WA House RSG - Committee Meeting
(February 19, 2024) - Summary

Testimony on cannabis commission legislation showed an industry divided over benefits and costs, plus the committee recommended bills on cannabis waste and THC-based taxation.

Here are some observations from the Monday February 19th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 3 takeaways:

• Committee members heard divided testimony on the merits of SB 5546, "Establishing a Washington state cannabis commission." 
  • Introduced in 2023, the legislation was modeled after numerous crop commodity commissions already overseen by the Washington State Department of Agriculture (WSDA). During the 2023 session, the bill was heard by the Washington State Senate Labor and Commerce Committee (WA Senate LC) and then by the Washington State Senate Ways and Means Committee (WA Senate WM). After the full senate further modified the bill before passing it in March 2023, the result was an engrossed substitute version. That iteration of the proposal was heard by WA House RSG across twomeetings, amended again, and sent to Washington State House Appropriations Committee (WA House APP).
    • The overall concept of creating a framework to establish a cannabis commodity commission in Washington state had been proposed in legislation for several years, with HB 1710 in 2022 being the most recent effort.
  • In 2024, the Washington State Senate Rules Committee (WA Senate RULE) included SB 5546 in a package pull of legislation on February 12th, and senators again voted to pass the bill the following day.
  • At the WA House RSG meeting, Committee Counsel Peter Clodfelter went over the bill report to outline the effects of the current language (audio - 2m, video):
    • Authorizes the creation of the Washington State Cannabis Commission (Commission) if approved in a referendum by a majority of active cannabis producers and active cannabis producer/processors voting.
    • Specifies that the Commission would consist of cannabis producers, producer/processors, and the Director of the Washington State Department of Agriculture (WSDA), and would be funded by assessments on producers and producer/processors.
    • Specifies purposes of the Commission including planning and conducting programs, funding research, advising government agencies, advancing knowledge and practice, and other purposes.
    • Grants the Commission powers and duties and includes certain oversight of the Commission by the Director of the WSDA.
    • The revised fiscal note from WSDA staff showed the cost of the bill was “estimated to be less than $50,000 in fiscal years (FYs) 2025 and ongoing each fiscal year thereafter,” as work done by department staff would be “reimbursed by the Commission.”
  • Representative Melanie Morgan wanted to know if the commission would include “any type of equity in terms of historically…marginalized folks.” Clodfelter replied that in the initial appointments the WSDA Director made to the commission “there is a directive to consider diversity…for appointment of the initial members.” He added that a prior version “had more specific language actually requiring one of the commission members to be a social equity licensee,” but the text did “alleviate the need to pay the assessment by any cannabis producer and processors in the social equity program through” 2028 (audio - 1m, video).
    • Morgan was a Co-Chair of the former Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF).
  • Ranking Minority Member Kelly Chambers checked if the bill distinguished between indoor and outdoor growing, with Clodfelter stating it didn’t (audio - 1m, video).
  • Industry opinion on the measure was divided, with seven people testifying in favor of the bill.
    • Bill Wagenseller, Washington Bud Company Co-Founder (audio - 1m, video)
      • Wagenseller said he’d been growing indoors since 2011, but still faced challenges with pest management. He mentioned that a commission could fund research on topics like this. Wagenseller then alleged “our LCB agent recently told us that over 30% of the samples they collect for pesticide testing by the WSDA are tainted with unapproved pesticides.” He felt enforcement of producer compliance with existing pest control rules wasn’t enough, “my hope is that in time a commission would provide real research to establish a proven method of pest control for all growers.”
    • Shawn DeNae Wagenseller, Washington Bud Company Co-Founder and Cannabis Alliance Secretary (audio - 1m, video)
      • Wagenseller argued that lawmakers weren’t requiring creation of a commission, “this bill will simply establish a voting structure for cultivators” to establish a commission themselves. With a threshold of 40% participation, “higher than any other commission,” she remarked that the group would be “a benefit to consumers, it's a benefit to the state, and it's certainly a benefit to cultivators.”
    • Steve Walser, Buddy Boy Farm Owner (audio - 1m, video)
      • Walser was “a long time organic farmer from eastern Washington coming up on 50 years right now,” who grew cannabis and other crops “on my irrigated farm near Spokane.” He’d served on other commodity commissions in the state, and noted, “I did not have to pay commission taxes because I was an organic producer, but I chose to do so anyway. And I did so because it was so useful to all of us even though it wasn't always exactly applicable to me in my agricultural techniques.” Reflecting on the range of studies a commission could support, he agreed there would have to be an effort to educate producers ahead of a vote to start the group, “but it is going to be the voice of the cannabis industry and the research is going to be invaluable. Nobody has done this anywhere in the world and we need to get started.”
    • Caitlein Ryan, The Cannabis Alliance Executive Director (audio - 1m, video)
      • Echoing the sentiments of others, Ryan was amenable to finding “a way to refine the language even further. After an arduous multi-agency effort we have been able to more [accurately] calculate the needed assessment.” She expected an assessment of 0.[2]9% on all sales revenue “would give the commission a $1.5 million budget,” and backed “further clarifying language to ensure the details of the assessment structure would be done in rule at the hands of those being assessed.”
    • Erik Johansen, Cannabis Alliance member (audio - 1m, video)
      • Formerly a WSDA Registration and Licensing Services Policy Assistant, Johansen had “served on the Commission on Integrated Pest Management.” He supported SB 5546, as “in my professional opinion there is no crop grown in the state of Washington that would benefit more from having a commodity commission than cannabis.” Johansen pointed to the difficulty of agricultural research on cannabis given federal prohibition on the plant, noting, “this would be research directed by the growers,” and felt the bill was “critically important” to the cannabis sector.
    • Sean O'Leary (audio - 2m, video)
    • Scott Berka, Licensed Producer/Processor (audio - 1m, video)
  • Six individuals from the cannabis industry raised various concerns in their opposition to the legislation.
    • Lukas Hunter, Harmony Farms Director of Compliance and Government Affairs (audio - 1m, video)
      • Hunter disagreed with “the way the research would be conducted,” as it would likely benefit some growing techniques more than others. Also, “the amount of money that would be going into this would not…be enough to be able to equitably conduct research to the benefit of the cannabis industry as a whole,” he said. Hunter also argued “the electoral process for this, because it's 40% of active producer/processors and 40% of active processors to a 51% vote of those constituents,” he estimated, “15% of the producer/processors that would have to vote ‘yes’ on this for it to go into effect.” He said cannabis interests remained “very mixed on this and to have 15% of the industry be able to make a decision is challenging.”
    • Bethany Rondeaux, Olympus Horticulture Owner (audio - 1m, video)
      • Deeming SB 5546 “controversial,” Rondeaux believed the “handful of producer/processors that support this bill could easily start a commission on their own without legislation.” She was concerned her business would have “sales…garnished without our consent to fund their desires.” With no opt-out, nor guarantee research undertaken by the commission would benefit her company, Rondeaux agreed that more cultivators should support the commission for it to be created, and called out “before this bill has even been passed the assessments have doubled from last year to this year.”
        • When the bill reached the senate floor it had two assessment rates, one of 0.29% for licensed producers, and a rate of 0.145% for producer/processors. However, amended language from the chamber altered the requirement so that all licensees would have fees assessed at 0.29%.
    • Brandon Park, Hygge Farms (audio - 2m, video)
    • Brooke Davies, Washington Cannabusiness Association (WACA) Deputy Director (audio - 1m, video)
      • Davies regarded the commission as something which could have value when cannabis was legal nationwide, but as it stood was “just another tax" on producer/processors, some of whom were “barely hanging on.” She seconded other objections on the amount of licensees that would have to support creating a commission, and also argued the fiscal note showed “the policy no longer has a fiscal impact” since funds raised by assessments would go to reimbursing WSDA before supporting industry research. The revised assessment amount already constituted a “tax rate increase from what was proposed,” and she questioned if meaningful research could be done with the collected sum.
    • Andy Brassington, Evergreen Herbal CEO and WACA Board of Trustees (audio - 1m, video)
    • Ezra Eickmeyer, Producers Northwest Founder (audio - 1m, video)
      • Eickmeyer stated “we have interstate commerce and we're competing to get Washington products on the shelf and other states,” making a commission valuable when federal law made businesses “authorized to engage in marketing to other states.” He agreed with other concerns raised about the assessment fee, and felt “when we were coming and telling you about the things that we're going through out in the business world…it's traumatizing for many of us,” and licensees couldn’t “take on any more expenses right now for something that we don't see an immediate benefit in.”
  • WSDA Policy Advisor to the Director and Legislative Liaison Kelly McLain testified as “other” on SB 5546. She acknowledged having previously worked with the proponents, and explained rulemaking work would only be undertaken by WSDA staff following a successful referendum vote to create the commission. “You've heard before that cannabis growers in Washington continue to struggle with a lack of directed research on plant genetics, pest management, and other ag[ricultural] topics that are normally tackled by universities,” she said. The absence of federal or university study “makes growing the plant more difficult and a research focused, industry-funded commission is one way this could be addressed,” McLain concluded (audio - 2m, video).
  • Several minutes later, Chambers attempted to ask about research costs, but McLain had already left the meeting (audio - 1m, video).
  • SB 5546 was scheduled for executive session on Tuesday February 20th and five amendments were proposed. However, following a discussion of how amendments might interact with one another under the bill and a caucus, Co-Chair Sharon Wylie announced SB 5546 was being removed from the schedule without further action.

• Several amendments on SB 5376, "Allowing the sale of cannabis waste," were considered before committee members voted to recommend the proposal.
  • Introduced in 2023, the legislation was first heard in WA Senate LC that January whose members recommended substitute language the next day. WA Senate WM hosted the next hearing on the bill in February 2023 and recommended passage a week later. Progress on the legislation was halted when the bill was placed in the WA Senate X-file until January 9th, when it was added to a package of bills, moved to the floor, and passed on January 17th. WA House RSG hosted a public hearing on the bill on February 14th, after which three amendments were published.
  • In executive session, Committee Counsel Matt Sterling briefed on the amendments (audio - 2m, video)
    • Amendment STER 056 - Kloba, who proposed the amendment, immediately withdrew it following Clodfelter’s briefing (audio - <1m, video).
    • Amendment STER 060 - Reeves put forward more specific notification requirements for those selling cannabis waste.
      • After being moved for a vote by Vice Chair Chris Stearns, Reeves remarked on the importance of “ensuring first and foremost that we are always thinking about how the work of this body is done in an equitable, thoughtful, and transparent manner.” She said the amendment would ensure as “we expand opportunities for the industry to generate new revenue and utilize a circular economy, that we're doing it with equity and transparency in mind” (audio - 1m, video).
      • Representative Kevin Waters voiced his disagreement, stating “we feel that waste should not…have any ties to it, any regulation to it” (audio - 1m, video).
      • The amendment was added into the bill by a voice vote (audio - <1m, video).
    • Amendment STER 061 - Also from Kloba, Clodfelter called this a “clarifying amendment” around selling waste material to a party not licensed by WSLCB.
      • Kloba shared that there were “anti-monopolistic” rules against selling cannabis below cost, but “waste product, whose value might be extremely difficult to understand what the cost to generate it was” would be carved out as exempt from this restriction (audio - 1m, video).
      • Waters agreed with Kloba’s arguments (audio - <1m, video), and the amendment was adopted in a voice vote (audio - <1m, video).
  • Speaking to the broader bill, Kloba remarked that “a circular economy is a really important concept,” and that all licensees had the expense of getting someone to take their cannabis waste material to a “landfill where they create methane.” She felt SB 5376 would take “really good steps to deal with the waste appropriately” (audio - 1m, video).
  • Waters concurred that the bill made sense because “getting rid of waste should be easy and allow our operators to be able to get rid of it in a fair way, and to make sure that it's not going in landfill and actually has another use, so we will be voting yes” (audio - <1m, video)
  • The committee passed the bill as amended unanimously (audio - 1m, video).
    • The legislation was subsequently scheduled for a public hearing in WA House APP on Thursday February 22nd.

• Although no amendments were offered on SB 6271, “Modifying the cannabis excise tax to consider THC concentration,” a member promised a floor amendment to add “revenue generation components” and ensure “public health [was] included in the discussion and the review.”
  • The bill was initially heard by WA Senate LC on January 22nd before members recommended passage on January 25th. The full Senate then approved the bill without amendment on February 2nd. WA House RSG hosted a hearing on the measure on February 14th.
  • Clodfelter commented that no amendments had been proposed, and briefly reviewed the effects of SB 6271 (audio - 1m, video)
    • Requires the Liquor and Cannabis Board (LCB) to collect data on sales of cannabis products, including the amount of products sold in each category and the average tetrahydrocannabinol (THC) concentration of products sold in each category, with a report due in November 2025.
    • Requires the LCB to formulate a recommended approach and implementation plan for modifying the cannabis excise tax, which must be revenue neutral and propose a higher tax on products with a higher THC concentration relative to other products in the same category, with a report due in September 2026.
  • Reeves supported the bill and mentioned, “while there are no amendments on this bill today, I want to highlight that we do think that there is still some work to do on this legislation and, in partnership with our public health allies, believe that there's a couple of points that have been made for inclusion in this conversation.” She went on to specify “revenue generation components, making sure that public health [was] included in the discussion and the review of this data,” promising to put forward “an amendment for consideration on the floor” (audio - 1m, video).
  • Chambers also regarded “the piece on data collection and sales is pretty important,” since lawmakers wanted to “know about the various types of products that are being sold, the concentration levels, and how much of each.” She was in favor of the legislation, even as she had “some concern looking further down the road” about the idea of modifying tax rates based on concentration: “what does that look like in a state where Washington already has the highest tax rate?” (audio - 1m, video)
  • “I do invite all of us to continue on with this conversation. I think it's an important one and I think we can come to something that's reasonable,” Kloba added (audio - <1m, video).
  • The committee voted unanimously to recommend SB 6271 (audio - 1m, video).
    • With no fiscal hearing in the WA Senate and no changes to the bill, the most likely action would be referral to the Washington State House Rules Committee where members could decide to schedule the bill for a second and third reading on the House floor.

Information Set