WSLCB - Executive Management Team
(May 15, 2019) - Summary

The agency may be asked to evaluate taxation of marijuana products by THC level + a quarterly labs update.

Here are some observations from the Wednesday May 15th WSLCB Executive Management Team public meeting.

My top 3 takeaways:

  • The legislature appropriated $100K to WSLCB to perform and deliver an interim study on a variable cannabis excise tax rate pegged to product potency (audio – 19m).
    • During roundtable discussion, Agency Director Rick Garza brought up a proviso which was added to the State’s budget legislation. Section 143(7) states: “$100,000 of the dedicated marijuana account—state appropriation for fiscal year 2020 is provided solely for the board to convene a work group to determine the feasibility of and make recommendations for varying the marijuana excise tax rate based on product potency. The work group must submit a report of its findings to the appropriate committees of the legislature by December 1, 2019.
    • At publication time, HB 1109 (“Making 2019-2021 biennium operating appropriations”) had been successfully passed by the legislature but had not received executive action by the Governor. It is possible that the study and funding could be cut with a line item veto.
    • The requested interim study and associated funding was added via amendment 1109-S.E AMS WM S3636.2 from the Senate Ways and Means Committee on April 3rd. The following day, the language was adopted in engrossed amendment 1109-S.E AMS ENGR S3636.E on the Senate floor. The language survived the harried end of session conference process between the chambers as part of 1109-S.E AMC CONF S4569.2 adopted on April 28th, the last day of the session. Read the Bill as Passed Legislature and the final House Bill Report.
    • Garza suggested one senator was interested in the idea of a tax on tetrahydrocannabinol (THC) as a different revenue structure for cannabis products, and may have written the six-figure appropriation for WSLCB in part to fund economic research: “There was a legislator in the Senate who had heard discussions about potency tax and said, ‘Hey, maybe that’s something to consider.’”
    • Garza acknowledged no other legal cannabis state used the suggested taxation model, although the idea had been floated by public health and prevention communities before.
    • It is noteworthy that this interim study was funded. In contrast, last year’s study of medical delivery and 2017’s home growing study were not funded outside the agency’s normal operating budget. Garza confirmed this study and its funding were not requested by the agency.
    • WSLCB staff intended to meet on May 30th to begin planning and may hire an economist for tax revenue forecasting.
    • The conversation evolved into an open question about the possibility of freighting the study with other economic concerns of the board such as the market impact of exempting medical patients from the excise tax.
  • Cannabis Examiner Manager Kendra Hodgson provided her quarterly lab update (audio – 13m).
    • Hodgson explained that 14 laboratories held accreditation in the state:
      • Steep Hill Labs remained inactive and unlikely to become active without significant changes to their “corporate structure.”
      • Three labs were approved for pesticide testing: Confidence Analytics, Medicine Creek Analytics, and Praxis Labs.
      • Medicine Creek Analytics had obtained approval for heavy metals testing, a requirement of medically compliant products reinstated by the Department of Health on April 11th.
    • Hodgson coordinated with Director of Communications Brian Smith to prepare public listening sessions on marijuana lab licensure.
      • The first session will be hosted on June 3rd in Olympia in-person or via webinar. It’s unclear if this session will be at the agency’s current headquarters in East Olympia or their new offices in the Capitol Plaza Building downtown; learn more about the agency move here.
      • The next session will be hosted on June 5th in Spokane and will be in-person only.
      • Smith promised an announcement to licensees which he delivered later the same day.
      • Hodgson anticipated fewer attendees than past sessions, but claimed three or four new labs were interested in the accreditation process.
    • WSLCB planned to hire a Chemist 2 position to focus on the agency’s lab policy needs. The initial pool of candidates is slated for review by Garza’s office on May 21st.
    • Hodgson talked about the passage of HB 2052 and the process of transitioning significant laboratory authorities outside the agency.
      • See Cannabis Observer’s recent update on the bill’s status. The legislation was signed into law by the Governor on Tuesday May 7th.
      • The Department of Ecology (DOE) will take on responsibility for lab accreditation on July 1st, 2024.
      • DOE is also tasked with establishing a cannabis science task force with stakeholders and other agencies including Director Garza or his appointee, and the Washington State Department of Agriculture (WSDA). The first meeting of the task force was planned for September 1st as mandated by the bill.
      • The task force will produce two reports, the first approximately one year later, and a second report by December 1st, 2021 with “findings and recommendations for additional laboratory quality standards including, but not limited to, heavy metals in and potency of marijuana products. The LCB may adopt rules that address the findings and recommendations in the Task Force reports.”
      • The task force will have two subgroups:
        • A proficiency testing program work group led by DOE;
        • A laboratory quality standards work group to be led by WSDA.
        • Furthermore, “[the] Task Force may reorganize the work groups or create additional work groups as necessary.”
      • The WSLCB will retain all current responsibilities for labs until the 2024 transition to DOE, after which time they’ll shoulder fewer responsibilities.
      • Staff was evaluating a “dual gate system” where either accreditation was a shared process between DOE and WSLCB, or DOE would accredit labs while WSLCB licensed them (separate from a state business license).
      • Director of Licensing Becky Smith wanted to further evaluate the lab approval practices of other states. Hodgson said ISO/IEC 17025 accreditation was common but there was hesitation because the standard wasn’t cannabis specific. She acknowledged there were “different types of models” among legal states.
  • Agency leadership shared far-ranging updates on Cannabis 2.0, social equity, tribal consultation, licensure, traceability, and more.
    • Board Chair Jane Rushford told staff the next step for her Cannabis 2.0 project would be a meeting of senior personnel from partner agencies on June 5th, but did not elaborate on their agenda. Rushford also said the June 12th EMT would include a work session on medical cannabis.
    • Board Member Ollie Garrett reported meeting with Bobby Lee, the new Acting Director of Seattle’s Office of Economic Development and the former Director of the City of Portland’s Office of Economic Development. Lee connected Garrett with Tory Campbell, Prosper Portland’s Manager of Entrepreneurship and Community Economic Development Teams. Both worked on Portland’s cannabis social equity grants program and offered to visit with WSLCB to discuss their work. Garrett said the Portland program allocated $150,000 from revenue generated by a cannabis surtax for capital grants which businesses could apply for. Thompson added that his team was completing a white paper on state and city equity programs which Tribal Liaison Brett Cain described during the May 1st EMT. Thompson expected the paper would be ready the following week (audio – 5m).
    • Board Member Russ Hauge attended a “useful meeting” of tribal attorneys to continue a dialogue recently begun with the state’s sovereign tribal nations on their inclusion in the agency’s rulemaking process. The need for consultation became apparent after the agency attempted to change rules about acceptable forms of out-of-state tribal identification. Hauge reported that tribal nations within the state had different ID standards and were concerned that WSLCB’s expectations for out-of-state tribal IDs would require costly changes. As an alternative approach, Hauge suggested a “non-exclusive list” of ID regulations may allow more flexibility for tribal governments (audio – 9m).
      • Enforcement Chief Justin Nordhorn noted that attempts to create a rulemaking notification list for tribal officials had proved difficult as the contact information the agency had “left something to be desired.” He recommended contacting the Department of Revenue (DOR) as they tended to have better information.
    • On Monday May 13th, Garza spoke to companies that underwrite cannabis businesses at a Northwest Insurance Council meeting in SeaTac regarding how the agency approves and oversees licensees. He planned to attend an upcoming meeting of the Tacoma Rotary Club to provide similar perspective. Lastly, Garza mentioned Central Washington University (CWU)’s 2018 Cannabis Caucus and their inclusion of campuses from other legal states. Garza, Deputy Director Megan Duffy and Researcher Trecia Ehrlich planned to attend the school’s 2019 event later in the week (audio – 9m).
    • Duffy and Brian Smith confirmed the new date for the next traceability release was June 6th. Smith said they’d be sending updates to licensees soon.
    • Becky Smith reported that a second marijuana research license was moving forward and would soon be reviewed by the agency.
    • Thompson said WSLCB was invited to a King County Board of Health meeting on Thursday May 16th regarding a potential cannabis “secret shopper program.” Chief Nordhorn, Policy and Rules Coordinator Kathy Hoffman, and other staff planned to attend to share updates on Quality Assurance (QA) and pesticide testing rule development.