WSLCB - Board Caucus
(June 9, 2020)

Here are some observations from the Tuesday June 9th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• The Board and agency leadership discussed the WSLCB’s emerging plans for implementation of HB 2870’s marijuana social equity task force and program.
  • Board Member Ollie Garrett last brought up HB 2870 at the May 26th board caucus. The bill, signed into law on March 31st, initiated a task force “to make recommendations to the board including but not limited to establishing a social equity program for the issuance and reissuance of existing retail marijuana licenses, and to advise the governor and the legislature on policies that will facilitate development of a marijuana social equity program.”
  • Garrett explained that she’d been working with Director Rick Garza and Deputy Director Megan Duffy on “the social equity bill and the LCB, the perception of the LCB, and things around what the LCB could be doing.” She said that they’d reached some “decisions and recommendations on things that we would like to do” and asked agency staff to elaborate (audio - 11m).
  • Garza offered his perspective that “within the discussions on that bill” [Washington State] Commission on African American Affairs (CAAA) Chairman Will Hausa and Commissioner Paula Sardinas “shared throughout that process with us that there was considerable concern of communities of color” around the “process that we use for licensure.” The CAAA members communicated that “there were issues that we needed to go out into the community and speak with them about.” Garza explained that he was familiar with “the level of mistrust” from past applicants and public testimony on HB 2870. 
  • After the legislative session, Garrett, Garza, Duffy, and Director of Legislative Relations Chris Thompson started talks on how to have “meetings in our communities around the state...that’s an important thing to do, and it might be lost or difficult to do in a virtual situation.” He reported that agency staff, Garrett, and CAAA members had been talking remotely “every two weeks for the last couple months.”
  • Garza noted that implicit bias training provided to “all of our employees” in 2019 by Caprice Hollins of Cultures Connecting had been “well received by the agency.” Based on this experience, WSLCB re-hired Hollins to help “facilitate these [community] discussions” before and during the task force’s work. He said that Hollins would be arranging “five or six meetings statewide” as permitted by the phased reopening of public areas in Washington due to COVID-19, adding that phase III permitted gatherings of “50 or fewer.” Garrett pointed out that the agency planned to consider guidance from the Hillard Heintze independent enforcement report and seek public feedback on equity in the alcohol marketplace as well as cannabis.
  • Garza also hoped to utilize public feedback to enhance WSLCB’s “diversity, equity, inclusion” (DEI) training. “We find ourselves in difficult times as a state, a country, with respect to, as you all know, race relations” he remarked, and Garza intended “to make sure that we provide the training and education that’s necessary to make sure...we always treat everyone both inside the agency and our stakeholders that we deal with, with respect and courtesy.” Garrett said the agency’s outreach would be “in conjunction” with Sardinas’, and that she wanted WSLCB staff at the events “listening and hearing what the community is saying.”
  • Garza noted that there was “great funding for providing technical assistance” to prospective applicants.
    • The Washington State Department of Commerce (COM) received $1,100,000 as a new annual appropriation from the Dedicated Marijuana Account (DMA) in section 916(1)(i) of the supplemental operating budget “to fund the marijuana social equity technical assistance competitive grant program.”
    • The biennium operating budget allotted $348,000 to WSLCB in section 140(13) from the DMA for fiscal year (FY) 2021 to implement HB 2870, over $20,000 more than the agency asked for in the bill’s final fiscal note prior to passage.
    • A final final fiscal note was added on March 23rd following the bill’s passage with revised costs for the WSLCB, the Office of the Attorney General (OAG), and the Governor’s Office. The latter two offices incurred new expenditures for task force responsibilities.
  • Garza said the agency would be involved in the task force, and had 34 “idle” licenses ready for distribution once the task force made “recommendations on what that [social equity] program would look like.”
  • The Marijuana Social Equity Task Force was defined to include the following members:
    • Two senators, one from each caucus, selected by the President of the Senate, Lieutenant Governor Cyris Habib, including:
      • Senator Rebecca Saldaña, Deputy Majority Leader
    • Two representatives, one from each caucus, selected by Speaker of the House Laurie Jinkins, including:
      • Representative Kelly Chambers, Assistant Minority Whip
    • In addition to lawmakers, Habib and Jinkins “shall jointly appoint: (i) One member from each of the following:”
      • (A) The commission on African American affairs;
      • (B) The commission on Hispanic affairs;
      • (C) The governor's office of Indian affairs;
      • (D) An organization representing the African American community;
      • (E) An organization representing the Latinx community;
      • (F) A labor organization involved in the marijuana industry;
      • (G) the liquor and cannabis board;
        • Garrett was formally designated to the task force on behalf of WSLCB at the April 28th Board Caucus, but may still require approval from the leader of each chamber.
      • (H) The department of commerce;
      • (I) The office of the attorney general; and
      • (J) The association of Washington cities;”
    • To represent the cannabis industry, Habib and Jinkins “shall jointly appoint:
      • (ii) Two members that currently hold a marijuana retail license; and
      • (iii) Two members that currently hold a producer or processor license or both.”
      • Cannabis Observer previously reported that “one of four industry representatives may be assigned, but we have not been able to confirm whom.”
  • Staffing for the task force would be provided by the Governor’s Interagency Council on Health Disparities which is in turn staffed by the Washington State Board of Health (SBOH).
  • The task force was mandated by law to have its first meeting by July 1st. However, logistical challenges and the lack of designated members would make the deadline difficult to meet absent swift action by Habib and Jinkins.

• Policy and Rules Manager Kathy Hoffman shared an update and projected new rulemaking milestones for the coming months.
  • Hoffman claimed “not a whole lot has changed since” the last rule review on May 26th and board action at the May 27th board meeting (audio - <1m).
  • Quality Control (QC) Testing and Product Requirements (WSR 20-03-176, audio - 1m). Hoffman told the group that staff had received “about two comments” in writing. However, she anticipated more feedback “as we get closer to the [public] hearing date” on July 8th.
  • True Party of Interest (TPI, WSR 18-22-054, audio - 1m). Hoffman said she was curating comments from the project’s May 20th listen and learn forum and expected to present a CR-102 with proposed rule changes on June 24th, followed by a public hearing on August 5th. Though the rulemaking project didn’t meet requirements which would necessitate a significant analysis, Hoffman stated “because we are making some significant policy changes by way of those rules it seems appropriate to do that.”
  • Voluntary Compliance Program (VCP, WSR 19-15-074, audio - 1m). Hoffman said staff were meeting internally to review comments from the May 28th listen and learn forum. She claimed her timeline was a bit “ambitious,” but predicted she’d have a CR-102 to present on June 24th, with a public hearing on August 4th. She felt the agency was “pretty close to being done with that package.”
  • Incremental Expansion of Tier 1 Canopy (WSR 20-01-171, audio - 1m). Policy and Rules Coordinator Casey Schaufler was tasked with organizing listen and learn sessions on yet to be released draft revisions to Producer rules in WAC 314-55-075, one on June 23rd and a second on June 30th. Hoffman asserted that staff were “still tentative on July 22nd” for bringing forward a CR-102 for the board’s approval, “but we’ll know more about that after the listen and learn sessions.” She expected the agency would send an announcement about the forums “in the coming week.”
  • Cannabis Retail Title Certificates (WSR 18-09-117, audio - 1m). Hoffman reported that Schaufler was organizing the rulemaking project and “folding [in] the elements of [SB] 6206” which was signed into law on March 25th.
  • Emergency Rules (audio - <1m). Staff continued to monitor the agency’s emergency rules on vapor products as well as the Governor’s proclamations around the coronavirus pertaining to the agency.
    • The State Board of Health (SBOH) scheduled a board meeting for the morning of Wednesday June 10th where they planned to consider a third iteration of their existing emergency rule banning “the sale of vapor products containing vitamin E acetate.” The SBOH approved initiation of a formal rulemaking project to more permanently implement the prohibition at their March meeting.
  • HB 2826 Implementation (audio - 1m). Hoffman first mentioned the implementation of HB 2826 to encode the agency’s new cannabis regulatory authorities on April 14th . She said staff intended to provide a CR-101 for the board’s consideration on July 8th. Having previously not expected to move forward on the rulemaking project until August, Hoffman and Board Chair Jane Rushford credited her new staff members for enhancing the agency’s rulemaking efficiency.

• The Board and agency leadership briefly discussed WSLCB operations through the pandemic fallout, an upcoming Regulator’s Roundtable, and the Marijuana Odor Task Force.
  • Duffy provided an update on internal agency operations including her work on a draft "re-entry plan for the agency” "loosely tied" to the Governor's advice on phased reopening. She summarized the Governor’s advice to executive agencies as: “if your folks are at home and can fully perform the functions of their job at home they should continue to telework.” During the closure of WSLCB headquarters, Duffy said “just a few” people at the agency had needed to come in “a day or two a week to perform” tasks which “largely relate to incoming mail.” The WSLCB management team would “have a discussion about the re-entry plan here in the near term” and then share it with the entire Board (audio - 6m).
  • Turning to the agency budget, Duffy articulated "a lot of challenges" for the rest of the biennium---and next---owing to budget cuts due to COVID-19. She said the next Washington State Economic and Revenue Forecast Council (ERFC) forecast “related to revenue” would arrive on June 17th. Following the forecast, Duffy anticipated that the Washington State Office of Financial Management (OFM) would “follow up with instructions to agencies with regard to how we need to approach planning for [fiscal year (FY)] 2023” which she expected would “look like reduced budgets.” She reported that the Office of Governor Jay Inslee had contacted “specific agencies” to ask them to undertake a “15% savings exercise.” While WSLCB was not on that list, the agency “produced savings and submitted those to OFM.” Following OFM’s response, the WSLCB would begin budget planning for FY 2021-23.
    • ERFC’s preliminary forecast for June 2020 predicted a 5.8% decline in Washington’s gross domestic product (GDP) for the year, revised from a February prediction of 1.9% growth due largely to the impacts of the State’s response to COVID-19.
    • At the ERFC’s Economic Review Meeting on June 2nd, the Council’s Executive Summary stated “Washington’s unemployment rate soared to 15.4% in April from 5.1% in March and 3.8% in February. The April rate was an all-time high in the series that dates back to 1976. The February unemployment rate was an all-time low.”
  • Turning to WSLCB’s system modernization project (SMP) which Duffy last spoke about on April 28th, she said the project’s “kickoff” meeting with the contracted vendor Slalom would occur later that day. She felt the agency was “in a good spot” and looked forward to “getting something in place.”
    • WSLCB announced the contract on Tuesday June 4th, stating that the company would “implement a new application to replace WSLCB’s aging, legacy licensing and enforcement technology systems, as well as updating the agency’s business processes and operations.”
    • The SMP was initiated in 2014 and at publication time was budgeted $18.8M. Learn more at the Washington State Office of the Chief Information Officer’s Project Dashboard.
  • During his update, Garza explained that the cannabis Regulators Roundtable would have their first virtual conference in August. He said organizers intended to “spread the conference over five days” with roughly 10 to 12 sessions in “two-hour segment[s] each day” (audio - 6m).
    • According to comments from Rushford on February 25th, the event had been originally planned for June 1st in Portland.
  • Board Member Russ Hauge very briefly mentioned that he continued to work with Director of Legislative Relations Chris Thompson to organize the Marijuana Odor Task Force established by proviso in the 2019 supplemental operating budget (audio < 1m).