WSLCB - Engagement - The Cannabis Alliance
(July 9, 2020)

Here are some observations from the Thursday July 9th Washington State Liquor and Cannabis Board (WSLCB) engagement at The Cannabis Alliance monthly general meeting.

My top 3 takeaways:

• Director Rick Garza offered remarks on the WSLCB’s efforts during the coronavirus pandemic.
  • Garza thanked the group “for the opportunity to spend some time with your team” and offered to arrange “a WebEx”, much like the agency provided for the entire industry on May 22nd, as “we won’t cover everything today.” He asked the Cannabis Alliance to coordinate with Special Assistant Gretchen Frost and “plan on doing something in the next two or three weeks” (audio - 5m, video).
    • From there, Garza moved to “talk about the pandemic," saying Governor Jay Inslee’s original “Stay Home, Stay Healthy” proclamation, which transitioned to the “Safe Start – Stay Healthy” phased reopening plan on May 31st, was a decision that would inevitably “affect all the businesses in our state.” Garza also acknowledged that “unlike the alcohol industry that we regulate, you were not closed.”
    • He described the initial effort to “get all of our people out of our building” with equipment to work from home. Garza reflected “that’s worked very well” in his estimation. However, he asked for feedback on responsiveness from the agency’s Licensing, Enforcement, or Finance divisions. “Most of the response I’ve gotten from the cannabis industry is, ‘it's working well,'” he explained, saying he wanted to know if there were “gaps or issues” which licensees hadn’t reported.
  • Garza next spoke about the agency’s internal COVID - Legal/Policy/Rules Meetings hosted multiple times per week to answer a “barrage of questions” from the WSLCB’s regulated communities (audio - 7m, video).
    • The agency provided “allowances that...normally you wouldn’t do” such as curbside service in response to complaints, questions, and requests from licensees.
    • Garza took a moment to mull over “dealing with nightclubs,” which remain closed. He stated the agency had worked with the Washington State Department of Health (DOH) and the Department of Labor and Industries (LNI) on guidance which would have enabled those businesses to open before phase 4, the final stage of Inslee’s now halted reopening plan.
    • Garza acknowledged that "many of the allowances specific" to cannabis amounted to “thinking about it strictly as a public health issue, right? Anything that keeps people from having to go into the stores where there’s more contact” led to approval for service “accommodations.” 
    • Garza stated that the first group to ask for modification of WSLCB’s regulations was the Washington SunGrowers Industry Association (WSIA) who requested children and grandchildren of licensees be allowed in “work space” at grows after the State “closed the schools.” He heard “consternation about that from public health, from law enforcement” and pointed to pushback in the media from Mothers Against Drugged Driving (MADD) suggesting the agency was “harming our kids by allowing the kids onto the grows.”
      • Enforcement Chief Justin Nordhorn previously stated the agency would stand by the policy until coronavirus restrictions were ended.
      • WSIA continues to advocate for more permanently encoding the temporary reprieve on enforcement of WAC 314-55-15(2).
    • Garza said “all of these” rule allowances would remain until phase 4 “and phase 4 is normality” which he believed to be “when we have a vaccine.” He added that although Thurston County had been in phase 3 “we’re starting to see an uptick in the number of positive cases...I think we're gonna be stuck in this for quite some time.”
    • In March---the “first month when everybody thought you were going to be closed”---Garza said there was “a 31% increase in sales." Subsequent months had shown “a corresponding 10% increase in sales every month forward over the previous year." If nothing else, the cannabis sector had “seen some really good growth compared to last year.”
  • Garza’s final topic before taking questions was on cannabis social equity, last mentioned by the Board on July 2nd (audio - 3m, video).
    • Garza began by recalling that social equity hadn’t been part of Initiative 502 or Colorado’s legalization as compared to subsequent adult-use states like California, Massachusetts, and Michigan as well as cities like Los Angeles and Portland.
    • Garza credited Board Member Ollie Garrett for championing the concept at WSLCB after having learned more with other legal state regulators. He acknowledged the tremendous toll the war on drugs had on “everyone” but particularly “hispanics, and African Americans, and Native Americans.”
    • Regarding the implementation of HB 2870, passed earlier this year, Garza indicated the marijuana social equity task force would consider distribution of “licenses that have been returned, or people have gone out of business on the retail side.” However, the Governor’s staff announced a three month delay in the formation and reporting of the task force due to the pandemic. Garza stated that members of the task force were “being named in the past few days" and that he’d share that information with the trade group’s leadership “as soon as I have it.”
    • Garza expected the task force would help WSLCB determine “how we’re going to create the criteria” for a social equity license application and report back to lawmakers on “what should be done beyond the licenses that we have available.” He stressed that the group was “a legislative task force, not a liquor board task force.”
      • Cannabis Observer requested and obtained a copy of a WSLCB contract signed on May 15th with Caprice Hollins of Cultures Connecting “for the purpose of providing consulting and facilitation services in support of a Social Equity Task Force and continued Diversity, Equity and Inclusion efforts.”
      • Reviewing our archive, Cannabis Observer learned the agency previously worked with Hollins on implicit bias training in 2019. The consultation was mentioned during a caucus meeting in September of that year. At the time, we did not highlight how Garza reported some WSLCB staff experienced a "little bit of a hiccup” when undertaking the training facilitated by Hollins.

• Garza was joined by WSLCB Policy and Rules Manager Kathy Hoffman when fielding questions from Cannabis Alliance members.
  • Agency Request Legislation (audio - 3m, video). Asked in chat if WSLCB would be seeking the Governor’s approval for agency request bills prior to the 2021 legislative session, Garza said “we have no bills that I’m aware of that we would move forward right now.” He noted the “huge budget crisis” and expected the agency would be obligated to undertake budget reductions. This meant there was little appetite for new spending, according to Garza.
    • The only exception Garza mentioned were earlier bills “from the industry, it’s to allow for [cannabidiol] (CBD), to allow for other products other than marijuana-related products to be sold in our stores. That’s something that we do want to work with you about.” Garza expressed skepticism as to why licensees “should be forced to create an ancillary business...it’s kind of a scam, right folks?” He promised that Director of Legislative Relations Chris Thompson and Hoffman would collaborate with industry representatives on merchandise legislation but that it wouldn’t happen as an agency request bill.
    • Learn about other coronavirus-related budget impacts from the Washington State Office of Financial Management (OFM) including a letter to State agency directors on “Immediate Actions to Capture Operating Budget Savings.”
  • Home Grow (audio - 1m, video). Cannabis Alliance Executive Director Kristin Baldwin asked whether the Board would support home grow cannabis legislation like those previously considered by lawmakers. “Typically what we've done is just stayed out of it," Garza responded, saying it was a debate “between industry and legislators...I think we took a neutral position the last two years.” He added that for the agency to take a different approach would require “a discussion with the Board." Baldwin added that with “a little tax incentive, it might go somewhere."
    • The agency was neutral on 2018 home grow legislation, HB 2559. In 2019, Thompson voiced agency “concerns” about HB 1131 to the Washington State House Commerce and Gaming Committee. WSLCB representatives did not testify or sign in on HB 1131 in 2020.
  • Delivery (audio - 1m, video). Baldwin asked if the agency was “open to looking at delivery” as it could facilitate social distancing. Garza agreed the pandemic “changes things with respect to consideration of things like that” and WSLCB would work with industry representatives if they brought forward a proposal.
    • Home delivery to patients had been one component of prior WSLCB request legislation.
    • Last fall, Board Member Russ Hauge expressed displeasure with a company promising commercial delivery to adults despite the practice being prohibited by RCW 69.50.4013(4)(a).
  • Fingerprinting (audio - 1m, video). Noting “fingerprinting has been impossible” for licensing background checks during the pandemic, Baldwin asked how the agency was responding. Garza answered that “I thought that we had stopped that.” Hoffman said, "I don't have any information on that, but I’m happy to find out for you."
  • Disproportionately Impacted Areas (audio - 2m, video). Returning to the Social Equity Task Force, Baldwin asked when the public might find out what areas of the state would be considered disproportionately impacted. Garza said those criteria would be determined by the as yet unformed task force, not WSLCB. Once the group delivered criteria to the agency, “I hand it off to” agency rulemaking staff “to put it into place.” He asked that licensees not believe rumors about WSLCB’s social equity agenda as the agency would not take action “until the task force provides the information to us.” He argued that stakeholders would have ample chance to offer input both to the task force and in any subsequent rulemaking. Garza expressed confidence in Washington State Board of Health (SBOH) Health Policy Advisor Christy Curwick Hoff, the lead staffer for the task force "who has done health disparity work."
    • Hoff’s role was first identified by Garza on June 23rd. At publication time, she was also a member of the State’s Diversity, Equity, and Inclusion Council.
  • Patient Database (audio - 1m, video). The final question came through the chat feature, asking if “changing the in-person requirement for the patient database [was] on the table." Baldwin said “compromised patients are afraid to come in. Be cool if they could send a digital picture into the store that they verify by face rather than requiring the employee to take the picture.” Garza asked that Baldwin forward any policy change language to him and he would put it in front of the COVID legal/policy/rules team at WSLCB.

• Hoffman provided a rulemaking update before wrapping up the agency’s engagement with the trade group.
  • The last rulemaking update occurred at the July 8th Board Meeting. Hoffman thanked the group for their "collaboration," adding that "your participation and input is always appreciated and always very welcome." She also shared appreciation for the new Policy and Rules Coordinators on her team, Audrey Vasek and Casey Schaufler, the latter of whom had "taken more of an interest in the cannabis" rulemaking and was present on the call. Hoffman said his assistance allowed her to “engage with you in an expanded capacity” and work to “strengthen our rule program.” She noted that her team was working to create “one-stop-shopping for any licensee who wants to understand how the LCB might interpret a particular rule or concern” (audio - 4m, video).
    • Towards the end of the engagement, Schaufler briefly thanked the group for the chance to connect (audio - <1m, video).
  • Quality Control (QC) Testing and Product Requirements (WSR 20-03-176, audio - 2m, video). Hoffman said the CR-102 “bringing in the requirement for pesticide and heavy metals testing for all marijuana products in Washington state” had attracted "45 or 46" written comments in addition to public comments which were mostly heard at the rulemaking project’s July 8th public hearing. Hoffman assured the group those comments would be organized for the agency to consider “whether we need to incorporate those comments, those changes, into the rule which would more than likely result in a supplemental CR-102” and another public hearing. Hoffman conceded it remained possible the agency would instead address comments in the concise explanatory statement which would be part of the CR-103 to formally adopt the agency’s revisions.
  • True Party of Interest (TPI, WSR 20-14-032, audio - 2m, video). Hoffman described the CR-102 as “set for public hearing” on August 5th. She said the listen and learn session on May 20th, the first such event conducted virtually, was “kind of tough...but we did glean a lot of good information from you.” She indicated the Board approved moving forward with the proposed revisions on June 24th. Hoffman noted the new rules removed spousal vetting requirements, “more clearly defined what a financier means,” and better describe “what a [TPI] is not.”
  • Incremental Expansion of Tier 1 Canopy (WSR 20-01-171, audio - 2m, video). Hoffman said the project was about incremental canopy expansion for the state’s smallest growers and to consider “allowing that expansion based on the production of DOH compliant product.” The agency opened the tier 1 expansion rulemaking project in December 2019 and hosted two listen and learn forums on June 23rd and June 30th. The forums reviewed WAC 314-55-075 in its entirety “without us putting any conceptual language into it” which was "new for the cannabis industry." There were “statutory constraints” in what could be changed about the rules and organizing the comments received was ongoing. However, the next step was shaping up to be a request for existing tier 1 licensees “to meet with LCB individually and, and talk about the concerns that they have.” What Hoffman called a “deliberative dialogue session” with these growers had yet to be scheduled.
    • Following the rule report from Hoffman, Washington Bud Company Co-Owner Shawn DeNae Wagenseller offered the view that “there’s a big difference between active canopy going into 502 versus overall licensed canopy. What can be done to reduce the unused canopy and transfer to active licenses that need more canopy?” Garza chimed in to ask that the Cannabis Alliance submit the proposal as “that’s not an idea that I’ve heard...I don't think anybody’s ever said 'what about providing it to someone else because it's already licensed?’" Hoffman called it a “big question,” and indicated that Wagenseller had raised the idea in the June 23rd listen and learn forum as well. Garza attributed WSLCB’s hesitation to past comments from the industry that more canopy would lead to more products on the market and more “pressure on those producers...the question would be what if they choose to [grow in their dormant canopy]? Tomorrow? Next week? Next month?” (audio - 3m, video).
  • Voluntary Compliance Program (VCP, WSR 19-15-074, audio - 2m, video). Hoffman highlighted the VCP listen and learn forum the agency hosted on May 28th and said that a proposed rule draft had been returned from the Washington State Office of the Code Reviser (OCR) and could be put before the Board as a CR-102 on August 5th. She remarked that the program would be for those with “questions about ‘is this particular part of my business compliant? How can I come into compliance if I need to?’” Hoffman described it as "almost sort of a safe harbor, a way to be able to connect with our agency representatives and talk to you about whether or not parts of your retail establishment, you know, meet the requirements of rule." 
  • HB 2826 Implementation (audio - 1m, video). Hoffman described the recently approved CR-101 as “[tetrahydrocannabinol] THC Vapor Products, a lot of work to be done there, especially around definitions.” Staff were developing draft conceptual rules for use “as a basis for our listen and learn sessions there.”
    • In a later comment, Hoffman said she didn’t anticipate a CR-103 before "early January."
  • SB 6206 Implementation - Location Compliance Certificates (audio - 1m, video). Hoffman felt the agency wouldn’t “need a listen and learn session for this" as it required the addition of one sentence to existing rules. Nonetheless, there would be a public comment period, “and of course we want to hear from you on that.”
  • Cannabis Retail Title Certificates (audio - <1m, video). Hoffman acknowledged that the agency had withdrawn the rulemaking project on July 8th as the Board was satisfied with the board interim policy (BIP).
  • Wrapping up, Hoffman told the group that "you may have noticed that we have slowed down rulemaking," saying the pace of rulemaking was something she’d heard complained about when she joined the agency at the end of 2018. She argued some rules were still being put into place or being adapted and “clearly there was a reason” licensees found agency rulemaking rushed. “We're at a place now where we can kind of slow that down and be a little more surgical about the rulemaking that we’re doing." She envisioned some of the pandemic allowances would come up during next year’s legislative session which could require rulemaking, so the agency would attempt to finish as many open rulemaking projects as possible before the spring (audio - 3m, video).
  • Garza lauded Hoffman again for moving the agency to "another level with respect to rulemaking.” Garza also felt “there are always more ways to be transparent” and appreciated the innovations which Hoffman had introduced which enhanced rulemaking inclusivity. That team, Garza suggested, would fix a previously “fragmented” response from agency divisions to questions and problems voiced by licensees (audio - 2m, video).