WA House RSG - Committee Meeting
(December 10, 2024) - Cannabis Social Equity Program

A briefing for the committee covered the equity licensing process at WSLCB, consultation by the Office of Equity, along with technical assistance and grants from WA Commerce.

Here are some observations from the Tuesday December 10th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 3 takeaways:

• The Washington State Liquor and Cannabis Board (WSLCB) panel presented an update on the cannabis social equity program at the agency and fielded legislator questions on applicant reimbursements, licensing windows, and perceived saturation of the retail market.
  • Regulators last briefed committee members on the program in December 2023 and last discussed its progress during the public hearing on implementation of SB 5080 on December 4th.
    • The previous committee work session pertaining to cannabis was on September 17th.
  • WSLCB Board Member Ollie Garrett began her remarks to lawmakers with a history of the equity program, noting that licensing windows in 2013 and 2015 drew 1,800 applicants for 595 retail locations. She reflected that in “2016, before I joined the board, we were hearing [how there were] people that w[ere] harmed by the war on drugs, being left out” of the licensed cannabis sector. She’d been appointed to the board by Governor Jay Inslee with “clear instructions that they want to hear from a person that represent[ed] black businesses and minority owned businesses” (audio - 9m, video - TVW, presentation).
    • Garrett shared that while the staff told her,: “Everything was great. We did everything according to the directions from the legislators,” yet she got a different message from community members about the “pain and hardship that they felt of not getting into the industry.”
    • With no social equity-specific provisions in the original ballot language, Garrett said she’d worked on initiatives trying to bolster this, including the Cannabis Advisory Council (CAC), which last met in 2021. She had also pursued demographics for retail owners in 2019, suggesting the racial disparity of African and Hispanic American retail ownership “was identical to what the press was saying.”
    • The first agency-request legislation to address cannabis equity was HB 2870, a 2020 law which established the equity program and “authorized the LCB to issue retail licenses that w[ere] previous forfeited that we had back” or had never been issued. Garrett told lawmakers “when the LCB introduced the bill, they didn't think it was going to go anywhere,” but once it became law the board initiated community engagement, as well as participation by Garrett and others on the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) followed and underscored “firsthand the harm, the pain, the things that people went through, the investments that they made in order to be left out.”
    • Garrett mentioned SB 5080, passed in 2023, had also been a WSLCB effort as she and others “knew that more needed to be done.” She suggested this law “expanded the scale of the current social equity program, and it improved many of the aspects of the process. We heard from people who went through the first round…we worked with the community to build and to see what is it that we c[ould] do different?” In concluding her remarks, Garrett reported that “barriers remain for those seeking license under House Bill 2870, and also for those that will apply in the next round. We're going to talk about that here today.”
  • Director of Licensing Becky Smith spoke about various aspects of the equity licensing process (audio - 7m, video - TVW).
    • Beginning with “where we are,” she said 40 equity applicants could be “split it into two areas,” 30 which were “pending processing, [they] haven't currently found any location [and] we reach out to those folks every, every month, once a month, we reach out to those applicants to see if there's things in ways that we can assist them.” She indicated there were “a couple of folks that never contacted the LCB or my staff back.” Other applications were resolved, “four with pending locations,” along with “five that have been issued, and then one that has been withdrawn.” 
    • Smith mentioned an additional group were retail title certificate holders who were given a license by WSLCB, but barred from operating due to local government bans or moratoriums. These individuals “still were required to meet a portion of the social equity requirements,” she remarked, “but they already held a license…being part of the social equity program, it allowed them to move [this licenses] within their jurisdiction.” Smith indicated five of seven had been able to turn their certificate back into a license and open up.
    • Smith said that collaboration with other state agencies was important for the social equity program, calling out Washington State Office of Equity (WA Equity) Director Megan Matthews for being “instrumental” in updating the application process. She also credited Washington State Department of Commerce (WA Commerce) staff who had helped in the WSLCB-led “5080 work group” along with WA Equity staff and representatives from the Washington State Office of Women and Minority Business Enterprise (OWMBE).
    • Smith relayed that there had been 107 applicants for a one-time reimbursement of the WSLCB licensing fee for having a social equity plan, which could include hiring formerly incarcerated individuals or doing charity work in their communities. She also lauded the work of agency officials in publishing an equity blog to help applicants as well as updated disproportionately impacted area (DIA) maps.
    • Representative Kristine Reeves returned to the issues of the one-time reimbursement and how this differed from the technical assistance grants opportunities in law, being “a little concerned that we're mixing those two things together” (audio - 1m, video - TVW).
      • Smith was confident those outside the equity program were not receiving resources intended for equity applicants.
  • Director of Policy and External Affairs Justin Nordhorn talked about how SB 5080 rulemaking had been improved following the initiation of the project in June 2023. He cited the opportunities for input from the public, such as an informal public comment period, a survey of applicants from the previous round, plus engagement with interested parties in public hearings on September 11th and December 4th. Nordhorn also brought up a contract with Whitney Economics who issued a report in March 2024. He added that the proposed rules were set to be adopted by the board on Wednesday December 18th and take effect on January 18th. Nordhorn also expected another application window would be “opening sometime in the spring” (audio - 15m, video - TVW).
    • Getting into the specifics, Nordhorn said SB 5080 had changed the provisions to qualify and necessitated agency staff update DIA maps. He observed, “generally, the new definitions are adding more census tracts that qualified as a [DIA] to consider gentrification… in 2010 there [would be] 244 census tracks that qualified. And in the previous iteration…there were only 139 that would have” counted as DIAs. He described the response to these updated maps as “very, very quiet,” but acknowledged staff had previously heard from “some folks thinking that we should have those over a different period of time than what was identified in statute.”
    • Another area of changes in the rules related to a scoring rubric for prioritizing applicants when more than one applied for one of an area's allotted equity licenses, Nordhorn explained. One revision gave greater points to those with a cannabis conviction over individuals with convictions for other substances. Qualifying based on household income would also change: “what we're going to see is the household income evaluation for one year prior” to applying for the program, he stated, even though “it doesn't really…align with some of the DIA periods and stuff.” While socially or economically disadvantaged criteria had been based on the OMWBE standard, “we took that a little bit further in the scoring rubric and the point structure, because we're trying to figure out, what does this mean? What does this look like from a personal impact?” Nordhorn told lawmakers the rubric also provided “some points for folks who applied in 2870 [but] weren't selected,” along with additional points for former medical dispensary owners.
    • Nordhorn shared that the proposed rules incorporated options for statewide mobility, which he said had been “most concerning to folks” who testified on the rulemaking project. He remarked that mobility would be “on a staggered basis, so that those folks who went through the process in 2870 and maybe they're in a county that was not heavily applied for, [meanwhile] we have people in King County that missed getting a license by two points, and they were around the 300 point level.” Then, individuals applying through the SB 5080 licensing window would have to “meet or exceed the minimum score” in order to change jurisdictions. Nordhorn added that anyone who applied under SB 5080 and was issued a license would be mobile statewide and that the agency decided to maintain this current policy around title certificate holders.
    • Nordhorn expected there to be two WSLCB licensing windows, the first for retail licenses, and then later for producer/processor licenses.
  • Smith acknowledged that barriers to licensing remained, particularly ongoing bans and moratoriums in 81 Washington cities or counties, as well as the challenge of applicants accruing startup capital. However, she suggested that the revised application process had been streamlined so that an applicant only had to register through the portal, and then the agency would send their information to the successful third party contractor for scoring and prioritization (audio - 4m, video - TVW).
  • Representative Melanie Morgan sought clarification on how a person who hadn’t been awarded a retail license could get a producer/processor license (audio - 4m, video - TVW).
    • Nordhorn responded that an individual would have to re-apply, though if they held a current retail license they were not eligible to apply for a producer/processor license. He indicated that agency leaders didn’t want “to assume that people automatically want a producer/processor license so it does not transfer automatically.”
    • Morgan asked if WSLCB recognized “a retail person who's here to sell the product is a whole different level of expertise and entrepreneurship versus producer/processing…that's, ag[rilcuture], I mean, that's a whole different mindset and a whole different set of skills and expertise in that.” She was curious how agency staff would “bridge” those two groups. Nordhorn stated that some legacy dispensary owners had operated vertically integrated enterprises giving them broader experience with sales and production than those who had only operated licensed enterprises. “We're just trying to create the most opportunities for folks…and you're not successful in getting the retail you can either wait for another window, or you may want to be looking at production and processing,” reasoned Nordhorn.
    • When Morgan asked for specifics about changing technical assistance grants if an individual applied for a different license type Nordhorn deferred to WA Commerce.
  • Reeves was curious if the LCB would go back to the market analysis done by Whitney Economics “to ensure, particularly with statewide mobility, that we're thinking about how much the market can actually bear in terms of the rollout, or are you rolling out all these licenses at once?” (audio - 4m, video - TVW)
    • Nordhorn pointed out a distinction that “where we see in the ICPS [International Cannabis Policy Study] that close to 90% of consumers [were] participating in the legal market. That doesn't mean it's exclusive…whereas in the Whitney economics, their projection was around 55% of folks were actually utilizing the legal market,” and “the saturation of retail is, is really…full. While it didn’t delve into the county-level… but you do have inventory, staffing, and all of those types of things that come into those equations.” He suggested that more licensing could increase participation in the cannabis market, “and so if we see the illicit market impacted, the theory’s then, then it would increase, and that's why you see a significant increase in the number of viable licenses over time through 2032.”
  • Representative Morgan asked how many locations one license was authorized to operate (audio - 1m, video - TVW).
    • Smith answered that an HB 2870 equity licensee could procure one location, but a true party of interest can generally be associated with up to five retail locations total, as one company could own five licenses.
      • HB 2870 licensees remained eligible to apply during SB 5080 application windows.

• Representatives of the Washington State Office of Equity reviewed their collaboration with WSLCB for lawmakers.
  • Policy and Legislative Affairs Director Omar Santana-Gomez described the office mission and work, indicating that they’d been established in 2020 to “promote equitable access to opportunities, power, and resources across government that reduce disparities and improve outcomes statewide” (audio - 3m, video - TVW, presentation).
    • Santana-Gomez explained that office staff facilitated policy and systems change within state government through partnerships with agencies to infuse equity into processes and reduce barriers to access from communities. He said WA Equity leaders were constantly asking “how do we build those relationships with our state partners to make sure we are reducing and limiting those…barriers?” Along with hiring a diverse staff, Santana-Gomez suggested their team wanted “not just visible and invisible diversity, but also when it comes to geographic diversity” with personnel from across Washington.
    • In 2023, Santana-Gomez stated that WA Equity staff had collaborated with WSLCB counterparts to assist in revising the equity application process and continued to build relationships with agency officials to improve programs.
  • Senior Policy and Legislative Affairs Director Patrick Stickney talked about the WA Equity role in the Community Reinvestment Project (CRP) which had been created in 2022 with a $200 million appropriation by the legislature to address racial, economic, and social disparities created by the war on drugs (audio - 2m, video - TVW).
    • Although WA Commerce housed the majority of this work, he remarked their office had consulted on, and advocated for, the efforts of WA Commerce staff.
    • Stickney said they’d helped WA Commerce “process applications for the cannabis business grants, to cross reference that with…definition for the community reinvestment project, and then also to provide feedback on the cannabis social equity business course.” He stressed that they were also helping “increase the accessibility of the language to the public.”
  • After outgoing-Governor Inslee announced a state agency hiring freeze and called for agency spending cuts in a “budget exercise,” his office released a proposed budget for the 2025-27 biennium which included equity investments for transportation, education, and the environment.

• Washington State Department of Commerce Life Science and Global Health Sector Lead Alison Beason described equity program goals and gave updates on her department’s work before taking questions about their quarterly reports and any process to recapture unspent grants (audio - 13m, video - TVW, presentation).
  • Beason’s role put her in charge of the social equity program work for WA Commerce, and she stated while the department fulfilled a variety of functions, “something that we really, really shine at is helping with small business assistance and economic development.” She directly credited the work of Elijah Moon, Commerce Specialist for Finance and Grants Services, calling him “instrumental in helping me present this program, develop this program, and work with the community on this program.”
    • “This program is a small, small step in fixing an overall large problem that we've seen when it comes to Black and Brown communities getting into the cannabis business,” Beason established. She told the committee the equity program would “improve communities that were impacted by the war on drugs, but…it's not just making sure people have extra tools, but we…as a government entity, needs to understand some of the things that we've done…we need to fix those things that have happened in the past.”
  • Beason said “what everybody was very excited about this year, [was] the grant program” for cannabis equity applicants. She argued her staff took “a holistic approach last year when we did this program,” and grants included some vendors who previously provided mentorship for program applicants, “and then we had a facilitator, and then we also had an online technical assistance program. It was very chopped up.”
    • Through “one contractor, [Make Green Go!] we were able to have mentors or client specialists,” said Beason, and “also incorporate grant specialists.” She highlighted the importance of having the technical assistance “under one bubble... because as people were going through the…grant process, they needed to talk to each other.”
    • Beason remarked there was “a team to navigate you through” this process, and was proud of the approach. Similarly, “when it came to the grant we want it simplified, we made it a two page application process with an Excel budget spreadsheet…with that information, we were able to help people kind of get their foot in the door in the future.” Their work was a legislative mandate, she noted, and “this is a pilot program…so after these two years, we do not know what the funding is going to look like, but if we did get additional funding, we are not allowed to fund any [cannabis equity license] after July 1, 2024 so that is something that if we had to do an update,” she’d seek legislator support.
  • Beason reviewed the technical assistance curriculum created for the cannabis equity program by Make Green Go! was condensed from 17 modules “down to around four or five modules” since the initial feedback was that the information was “overwhelming.” WSLCB staff had advised a focus on fundamental business knowledge such as business plan development, she reported. She’d learned from the City of Oakland, California about the value of making the WA Commerce online technical assistance program freely available to anyone interested, indicating their program launched in September 2023.
    • Gregory Minor, an Oakland City Administrator, discussed his municipality’s program with Seattle officials in March 2022.
    • Beason mentioned that the program included client success managers to help applicants identify their specific needs and connect them with the appropriate resources.
    • She stated that officials had “given out 39 grants of $141,000 up front cost” from a fund of “around $3 million in community reinvestment funds and $3 million in designated cannabis funds.” Beason anticipated there being “$3 million this year for designated cannabis funds. We made sure all the community reinvestment funds [appropriated were] dedicated just for grants.” She expected WA Commerce would “do another round that we're trying to figure out for the next round, but…we'll need your help on information about how we do this, RCW and things like that.”
    • Beason highlighted “a project at Interchange…I call it like a trade association. It's a little wild west, but it's a trade association that gets producers and processors and retail people together, and they're allowed to share product, so people can get their product into that business." She’d heard positive anecdotes about the value of the group’s events from attendees.
    • Like other panelists, Beason recognized challenges posed by local regulations and limited real estate options, and that landlords would “jack up the cost” when they realized it was a cannabis business, stating this practice was “manipulating the system.”
  • She reported that four stores had opened, another five were opening soon, over 1000 people had participated in technical assistance, participants had used an average of ten hours per client of mentorship, and 92% of equity applicants were submitting quarterly reports, a requirement of the grants.
  • Co-Chair Sharon Wylie wanted to know what Beason had gleaned from the quarterly reports, or if they’d provided any "aha moments" (audio - 2m, video - TVW).
    • Beason had found that the 12-month time frame to spend the funds may not be sufficient due to difficulties in finding suitable locations. She elaborated that even when giving someone a grant which might cover part of a lease, “it's hard for me to find a house in my price point. And so 12 months is not enough time." Beason commented that she’d heard “I haven't even touched my bank account. I haven't spent the money because I can't find a location,” but they were trying to find solutions, “because the money needs to be expended by…June 1st.”
    • When Wylie followed up to ask if giving grant recipients more flexibility would be beneficial, Beason agreed, pointing out that community reinvestment funds could be spent over 24 months.
  • Reeves shared her understanding that WA Commerce might not be able to recapture grant funds once expended (audio - 1m, video - TVW).
    • Beason noted that the grants were given under statutory authority which required projects funded by grants be completed within 12 months of the awarding of the money. When Reeves asked about authority to enforce recouping the money Beason promised to get back to her with an answer.

Information Set