WSLCB - Board Caucus
(May 7, 2024)

Here are some observations from the Tuesday May 7th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 4 takeaways:

• Policy and Rules staff talked about Payment Flexibility—previously designated Payment Terms—a petition accepted a year earlier that was scheduled to become a rulemaking project at the board meeting the following day (audio - 4m, video - TVW).
  • Policy and Rules Coordinator Daniel Jacobs went over the background of the petition accepted by the board for recommendation in March 2023 and related to approved payment methods for sales between cannabis licensees in WAC 314-55-115, which “currently identifies five methods of payment: checks; credit or debit cards; electronic fund transfers; prepaid accounts, or payments using a money transmitter.” He offered there were explanatory “conditions for all of the payment methods except for checks.”
  • Jacobs said he would present a CR-101 to formally open the project at the Wednesday May 8th board meeting. He cautioned that “initiating this rule project does not necessarily mean we're going to adopt the rule language as requested, [but] it does seem like it would be appropriate to at a minimum flesh out details about how payment via check can be done.” Given the technical nature and narrow impact of the request, he told board members staff planned to survey industry members instead of convening a focus group. Jacobs expected the survey to be distributed by June 3rd and close on July 8th; he further expected an informal comment period would run until June 20th.
  • Assuming survey comments were supportive of the change, Jacobs said a CR-102 would be presented on July 17th followed by a public hearing on August 28th. A CR-103 to adopt changes would then be put before board members on September 11th, with the modified rules taking effect the following month on October 12th.
  • Jacobs additionally noted they were planning on keeping the project focused on cannabis, since alcohol sales were in other rules and laws, and “payment related to alcohol services and the alcohol industry generally has access to banking and financial services that the cannabis sector doesn't have.”
    • Board Chair David Postman asked about some of the differences between payment options in the alcohol and cannabis sectors. Jacobs emphasized changes would impact a much higher number of alcohol licensees, which would require a broader survey pool and longer timeline. He added that staff weren’t opposed to reviewing alcohol payment flexibility. Postman was aware of interest from the alcohol industry, but wanted the cannabis project completed before they considered that (audio - 3m, video - TVW).

• Policy and Rules Manager Cassidy West rapidly reviewed seven other cannabis rulemaking efforts underway at WSLCB.
  • West previously discussed the status of rule projects with the board on April 23rd.
  • SB 5080 Implementation (audio - <1m, video - TVW, Rulemaking Project)
    • West commented that a focus group on implementing the 2023 social equity law was scheduled for Wednesday May 15th.
    • West subsequently noted a second focus group would be announced that day, a hybrid online and in-person event at Highline College on May 22nd. A CR-102 was set to be presented on June 18th, she added (audio - <1m, video - TVW).
  • SB 5367 Implementation (audio - <1m, video - TVW, Rulemaking Project)
    • West said “the last day that we're accepting comments” on their draft language around the 2023 tetrahydrocannabinol (THC) legislation was also May 15th, acknowledging a “series of workshops” related to the law and their proposed wording, with the most recent one on May 2nd. A CR-102 with proposed changes was anticipated at the May 22nd board meeting, she added.
      • The forecast for the CR-102 is one of few rulemaking actions to be moving ahead of the last timeline of July 17th which was offered in the April 23rd update.
  • SB 5376 Implementation (audio - <1m, video - TVW)
    • The law related to the sale of cannabis waste material was another project West indicated would have a presentation and seek board approval for a rulemaking project on May 22nd.
  • Employee Stock Ownership Plans (audio - <1m, video - TVW).
    • According to West, Policy and Rules Coordinator Daniel Jacobs would have a recommendation on the petition for rulemaking on May 22nd.
      • Little had been said about the petition since it was initially mentioned on April 23rd. West outlined her approach to rulemaking petitions for the board in October 2023, and officials had previously discussed the challenges of getting petition recommendations before the board within the required 45-day timeframe. While some staff had called for publishing petitions on the rulemaking webpage and soliciting public input prior to a recommendation, those efforts hadn’t been made for the employee stock petition or another to ban disposable vapor cartridges which was also expected to be presented on May 22nd.
  • Retail Medical Cannabis Endorsements (audio - <1m, video - TVW, Rulemaking Project)
    • West mentioned that Jacobs was set to lead a public hearing on the proposed changes on June 5th, followed by a CR-103 to adopt changes at a special board meeting announced for Tuesday June 18th.
      • Wednesday June 19th is a state holiday in observance of Juneteenth. 
  • Product Samples (audio - <1m, video - TVW, Rulemaking Project)
    • A CR-102 was forecast by West to be ready at the first board meeting in July.
  • Minors on Wholesale Licensed Premises (audio - <1m, video - TVW, Rulemaking Project)
    • West said there would be a focus group on the project in June, after which Policy and Rules Coordinator Denise Laflamme “will be presenting a [CR-]102” at some point in July.
      • West suggested on  April 23rd that the proposed rule language would be presented July 17th.

• After West addressed the HB 1453 implementation rulemaking project, other staff weighed in on the continued need to communicate to the regulated sector how the law would be more strictly applied than an earlier sales and use tax exemption.
  • Officials last briefed the board on the project on April 23rd.
  • Jacobs commented that the CR-101 had been filed on April 24th to implement the law to exempt registered medical cannabis patients from paying a 37% excise tax on medical grade cannabis items (audio - <1m, video - TVW). West anticipated a public hearing on drafted language on July 31st (audio - <1m, video - TVW).
  • Director of Policy and External Affairs Justin Nordhorn spoke up to say staff were continuing to discuss the law with interested parties as there remained "a lot of confusion in the industry" about it (audio - 5m, video - TVW).
    • Nordhorn said that the law would take effect on June 6th, so “we are not able to wait until rulemaking is completed before retail licensees are eligible to provide that excise tax to qualify patients.” He emphasized the “parameters around this particular bill that is more restrictive than what we've seen over with the sales and use tax” exemption.
    • Clarity was important if stores wanted to avoid “an inadvertent tax bill down the road,” said Nordhorn, as “folks have to understand that (a) you have to be a medically endorsed store” to offer the discount. He further emphasized that patients had to be registered with the Washington State Department of Health (DOH), and the exemption could only be applied on “medically qualifying products under Department of Health's WAC 246-70-040.” Nordhorn relayed that finance staff at WSLCB were “setting up the modified tax exemption forms to include the language so it'll be ready in time.” He assured board members that there would be plenty of communications and materials to reinforce this message going forward.
    • He noted, “We're seeing some chatter, informally, from different companies across the state, some are promoting getting” authorized patients registered. Nordhorn said, “I want to stress, this is a patient-physician relationship. If you have questions, contact the Department of Health around that, but this is not something you can just go and get something from an unlicensed medical provider.” He explained there were “about 9000 patients in the registry right now,” and very few producers of medically compliant items, “but coming into June, that product will not be available immediately across the state.” Nordhorn reiterated that meant any store “providing that excise tax exemption to, to all products in the store, they're going to have a tax liability.”
    • “A lot of the associations are really concerned about this, so that's why I'm stressing this,” added Nordhorn. He had told industry representatives all this, “but there still seems to be some confusion that's being shared with us.” Nordhorn reiterated that more communication would be distributed soon, but wanted agency leaders to understand and address misconceptions if they received questions on the law.
  • Postman wondered whether DOH officials would be reaching out to registered patients. Nordhorn didn’t know the department’s process, but felt they could ask their DOH counterparts. When Postman mentioned informing stores, both endorsed and not, Nordhorn replied that DOH staff were producing a statement on the existing sales and use tax exemption for patients. “There is some discussion around alignment,” he said, “for folks to understand both statutes and approaches so there's less confusion. And less confusion means less opportunities for error.” Postman recognized this “could feel like a contraction” to people who had been selling any cannabis products to unregistered patients without collecting the tax, and felt although the stricter interpretation was “a shift, I think it's a good one" (audio - 2m, video - TVW).
  • Board Member Ollie Garrett thanked Nordhorn for the clarity and encouraged him to make the same presentation at the following day’s board meeting for members of the public, since “there's miscommunications going on" (audio - 1m, video - TVW).
  • Board Member Jim Vollendroff highlighted the importance of community involvement on the topic. He’d sometimes missed agency communications to the cannabis sector, and “when I'm in litigation review, sometimes I hear comments like, ‘well, I didn't know or wasn't aware of’” important changes (audio - 4m, video - TVW).
    • Nordhorn remarked that he was drafting language with Communications staff and aiming for short, concise explanations, as well as an infographic about it. He also believed that multiple types of communications, such as legislative summaries, could be helpful. 
    • Special Assistant to the Director Gretchen Frost commented it was a situation in which you had to explain things “seven times, seven different ways.” Postman concurred, and felt it was an effort worth making, even though it “provide[d] a great benefit to one group of people [and would] be a little bit more bookkeeping for another group of people.”

• Strategy and Performance Manager Jessica Dang presented an updated Agency Strategic Plan and summarized goals for “public health and public safety”; developing a culture of trust; plus responsiveness to “communities, partners, and our customers” (audio - 8m, video - TVW, presentation).
  • WSLCB staff publish a five year strategic plan to define longer term goals or changes to the agency mission and intended culture. With the 2019-2024 plan concluding, Dang and her staff had been planning for the latest iteration since November 2023.
    • Additionally, division staff release separate plans such as Enforcement and Education; or Information Technology (IT). 
  • Dang began her presentation by explaining the new plan was “finalized” but staff were refining “the look and feel” of the final document. She said that her staff had heard from others at the agency after “I sent a survey out last month…designed to get a feel for the relatability of the plan, as well as capture any highlights or concerns that people may have.”
    • Dang stated that Mallori Hayes, a recently-hired Strategy and Performance Analyst, had compiled themes from the 60 respondents. Hayes’ survey asked WSLCB officials how strongly they agreed with statements that their own, or their team’s work contributed to the plan, as well as “if the plan was simple to understand or follow.”
    • Results showed “84% of people seeing how their work contributes, and ‘bout 85% people saying that the plan was simple and easy to understand. When asked what “about this plan excites you?” the top themes relayed were “simplicity of the plan that was inclusive, more people focused, and that we have some focus on modernizing processes.”
    • Dang then articulated concerns they’d heard about a need for “opportunities to be really intentional in our implementation, measurement, and achieving results.”
  • The agency vision of “Safe communities for Washington State” wouldn’t be changed, but Dang noted “public health had been present in our agency goals for some time, but now we've brought it into the mission statement.” She said the mission of WSLCB would now state: “Promote public safety, public health, and trust through fair administration, education, and enforcement of liquor, cannabis, tobacco, and vapor laws.”
  • Dang then expressed how she was “excited” about expanded agency values, which were “the foundation of our culture” at WSLCB:
    • “Respect - We are inclusive, treating everyone with courtesy and dignity, ensuring equity for all. 
    • “Open communication - We practice transparency, invite input, listen to understand, and share accurate and timely information. 
    • “Accountability and integrity - We hold ourselves to the highest ethical standards and follow through on our commitments. 
    • “Continuous improvement and meaningful results - We seek creative solutions to provide better outcomes by evolving our processes, systems, and services. 
    • “People Focused - We put those we serve and each other at the center of our work.”
    • At time of publication, the agency values were listed as “Respect and courtesy, Professionalism, Open communication, Accountability and integrity, Continuous improvement and meaningful results, Customer focus.”
  • Dang then covered the “goals, objectives and strategies we're moving forward with.”
    • “Goal One - All Washington communities have the highest level of public health and public safety.” Dang remarked that their “first objective and strategy here [was] focused on partnering with communities and other organizations to improve public health outcomes. The second objective [was] focused on public safety with strategies designed to make a positive impact on youth access; adult misuse and diversion; and to inform and educate our customers and communities in a coordinated and consistent way.”
    • “Goal Two - Our services are accessible and responsive to the needs of communities, partners, and our customers.” “We plan to do this through timely delivery of quality services, and prioritizing our efforts and allocating resources effectively,” relayed Dang, promising strategies “focused on improving and modernizing business processes. And using a framework for decision making, predictable repeatable framework for decision making.”
    • “Goal Three - We have a culture of trust, belonging, and valuing people.” Dang said this would involve “providing opportunities for personal, professional, and organizational growth.” She added that agency leaders would be “using a holistic lens when we think about wellness and professional development” and “striving to be inclusive of industry and community members when making decisions about our work. And we'll do this through engagement and consultation on rule creation.”
  • The new strategic plan would be shared with the wider agency “within the next couple of weeks. I'll also be sharing at each division team meetings,” Dang said, in addition to an “all staff town hall in June.” Her staff would collect “action items toward each strategy,” and there would be quarterly updates “for the next year with each division to track progress on strategies.” Dang noted there would be “updates on the internet, we will have a dashboard also for action items,” and “we'll have meetings twice a year with [the] management team to discuss overall progress and barriers” to their goals. She expressed gratitude for the feedback from management and around the agency, and specifically the efforts of the “strategic plan development workgroup:”
    • Julie Graham - Director’s Office
    • Mallori Hays - Director’s Office
    • Jim Weatherly - Director’s Office
    • Kandace Jaeger - Enforcement and Education 
    • Captain Magerl - Enforcement and Education 
    • Kimberly Ames - Finance
    • Dawn Russell - Human Resources
    • Jillian Murphy - IT Services 
    • Nicola Reid - Licensing
  • Postman encouraged Dang to list herself with the workgroup, remarking “it's a tough process to brainstorm, write, edit, and everything else by committee, and you've done it [on] all these different levels. I think that's really good” (audio - <1m, video - TVW).
  • Vollendroff offered his thanks for the direct mention of public health, and given his background in behavioral health, he called the revised mission statement "incredibly important" (audio - 1m, video - TVW).
  • Vollendroff also wanted more information on “what action planning by different sections of the LCB might look like” (audio - 1m, video - TVW).
    • Dang said they were requesting specific fiscal year (FY) 2025 action plans with "specific, time-bound activities" for each division to accomplish which should help them reach the outlined goals. “I'm not looking for things that are like ongoing work, but what are some things that we can do that are going to move us forward,” she indicated. There would also be “some measure development at the objective level of the plan. So we'll have performance metrics that we can look at…in the next few months, in the next six months.”
  • Vollendroff also remarked on community engagement, suggesting that after a quarter century working in government, WSLCB provided “some of the most frequent opportunities to engage with leadership within a state agency that I know of. Going into board meetings, joining caucus, these are just incredible opportunities. And I've seen people take advantage of that in ways that I think have made us better.” Vollendroff brought up internal conversations about how to engage communities and interested parties, “and I look forward to seeing increased opportunities and community and engagement with those folks that we interact with on a regular basis” (audio - 1m, video - TVW).
  • Garrett voiced her appreciation for the work of Dang and the others behind the new strategic plan (audio - <1m, video - TVW).
  • Postman requested that Dang include updates to the board among her planned outreach over the next year, “particularly the work plan piece when, when those come through” (audio - 1m, video - TVW).
  • Postman considered the survey results to bear out questions raised by the management team about how staff felt they could “talk the talk, but can you walk the walk.” He concluded that positive responses were about “really what's in there, the substance [while] concerns are, ‘well, are you going to do something about it?’ So I get that's really on us now” (audio - 1m, video - TVW).