WA Senate LCTA - Committee Meeting
(January 19, 2022) - SB 5671 - Public Hearing

SB 5671
[ Event Details ]

Sharply divided testimony on a bill to add more members and non-voting legislators to the WSLCB board suggested the idea was controversial in both the cannabis and alcohol sectors.

Here are some observations from the Wednesday January 19th Washington State Senate Labor, Commerce, and Tribal Affairs Committee (WA Senate LCTA) Committee Meeting.

My top 4 takeaways:

  • WA Senate LCTA Counsel Matt Shepard-Koningsor briefed on SB 5671, “Modifying the composition of the Washington state liquor and cannabis board” (WSLCB, audio - 1m, video).
    • The potential proposal was first publicly brought up in December 2021, when WSLCB Chair David Postman reported having learned that a cannabis trade group was presenting the idea to lawmakers because the board “needed help” or would be improved by being able “to have conversations outside of a public meeting.” He expressed skepticism, feeling the desired result was “to dilute any power or authority the three of us have.”
    • Shepard-Koningsor went over the bill analysis, which stated the legislation would add “two voting and four nonvoting members” to the board. He reviewed the agency's regulatory scope, board structure, and member terms, saying the changes in the bill would have the board “mirror the composition of the Washington State Gambling Commission.”
    • The ex officio legislator members would include “one from the majority political party and one from the minority political party” in each chamber, Shepard-Koningsor stated, and would be appointed by the Speaker of the House and the Lieutenant Governor, who was also President of the Washington State Senate (WA Senate). These appointees would serve two year terms, he added, “or, for the period in which the appointee serves as a legislator, whichever expires first, they may be reappointed, and vacancies must be filled in the same manner.”
    • Shepard-Koningsor reported no fiscal note had been requested.
  • 17 people testified or signed in backing the bill, an array of cannabis licensees, lawyers, lobbyists, and even a former WSLCB Enforcement Officer who shared how they believed changing the board would help the agency.
    • Senator Ann Rivers, the bill’s co-sponsor and a new member of WA Senate LCTA, testified first on the legislation, noting she’d been the prime sponsor of SB 5318, a 2019 law aimed at reforming enforcement practices at WSLCB. That bill had been passed to "begin the process of reform" at WSLCB and “keep our finger on that pulse” of the “burgeoning” cannabis industry, she explained. SB 5671 was “the next step to that, because it seems that our liquor and cannabis board has chosen to ignore the mandate that we sent,” asserted Rivers, meaning it was time to “have another look and make sure that we are doing everything we can to to assure the success of this industry” (audio - 2m, video).
    • Vice Chair Derek Stanford, the bill’s primary sponsor, said the legislation recognized that "policy is changing rapidly in this industry.” While acknowledging the board had “done a good job trying to keep up with that,” he believed the state would “benefit from having more connection with the legislature and legislative policy discussions.” Ex officio members were on “many other boards for exactly this same reason,” Stanford indicated, and both the board and legislators would be helped by “better coordination.” Additional board members were a way of “bringing more voices into [the] discussion” at the agency, he concluded (audio - 1m, video).
    • Vicki Christophersen, WACA Executive Director and Lobbyist (audio - 2m, video)
      • Christophersen told the committee members that she’d emailed several documents about the association’s position to them, including “two recent court cases in which the courts have ruled that the LCB still is applying old rules and has bias towards the cannabis industry.” She commented that other business sectors “potentially do not have the same experience as they have been in place and regulated for dozens, if not hundreds of years” but cannabis suffered under “outdated perceptions of the industry.” While appreciative of “the work that’s been done by the LCB to date” implementing SB 5318 (which Christopherson supported), that bill "was the first step,” she said.
      • Christopherson commented that WACA members didn’t “have to look very far” to find alternative structures for regulatory bodies, noting the seven member Oregon Liquor and Cannabis Commission (OLCC) as well as the state gambling commission which had five voting members and four ex officio members “bringing a diversity of opinions and perspectives to their deliberations.”
      • Chrisophersen said SB 5671 didn’t solve a specific problem at the agency, but instead represented an attempt “in good faith to try to continue the conversation as to how we can better ensure a fair and predictable regulatory environment.” She expressed a sanguine view that the bill was “potentially one way to deal with it, it is not the only answer, and it may not be the right way to do it."
      • Christophersen voiced strong criticism of the board’s behavior and motives during public comment in May 2021.
    • Chris Marr, Marr Government Affairs Principal Lobbyist; both a former WSLCB board member and state senator (audio - 2m, video).
      • Expecting the bill to start “a healthy discussion,” Marr said as a cannabis consultant he’d seen “a fraught relationship between the industry and the board, and have also had clients denied settlements negotiated with enforcement.” He said that state agencies “needed to evolve to become more effective,” mentioning a 1999 effort that restructured how the board managed divisions in the agency in a way “that may have made sense pre-[Initiative-]502, it makes the job more challenging now.”
      • Marr believed the board needed to change to increase its “effectiveness" and "provide an opportunity for additional diversity." He saw adding legislators as ex officio members as a “sensitive issue” for some, but he believed “adding valuable perspectives” would “improve communication, and better align the statutory and regulatory piece.” Marr also encouraged legislators not to focus on “the dire outcomes that are going to be put forward, examine the bill in terms of what it does to improve transparency and thoughtful oversight of a complex issue.”
    • Troy Peterson, Apex Cannabis Co-Owner and WACA Board of Trustees Member (audio - 2m, video).
      • Saying the bill “increases access to” the agency and would help “to educate legislators," Peterson noted that two WSLCB board members couldn’t take part in the same meeting without “being on public record, it’s way too clunky to visit with them.” He said he hadn’t been able to “get two board members to collaborate with my wife and I and come see what we do” in a single visit. Peterson said it was a similar situation for WACA members, who couldn’t “grab a couple board members and have ‘em come over there…without it being an ‘official meeting.’”
      • The opportunity to “educate” ex officio members was another option Perterson wanted, believing SB 5762 would “assign a legislator from the four corners to take time to learn our issues so they can do better at informing their peers.” He expressed surprise about having a lawmaker tour his facility who “didn’t understand” what cannabis concentrates were, which he said was “25% of what we sell.” Better board access and the chance to inform legislators would make it “better for the entire industry,” Peterson reiterated.
      • Vice Chair Steve Conway, noting he’d been an ex officio member of the gambling commission which met monthly, asked how often the board met. Shepard-Koningsor said his understanding was that the board met weekly. Conway asked the bill proponents to recognize “asking legislators to come three times a week to a board meeting might be overwhelming” for some lawmakers (audio - 1m, video).
        • At publication time, a typical month of WSLCB meetings included seven public meetings board members were expected to attend:
        • Board member responsibilities also include adjudication of disputes and responsibilities in relation to agency staff (e.g., representing the board in staff meetings, sponsorship of efforts like the Cannabis Advisory Council). As the bill did not distinguish ex officio members beyond voting power, it was unclear to what extent legislative members would be expected to participate in or recuse themselves from board activities beyond public meetings.
    • David Otto, Attorney and licensed producer/processor (audio - 2m, video).
      • A Seattle attorney who had represented cannabis licensees in addition to having his own license, Otto testified that he was "astounded at the resistance for improving the board” and “improving communication and accountability.” He thought communication between the board and licensees was "far, far too adversarial” (it had “been that way for years") and blamed current board members and the Washington State Office of the Attorney General (WA OAG).
      • He argued that lawmakers who voted for enforcement changes at the agency in 2019 as well as licensees wanted “safety and proper development/operation of this industry.” Otto also felt there was too much “cancellation of licenses” because officials failed “to understand basic business practices.” He noted a variety of struggles the cannabis sector faced beyond the “opaque enforcement" practices of WSLCB, saying the agency had “very little, if any, practical protocol around the activities of the board.” SB 5672 would add “more competency, more visibility, more input into the board,” said Otto.
      • Otto represented Peak Analytics, a former lab accused of tampering with cannabis testing results by the agency in 2017.
    • Andy Murphy, Miller Nash Attorney (audio - 2m, video).
      • Murphy stated that he had cannabis clients and liked the “addition of the ex officio members because I’m aware of multiple instances where LCB’s policies and practices do not align with legislative intent.” He said the “most glaring” instance had been in Brinkmeyer v. WSLCB, where he represented the plaintiff and lawyers for the agency “argued that no constitutional protections exist whatsoever for the entire cannabis industry.” Murphy said this position was stated “six times in an eight page brief in federal court” whereupon the board “relied on the federal illegality of cannabis to strip all fundamental rights from an entire industry.”
      • Citing RCW 69.50.563 which included exceptions to issuing an administrative violation notice (AVN) without issuance of a notice to correct, Murphy claimed “in practice and policy, the LCB use no exceptions for when it can first issue an” AVN, and didn’t use notices to correct as “a prerequisite in any circumstance.” He then said a rule allowing the board to bypass enforcement reform mandates to “impose the older, harsher, more severe penalties” was still applied “after the board adopted new, more lenient penalties.” Murphy saw this pattern with “our cannabis clients, but not with our liquor or other clients that are regulated by the LCB.”
    • Ty Camp, Sunshine Farming Owner (audio - 3m, video).
      • Camp reported having a “case” against the agency that had been open for three years, though “we never wanted this battle.” The litigation had been an “expensive fight,” he reported, resulting in “three different settlement offers from the AG’s office” that were all subsequently “rejected by the board” without explanation. He lauded Thurston County Superior Court Judge Erik Price who “ruled that the LCB in fact was improperly imposing outdated penalties against my business.” Camp said the ruling was “retroactive.”
        • The order indicated the ruling was retroactive for his case specifically.
      • Camp said reforms passed in 2019 “forced the LCB to do what was right” but hadn’t kept them from cancelling licenses “even if they don’t pos[e] a public health or safety risk.” Adding members to the board “will reduce the power of the single board members that [are] there,” Camp reasoned, believing the bill still did “not go far enough to fix what's wrong with the agency, but I…ask for your support in giving us a better balance.”
    • Ryan Espegard, Gordon Thomas Honeywell Attorney (audio - 2m, video)
    • Rebecca Burghardi, Northwest Cannabis Solutions Assistant Director for Research and Development and WACA Board of Trustees President (audio - 1m, video)
    • John Jung, Former WSLCB Enforcement Officer (audio - 2m, video).
      • Jung wanted to “correct the statement I made in March 2019” before the committee about the board being a “kindergarten operation, I was wrong, it is a preschool operation." Since his testimony in support of enforcement reforms at the agency, he said the agency had “tossed aside” recommendations from an independent review by consulting firm Hillard Heintze released in December 2019.
      • Jung believed board members “pretend to change or care when only under fire,” explaining he’d left the agency after being told by “a union representative [that] 96% of the minority enforcement agents did not receive proper law enforcement training.” He alleged that Director of Enforcement and Education Chandra Brady was unconcerned and discriminatory in her response.
      • Jung claimed Brady “rewards bad actors,” having promoted an officer to captain “who blatantly violated 2017 governor executive order regarding immigrants” by running “criminal history checks of Chinese nationals and/or ask[ing] if they were here in the U.S. lawfully.” According to Jung, that same officer “had a case dismissed from Lewis County Superior Court due to improper service of [a] search warrant.”
    • Signed in but not testifying (8):
  • 18 people spoke or signed in against the bill, including the WSLCB chair, cannabis licensees, and members of the public fearful the move would hurt transparency and social equity progress at the agency.
    • Paula Sardinas, FMS Global Strategies President and Washington Build Back Black Alliance (WBBBA) (audio - 2m, video)
      • For “half a decade,” Sardinas said she’d been speaking about the WSLCB in front of legislative committees. She was familiar with the enforcement reforms undertaken by the agency and, after speaking with  “nearly 1,000 African American and Black Washingtonians, we are deeply satisfied with the leadership” of the board. “It has been transformational to see” changes at the agency, she remarked, especially given “an issue as new as cannabis,” which she felt the board had managed “with grace and poise.” 
      • Sardinas believed that “in order to continue to have representative democracy and to be able to have voices heard we need a board that is apolitical, that listens to the people.” In her collaboration with WSLCB, she reported that the board had “availed themselves not just to me but also to members of community.” Saying they were “on the precipice of being able to get things done in social equity,” Sardinas was against having “the good work that’s being done under Chair Postman be interrupted.” She summarized that “today we have a well-functioning agency that is serving the Black and Brown community well” and wished to see the board continue in its current form.
    • David Postman, WSLCB Chair (audio - 3m, video)
      • Postman was hopeful that the discussion around the legislation would include stakeholders “beyond just the…one lobbying group that brings this to you.” He described how a three person board had overseen WSLCB “for about 90 years,” and he had no objection to “sincere suggestions on how to do that better.” Postman was continuing to learn about the cannabis sector with the help of licensees, but insisted that the board "most definitely have not ignored the mandate of the legislature." Moreover, expanding the board to allow members to meet privately wasn’t viewed “as any benefit or modernization to us,” he asserted, as the board never met privately “except to talk about legal matters and personnel matters.”
      • “Unfortunately, Ms. Chistophersen has never spoken to us about this effort to improve our agency,” Postman noted, “but her communications with the committee show a surprisingly deep misunderstanding of what the LCB has done and does today.” Pointing to Initiative 1183, which privatized liquor sales, he was confounded that “you were told that privatization of the liquor industry increased the scope of our regulatory responsibilities without corresponding adjustments to its structure, the opposite is true.” Following cannabis legalization, Postman said WSLCB “adapted and modernized again,” and “totally remade our rulemaking process in a way that” WACA members had said “they were deeply grateful for.”
      • Postman highlighted an update to legislators by WACA representatives in October 2021 where the trade group praised various agency leaders as “accessible, nimble, dynamic, committed to ongoing culture change and open to new ideas.” But now the narrative was that “there’s a crisis at the LCB,” Postman observed, and despite comparisons between WSLCB and the gambling commission “the two are very different” as WSLCB board members adjudicated a case load several times larger than the commission. 
      • Rivers observed Postman “portraying the idea that this is a business organization coming after you, but…the courts decided not once, but twice, that you were not making any efforts to meet either the spirit of the letter of the law.” She insisted the bill was about the courts “saying that to you” and wanted to know how Postman could “rationalize ignoring the courts” (audio - 3m, video).
        • Postman took issue with Rivers’ characterization of the litigation: “there were two cases that spanned over two years of LCB business” before his tenure, he stated, and “no judge has said we have refused to modernize or adopt or to listen to the legislative mandate.” Postman said the case mentioned by proponents involved retroactivity of “the penalty structure,” and that while the superior court “ruled one way there’s an unpublished court of appeals decision that rules another” way, leaving the issue “unsettled” even as the board continued to rely on the revised penalties.
        • He talked about how contemporary board members were “much more likely to give licensees more time to comply and to reduce a recommended penalty than to vote for a stricter penalty,” concluding that the board was “leading the transformation” at WSLCB. Referencing the case against Camp’s company, Postman admitted the board had a clear bias because “that case demanded something different than what the staff brought us.”
    • Caitlein Ryan, The Cannabis Alliance Interim Executive Director (audio - 2m, video)
      • Ryan called the legislation “a cynical effort to politicize the regulatory authority" of WSLCB and asked the committee not to advance it. “While we agree that there are certainly areas in need for reform within the LCB like consistency across departments, additional development of enforcement policies, licensing efficiency, and sufficient staffing,” she didn’t see how SB 5671 addressed “any of these concerns, and is frankly a distraction from the current efforts in progress.”
      • She echoed Sardinas’s comments, finding the three person board was “an insurance for transparency by requiring public access to any meeting of two or more members…a critical aspect to the functioning” of the board.
    • Brionne Corbray, former dispensary owner (audio - xm, video).
      • Corbray found it “hard enough” to get into the cannabis industry and wanted the board to stay the same size to avoid it becoming “harder and harder to deal with.” He found the current board members offered plenty of “opinions” and “beliefs,” and with more members the “more difficult it is going to be for us to get involved” in the industry. Believing that the deliberations of the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) had yet to lead to licenses being issued for social equity applicants, Corbray urged lawmakers to let the board “deal with…the issues at hand” and not “complicate” WSLCB activities.
      • Ranking Member Curtis King, a WA SECTF appointee, understood that two retail licenses had been issued to African Americans in 2021, adding “nowhere am I implying that’s enough, but I think factual information would be better than none.” Corbray tried to respond but Chair Karen Keiser insisted on continuing the hearing: “we’re not going to debate that issue until later,” she told committee members (audio - 1m, video).
    • John Worthington (audio - 2m, video)
    • Christopher King (audio - 2m, video)
      • “Until this agency is gutted and revamped,” additional board members wouldn’t improve the situation, King said. Asserting he was a “former government [assistant attorney general] and trial lawyer,” he mentioned federal litigation against WSLCB he’d brought, alleging the agency's enforcement division were “fake cops” and that their actions “interrupt the sanctity of the doctor-patient relationship.” King said the documents related to his case would “blow your mind” and that he’d helped get cases dismissed involving Levi Lyon of LyonPride Music, Cynjo Raylene Hall, and patient John Novak.
    • Micah Sherman, Raven Co-Owner, Washington Sun and Craft Growers Association (WSCA) Board Member, and WA SECTF appointee (audio - 2m, video)
      • Describing himself as both “a vocal critic and appreciator of the work of the LCB,” Sherman said “valid issues" about regulation of the industry had been raised in the hearing “but this is not a vehicle to" fix them. He indicated that WA SECTF members planned to address “how can we involve the [Washington State Department of Agriculture] WSDA in the regulation of the production of cannabis,” and recommended waiting on that effort before remaking the board.
      • “This was not a bill that involved the industry as a whole,” Sherman claimed, saying WSCA and WA SECTF members weren’t consulted, having only finding out about SB 5671 “at the last minute.” Rather than furthering transparency, he viewed the proposal as “a vehicle for corporate interests."
    • James Kevin Shelton, Former cannabis entrepreneur (audio - 2m, video)
    • Signed in but not testifying (10):
  • Two representatives of alcohol interests testified as ‘other’ to express concerns about how SB 5671 might impact improvements in decision making they’d witnessed at the agency.
    • Josh McDonald, Washington Wine Institute Executive Director (audio - 2m, video)
      • McDonald thanked Stanford for “always having an open door” and talking with him about the institute’s concerns with the legislation. Having worked with the board for “many decades,” he said wine had “literally grown as an industry under their watch.” McDonald said the “open dialogue” with WSLCB leaders was appreciated as they were the industry’s primary regulators in the state, meaning “how this board functions, how it’s structured, and how decisions are made greatly impact all Washington wineries.” He further praised the coronavirus pandemic guidance of the agency since March 2020 for helping wineries “keep our doors open” during one of “the most uncertain, and frankly frightening, times in our industry.” McDonald added his group was “up for open conversations for all licensees” to improve the agency, but had concerns about the bill.
    • Annie McGrath, Washington Brewers Guild Executive Director (audio - xm, video).
      • Though not wishing “to be dismissive of other licensees’ concerns or a conversation that seeks to further improve operations at” WSLCB, McGrath nonetheless “had several concerns and remaining questions" about the proposal. She said a “marked improvement” had been observed at the agency following enforcement reforms adopted by the legislature in 2019 “which included input from all license types” that led to a “shift toward education over enforcement” as well as “great improvements in the rulemaking process.”
      • Believing that the “agency and the board as it is currently structured has shown that it can be thoughtful, responsible, and flexible in its decision making,” McGrath pointed to the pandemic response as a circumstance where the board made the best of a difficult situation. She worried that an expansion of the board would impact “it’s ability to efficiently respond to the complex challenges facing the licensees and public today” or impact continuing enforcement changes within the agency. Additionally, McGrath wondered if alterations to the composition of the board “could divert staff attention and agency resources at a time [when] we need continued stability and…responsiveness from the agency.”

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