WA Senate - Session
(March 1, 2024)

Here are some observations from the Friday March 1st Washington State Senate (WA Senate) Session.

My top 4 takeaways:

• By the time HB 1453 (“Providing a [37% excise] tax exemption for medical cannabis patients”) arrived on the WA Senate floor, partisan disagreement over its impacts had started to take shape.
  • After starting the legislative process in 2023, HB 1453 was added to the House calendar on February 8th, and a supermajority voted to pass the measure on February 9th.
  • The Washington State Senate Labor and Commerce Committee (WA Senate LC) heard and recommended the proposal on February 19th, with a trio of Republicans voting against passage, including Republican Leader John Braun.
  • On February 22nd, the Washington State Senate Ways and Means (WA Senate WM) heard favorable testimony on the bill. On February 26th, the committee members voted to add a striking amendment which sunset the tax exemption in 2034 and required “a tax preference performance review by the joint legislative audit and review committee [JLARC]; and requires the joint legislative audit and review committee submit an initial report” by December 2029. Committee members recommended the bill without any remarks in a nearly party-line vote.
  • On February 28th, in a Washington State Senate Rules Committee (WA Senate RULE) meeting, President Pro Tempore Karen Keiser used her member pull to move HB 1453 to the WA Senate floor calendar, but an ensuing discussion showed disagreement about the fiscal implications. 

• An amendment to end the tax exemption in five years rather than ten, as well as move up the reporting requirements, was proposed by Senator Curtis King over concerns about “how easy or how hard it may be to get” medical cannabis authorizations.
  • The amendment would cease the exemption “for medical cannabis patients and designated providers on June 30, 2029, rather than January 1, 2034; and requires [that JLARC] submit a final report to the legislature by December 1, 2028, rather than an initial report by December 1, 2029.”
  • King said the move reflected an emerging concern some had about HB 1453 and “how easy or how hard it may be to get these medical certificates.” He added that he’d been told “by three or four very reliable people that things have changed and that these medical cards aren't going to be available like they were back eight, or nine, or ten years ago. So I ask for your acceptance of this amendment” (audio - 1m, video)
    • Following passage of SB 5052 in 2015—a law that merged the medical and adult use cannabis markets—patients whose doctors filled out a medical authorization form had been permitted to cultivate and possess more cannabis than adults. However, they were required to enter into a database maintained by the Washington State Department of Health (DOH) in order to get a card which would allow the excise tax exemption. At time of publication, registered patients also had an exemption for the lower sales and use tax on medical cannabis products.
  • The amendment was included in HB 1453 by voice vote (audio - <1m, video).

• Senators gave remarks on the legislation, ranging from hope the measure would help patients in need, to fears that mass medical fraud could result and diminish tax revenue.
  • Having previously sponsored a similar bill, Keiser noted that measure passed the chamber in March 2021, and again in 2022. She felt items tested to DOH standards were “actually a higher priced product than many of the more recreational products,” and “there's not much demand at this point because the patients who find these products to be helpful find them on the gray market now or they sometimes grow their own.” Keiser commented that DOH regulation resulted in superior cannabis products “which is why I prefer to encourage medical…cannabis patients to use the products that are certified by Department of Health, and to do that I believe we need to reduce the tax that currently is applied at 37% on those products” (audio - 2m, video).
  • King reiterated the “concerns on our side in regards to how easily or how tightly these medical cards will be given out,” but had been "assured by three people that I trust that things have changed, and changed in the right direction.” He was confident there were “safeguards here that will allow only those" who need medical cannabis to benefit from the tax exemption (audio - 1m, video).
  • Senator Ann Rivers sought permission to read part of an internet search result into the record. Without stating what she’d searched, she shared that part of the results from one website read “Washington medical marijuana card, get yours in 15 minutes!” Rivers claimed the “reality” was that “when we made landmark legislation in 2013 we indeed lived in the wild, wild west where there were numerous sites just like the one that I read just now.” She protested, “whether it's medical cannabis or recreational cannabis…having your card allows you to buy either.” She was grateful for King’s work, and expressed a hope to be wrong, but “we know people, especially these days when the cost of everything is going up, will be happy to spend a couple hundred bucks on the front end to get a fraudulent card so that they can save 37% tax.” Assuming widespread medical malfeasance, Rivers professed to being “gravely concerned about this” since cannabis sales represented “about a billion dollars that we rely on as budget writers in this state…that could go out the door when we once again see the proliferation of these cards that are everywhere, given by the MD of the internet.” Stating she’d “just lived through the, the cannabis wars and I am very, very concerned that this market will return to that” (audio - 3m, video).
    • Identifying as a long time legislative leader on medical cannabis, including sponsoring a 2013 bill that would have lowered medical cannabis taxes, Rivers felt very different when another bill to exempt patients from the excise tax reached the floor in 2021.
      • At that time she offered favorable remarks on the bill (which didn’t expire the tax preference), and specifically cited her work on SB 5052, and the improvements it had made to the authorization process. She claimed SB 5052, the 2015 law which Rivers prime sponsored that aimed to get the “wild west of, of the medical marijuana system…under control, and harmonize it with our, our recreational” market.
      • Rivers had also sponsored a 2017 law that combined various cannabis licensing, advertising, medical, and other regulatory issues together, making her one of the lead legislative architects of Washington’s medical cannabis system at time of publication.
    • Rivers’ position may reflect some confusion over the effects of HB 1453, along with an about face on confidence in systemic accountability in issuing valid authorizations for medical cannabis.
      • JLARC staff indicated in 2021 there was inconsistent interpretation of the existing sales and use tax exemption as applying only to DOH tested and labeled products, in contrast to any cannabis item “beneficial for medical use” by the individual. However, the text of HB 1453 is explicit that the tax exemption could only be applied to products “identified by [DOH] as a compliant cannabis product.”
      • The last change to the issuance of medical authorizations was enacted through SB 5052 also created the medical database and registered patient cards.
  • Keiser shared a point mentioned in the fiscal note on the bill that existing purchases by registered patients were “just about 1% of sales,” and asserted DOH compliant items were both "more expensive, and have lower THC levels than the recreational cannabis.” She mentioned some of the qualifying conditions, and argued it was “unfair to tax" medicine like this, adding she was also “surprised to see my colleagues across the aisle opposing a tax reduction" (audio - 1m, video).
  • Senate President Denny Heck observed “there happen to be lots of knowledgeable voices about cannabis products on the floor today,” evoking laughter from a few in the chamber (audio - <1m, video).
  • Braun voiced his continued opposition to the legislation, seconding the concerns raised by Rivers. “I distinctly remember…negotiations back in 2013-2014 with [former] Representative [Eileen] Cody and then-Representative [Reuven] Carlyle as we…corralled the wild west of cannabis here in our state where there was a green cross popping up on every street corner it seemed like.” Also like Rivers, Braun hoped “we get this right but I worry a lot…for a number of reasons,” given that a “billion dollars a year worth of our revenue comes from cannabis” and not taxing medical patients “could put a gigantic dent in that” (audio - 1m, video).
    • Under the revised fiscal note, Washington State Liquor and Cannabis Board (WSLCB) staff explained that “the percentage of tax-exempt sales appears to be declining almost every year since 2017,” but if the bill resulted in increasing patient “demand for product that meets the DOH testing standards, and the supply meets the demand, then there is the potential that there could be a significant negative impact to cannabis excise tax revenue.”
    • The analysis indicated that “cannabis excise tax revenues were $511.1 million in FY22,” a sum affirmed when JLARC staff outlined cannabis revenues for the legislature in November 2023. The fiscal note conveyed that it was “unknown how much more cannabis product would be produced that meets the standards of WAC 246-70-040 and how many more patients would take advantage of the excise tax exemption.” The fiscal note on the initial version of the bill found revenue from DOH compliant cannabis was several thousand dollars, although the revised analysis allowed that a “potential exists however, for the impact on cannabis excise tax revenues to be significant.” The tax exemption was enforced for DOH-approved items only, because as WSLCB Director of Legislative Relations Marc Webster explained by email to lawmakers agency “estimates [were] that far less than 1% of products currently sold would be eligible for this exemption. It could be between 0.03% to 0.1% [so the] tax implication in the early years is thus likely in the thousands, not hundreds of thousands or millions.” He stressed HB 1453 was “designed to start moving that needle. It’s designed to incent[ivize] people to get a DOH medical card, and thereby attract new producers to start getting their own certification from DOH…The figure of $5 million is not an estimate, but rather an illustration – it represented 1% of 2022’s total excise tax collections.” Of the two fiscal notes prepared by agency staff, Webster indicated this “first you could argue is low, but it’s based on actual data. The second is just an illustration, and is likely far too high, at least at first.”

• Three quarters of the Senate voted to pass HB 1453, whose changes WA House would need to concur with for the bill to pass the legislature as written (audio - 3m, video).
  • When Heck initiated a roll call vote, 36 senators supported the legislation while Braun, Rivers, and 11 others voted against it:
    • Senator Matt Boehnke
    • Senator Perry Dozier
    • Senator Phil Fortunato
    • Deputy Republican Leader Chris Gildon
    • Senator Drew MacEwen
    • Senator Jim McCune
    • Senator Mike Padden
    • Senator Jesse Salomon
      • Salomon was the only Democrat to oppose the legislation.
    • Capital Budget Leader Mark Schoesler
    • Republican Whip Keith Wagoner
    • Operating Budget Leader Lynda Wilson
  • Given the senate changes to the bill, HB 1453 required a concurrent resolution by the House. In the event the chamber doesn’t support the revised language, senators could be asked to recede from their changes. Should legislators still be unable to resolve their differences on the legislation, both chambers can appoint members to a conference committee to produce a report and compromise draft which the House and Senate must then vote to accept before the legislative session concludes on Thursday March 7th.