair
    • Representative Nicole Macri, WA House APP Vice Chair
    • Senator Joe Nguyen, Assistant Majority Floor Leader and WA Senate WM member
    • Representative Timm Ormsby, WA House APP Chair

• $626,000 was budgeted from the performance audits of government account to the Washington State Joint Legislative Audit and Review Committee (JLARC) to study retail outlet density as part of social equity legislation.
  • Section 103(4) funded a study required by SB 5080, "Expanding and improving the social equity in cannabis program," for the committee to determine “whether current levels of cannabis production align with market demand and capacity, including the impact of any additional cannabis producer licenses granted under the legislation” due by June 30, 2025.

• $11,500,000 was budgeted from the judicial stabilization trust account to the Washington State Administrative Office of the Courts (WA AOC) to help local governments continue to vacate simple possession convictions, including for cannabis.
  • Section 114(13) set aside money “to assist cities with costs of complying with the State v. Blake decision that ar[o]se from the city's role in operating the city's criminal justice system, including vacating prior convictions for simple drug possession, to include cannabis and possession of paraphernalia, and certifying refunds of legal financial obligations and collections costs.” 
  • Find out more from the 2023 special session on May 16th where lawmakers passed SB 5536, “Concerning controlled substances, counterfeit substances, and legend drug possession and treatment,” in response to the court case.

• $4,341,000 was allocated from the general fund to the Washington State Office of the Attorney General (WA OAG) related to the Washington State Organized Retail Crime Task Force (WA ORC Task Force), inclusive of incidents which had impacted cannabis businesses, and also for legal support of the social equity program.
  • Section 126(15) provided $755K for fiscal year (FY) 2024, and $1,515,000 for FY 2025 from the general fund for the office “to create a centralized statewide organized retail crime task force to coordinate, investigate, and prosecute multijurisdictional retail crime.”
    • The WA ORC Task Force heard from a panel of cannabis business representatives on March 29th.
  • Section 126(19) set aside $2,071,000 from the legal services revolving fund “for implementation of Engrossed Second Substitute Senate Bill No. 5080,” for any legal counsel needed in relation to the bill.

• $7,045,000 was budgeted from the dedicated cannabis account (DCA) to the Washington State Department of Commerce (WA Commerce) for economic development and to support department programs.
  • Section 131 budgeted $3,446,000 for FY 2024 and $3,587,000 for FY 2025 for the Office of Economic Development.
  • Section 133 disbursed $5,000 for FY 2024 and $7,000 for FY 2025 as general program support.

• $597,000 was budgeted from the administrative hearings revolving account for the Washington State Office of Administrative Hearings for hearings related to the social equity program.
  • Section 136(1) appropriated the money as part of SB 5080 in anticipation of administrative hearings from applicants challenging prioritization scoring by Ponder Diversity Group.

• $66,520,000 was allocated from the DCA to the Washington State Liquor and Cannabis Board (WSLCB) for agency operations and implementing 2023 legislation; some prior budgeted amounts were modified and separate money was appropriated for the systems modernization project (SMP).
  • In section 146 the board received $13,481,000 for FY 2024 and $14,041,000 for FY2025 for general administration as part of RCW 69.50.540.
    • Subsection (2) provided $35,278,000 from the liquor revolving account for SMP, “subject to the conditions, limitations, and review requirements of section 701 of this act,” which pertained to technology investment by State agencies. A Washington State Office of the Chief Information Officer (OCIO) project dashboard for SMP indicated it began in September 2015. After delays and the loss of a vendor in 2017, the project needed more funding, including nearly $18 million in a budget request in November 2021.
  • Subsection (4) invested $42,000 a year for FY 2024 and 2025 for implementing SB 5263, “Concerning access to psilocybin services by individuals 21 years of age and older.” WSLCB staff have been required to support a pilot program and participate in some advisory groups, though Inslee vetoed some sections of the bill pertaining to WSLCB involvement when signing it on May 9th.
  • Subsection (5) allocated $250,000 for FY 2024 and $159,000 for FY 2025 to implement THC regulation legislationSB 5367, also signed into law on May 9th.
    • WSLCB staff mentioned that rulemaking to implement this law was expected to start on June 7th.
  • Subsection (6) enabled agency officials to implement changes to the social equity program described in SB 5080. In FY 2024, the agency would receive $1,527,000 from the general fund along with $2,255,000 through the DCA, and in FY 2025 they were budgeted $1,463,000 from the DCA.
  • Section 1122 reduced previously approved FY 2023 general fund spending for WSLCB from $1,612,000 to $1,277,000.

• $111,479,000 was budgeted from the DCA to the Washington State Health Care Authority (WA HCA) to administer community health centers and behavioral health programs, as well as some additional prevention spending.
  • Section 211 set aside $25,544,000 for FY 2024 and $28,936,000 for FY 2025 for medical assistance, and subsection (27) directed these funds for community health centers through standing appropriations in RCW 69.50.540(2)(e) “in lieu of general fund—state payments to community health centers for services provided to medical assistance clients.”
  • Section 215 allocated $28,498,000 for FY 2024 and $28,501,000 for FY 2025 for the WA HCA community behavioral health program.
    • Subsection (22)(a) provided $12,878,000 for both FY 2024 and FY 2025 from this appropriation for obligations in RCW 69.50.540 to fund the Healthy Youth Survey (HYS), analysis of cannabis legalization by the Washington State Institute for Public Policy, plus additional substance prevention, treatment, and health programs.
    • Subsection (115)(c) funded prevention services with $2,000,000 from the opioid abatement settlement account “that address underage drinking, cannabis and tobacco prevention, and opioid, prescription, and other drug misuse among individuals between the ages of 12 and 25.”
  • Section 1211 reduced previously approved FY 2023 DCA spending for WA HCA from $27,241,000 to $21,078,000.

• $580,000 was budgeted from the general fund to the Washington State Criminal Justice Training Commission for improved training of limited authority Washington peace officers, inclusive of some WSLCB Enforcement and Education personnel.
  • Section 218(11) invested $290,000 a year for FY 2024 and 2025 “for academy training for limited authority Washington peace officers employed by” WSLCB and other agencies.

• $24,219,000 was allocated from the DCA to the Washington State Department of Health (DOH) and another $4,966,000 from the general fund related to the patient authorization database and the Washington State Poison Center (WAPC).
  • Section 222 disbursed DCA funds, $11,863,000 for FY 2024 and $12,356,000 for FY 2025.
    • Subsection (11) invested $725,000 a year for FY 2024 and 2025 from the general fund for WAPC as a standing appropriation in RCW 69.50.540(2)(b)(i)(B).
    • Subsection (51) budgeted $2,062,000 for FY 2024 and $1,454,000 for FY 2025 through the general fund “solely for the department to complete upgrades to the medical cannabis authorization database to improve reporting functions and accessibility, and is subject to the conditions, limitations, and review requirements of section 701 of this act.”

• $2,934,000 was budgeted from the general fund to the Washington State Department of Agriculture (WSDA) to complete cannabis laboratory standards, continue pesticide testing of cannabis samples, and other funding to reduce soil contamination impacting cannabis producers.
  • Section 311(8) budgeted $842,000 for FY 2024 and $822,000 for FY 2025 related to implementation of a 2022 law on lab quality standards that established the WSDA-led Cannabis Lab Accreditation Standards Program (CLASP) to develop rules across agencies.
    • Subsection (26) was a proviso which set aside $635,000 a year for FY 2024 and 2025 for WSDA laboratory pesticide testing of cannabis samples.
  • Section 1309(27) increased previous money from the model toxics control operating account by $200,000 for FY 2023 specifically to reduce “contamination from dichlorodiphenyltrichloroethane (DDT) and DDT remnants in soil and water in Okanogan county.”

• Supplemental budget funding for the Washington State Patrol (WSP) anti-drug and gang task forces remained in place, but new funds were not appropriated for that purpose in the subsequent biennium; a smaller amount was appropriated for implementation of SB 5367.
  • Section 1401(2) budgeting $2,423,000 through the DCA for the WSP task forces was approved in March 2022 in the supplemental budget for both FY 2022 and FY 2023, and allowed WSP staff “to partner with multi-jurisdictional drug and gang task forces to detect, deter, and dismantle criminal organizations involved in criminal activity including diversion of cannabis from the legalized market and the illicit production and distribution of cannabis and cannabis-related products in Washington state.”
    • A similar provision was not included in the FY 2024 or 2025 budgets.
  • Section 402(7) provided $320,000 for FY 2024 and $68,000 for FY 2025 from the general fund “solely for implementation of Engrossed Second Substitute Senate Bill No. 5367 (products containing THC).”

• $1,211,000 was budgeted from the DCA to the Washington State Office of the Superintendent of Public Instruction along with additional money from the general fund for the building bridges dropout program.
  • Section 501(4)(g)(i) funded the Building Bridges statewide program with $593,000 in FY 2024 and $618,000 in FY 2025 to assist with programs for “dropout prevention, intervention, and reengagement programs, including the jobs for America's graduates (JAG) program, dropout prevention programs that provide student mentoring, and the building bridges statewide program. Students in the foster care system or who are homeless shall be given priority by districts offering the jobs for America's graduates program.” As well as DCA, the program was allocated $280,000 a year from the general fund.

• $716,000 was budgeted from the DCA to the University of Washington (UW) for research, with separate funding for Addictions, Drug, and Alcohol Institute (UW ADAI) staff to develop materials on “first episode psychosis and cannabis use.”
  • Section 606 disbursed $351,000 for FY 2024 and $365,000 for FY 2025 related to cannabis and public health research.
    • Subsection (61) was a proviso indicating $500,000 from the workforce education investment account would be used by UW ADAI staff “to develop resources regarding the connection between first episode psychosis and cannabis use.”
    • Find out more from an April 20th presentation on the topic by UW ADAI Research Scientist and Cannabis Education and Research Program (CERP) Director Bia Carlini.

• $386,000 was allocated from the DCA to the Washington State University (WSU) to support standing appropriations for cannabis research.
  • Section 607 featured $189,000 for FY 2024 and $197,000 for FY 2025 to support appropriations in RCW 69.50.540(2)(c)(i) for “research on the short and long-term effects of cannabis use, to include but not be limited to formal and informal methods for estimating and measuring intoxication and impairment, and for the dissemination of such research.”

• $931,472,000 was budgeted from the DCA to the Washington State Treasurer for deposit into the Basic Health Plan Trust Account and general fund, plus funding related to previous legislation on cannabis revenue.
  • Section 801 disbursed $50,472,000 for “Cannabis Excise Tax distributions pursuant to” SB 5796 which became law in 2022 and changed several standing appropriation amounts. SB 5796 further mandated study of appropriation levels by JLARC, which had scheduled one presentation on the topic for November 29th, and another to present a proposed final draft of the report on January 3rd, 2024.
  • Section 805
    • Scheduled $269,000,000 for FY 2024 and $278,000,000 for FY 2025 from the DCA to the Basic Health Plan Trust Account in accordance with RCW 69.50.540(2)(d).
    • Set up $162,000,000 for FY 2024 and $172,000,000 for FY 2025 from the DCA to the general fund.
  • Find out more from the Washington Marijuana Revenues and Health page.
  • Section 1801 reduced previously approved FY 2023 funding from DCA related to SB 5796 from $25,243,000 to $22,441,000 and section 1804 updated mentions of ‘marijuana’ to ‘cannabis’ without changing amounts appropriated.

• The session law indicated SB 5187 took immediate effect upon signing by Inslee, although the majority of appropriations would take effect at the start of July 2023.
  • This allowed supplemental changes in funding for the remainder of FY 2023, for instance WSDA funding to reduce “contamination from dichlorodiphenyltrichloroethane (DDT) and DDT remnants” in Section 1309(27), to become immediately available to that department.
  • Budgetary fiscal years in Washington State run from July 1st to June 30th, so FY 2024 money would be able to be spent starting July 1st, 2023, and the FY 2025 allocation would become available July 1st, 2024.