WSLCB - Alcohol Advisory Council
(December 2, 2020)

Here are some observations from the Wednesday December 2nd Washington State Liquor and Cannabis Board (WSLCB) Alcohol Advisory Council (AAC) meeting. Cannabis Observer tracked this alcohol stakeholder meeting as we considered there could be general information presented of value to all WSLCB stakeholders. At publication time, the agency’s Cannabis Advisory Council had not met since December 2019.

My top 3 takeaways:

• Policy and Rules Manager Kathy Hoffman explained a “policy analysis process and tool” developed to review COVID-19 temporary allowances (audio - 10m).
  • Since she had joined the WSLCB, Hoffman said the Policy and Rules staff had been reorganized within the Director’s Office into “a Legal and Policy team” as a way of “centralizing” various “agency decisions.” She hinted, “And in the not so distant future, we’ll launch an interpretive statement program designed to support consistent statute and rule interpretations into a one-stop repository format that will be accessible to the public and the agency alike.”
    • One of the first interpretive statements Hoffman was undertaking was development of a formal agency position on Delta-8-THC which she discussed during a training webinar for public health and prevention community advocates on November 12th.
  • Hoffman went on to cover “changes we’ve made in policy development in general, and specifically the COVID-19 allowances.” She reported that staff had formed an “agency policy work group in mid-August of this year to begin to take a look at the temporary allowances we offered in response to the COVID-19 outbreak. After our conversations” with some AAC members and on-going “extensions of Governor Inslee’s Stay Safe, Stay Healthy orders,” Hoffman indicated “we wanted to take a closer look at the allowances from a policy perspective.” That review primarily focused on whether an allowance would need “a statutory or regulatory revision to be considered...for future expansion or extension,” Hoffman said.
  • Hoffman continued, “In order to analyze those allowances, we developed a policy analysis process and tool consisting of 11 criteria reflective of our authorizing environment” which would “be applicable to future policy development and analysis effort.” The Policy and Rules team’s use of the process for “reviewing the temporary COVID-19 allowances...allowed us to test its overall effectiveness and durability for our future policy work.”
  • The analysis criteria she identified:
    • “Public health and prevention,”
    • “Diversity, equity, and inclusion,”
    • “Tribal and local government,”
    • “Consumer perspectives,”
    • “Enforcement and public safety,”
    • "Industry and political perspectives,”
    • “LCB licensing,”
    • “Whether we had statutory authority to expand or extend the allowance, or we had the authority to do that in rule,”
    • "Taxation and fee impacts,”
    • "We looked to an implementation lens that included an estimating amount of time it would take to promulgate rules including analyzing any additional compliance costs”
    • “implications for internal operational changes" like information technology “or licensing system changes.”
  • Hoffman said this process had led to the creation of “a series of internal documents that lay out all the information and responses we gathered for each metric we looked at” which enabled staff to “discuss each of those metrics” at greater length and list supplemental information or research. She stated that the intention was to create “living documents that can change as more information becomes available” or if “circumstances change” around policies, and for “memorializing our decision making processes.”
  • A table of “preliminary positions” on alcohol allowances had been created by the agency and was “the final product of this process,” Hoffman said. WSLCB representatives would use the process and “expand on it in the coming months adding stakeholder engagement” in addition to “continuous process policy evaluation elements,” she added.

• Chief Financial Officer Jim Morgan described the impact of a potential 15% cut from the agency’s budget in the next biennium (audio - 5m).
  • Morgan began by explaining that an economic forecast from March 2020 from the Washington State Economic Revenue Forecast Council (ERFC) had projected “continued economic growth” but those assessments were rendered “obsolete” by the COVID-19 pandemic. ERFC’s June 2020 Forecast “lowered the revenue projections for the current biennium, which ends [in June 2021] by four and a half billion dollars, and the next biennium budget forecast by $4.3 billion.”
  • The results for state agencies, Morgan remarked, included employee furloughs, hiring and purchasing freezes, cancelled raises, and “cuts from agencies of 10% of their fiscal year ‘21 budget” which amounted to $5 million for WSLCB. “Fortunately,” he said, “we had vacancy savings and other projected savings that allowed us to make that cut without impacting services.”
  • Morgan said the subsequent Washington State Office of Financial Management (OFM) Operating Budget Instructions “called for 15% reduction options from each agency” from their 2021-23 biennium budget, as previously discussed by WSLCB leadership on August 4th and October 9th. While the agency’s “budget package” to OFM in a typical year included “our agenda, what we really hope to accomplish,” he told the group in this budget cycle “we went on the defense.” WSLCB staff evaluated reductions through a perspective of “minimizing service-level impact” while helping lawmakers “understand the impacts of those cuts if they chose to accept” them.
  • In “better news,” Morgan highlighted how ERFC’s September 2020 Forecast “cut the projected shortfall in half,” and that the latest projection in November 2020 “continued to reduce the shortfall.” At that moment, he explained, WSLCB staff were waiting on the Governor’s budget proposal to be followed by lawmakers’ budget proposal “in the springtime.” Nonetheless, Morgan had “gotten indications that things won't be nearly as dire as the 15% budget options we did have to put on the table."
  • Morgan noted that WSLCB did include “one request for increased funds” for the agency’s system modernization project (SMP) which he noted was unlikely to conclude “by the end of this biennium as we’d originally hoped.” He qualified that the money being asked for was intended “to be able to continue and to complete that project.”
    • Deputy Director Megan Duffy provided an update on the SMP earlier in the meeting (audio - 5m).

• Director of Legislative Relations Chris Thompson shared how the agency had been encouraged to “revisit” its legislative agenda to compose legislation which would make certain temporary alcohol privileges permanent (audio - 6m).
  • Thompson previewed the agency’s 2021 legislative agenda during a November 30th work session for lawmakers, some of whom seemed eager to support legislation to more permanently encode some temporary alcohol allowances.
  • Thompson started off by saying WSLCB leadership "did not plan to have a legislative package to put forward in the 2021 session." However, he and others had been “surprised recently with a request to revisit that."
  • Thompson said pandemic restrictions had been “very hard on the industries that we regulate...and some more than others, of course.” He reported that the agency had received “dozens and dozens” of requests for “allowances” that had been granted even though some involved existing “statutory or regulatory limitations of licensee privileges.” He stated that WSLCB had been “asked to look at” these privileges for “potential consideration to extend” them in “the form of agency request legislation.”
    • Thompson did not publicly divulge who asked the agency to compose legislation to this effect this late in the run up to session.
  • Thompson said agency staff had met internally as well as with the Office of the Governor to look at “what might be included in such a bill.” He said the evaluation was “particularly on the alcohol side of the house,” looking at allowances that could be extended “for a particular period or permanently or indefinitely or on some other basis.” Thompson said staff were weighing the “demand for” allowances in relation to the “types of circumstances that prevail with the pandemic” as well as “what seems to make sense to us” and the fiscal implications for WSLCB.
  • Thompson was unsure of the timeline to conclude the evaluation and draft request bill language, but promised to present any proposal to AAC members and alcohol stakeholders in a matter of weeks.
    • On May 28th OFM Executive Director of Legislative Affairs Drew Shirk distributed a letter to agency directors asking that request legislation be submitted by September 14th. OFM would “only be authorizing bills outside this timeline on a case by case basis” and “agencies are encouraged to focus on legislation that promotes the Governor’s priorities.” Shirk advised the directors that “this is not the time for good ideas with fiscal impacts unless the proposals meet a high priority objective of the Governor.” 
    • State agencies use OFM’s Bill Analysis and Tracking System (BATS) in order to “manage and track legislation. Agencies create and submit agency request legislation to the Office of Financial Management, manage their agency request legislation, track and analyze bills working their way through the Legislature, and assign tasks and activities related to bills. BATS also is used by OFM and the Governor’s Office to make recommendations and decisions on enrolled bills.”
    • On Monday December 7th legislators began pre-filing legislation ahead of the 2021 session which begins January 11th.