WSLCB - Board Meeting
(August 28, 2024) - Summary

Besides a call for minor changes to rules implementing a patient tax exemption, board members heard about an alleged “bait and switch” tactic being used on some equity applicants.

Here are some observations from the Wednesday August 28th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 2 takeaways:

• One person offered input on proposed WSLCB rule changes to implement HB 1453 “Providing a [37% excise] tax exemption for medical cannabis patients.”
  • The law—passed on March 14th—expanded a previous patient exemption on sales and use taxes, but also narrowed the application of the exemption to only be offered by medically endorsed retailers selling Washington State Department of Health (DOH) compliant products to patients registered with the department.
    • Board members approved a CR-101 to start rulemaking on April 24th and hosted two implementation focus groups on June 3rd and 6th.
    • DOH staff hosted a webinar on the medical cannabis program more broadly on July 18th.
    • Staff previously discussed the project on August 13th, and during the prior day’s board caucus (audio - 5m, video - TVW, video - WSLCB).
  • In the meeting, Policy and Rules Coordinator Daniel Jacobs introduced the HB 1453 rulemaking project, remarking that his office had received two written comments “in support of the rules filed July 17.” Absent testimony which would cause them to re-draft the proposed text, he said, “final rule language will be filed on September 11, and effective October 12.” Jacobs acknowledged the history and implications of the law, which he noted gave WSLCB, “rulemaking authority to identify the records that retailers need to keep demonstrating that these requirements are met.” He also specified the “exemption is currently scheduled to expire in June 2029” (audio - 4m, video - TVW, video - WSLCB, Rulemaking Project).
    • The proposed rules amended WAC “314-55-083 on traceability, 314- 55-087 on record keeping generally, and 314-55-089 on tax reporting,” he told the board. Jacobs stated changes were needed to “address the new requirements and to reference a new rule that we're proposing to create at 314-55-090, which is dedicated solely to this new tax exemption.” He elaborated on staff’s thinking behind the new section, “based on past experience with alcohol delivery allowances that were temporary during the [coronavirus] pandemic but then made permanent by the legislature.” Under the CR-102, should lawmakers choose to “later make this exemption permanent or to tweak it, we have the structure of a rule in place, and if it expires as scheduled, then we can rescind the rule at that time.” Jacobs explained how the proposed section spelled out the requirements of HB 1453, “as well as requiring retailers to keep the following records for every sale where they are exempting the excise tax: the date of the sale, the unique identifying number from the recognition card, as well as its effective and expiration date, identifying information about what product is sold which is having the excise tax exempted from it, and the total sales price.”
    • Additional “technical changes” were made in the impacted rule sections, Jacobs indicated, “such as updating LCB’s mailing address, fixing some typographical errors, and changing the acronym from WSLCB to LCB, consistent with other rulemaking” completed on July 31st.
  • Board Chair David Postman asked about the interplay between the proposed rules and what information was in the Cannabis Central Reporting System (CCRS), specifically, “the ability to track that these products have been tested for heavy metals [HM], which is required for all medical compliant product” (audio - 2m, video - TVW, video - WSLCB).
    • Jacobs said this requirement was already in the traceability rules, “I went over…how retailers need to keep copies of all of those records. They are also going to be required to document that information in CCRS.” The rules would mandate “all quality control testing needs to be reported to CCRS.” DOH rules required HM testing specified to be reported “in addition to the quality control rules,” observed Jacobs.
  • The sole public testimony came from Caitlein Ryan, The Cannabis Alliance Executive Director, who specified she had one rule change that “can be attended to without slowing things down.” She thanked Jacobs “for continuing to move on this quickly so that we have these rules in place” (audio - 4m, video - TVW, video - WSLCB).
    • Ryan mentioned that subsection (2)(c) related to stock keeping units (SKUs) and “maintaining that SKU number, [prompting her to] highlight that sometimes…the SKU number is often utilized for…keeping stock and isn't necessarily in alignment with the traceability number.” She wanted to ensure in the event a retailer SKU differed from the “seed-to-sale barcode, that…they know that, that there's a difference there, and that they're making sure that they're retaining those records properly.”
    • Turning to traceability, Ryan noted she’d heard “folks are struggling to get the labs, some labs to get the test results into CCRS…When asked for them, they're being supplied. However, if the rule is saying that they need to be in traceability, just making sure that there's good education with folks so that they understand the T's that need to be crossed and the I's that…need to be dotted in there.”
    • While appreciating all the language regarding what WSLCB needed to be reported, “which I know also goes along with the legislation that's potentially coming up,” said Ryan, she called for references to be added to RCW 69.51a.235 which covered patient confidentiality. She wanted rules to reiterate “this is in alignment with patient confidentiality as laid out in RCW,” and suggested such statutory referencing had been done before “a couple of times for other parts within this rule set, and I think it would be worthwhile here as well.”

• Several public commenters repeated allegations made August 14th of racial bias by agency officials responsible for previous licensing opportunities and how it had impacted the existing market, and a social equity applicant laid out challenges he’d faced finding a property for his retail location.
  • Christopher King (audio - 4m, video - TVW, video - WSLCB)
    • Reflecting on a tribal compact also approved in the meeting as well as expedited efforts for gender neutral rule language, King suggested, “we've watched this board make sure that natives got their thing. LGBTQI got their thing, and your White cronies mostly got their thing.” He contrasted this with how “Black and Brown sat here adjacent to the whole process, waiting for something to happen. And now, after much browbeating, licenses are finally going out…the whole nine yards.” The perceived disparity tied in with his objections over a reduced public speaking window at meetings, as King pointed out when the board last contemplated reduced comment times in 2019, “but somebody testified and said the same thing that I said, which is that if it ain't broke, don't fix it…meetings are scheduled for two hours anyway, so it's never a problem.” The circumstances seemed emblematic to King that “all these other groups of people have their thing, when it comes to Black and Brown, we don't get our thing. We get our time slice…It's content based discrimination.”
      • Arguments by patient Don Skakie in 2019 raised similar objections to the board’s move to reduce speaking times. However, they differed in that King initially insisted on June 5th that the change was indicative of a retaliatory racial bias directed against him and others by the board.
    • Explaining in law school he’d aced “exactly two courses, First Amendment, Media and Constitutional law. So I'm going to bring both those to bear for you.” King argued “you have created a situation…that requires a strict scrutiny analysis.” He insisted there was a “compelling governmental interest that is the discrimination that you just did and continue to do.” The narrowest lawful remedy King saw was to offer licenses to “people who are qualified that you screwed in the first place,” as it was the “least intrusive means to reach the desired goal [of] some kind of justice, and that means reparations for the money that you took, it means giving licenses out..” King then tried to insist on acknowledgement of his viewpoint, suggesting lawmakers, the public, and other organizations “understand me…I think major media needs to have a full time team of reporters covering what you did to Black and Brown in this industry, as well as the [medical] co-ops, too.”
  • Paul Brice, Happy Trees Owner and former Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) advisory member (audio - 3m, video - TVW, video - WSLCB)
    • Similar to his remarks on August 14th, Brice observed he was "at another cannabis convention" that was “predominantly…White” participants. Speaking to the next licensing opportunity for social equity licenses, he said he’d submitted a rulemaking petition related to retail title certificate holders. Brice believed it “seems so silly to not want us to have some type of studies on what was the first round success? How many true Black or Brown actually received this license?” He insisted that the program was intended primarily to increase ownership in these communities of color.
      • On July 9th, Licensing staff reviewed applicant demographics from an anonymous survey, including that “47% identified as Black or African American.”
    • Brice recognized he was “part of this program, again, that I did not qualify by applying, even though I had high points, and whatnot, but just, just seemed to miss it again. There was grant monies awarded for by and for. We know what ‘by and for’ meant…Black or Brown, if you had to associate yourself or a Black community, or you're a Black person yourself, if you're by and for it received this money.” He felt the agency was going to face litigation no matter what, “so accept it…do the right thing.” Brice offered hope “we can actually find some friends in the LCB and success for this program.”
      • The statute on the technical assistance grants managed by the Washington State Department of Commerce did not explicitly tie the funds to applicant race, nor do social equity qualifications in RCW 69.50.335 outline racial preference as a criteria.
      • Despite a significant history tying cannabis prohibition policies to racial disparities, board members were told by a prominent attorney in 2022 how explicit racial preferences were unlikely to be upheld if challenged in federal court and could compromise an equity program.
  • Michael Klein (audio - 3m, video - TVW, video - WSLCB)
    • Klein suggested he might be “the only one in the state that went through the entire [social equity] process, from application through build out so doing my own floor plan, traceability, sales, electrical, city permits completely, the entire process, no violation whatsoever.” But after hearing prior testimony, he acknowledged “the biggest issue, I didn't realize this, was just going to be about race.” Klein said he’d struggled being “kicked out of high school…never felt like I wasn't going to be arrested. Been growing for 20 years.”
    • The biggest obstacle he perceived was a complex arrangement where “commercial real estate brokers are teaming up with…property owners, and what they're actually doing is a bait and switch.” Klein said, “they offer an employee contract, tell you that they're buying a building…and they need a lease to your place. And then they don't build the building, and then they don't pay rent, utilities, or anything.” This led to private arbitration, he stated, and agency officials wouldn’t know the practice was happening for two years. Klein claimed that officials would then learn more about the supposed bait and switch tactics, where perpetrators would “just find a commercial broker type” online and tell them, “we're gonna write this up in three contracts,” one for WSLCB, another for the Washington State Department of Revenue. He expected board members might notice “it's in Odessa, Washington's where they're stacking up licenses…they come in and tell you, you know, we're gonna offer you a job.” Resolving the situation involved paying for both legal representation and court costs, so “most people have to back down.”
    • Postman encouraged Klein to send in any additional comments by email (audio - <1m, video - TVW, video - WSLCB).
  • Peter Manning, Black Excellence in Cannabis (BEC) President (audio - 4m, video - TVW, video - WSLCB)
    • Having recently attended “a happy event, but it was predominantly all White,” Manning suggested, “myself and two other Black people there in the cannabis industry” were the only non-White attendees. He claimed this was how the industry had been since 2015 when SB 5052 was passed, merging a newly licensed adult use market with an unlicensed medical dispensary sector. Manning addressed Board Member Ollie Garrett, whom he said he’d first approached in 2016 and found his concerns were “disregarded.” Despite subsequent inquiries, including a 2019 “misconduct report” by D Diamond Consulting which touched on allegations of racial bias by WSLCB staff, “nothing changed…with the Black or Brown community in the cannabis industry.” Manning remarked that only legislation or litigation seemed to motivate agency action, even “when you guys were just a Liquor Control Board, you guys didn't give licenses to Black people. That's evident.”
      • The D Diamond Consulting report focused on “the portions of allegations that Mr. Manning would have difficulty proving in court, such as racial bias, while significantly downplaying the portions that showed deceitful activity by Board staff and the corresponding denial of due process in the processing of Mr. Manning’s original application.” 
    • Manning believed “White supremacy is scared of Black independence, because it killed it.” He again named specific members of WSLCB Licensing and leadership he felt bore responsibility for prior licensing discrimination and called for those still at the agency to be fired. Manning added, “it's not right, Postman, and you know it, and we're going to take you to court.”
  • Postman said Manning’s allegations were “not correct, it's not true, it's not fair. It's mentioning people who are among the people who've worked the hardest on this program.” He recognized Brice’s sentiment that “there are some differences about what that program looks like as it rolled out, but this is now the second installment,” and Postman felt staff had been working with members of the community in earnest. Nonetheless, he said it was “troubling that those that have spent the most time and been the hardest on themselves in the current system to improve it, are the ones whose names get read off every other Wednesday. I think that's beyond unfortunate” (audio - 1m, video - TVW, video - WSLCB).

Information Set