WA Legislature - Update
(February 14, 2025)

WA Legislature - Update (February 14, 2025) - Takeaways

Wrapping up the first five weeks of the 2025 session, committee schedules for the final week before the first cutoff were filling up prompting reshuffling and winnowing of legislative priorities.

Here are some observations of the Washington State Legislature (WA Legislature) for Friday February 14th, the 33rd day of the 2025 regular session.

My top 4 takeaways:

  • Thursday afternoon, the executive session on the retail advertising bill planned for the same day as the first cutoff was rescheduled to earlier in the week.
  • The cannabis farm gate sales bill had been scheduled for an executive session in the Washington State Senate Labor and Commerce Committee (WA Senate LC) on Friday February 14th - but was reshuffled after an amendment was published on Thursday afternoon.
    • SB 5403 - Cannabis Direct Sales
      • Introduced by Senator Rebecca Saldaña, Chair of WA Senate LC, the legislation would authorize cannabis producers to sell their own flower directly to consumers.
      • During the public hearing on January 27th, a supermajority of the 23 people who testified supported the legislation, although questions were raised about market impacts.
      • A questionable fiscal note on the legislation was published on Friday February 7th.
        • WSLCB staff hazarded no guess about potential changes to cash receipts from farm gate sales, explaining: “While this bill allows for direct sale activity which is taxed at the 37% cannabis excise tax rate, it is unknown the volume of these sales and how much activity will be new sales as opposed to consumers buying product via direct sale from a cannabis producer rather than from retailers.”
          • The market report by Whitney Economics, a vendor selected by WSLCB Research Program staff, projected that retail cannabis stores were not capturing a significant proportion of consumer demand for cannabis in Washington state.  The report author, signed in “Other” at the public hearing on SB 5403, projected that participation in the legal market was at 51% - which if true would mean that 49% of sales were not made at licensed businesses and the state was missing out on hundreds of millions in revenue annually.
        • WSLCB staff made their fiscal projections under unusual assumptions about the number of operational producer licenses and the expected number of direct sales participants.
          • “There are currently 954 cannabis licensees with a producer license. The agency estimates 80% of them would want to take advantage of the direct sales ability introduced in this legislation.”
        • Staff then used the assumption that 763 licenses (not accounting for ownership of up to three licenses per entity) would stand up direct sales capabilities on their premises by 2026—and every year thereafter—to generate what might be called an “upper bound” calculation of expected costs to the agency.
          • By way of contrast, in the fiscal note on HB 1410 (Suspending Inactive Producer Licenses), WSLCB Licensing staff reported: “Last year, the Department of Revenue stated that there were up to 246 inactive producer accounts.”  It was initially unclear if WSLCB Licensing, Finance, and Enforcement and Education staff took that factor into consideration when making their calculations on SB 5403.
        • During the WSLCB presentation to WA Senate LC members on Monday February 10th, Licensing Division Deputy Director of Administration Nicola Reid began with a straightforward count of cannabis licenses by type: “You will see that there [are] 794 producer/processor licenses, 157 producer only, 195 processor only, and 471 for cannabis retailers” (audio - 2m, video - TVW).
          • So the more recent total of 951 producer or producer/processor licenses largely matched the earlier estimate of 954 in the SB 5403 fiscal note.
        • As no mention was made of inactive producer accounts in the presentation, it can reasonably be assumed that the total is inclusive.  246 inactive licenses would comprise roughly 25% of all producer or producer/processor licenses.  Therefore, WSLCB staff have assumed that 5% of inactive licenses will be reactivated to take advantage of the opportunity provided by SB 5403 - in addition to all active licenses.
        • While not necessarily a reasonable projection, the enthusiasm with which WSLCB staff presume producers will take up the opportunity to provide highly regulated and taxed farm gate sales by 2026 says something inescapable about the popularity of the proposal, and conveys a perceived need for structural change in the marketplace from the regulators themselves.
      • On Thursday afternoon, an amendment was published by Saldaña which would implement a previously stated goal to limit the total amount of flower that can be sold by producers.
        • “EFFECT: Limits the amount of cannabis flower that can be sold directly to consumers by cannabis producers and processors to a maximum of 1,000 pounds for each business entity per calendar year.”
        • As the limit would be established per "business entity," overall direct sales would be further constrained as individual entities may hold up to three production licenses.
      • Shortly thereafter, the executive session on SB 5403 planned for Friday February 14th was pulled and then rescheduled for Friday February 21st - the same day as the House of Origin Policy Committee Cutoff.