WSLCB - Board Caucus
(May 24, 2022)

Here are some observations from the Tuesday May 24th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• Director of Policy and External Relations Justin Nordhorn went over the status and future of temporary allowances due to the coronavirus pandemic.
  • Nordhorn informed the board there were four temporary allowances for cannabis licensees which were scheduled to expire on June 1st (audio - 1m, WSLCB video, TVW video) and reviewed them (audio - 5m, WSLCB video, TVW video). 
    • Retailers had been permitted to give away face masks and hand sanitizer to customers, Nordhorn explained, and this allowance would expire in June. “We put out a policy statement last year on incidental giveaways,” Nordhorn commented, and found that masks and sanitizer “fall under” this provision provided they didn’t “cost more than a dollar.”
    • Walk up windows and curbside service had been permitted, but Nordhorn categorized them as "higher risk and more challenging" as they were “in direct conflict with” state law. These allowances were offered for "health and safety reasons" during the pandemic, he stated, but retailers hadn’t been permitted to construct walk up windows. Nordhorn proposed letting these allowances lapse even as there was “still an interest" in the policy from licensees and patients because staff felt it was best to defer to state law.
    • Minors being allowed on the premises of producer/processor facilities had been approved for the children and grandchildren of licensees when childcare facilities were closed due to the pandemic and at-home learning was common, remarked Nordhorn. He conveyed that there were “a lot of concerns…including public health” at “having minors in these types of environments.” Nordhorn noted they had received a request to continue this allowance because waitlists at daycare facilities were still prevalent but he alleged there’d been “a lot of concerns about the health and safety of the youth…especially given” the presence of pesticides. He conceded this was something regulators also encountered “in other agricultural areas,” but suspected that indoor production carried “higher risk of exposure.” Nordhorn knew some on the board were concerned about letting the allowance expire and encouraged the board to “have a conversation about this” since the restriction was in rule, not statute.
  • The board had several questions about the value and possible extension of the temporary allowance for minors whose parents or grandparents have a cannabis production or processing license.
    • Board Member Jim Vollendroff asked how many people would be impacted by ending the allowance. Nordhorn wasn’t certain, commenting that there wasn't “any good data” on the subject but he had heard from licensees that “it's one of the biggest helps." He noted there hadn’t been “a lot of requests for extensions” (audio - 1m, WSLCB video, TVW video).
    • Board Chair David Postman mentioned that while legislation passed in 2021 mandated the extension of some alcohol allowances, there had not been similar efforts on the cannabis side. Mindful that some allowances were in conflict with state law, he contrasted how “there is no statutory prohibition” against minors at producer/processor facilities. Nordhorn confirmed the law against minors at a cannabis facility was specific to retailers (audio - 2m, WSLCB video, TVW video). 
    • Board Member Ollie Garrett wondered what problems had emerged after two years of the allowances. Nordhorn indicated he wasn’t “aware of any complaints” but warned that due to their reduced staffing there hadn’t been much oversight. Ollie mentioned that they were considering extending it for another 60 days to which Nordhorn replied that staff wanted to “use the same date” as the expiration of other allowances, September 30th. This would be the same date as producers and processors “transitioning product from the quality control rules” adopted by the board on March 2nd. Garrett anticipated most children would be back in school by that time and limited daycare options led her to favorably view the “carryover” of an allowance as the situation was “still happening.” Postman brought up the idea that people could submit rulemaking petitions to the agency to request the allowance be made permanent (audio - 4m, WSLCB video, TVW video). 
    • Postman asked when the board needed to make a decision for there to be adequate notification to licensees. Nordhorn revealed that he’d planned to notify licensees that day and that it would be useful to “get that messaging out sooner than later.” Feeling this allowance was “tricky,” Nordhorn hadn’t wanted to take action before discussing it with the board (audio - 1m, WSLCB video, TVW video). 
  • Postman said he was amenable to extending the allowance for minors in producing/processing facilities but not other allowances which “conflict with statute.” He felt that the coronavirus pandemic was “not over” and was sympathetic to licensees, particularly those situated in “more remote areas.” This led him to call for a “last extension” of the allowance through September, and also to “welcome” a conversation on changing rules to make the allowance permanent (audio - 2m, WSLCB video, TVW video). 
    • Garrett was in agreement with Postman’s assessment (audio - <1m, WSLCB video, TVW video).
    • Vollendroff recognized the “uncertainty with this virus” made it appropriate to “give some certainty to this particular request” by extending the allowance and being open to a conversation about enshrining it in rule. Postman clarified that this would be “the last extension of this sort that I would support” unless a rulemaking project was initiated (audio - 1m, WSLCB video, TVW video). 
    • Garrett wondered how long it would take to put the allowance in rule should a rulemaking petition be received. Nordhorn responded that staff could reach out to the person who suggested the allowance be made permanent as they hadn’t made a “formal rule request.” He speculated that rulemaking on the matter “could take up to six months” but that would depend on the amount and nature of public feedback on the proposal. Garrett stated that the board should avoid promising this would be the final extension on allowances given the “uncertain timeline.” Postman agreed, noting that "none of these allowances were meant to be permanent" and were reflective of the “circumstances of the moment" rather than an indefinite policy change. Moreover, Nordhorn pointed out that allowances should dissipate if Governor Jay Inslee rescinds the state of emergency (audio - 3m, WSLCB video, TVW video).
      • Inslee asserted on May 18th that there were no “immediate” plans to lift the state of emergency. 
  • Concluding his briefing, Nordhorn promised to speak with staff, develop outreach options with Director of Communications Brian Smith, and follow up with the person who wrote to encourage extending the allowance (audio - 1m, WSLCB video, TVW video).
    • On May 26th, WSLCB staff announced the extension of the "Minors Present on Premise to Support Families Impacted by School Closures allowance" through September 30th along with the cancellation of the other three temporary cannabis sector allowances.

• Director Rick Garza provided additional updates around cannabis retail safety and banking before Executive Assistant Dustin Dickson shared progress on the return of in-person board events.
  • Retail safety was most recently talked about by the board on May 11th.
  • Garza acknowledged the “rash of armed robberies that occurred in the last few months” as well as an agency partnership with the Washington State Crime Prevention Association (WSCPA) to create a series of “virtual trainings.” He understood the first one had been “held on May 12th in Seattle and went quite well” with multiple cannabis licensees in attendance.
    • The first WSCPA training was hosted on May 18th. Garza was conflating a “Cannabis Safety Summit” organized by the Seattle Police Department through the SODO Business Improvement Area (SODO BIA).
  • Garza then mentioned how WSLCB officials used an “emergency contract process” to hire Setracon, a Tacoma-based security firm, to go “to our retail shops, work with them, see what they can do with respect to recommendations” on site security. All retailers would be emailed about the voluntary and free assessments, he said, with registration for assessments open and starting “in the next few weeks” (audio - 1m, WSLCB video, TVW video). 
  • Garza reiterated difficulties cannabis retailers faced due to federal banking laws and said he’d spoken to Congresswoman Susan DelBene the previous day, having already lobbied Washington’s U.S. Senators Patty Murray and Maria Cantwell on the America COMPETES Act. He indicated that DelBene was a “conferee” to the congressional conference committee on that bill, which was amended with language from the SAFE Banking Act. Garza assessed the push for the legislation as “going quite well” (audio - 1m, WSLCB video, TVW video). 
    • Postman expected that “it's gonna be an uphill battle” to get the COMPETES Act passed with the cannabis banking language. Garza agreed that “everything is a lift with Congress these days" and that Senate Democratic leadership’s reticence towards piecemeal legislation showed “it's not just Republicans that are problematic here." Though Postman was supportive of “the goals” of comprehensive cannabis reform, the view that “anything to basically expand cannabis businesses today, it gets harder for new people to enter that market” was up against an “urgent” public safety situation (audio - 3m, WSLCB video, TVW video). 
  • Garza claimed the actions of agency staff to that point had already yielded results, crediting them as the reason "we're seeing fewer" retail robberies over the prior weeks. Additionally, he said meetings were “continuing” with Inslee’s office and representatives of other agencies on potential state legislation to “possibly use some of the revenue that’s created from cannabis to assist these businesses with the investments” needed to improve on-site security (audio - 1m, WSLCB video, TVW video). 
  • Postman reported that Chief Financial Officer (CFO) Jim Morgan informed him that the last monthly tax payment cycle from cannabis retailers represented the “first time since we legalized cannabis…his team received no cash tax payments” after several months where “there’s just one” cash payment.
    • Morgan had speculated that this might be the first time in the nation regulators “collected a month's worth of cannabis taxes with no cash.” Postman inferred there were at least banking options for cannabis companies in Washington, even if more were needed along with the ability for retailers to process credit and debit card payments.
    • Garza remarked that he understood the state to have “five state banks” and “four credit unions” willing to do business with cannabis licensees, adding that Washington’s rate for electronic payments was “by far better” than other legal cannabis states. He credited this to WSLCB licensing and enforcement work leading financial institution leaders to be comfortable with offering the industry banking services because “they get some of the information that we provide…in the traceability system so they can make sure that the accounts that they have with these licensees fits with what what they’re telling us.” Garza was confident that the “strict licensing process" at WSLCB made all the difference (audio - 3m, WSLCB video, TVW video). 
      • Find out more from the Washington State Department of Financial Institutions pages on Cannabis and Financial Services as well as State and Federal Cannabis Resources.
      • Neither Morgan, nor any agency staff discussing the Cannabis Central Reporting System (CCRS), have identified what information financial institutions are receiving now that the agency no longer uses commercial traceability software for the cannabis sector.
  • Dickson commented that he’d been working with the information technology (IT) and Communications staff on equipment for the boardroom as they prepared to “at least somewhat return to in-person meetings in the middle of June.” Postman stressed that while the board would return to in-person meetings “we will not be doing away with the online presence.” Remote viewing of board caucuses and virtual comments in board meetings had been “a great success” and would be a permanent part of hybrid WSLCB public meetings (audio - 1m, WSLCB video, TVW video).

• Policy and Rules staff gave members a short review of ongoing rulemaking projects for electronic service, pesticide action levels, implementation of HB 1210, and cannabinoid regulation.
  • Electronic Service (audio - 1m, WSLCB video, TVW video, Rulemaking Project)
    • Policy and Rules Coordinator Audrey Vasek attested that no public comments had been received and that the public hearing for the CR-102 was slated for June 22nd when the public comment period would end.
  • Pesticide Action Levels (audio - 1m, WSLCB video, TVW video, Rulemaking Project)
    • Policy and Rules Coordinator Jeff Kildahl stated that a CR-103 to adopt revised action levels, address cannabis remediation, update wording, and “remove redundant language” was being prepared. He anticipated final rules would be presented to the board on June 8th.
  • HB 1210 Implementation (audio - 1m, WSLCB video, TVW video, Rulemaking Project)
    • Kildahl reported that the 45 day public comment period under the expedited rulemaking process would end on July 2nd and that he planned to offer a CR-103 for final approval of the shift from ‘marijuana’ to ‘cannabis’ in agency rules in WAC Title 314 on July 6th. Presuming no significant changes or delays, he remarked the revisions would become effective on August 6th.
  • Cannabinoid Regulation (audio - 2m, WSLCB video, TVW video, Rulemaking Project)
    • Policy and Rules Coordinator Robert DeSpain said that the next deliberative dialogue on the subject of cannabis impairment would be on Tuesday May 31st and that an internal staff “drafting session” for conceptual rule changes was scheduled “just after” the dialogue. His hope was that they’d get substantive input from stakeholders to “inform the direction we go” on draft rules. A listen and learn forum may be held once the draft was “more structured…tentatively, the second week of July,” said DeSpain.