WSLCB - Executive Management Team
(October 13, 2021)

Wednesday October 13, 2021 1:30 PM - 3:30 PM Observed
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The three-member board of the Washington State Liquor and Cannabis Board (WSLCB) and agency leadership meet weekly as the Executive Management Team to facilitate coordination between the appointed Board and staff.

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Number: 1.564.999.2000
ID: 552 595 542#

Observations

CFO Jim Morgan told agency leadership CCRS remained on track and testing revealed no significant bugs; meanwhile, an informal integrator group formed to facilitate data exchange.

Here are some observations from the Wednesday October 13th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

  • Chief Financial Officer (CFO) Jim Morgan brought the board up to speed on the transition to a Cannabis Central Reporting System (CCRS), stating that the project was on schedule for launch by mid-December and had no “show stopper” problems (audio - 8m, video).
    • The software responsible for tracking the state’s legal cannabis, Leaf Data Systems, and the vendor providing it, MJ Freeway, had been blamed for numerous problems which were not adequately addressed by the program’s last update, release 1.37.5 in July 2019. Additional development was halted in favor of maintaining a comparatively stable system. The Traceability 2.0 Work Group, organized to help the agency chart a path away from its reliance on traceability technology, last met on March 2nd to explore a minimized Cannabis Traceability Requirement Repository. The move to CCRS was announced publicly on August 11th during staff discussion about a communications plan to accompany the system launch.
    • Morgan started off his presentation by saying the “project is going very well” and staff had concluded both “development work on the system” as well as “initial internal testing.”
    • “The first phase of external testing has been completed,” stated Morgan, involving a “one week pilot” with a group of six integrators, three licensees, and two accredited cannabis laboratories that had been “selected for their interest and their engagement.” The problems this group identified didn’t include any "show stoppers, and they have all been resolved,” he said. Morgan reported that CCRS testing was subsequently “opened up” to all “licensees, integrators, and labs.” The “ongoing” process had found more issues, “and they have also been resolved,” he noted, leaving “no outstanding issues that we’re aware of.”
      • While reporting to WSLCB under the CCRS regime would largely be conducted via comma-separated value (CSV) files following a set of defined formats, licensees would still be required to submit transportation manifest details via a Drupal-based web form prior to movement of products. The form was reportedly situated behind a CAPTCHA specifically intended to preclude automated submissions. At publication time, the web form still had not been published and it remained unclear why agency staff would necessitate its usage in a manner distinct from all other reporting requirements.
    • Morgan said there had been “targeted communications to keep our stakeholders informed” and the project remained on track for "a mid-December go live date." A CCRS webinar on September 8th included the participation of "several hundred folks,” Morgan told the team, and provided an “overview of the project” including “where we’re going.” A second webinar on October 4th also had “good participation,” focusing on the “technical aspects of the project, inform[ing] people of where they can find project resources” - although he cautioned that “I’m not the technical guy.”
      • In between the two webinars Morgan cited was another hosted for pilot test participants on September 20th.
    • Amongst the “common themes” he’d heard, one “has been concern about the schedule.” Staff remained “very confident that things are going to work and...licensees should be able to make that transition without a lot of trouble,” Morgan observed, in part because “we’re getting out of their way.” He suggested that MJ Freeway software could “cause business disruptions" whereas a “reporting only” process had conceptually been "very well received."
    • There had been complaints about “how product will be moving” between licensees, said Morgan, as that process had been facilitated by Leaf Data Systems and “now they’ll have to find different ways to do that.” However, handing over this responsibility to the cannabis sector would create “a level playing field with all of our other licensees,” he argued, as “we don’t get in the middle of transaction flows for liquor licensees or tobacco licensees.”
    • Morgan had heard "fairly limited" concerns that “that’s going to be a burden on some folks,” but assured the group that staff were looking to “avoid any significant disruption" to the industry. However, Morgan admitted, “we're not in a position to make it pain-free for them." Agency officials were working to “set them up for success as much as possible,” he believed, but "there will be some inconvenience."
    • During the transition to Leaf Data Systems there had been licensee disruptions that were “no longer going to be possible” as a result of CCRS, Morgan remarked. Although he considered it unlikely, if the CCRS system was not functional “on day one, they continue to do business, and we’re just not going to be receiving their files.” He asserted that "our ability to...cause problems for the industry" is something “that we're addressing with this system.”
  • Board Chair David Postman had a couple of questions for Morgan, and Director Rick Garza offered remarks on the effort later in the meeting.
    • Postman was curious about “the types of things” testing had identified as problems and asked for an example of something “that we’re able to fix.” Morgan found the issues to be ”pretty minor things" such as ensuring the proper CSV file format, and a “few instances” where the “appropriate message” was not sent to an individual making a report, “or, no message got sent back.” He summarized them as “fine tuning collecting the data and how we communicate back to the licensees” (audio - 1m, video).
    • Postman said he’d made “a pitch for people to engage [in] the additional testing” earlier that morning at the October 13th board meeting, and asked to confirm that “at this point it’s wide open” to all licensees, labs, and integrators. Morgan agreed, noting most participation had been from third-party software providers creating interfaces for their products. While wanting broader engagement, he reported that staff had "exercised the system well enough" to flush out issues and he expected “lots of support” would be available for those who had yet to try out CCRS. Postman thanked Morgan for acknowledging “we can’t make it completely painless, there’s always some bumps” and promised the board would seek further briefings as the transition progressed (audio - 2m, video).
    • During his update later in the meeting, Garza praised Chief Information Officer (CIO) George Williams, selected on May 11th, who had worked with Morgan and staff on CCRS to “figure out how we transition” to the reporting system (audio - <1m, video).
  • Just prior to the EMT meeting, the Washington Cannabis Integrators Alliance (WCIA) announced its formation and initial participant trade associations, testing labs, and third-party integrators intended “to enable interoperability between members' technology platforms that allows supply chain traceability for easier compliance, as well as improved data accuracy for cannabis licensees.”
    • The press release stated that WCIA was formed in direct response to the “upcoming transition to” CCRS. Participants in the group aimed to define “open standards and technical specifications so data can be exchanged easily between platforms without manual data entry” as a means of improving “the accuracy of information and facilitating more efficient traceability and compliance.”
    • The release goes on to identify WCIA’s initial participants:
    • WCIA participants had the following to say about the situation:
      • Travis Steffen, GrowFlow Chief Executive Officer (CEO): “Ensuring that operations are smooth and seamless is essential for cannabis licensees. The Washington Cannabis Integrators Alliance is a step we’ve opted to take to help make this a reality for business owners and is an important way for GrowFlow to live up to one of our values of putting customers first.”
      • John Yang, Treez CEO: “WCIA represents a significant advancement for the cannabis supply chain in Washington. By delivering interoperability capabilities, cannabis owners can simplify their information flow, increase efficiency by minimizing manual data entry and make compliance faster and easier.”
      • Zach Goldberg, GrowFlow Chief Technology Officer (CTO): “GrowFlow has been disappointed by the LCB's approach to the rollout of CCRS and the lack of communication with licensees and integrators on key decisions in this process.  We're doing everything we can, including forming an alliance with other integrators via WCIA to ensure minimal disruption for all licensees.  We welcome a more open dialog with the LCB about how we can manage this transition in a way that is beneficial to the industry. Minimizing business disruptions should be the top priority for everyone involved in the cannabis supply chain.”
      • Micah Sherman, Washington Sun and Craft Growers Association (WSCA) Board Member: “When the WSLCB announced their plans to shut down Leaf, the leadership at the Washington Sun and Craft Growers Association (WSCA) immediately had concerns about our licensee members continuing to be able to do ordinary business once Leaf had been turned off. We knew our software integrators would be able to ensure that we reported what the WSLCB needed, but our ability to transfer to all other licensees was not being discussed. We are very pleased to be a part of organizing our software providers into collective action to solve this problem in collaboration and cooperation. Time is short and there is a lot of work to be done to make sure this very short timeline doesn't disrupt our industry unnecessarily. Without the action of the individuals and groups that now make up the WCIA no one would be concerned with licensees continuing to be able to do business during this change. We are glad to be a part of that effort.”
    • At publication time, direct participation in WCIA was open to third-party and licensee/lab software integrators as well as supporters. Indirect participation would be enabled by utilization of data format specifications and transfer protocols which would be freely published on the WCIA website. But given the early stage of specification development, additional perspectives at the table would be welcomed and influential. And given the very short window of time allowed by the WSLCB for the cannabis sector to take over responsibility for reliable transfer of product information, manifests, lab results, and other data between multiple vendors and standalone licensee systems - the emergence of a vehicle for collaboration was a promising sign.

Director of Legislative Relations Chris Thompson went over the status of two potential agency request bills (lab standards, cannabinoid regulation) and an upcoming briefing to lawmakers.

Here are some observations from the Wednesday October 13th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

  • Thompson went over the status of request legislation to establish an interagency coordination team (ICT) at the recommendation of the Cannabis Science Task Force Steering Committee.
    • The concept of the ICT, which would handle lab standards, was reviewed in a March 23rd presentation on implementation of task force recommendations from Washington State Department of Ecology (DOE) Environmental Assessment Program Manager Jennifer Carlson, the task force policy coordinator. She stated the ICT would provide for:
      • Lack of federal oversight 
      • Technical assistance for labs 
      • Essential structure for performance based methods for pesticide testing 
    • The ICT would include representatives from WSLCB, the Washington State Department of Agriculture (WSDA), and the Washington State Department of Health (DOH). The ICT would define lab accreditation standards to serve as the “client” of the DOE, which would remain responsible for implementing a lab accreditation program based on rules developed by the ICT and encoded by WSDA policy staff.
    • The steering committee discussed the proposed bill on June 11th and again on August 5th, with staff for the respective agencies determining WSLCB would be the appropriate lead agency. The task force met most recently on October 1st.
    • The WSLCB board talked about the ICT request bill on June 9th and on September 8th, when Thompson told the board he anticipated participating agencies would request funding for “a couple, three or so, [full-time equivalent] FTE at each of the agencies, particularly in scientific disciplines.” According to the supplemental budget requests, the three agencies have asked for funds for almost 13 FTEs for the ICT.
    • During the EMT, Thompson described the ICT legislation as “jointly requested by LCB and the state Department of Agriculture” while stating that DOE and DOH were “partners in this larger effort which is to...upgrade the system for testing labs in the state for the cannabis industry.” He said a package with the bill draft had been submitted describing the transfer of authority along with the budget request for additional staff (“and thus, funding”) needed to implement the ICT (audio - 3m, video). 
      • The ICT would be a “cooperative” venture of WSDA, DOH, and WSLCB representatives, Thompson said, “to develop the substance of the testing lab requirements that we need.” WSDA officials would lead the team. As DOE staff “had some concerns about the initial draft,” Thompson commented that officials of the participating agencies had agreed to a revised draft. He expected DOE leaders to support the new draft along with the other agencies in the 2022 legislative session.
      • Thompson added that DOE staff “may want some additional statutory changes down the line,” likely alluding to request legislation drafted by DOE staff which proposed revisions to the timeline for the implementation of a new lab accreditation program.
  • The second request bill on regulation of “psychotropic compounds” in cannabis, conceived by WSLCB staff in response to concerns about synthesized cannabinoids in the legal cannabis market and other markets, had elicited significant feedback from stakeholders.
    • Distinctions between naturally occurring, synthesized, and artificial cannabinoids had been explored at length during two deliberative dialogues hosted by WSLCB staff on June 3rd and July 20th. Board members voted to refile a cannabinoid rulemaking project on July 7th so that its scope could be expanded in what staff would later describe as a “stopgap measure” on the issue.
    • On September 1st, Thompson sent selected stakeholders the draft bill “extending regulatory authority over cannabinoids of a psychotropic and impairing nature and providing for enhanced product safety and consumer information disclosure about marijuana products.” On September 7th, he sent another email, extending the feedback period. A revised draft was made available for a webinar dedicated to the request bill convened by agency officials on September 27th.
    • Thompson told the EMT that the bill would “authorize the state and the LCB to regulate cannabinoids that we believe need to be regulated,” as well as position regulators to “be ready with the necessary tools as new trends emerge in the industry” (audio - 3m, video).
      • This "is very difficult work; it's very technical; it's very complex" and had "very strong interests involved,” Thompson stated. He said WSLCB staff had “connected with more than 250” individuals, and “heard directly to some degree from at least 40-45” stakeholders and “the count is going up by the day.” Thompson described having met with representatives for the Cannabis Alliance and the Industrial Hemp Association of Washington (IHEMPAWA). He anticipated hearing from the Washington CannaBusiness Association (WACA) “and the public health association, and other stakeholders."
      • The public input led to “internal discussions” on “putting forward a proposal,” but Thompson reported that staff needed “more time.” The draft request bill was a "very much in-progress, in-flux effort" he stated, but he promised to return to the board with a “specific take” on the best “direction.” Thompson was additionally keeping Washington State Office of the Governor (WA Governor) staff informed as to “how definitively they’re progressing.”

Staff described the impact the internal Agency Policy Work Group was having on policy and interpretive statements, agency request legislation, and rulemaking at WSLCB.

Here are some observations from the Wednesday October 13th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team (EMT) meeting.

My top 3 takeaways:

  • Policy and Rules Manager Kathy Hoffman discussed the Agency Policy Work Group, which provides internal analysis on WSLCB leadership priorities like transitioning away from board interim policies and fostering "socially equitable conditions" (audio - 10m, video, presentation). 
    • Hoffman began the conversation with a history of the work group which began in February 2020 shortly before the coronavirus pandemic led to remote working and temporary allowance guidance for licensees.
      • The group had daily meetings at this time “to discuss agency response to requests for assistance,” she said, tracking decisions in a “COVID-19 spreadsheet.” Temporary allowances were studied by Enforcement and Licensing staff “from May to October of 2020,” with Hoffman and Assistant Attorney General Bruce Turcott doing “statutory and regulatory authority analysis to determine whether” WSLCB officials had the power “to move those allowances forward.”
      • Using a “COVID-19 workbook,” Hoffman described how allowances had been ranked based on request frequency. A “sub-group” reviewed each allowance “but we needed tools to do that analysis,” she stated, which led to the development of several policy documents:
      • These documents guided both “initial allowance analysis” and established a “foundation for the policy and interpretive statement program and our agency policy work,” said Hoffman. This process also informed agency request legislation in 2021; a 2021 Draft Policy Agenda and Policy Development Strategic Plan; and the Agency Policy Work Group itself, which used a “think tank approach,” she added.
    • Hoffman reported that the work group “issued three interpretive statements” as well as “five policy statements.” Topics she noted had been analyzed included:
    • The work group was in the process of drafting policy statements to replace board interim policies (BIPs), Hoffman remarked, noting that one BIP on cannabidiol (CBD) additives exempted them from being reported in traceability even though there was a “rule that says that licensees must do that.”
    • Hoffman said the work group would help “grow the capacity” of the rules team, “increase stakeholder participation in the policy review process,” and “continue to honor our think…tank model in new ways.” They would also look at prioritizing creation of "socially equitable conditions," she remarked, using metrics such as:
      • “Diversity, equity, and inclusion” (DEI)
      • “The lens of public health”
      • “Prevention”
      • “Different divisions” at WSLCB
      • “Reach out to local government if necessary”
    • In the future, the “big steps” predicted by Hoffman were “beginning to accept external requests” and “expand[ing] the scope of draft policy review.” Though the work group had limited its engagement to other state agencies, she talked about greater inclusion of “local government” or public advisory bodies like the WSLCB Cannabis Advisory Council (CAC).
  • Director of Policy and External Affairs Justin Nordhorn briefed on how the Agency Policy Work Group had impacted WSLCB policy and rulemaking processes, expounding upon ways external recommendations from stakeholders could influence agency perspectives (audio - 10m, video). 
    • Nordhorn discussed the impact the work group had when listening to ideas from industry members and providing “external reviews for those requests for those interpretive/policy statements.” He mentioned that an external request had come into the work group and they were weighing whether it should be an interpretive or a policy statement, or even a rulemaking or legislative change.
      • Norhorn observed that interpretive statements were more about an agency “position” on existing law or rule, while policy statements tended to generate more stakeholder outreach.
      • Using the Quality Control (QC) Testing and Product Requirements rulemaking project as an example, Nordhorn said work group members would benefit from feedback from a listen and learn forum scheduled for the following week to help analyze the “very complicated area” of rule.
      • Other issues he expected to come before the group included the “[HB] 1480 ruleset for implementation” as well as an “adjudications request from staff and the board on how we can handle electronic filings” which would impact the agency and licensees.
      • Nordhorn mentioned “a very large project" that involved “the full vetting of [WAC] 314” would likely take years to eventually “restructure” the rules to “clean up” and regroup topics. He anticipated this would lead to “modifications, some rule repeals” and other revisions.
      • Nordhorn also predicted that in “the near future” that packaging and labeling for cannabis and the hiring of additional Policy and Rules Coordinators would also receive input from the work group.
    • As for the rulemaking requests agency staff had been receiving, Nordhorn said development of a “prioritization matrix that can be visible” to staff for scoring them was underway. Such scoring might prioritize legislative mandates over other requests, he mentioned, and would evaluate “risk impacts, how far outreaching is this…does it impact a breadth of licensees or is this just…an isolated area?” 
      • Nordhorn noted the intent was to analyze those issues against the agency's strategic plan and board priorities. He told board members that information gathering for rulemaking projects required significant staff time and hoped there was recognition of “the complexity of some of these areas” as people requested rulemaking. He indicated “exploratory conversations” might take place between licensees or their representatives and work group members to “learn from one another” without resulting in compliance directives from WSLCB officials.
      • Nordhorn said the development of metrics was a continuing issue along with “how to assess the results” of actions or statements. He reported what they’d developed so far would be included in the 2021 annual report for the agency to “create that broader understanding” about their policy development and analysis. While some materials produced by the Agency Policy Work Group were long and “very technical,” Nordhorn expected in a decade, “when other folks are in these positions and they look back,” the motives and intent of the board and WSLCB leaders would be “documented in a very broad and in-depth manner.”
    • Board Chair David Postman asked if the “majority of the rulemaking that the agency does is legislatively mandated” (audio - 3m, video).
      • Nordhorn thought that it varied “year-to-year,” but he’d seen “a lot of internal requests” for rule changes. Suspecting that “the bulk is actually from outside of the legislative process,” he explained that a routine question staff asked was “can this be done by rule,” in which case staff would look to have the board take action rather than approach legislators to change the law.
      • Hoffman clarified that when staff considered the rulemaking process, they were mindful “about doing that right before the legislative session because we need to be queued, we need to have rules coordinators ready to go” in the event legislation mandated rulemaking. She further said the Policy Development Strategic Plan would be used to “make an assessment of where a particular project might fall.”
    • Postman stated that the Agency Policy Work Group hosted “really valuable…debates and discussions” for agency leaders, and the analysis the group produced was “understandable” and contained “valuable information.” Hoffman replied that it was a conscious choice to “memorialize agency thinking at that moment in time” (audio - 2m, video). 
  • Director Rick Garza provided brief commentary on the Agency Policy Work Group’s role in centralizing decision making by agency leaders on topics such as temporary allowances for licensees or consistent enforcement practices (audio - 2m, video). 
    • Garza lauded the presentations of Hoffman and Nordhorn. Hearkening back to the beginning of the pandemic in March 2020 when the group was established, he recalled they “had to figure out how to accommodate the many, many requests that came” into the agency.
    • He explained that “a central place where [WSLCB leaders] make decisions” had been a request of stakeholders, staff, and the Hillard Heintze independent review of agency enforcement practices in December 2019. Even as the board had the final say, Garza relayed the impression of many that various offices within the agency were making decisions “without talking to one another.” The work group was changing that impression, he believed, and the “comprehensive” program outlined by Hoffman and Nordhorn was eliminating the complaint he’d heard that rules were “arbitrary and capricious.” Garza credited “direct communication” through events like the listen and learn forums for making a difference.

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