Washington State Legislature - Cannabis Bill Activity
(April 1-2, 2019) - Summary

SB 5605 (vacating misdemeanor possession convictions) and SB 5298 (structure or function claims) are still moving, but SB 5985 was heard for other reasons.

Here are some observations of two cannabis bills still moving in the Washington State Legislature and a curious public hearing about a curious bill which was not heard to consider moving the bill.

My top 3 takeaways:

On Monday April 1st, the House Public Safety Committee hosted an executive session on SB 5605, “Concerning misdemeanor marijuana offense convictions.”

  • See details on SB 5605’s Senate policy committee public hearing and executive session. SB 5605 was passed by the full Senate without amendments. In the House, the bill was referred to the Public Safety Committee which hosted a public hearing for the bill on March 25th.
  • Committee Counsel Kelly Leonard summarized striking amendment 5605 AMH PS H2669.2 by Committee Chair Roger Goodman (audio – 1m, video). Specifies that the underlying bill applies to misdemeanor marijuana possession offenses charged under specific predecessor statutes as well as equivalent municipal ordinances. Reorganizes subsections in current law and the underlying bill, and removes duplicative language.
  • Goodman told members the amendment would “make sure marijuana convictions under municipal codes and under statutes prior to 1998 are also included.
  • Goodman reiterated the change included “all of the statutes that apply” and added that many misdemeanors occurred “in urban areas under municipal codes.” He said the companion bill, HB 1500, was “much more ambitious” while SB 5605 left it “up to those individuals, one by one” to seek vacating of convictions from a court (audio – 5m, video).
  • Ranking Member Brad Klippert encouraged a yes vote on the striking amendment “because I believe it’s significantly better than the underlying bill.” The amendment was passed by unanimous voice vote.
  • Discussing the newly-amended bill, Goodman repeated his support. Klippert praised a phrase in the bill (“the court may”) as “awesome” judicial discretion, while another (“the court shall”) required he vote against the bill. Representative Jenny Graham said she was “in agreement with” Klippert and raised concerns about who would pay for the process. Staff answered the bill “[doesn’t] have a restriction on the courts charging or not charging fees.” Goodman confirmed individuals would need to cover vacating costs.
  • In a roll call vote only Klippert dissented.
  • The amended bill was passed.
  • The bill was referred to the House Appropriations Committee and scheduled for a public hearing on April 5th at 1:30pm.

On Tuesday April 2nd, the House Commerce and Gaming Committee hosted an executive session on SB 5298, “Regarding labeling of marijuana products.”

  • See details on the SB 5298's Senate policy committee public hearing and executive session. Engrossed Substitute SB 5298 (ESSB 5298) was passed by the full Senate with two amendments. In the House, the bill was referred to the Commerce and Gaming Committee which hosted a public hearing for the bill on March 19th.
  • Committee Chair Derek Stanford withdrew amendment 5298-S.E AMH COG H2558.1 because its changes were incorporated into a different amendment (audio – 1m, video).
  • Committee Counsel Kyle Raymond described two other amendments (audio – 2m, video). Amendment 5298-S.E AMH COG RAYM 029 from Representative Brandon Vick: Exempts drug and pharmaceutical products approved by the United State Food and Drug Administration (FDA) from the marijuana product labeling requirements in this section.
  • Amendment 5298-S.E AMH COG RAYM 034 from Stanford: (1) Removes the requirement that a structure or function claim included on any Department of Health (DOH) compliant marijuana product label, or a claim that describes a product’s psychoactive effect included on any marijuana product label, be substantiated.
  • (2) Requires a structure or function claim included on any DOH compliant marijuana product label, or a claim that describes a product’s psychoactive effect included on any marijuana product label, to include a disclaimer that states such claims: (a) have not been evaluated by the State of Washington; and (b) are not intended to diagnose, treat, cure, or prevent any disease.
  • (3) Removes “relief” from the list of example marijuana product label terms that may be used to describe the product’s intended role in maintaining a structure or function of the body.
  • Vick described his amendment to exempt FDA-approved products as “pretty simple.” Stanford agreed and said “it makes sense to leave pharmaceuticals that are already going through FDA alone.” The amendment was adopted by unanimous voice vote (audio – 1m, video).
  • Next, the committee considered Stanford’s amendment. The Chair explained the new language would add “some requirements around disclaimers on labeling to make it clear that these claims have not been evaluated by the state of Washington and are not intended to diagnose, treat, cure, or prevent any disease.” Ranking Member Drew MacEwen agreed it would “conform it to other existing regulations at the federal and state level.” It was adopted by unanimous voice vote (audio – 1m, video).
  • Considering the final bill, MacEwen said ESSB 5298 “goes a long way in helping the industry be able to properly inform its consumers of what can occur with their product.” Stanford echoed that the bill would “provide more information” to buyers and “help people with their choices.” The amended bill was passed by a unanimous roll call vote and referred to the House Rules Committee (audio – 2m, video).

On Monday April 1st, the Senate Labor and Commerce Committee hosted a public hearing for SB 5985, “Concerning provisions impacting marijuana business licensees.”

  • SB 5985 was introduced on March 14th, the day after the house of origin cutoff. It’s Cannabis Observer’s understanding that bills can be introduced at any time, but in order to move them after house of origin cutoff they must interpreted to have a special status such as “necessary to implement the budget” (NTIB). It’s Cannabis Observer’s understanding that a bill with any fiscal impact can technically be interpreted as NTIB.
  • Read Cannabis Observer’s initial analysis of SB 5985 from March 18th.
  • Senior Committee Counsel Richard Rogers briefed from the Senate Bill Report (audio – 2m, video):
    • Creates an exception to the six-month residency requirement for businesses with labor peace agreements in effect, so long as 60 percent of the interest holders meet the requirements.
    • Modifies the limits on the number of marijuana licenses that may be held by businesses with labor peace agreements.
    • Requires a $1,000 fee for each additional license issued under the labor peace agreement provisions.
    • Modifies the licensing provisions regarding who is required to qualify for or be named on a license, be a Washington State resident, and be disclosed to the Liquor and Cannabis Board (LCB).
    • Authorizes additional fees to recover investigatory costs and grants discretionary authority to deny a license or renewal involving nonresident licensees.
    • Adds provisions addressing inheritance of a business with a marijuana license.
    • Modifies the provisions for outdoor advertising for licensed marijuana retail outlets including, banning billboards, allowing reader boards, removing the limit on size of signs, and allowing local governments to adopt less restrictive advertising rules.
    • Requires marijuana licensees to submit certain demographic information to the LCB and requires a report to the Legislature.
  • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director and Lobbyist, said all cannabis businesses were “by definition, small businesses” because they employed fewer than 500 people statewide. She called I-502 a “new adventure” in which WACA members’ chief concern was “lack of access to capital.” Christophersen admitted licensees who were not “independently wealthy” were at a disadvantage and chided concerns about outside capital creating a glut of cannabis products: “that’s not deep economic thinking.” Christophersen insisted new investors would focus on “efficiency, employees, and employee benefits” and claimed residency requirements would redirect capital to other legal states (audio – 3m, video).
  • Susie Gress, WACA Secretary and owner of Vashon Velvet, argued that despite positive press for her business, “we haven’t been able to make a profit in five years.” She claimed she could only increase profits by cutting costs, which her company could do with investors. Convinced that “there’s a big pot of money on the other side of our border, just waiting to hop into my pocket,” Gress shared stories about family members outside Washington and other investors. She likened legal cannabis to “a gold rush, everyone wants to be a part of it” if only the state would “hold out a bucket, and let the money pour in” (audio – 2m, video).
  • Andy Brassington, Evergreen Herbal CFO, said current law “hinders greatly” business growth and compared restrictions to only being able to sell a home to a vetted, in-state buyer: “absurd, right?” Brassington said this caused systemic undervaluing of licensees because of an “arbitrary, capricious law.” Admitting SB 5985 wouldn’t fix everything, he welcomed the new capital it would bring: “I’ve never seen an industry suffer from access to too much capital” (audio – 2m, video).
  • Committee Chair Karen Keiser acknowledged “the prime sponsor is sitting to my left, and I didn’t even let her speak to her own bill [first]” as is the usual custom in both the Senate and House. Keiser added the committee meeting would likely be its last prior to the April 3rd cutoff to read in policy committee reports on bills from the opposite chamber. Before the initial panel disbanded, Christophersen interceded to ask “the [30+] folks who drove in from all over the state to raise their hand so that you can see the support from the industry for this bill.” Keiser said, “Thank you, I see a lotta hands. That’s a very, very impressive demonstration” before asking Senator Saldaña to speak to her bill (audio – 4m, video).
  • Senator Rebecca Saldaña said she had planned to bring SB 5985 forward earlier but “we were running against the clock for some reason this year.” She sympathized with the difficulty of raising money and cited her brother’s small business franchise of an out-of-state brand. Saldaña said, “it’s no secret that I believe workers have a right to have a voice in their workplace” and emphasized her belief that labor peace agreements strengthened the country and the bill. Saldaña said the bill wouldn’t “guarantee that the workers will choose a union” but allowed them to do so more freely. The senator concluded the measure would bring together access to capital with a commitment to “high quality standards, to respect the workers’ dignity” in the growing industry.
  • Bryan McConaughy, contract lobbyist for the Washington SunGrowers Industry Association (WSIA), testified “other” due to the bill “being brought at this time.” He encouraged Saldaña to “get to know” small family farmers and the issues that concerned WSIA such as oversupply which could “drastically” impact licensee and state revenues. McConaughy indicated the bill was a curious mix of language only some of which was supported by his group. He called out the billboard ban which WSIA had previously opposed in the Senate. McConaughy urged members to learn about the needs of the members of other cannabis associations, “not just the one pushing the bill.” Chair Keiser asked about WSIAs members in eastern Washington and said “I think we’re gonna have to do a field trip” (audio – 2m, video).
  • Bob Battles, of the Association of Washington Businesses (AWB), opposed the bill’s labor peace agreements. He told the committee, “we believe those are preempted by the National Labor Relations Act (NLRA)” and cited Chamber of Commerce v. Brown as precedent (audio – 1m, video).
  • Dylan Doty, representing Lamar Outdoor Advertising, made clear their only objection was Section 5 of the bill which banned billboards. He characterized the ban as “unnecessary, and a bit of a overreach.” While I-502 had no explicit advertising restrictions, billboard advertising rules went into effect in mid-2017. Doty praised current parity with liquor advertising restrictions and highlighted recent news from Washington State University (WSU) showing a decline in teen cannabis use in Washington after legalization (audio – 2m, video).
  • Korbe Palmer, Vice President and General Manager of Lamar Outdoor Advertising, said the bill would “not only hurt us financially, but it’ll hurt our employees.” He assured members Lamar would work with Washington to develop “reasonable” regulations. Palmer claimed the bill would disadvantage new business development as licensees were already banned from television ads (audio – 2m, video).
    • Senator Maureen Walsh stated the “content and the intention” of the bill around investment was good, but agreed a billboard ban wasn’t appropriate. Praising Saldaña’s intent with the bill, Walsh said “I would hate to see a good bill go down based on a couple of small issues” which included Saldaña’s centerpiece labor peace agreements (audio – 1m, video).
  • Chris Masse, a Partner with Miller Nash Graham & Dunn, favored the bill and called Washington an “outlier” along with Alaska in its restrictions on funding. She noted Colorado allowed outside investors and was considering liberalizing access because the state was “seeing money pass them by.” Masse argued the bill was not “big boxification” of the industry and claimed investors would consider licensees of every size. She noted pushback on labor peace agreements and suggested employee stock options were a common startup practice worth normalizing (audio – 2m, video).
  • Jamie Hoffman, owner of Craft Elixirs, said her woman-owned business on a budget had trouble retaining talent. After four years, she was offering “modest medical benefits” to her 20-person staff but needed investment to grow more. Hoffman claimed new money would go to employees, then infrastructure, then expanded facilities, and help keep the company up to date with WSLCB rules (audio – 2m, video).
  • Samantha Grad, the Political and Legislative Organizer for UFCW 21, testified “in strong support” of the bill. She said a retailer’s employees had recently unionized after some difficulty and cooperation between employers and employees “could and should be the rule, not the exception.” Grad denied labor peace agreements were de facto unionizing. She said it was a “two way street” with “protections for both sides” and left the decision up to workers “without intimidation or fear of retaliation from their employer” (audio – 2m, video).
    • Keiser questioned Grad about Battles’ earlier contention that labor peace agreements were preempted. “California is currently operating under this language,” Grad answered, “so it’s not violating there” (audio – 1m, video).
  • Krystelle Purkey, representing Cannabis Retailers for Smart Growth, supported the bill due to the “competitive disadvantage” licensees faced. She supported the residency and license limit changes, but argued SB 5985 didn’t go far enough. Purkey suggested allowing out-of-state ownership for up to 51% of a license instead of the bill’s proposed 49%. She also suggested increasing the license cap to seven for all retailers and ten for licensees with labor peace agreements (audio – 2m, video).
  • Eric Gaston, Cannabis Organization of Retail Establishments (CORE) President and owner of Evergreen Market, said stakeholders wanted the state to be “successful” and “a leader” on cannabis regardless of their position on the bill. However, Gaston feared out-of-state money would cost Washington businesses the ability to lead with “the most compelling consumer model in the world for cannabis.” He said the state’s “variety, quality, and value” of products were “unparallelled” by other legal markets. Claiming other states lacked “robust products,” Gaston attributed that in part to investment restrictions. He warned “money is intelligent” and out-of-state capital would likely ask licensees “are you profitable? Are you efficient? And what’s your market share?” He concluded the bill wouldn’t help the businesses most desperate for funding and could hurt the quality of available products (audio – 3m, video).
  • Gregory Foster, founder of Cannabis Observer, spoke to his efforts to demystify cannabis policymaking from WSLCB and now the legislature: “The values of integrity and compassion and respect are values that we’ll bring to that conversation.” Foster opposed the bill “because of the way it was introduced, because it’s not transparent to the public.” He suggested it “seems to abuse the spirit of the rules of the Senate” regarding the cut off calendar process used to vet legislation.
    • Keiser interrupted his testimony to say “the bill before us is being heard because it has a fiscal item in it, so legally it’s possible to hear it and move it. It is my intention to hear the arguments, both pro and con, in this hearing so that we fully understand the ramifications of the bill. But it is not my intention to move it today.” She asked Foster to give objections or support for the bill’s contents. “Primarily, my concern is in terms of the principle of the matter” he answered and encouraged “open data and transparency” so that the public could understand “the rules of the game” (audio – 2m, video).
  • Ian Eisenberg, owner of retailer Uncle Ike’s and a CORE member, testified I-502 had “built-in protections for Washington-based companies” against market consolidation. He called the bill a “big money takeover” of the industry and asserted “mom-and-pop I-502 operators won’t be the recipients of this capital.” He compared the process to local small businesses suffering under a Walmart superstore and called the labor peace agreements “unfair, and ill thought out” potentially putting benefits he already offered employees at risk (audio – 2m, video).
  • Danny Khuu, Buyer for Evergreen Market, claimed small producers he talked to were fearful of larger licensees “buying up market share” and crashing prices (audio – 1m, video).
  • Anya Smith, a former Uncle Ike’s employee, said she was attempting to speak “for the actual employees of some of these companies” and asked the committee to pass the bill. Smith mentioned a disagreement with her former employer about a “work safety condition” that resulted in her being “cussed out by the owner and then fired unceremoniously.” She felt labor peace agreements would give workers a choice and contribute to making businesses “a safe place for everyone.” Keiser sympathized, praising Smith’s “courage to speak up” and acknowledged “you’re always in fear of retaliation in that situation” (audio – 2m, video).
  • Ed Mitchell, COO of retailer Have a Heart, testified in his extensive business history he’d never seen a sector “not allowed to share stock ownership with employees or that could not receive funding from the 49 other states.” Mitchell claimed his store had a diverse staff that couldn’t get an “ownership stake in the industry under the current regulations.” Mitchell’s anecdotal experience with other licensees told him about 80% struggled with access to capital (audio – 1m, video).
  • Keiser announced 31 people signed in not wishing to testify: “three ‘other,’ two ‘opposed,’ and all the rest in support of the bill before us” (audio – 1m, video).