WA Legislature - Update (February 23, 2024)

The first cannabis legislation of the session was passed; two bills in fiscal committees were heard and one was advanced regardless of not being heard; and the “potency tax” study was up for a financial review.

Here are some observations of the Washington State Legislature (WA Legislature) for Friday February 23rd, the 47th day of the 2024 regular session.

My top 4 takeaways:

On Thursday morning, the Washington State Senate (WA Senate) passed the low dose tetrahydrocannabinol (THC) beverages legislation, which became the first cannabis bill passed by the legislature in 2024.
- HB 1249 - "Regarding limits on the sale and possession of retail cannabis products."
  - Senator Karen Keiser, in commending the bill to her peers, acknowledged, "I've not tried it myself yet, one of these days!" Senate President Denny Heck then challenged Senator Curtis King to "top that" in his positive remarks.
  - The legislation was passed with Senator Mike Padden registering the only opposition and Senator Marko Liias excused. As the bill was not modified in the Senate, it became the first cannabis legislation passed by the Legislature during the 2024 regular session.

On Thursday, the Washington State House Appropriations (WA House APP) heard only positive testimony on legislation to allow sales and giveaways of cannabis waste byproducts.
- SB 5376 - "Allowing the sale of cannabis waste."
  - Positions (testifying + not testifying - duplicates = total)
    - PRO: 4 + 6 - 0 = 10
    - CON: 0 + 0 - 0 = 0
    - OTHER: 0 + 0 - 0 = 0
  - In a question for the panelists, Representative Lauren Davis seemed perplexed about who would purchase cannabis waste. Harmony Farms Director of Compliance and Government Affairs Lukas Hunter clarified that the bucked stems and unreclaimed leavings of cannabis plants were sought after for the same reasons that industrial hemp cultivars exist, and provided example uses such as inclusion in hempcrete, processing for fiber, use as animal bedding, and composting.
  - Later that day, an executive session on the legislation was scheduled for the committee’s final planned meeting of the 2024 regular session on Monday February 26th.

Also on Thursday, the Washington State Senate Ways and Means (WA Senate WM) advanced the “high THC” legislation despite process concerns raised by members and heard only positive testimony on the patient excise tax exemption bill.
- HB 2320 - “Concerning high THC cannabis products.”
  - As noted previously, it seemed unusual that the “high THC” legislation had been scheduled for an executive session as no standing committee of the Senate hosted a public hearing on the bill after its passage by the House in substantively different form as compared to the official companion, SB 6220, and then having undergone further modification by the Senate policy committee.
  - That concern was voiced by leaders from both parties early in the WA Senate WM meeting during a normally routine motion to invoke Senate Rule 49 to allow the committee to advance legislation without hosting a public hearing in certain circumstances. That rule reads (emphasis mine):
    - “All bills reported by a committee to the senate shall then be referred to the committee on rules for second reading without action on the report unless otherwise ordered by the senate. (See also Senate Rules 63 and 64.) A bill may not be referred to the committee on rules for second reading unless a standing committee has held a public hearing on the bill. This rule does not apply when the committee is considering a bill whose official companion has already been heard.”
  - After Vice Chair Joe Nguyen made the routine motion, Ranking Member Lynda Wilson asked to confirm that all of the bills on the agenda for executive session were eligible companions which were not substantively different. Committee staff acknowledged HB 2320 carried differences.
  - Chair June Robinson suggested staff highlight any differences in briefing and moved ahead with a vote on the motion. President Pro Tempore Karen Keiser, also the Chair of the Washington State Senate Labor and Commerce Committee (WA Senate LC) which put forward the striking amendment to HB 2320 under consideration, protested that the legislation was in fact different and a public hearing would be necessary. Majority Leader Andy Billig could be heard suggesting Robinson interpret Keiser’s staunch opposition as a “no” on the motion. Robinson proceeded with the vote, which raised some opposition, and called for staff briefings.
  - The briefing on HB 2320 by fiscal committee staff did highlight several substantive changes in the legislation as compared to what senators had heard about the official companion:
    - SB 6220 had been modified by WA Senate LC members to require the WSLCB to define “high THC cannabis products,” but no such provision was included in the bill under consideration.
    - HB 2320 as passed by the House had been reverted to directly provide funding to the University of Washington Addictions, Drug, and Alcohol Institute (UW ADAI) for the creation of clinical guidance and interventions in the WA Senate LC striking amendment.
    - Recurring funding for marketing outreach by the Washington State Department of Health (DOH) had been added in the WA Senate LC striking amendment.
  - However, fiscal committee staff did not emphasize other substantive policy changes in the bill under consideration:
    - No mention was made of the removal of the section raising the age gate to 25 for access to high THC products in the Washington State House Regulated Substances and Gaming Committee (WA House RSG) striking amendment, although staff did mention the removal of the corresponding section on government to government consultation with tribal nations to encourage similar policy changes.
    - No mention was made of significant revisions to the overall legislative intent in the striking amendment by the WA House RSG.
    - The addition of retail point of sale signage about the risks of high THC products to be developed by the DOH was framed as part of the original bill, but had been added in the WA House RSG striking amendment.
  - On return from caucus, Robinson announced that the committee would not take action on another bill with substantive changes. But HB 2320 was subsequently recommended to the Washington State Senate Rules Committee (WA Senate RULE) in a voice vote. No remarks were offered by members.
- HB 1453 - “Providing a tax exemption for medical cannabis patients.”
  - Positions (testifying + not testifying - duplicates = total)
    - PRO: 4 + 89 - 2 = 91
    - CON: 0 + 2 - 0 = 2
    - OTHER: 0 + 0 - 0 = 0
  - Following the briefing, Chair Robinson asked staff to reiterate the estimate from Washington State Liquor and Cannabis Board (WSLCB) staff that patient purchases were estimated to contribute 1% of cannabis excise tax revenue to the State, lingering on the $5M figure.
    - The fiscal note in question acknowledges “Non-zero but indeterminate cost and/or savings.” The discussion on “Cash receipts Impact” offers:
      - “LCB analysis shows about 1% of FY22 sales were retail sales tax exempt (made to cardholders). In fact, the percentage of tax-exempt sales appears to be declining almost every year since 2017. See the attached chart "Sales-tax exempt sales as a percentage of total sales.pdf".
      - “By creating an exemption from the 37% cannabis excise tax, this policy creates an incentive for more customers to obtain a recognition card to take advantage of the savings. Assuming there is a demand for product that meets the DOH testing standards, and the supply meets the demand, then there is the potential that there could be a significant negative impact to cannabis excise tax revenue. For context, cannabis excise tax revenues were $511.1 million in FY22. If 1% of those sales were products to recognition card holders that met the DOH testing standards, then the revenue loss would be $5.1 million per year.
      - “That being said, it is unknown how much more cannabis product would be produced that meets the standards of WAC 246-70-040 and how many more patients would take advantage of the excise tax exemption. The potential exists however, for the impact on cannabis excise tax revenues to be significant.”
    - The LCB analysis glosses important details.
      - Retail sales and use tax exemptions have generally been offered to authorized patients as well as individuals who take the extra step of registering with DOH, whereas the proposed tax exemption could only be applied to patients in the DOH database.
      - Retail sales and use tax exemptions have generally been offered to patients purchasing any cannabis products because there are very few processors (three or four) which create DOH-compliant products. The proposed excise tax exemption could only be applied on the purchase of DOH-compliant products.
      - No attempt is made to estimate the potential for increased sales should the policy encourage individuals who patronize traditional markets to instead obtain cannabis products within the regulated space. That’s understandable, as it is hard to put a number on the values to accrue from such a change, not all of them monetary.

On Friday, representatives would hear testimony on legislation to study tying the excise tax rate to reported THC values and senate leaders would be granted an opportunity to calendar bills.
- 9am: Washington State House Finance Committee (WA House FIN) - Committee Meeting [ Event Details ]
  - SB 6271 - “Modifying the cannabis excise tax to consider THC concentration.”
    - [ Register Position ]
    - On Thursday afternoon, legislative staff announced a public hearing on the tetrahydrocannabinol (THC) tax study had been added to their Friday meeting. At publication time, an executive session had not been scheduled.
- ~12:15pm: WA Senate RULE - Committee Meeting [ Event Details ]
  - On Thursday morning, legislative staff announced the WA Senate RULE members would convene and be granted a single member pull in addition to votes on regular and consent packages of legislation.
  - At publication time, two cannabis-related bills were positioned for calendaring in WA Senate RULE:
    - HB 2151 - “Reassigning the accreditation of private cannabis testing laboratories from the department of ecology to the department of agriculture.”
    - HB 2320 - “Concerning high THC cannabis products.”