WA House APP - Committee Meeting
(February 7, 2022) - HB 2022 - Executive Session

HB 2022 - Jesse Owens - Sha'Carri Richardson

After the failure of several minority caucus amendments on the social equity bill, some members raised doubts about increasing cannabis licensure leading to narrow passage out of committee.

Here are some observations from the Monday February 7th Washington State House Appropriations Committee (WA House APP) Committee Meeting.

My top 4 takeaways:

  • Staff briefed on amendments to HB 2022, "Concerning social equity in the cannabis industry," which incorporated several recommendations from the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF).
    • The bill was first heard on January 28th by the Washington State House Commerce and Gaming Committee (WA House COG). The policy committee approved a proposed substitute version and rejected one amendment to the bill on February 3rd. The changes to the bill were described as:
      • “Eliminates the requirement that the Liquor and Cannabis Board (LCB) must ‘issue’ each of the new cannabis licenses in each calendar year beginning in 2022 through 2029, while retaining the requirement that the LCB must ‘make available’ the licenses each calendar year beginning in 2022 through 2029.
      • Eliminates a reference to the word ‘mobile’ while retaining the authorization for cannabis licenses issued under the social equity program to be for premises located within any city, county, or town in the state that permits the cannabis business activity at the proposed location. 
      • Restores current law by eliminating all proposed changes to distance requirements in cannabis licensing
      • Modifies proposed changes to the prioritization process for cannabis licenses under the social equity program so that the LCB, in consultation with the Office of Equity and community organizations, must select a third-party contractor to prioritize applicants based on a scoring rubric developed by the LCB with input from the Social Equity in Cannabis Task Force and approved by the Office of Equity. 
      • Modifies proposed changes to the definition of ‘social equity applicant’ so that: (1) For applicants qualifying based on living in a disproportionately impacted area, the time period applicants must reside in the area is at least six months out of the last 60 years instead of at least five years out of the last 60 years; and (2) for applicants qualifying based on being disproportionately harmed by the war on drugs as evidenced by rates of arrest for cannabis possession offenses, the express requirement that an applicant be a racial minority is eliminated.
      • Modifies proposed changes to the cannabis social equity grant, low-interest loan, and technical assistance program administered by the Department of Commerce as follows: 
        • Combines the proposed annual $15 million for grants and $7.5 for low-interest loans to $22.5 million annually for grants and low-interest loans; 
        • Limits grants and loans to licensees under the social equity program, so applicants are not eligible for grants and loans but remain eligible for technical assistance; 
        • Specifies the Department of Commerce ‘may’ instead of ‘must’ award grants and loans to licensees under the social equity program; 
        • Adds eligible activities for grants, limits grants to $100,000 per eligible applicant, and specifies eligible applicants may apply for one grant annually and three total grant awards; 
        • Specifies eligible business-related expenses for which loans are available; and 
        • Authorizes the Department of Commerce to work with participating lenders to make loans and to reserve a portion of funds allocated or received in order to support loan loss reserves and reduce underwriting risk.”
      • The WA SECTF also advised the creation of a community reinvestment fund which was picked up in a separate bill, HB 1827, passed by the house on February 12th.
    • On February 5th, WA House APP hosted a public hearing on the revised legislation. Testimony was largely favorable, with nine speakers supporting the proposal and one, Craft Cannabis Council (CCC) Executive Director Adán Espino, speaking against. However, 80 signed in opposed, compared to only 54 signing in to signal support. Vicki Christophersen, WACA Executive Director and Lobbyist was the only person signed in as ‘other.’
    • On February 7th, WA House COG Counsel Peter Clodfelter described HB 2022 as a bill requiring WSLCB to “make available 38 new cannabis retail licenses and 25 new cannabis producer and processor licenses available each year between 2022 and 2029 as part of the social equity program,” limited issuance of other licenses, and “direct future appropriations towards grants and low-interest loans, and technical assistance.” Clodfelter then explained six amendments to the bill that had been put forward (audio - 6m, video).
      • Amendment H-2609.1 by Assistant Ranking Minority Member Drew MacEwen
        • “Removes the requirement that the Liquor and Cannabis Board (LCB) must make available 25 new cannabis producer and/or processor licenses each calendar year between 2022 and 2029 as part of a cannabis social equity program. Eliminates a proposed restriction that, through 2029, the LCB may only issue cannabis producer and/or processor licenses to social equity applicants.”
      • Amendment H-2610.3 by MacEwen
        • Would require WSLCB officials “to expedite issuance of cannabis retail licenses that have been forfeited, revoked, cancelled, or were not previously issued by the LCB but could have been issued and are currently available for issuance or reissuance to social equity applicants under 2020 and 2021 laws.”
        • The first version MacEwen offered, H-2610.1, was revised before the executive session; it would mandate staff “​​to expedite issuance of the cannabis licenses that are made available each calendar year between 2022 and 2029 under a cannabis social equity program.”
        • Representative Tana Senn sought clarity on what constituted "expedited." Clodfelter replied that it had been undefined but "presumably that would just have to be faster than the standard process" (audio - 1m, video).
      • Amendment H-2612.1 by MacEwen
      • Amendment CLOD 152 by Representative Laurie Dolan
        • “Modifies a proposed change to the definition of ‘social equity applicant’ so that for applicants qualifying based on residing in a disproportionately impacted area, the time period that applicants must reside in the area is at least five years out of the last 60 years instead of at least six months out of the last 60 years.”
        • This would return to how the “original bill was structured,” noted Clodfelter.
      • Amendment H-2620.1 by Representative Michelle Caldier
        • “Adds a direction for a $150,000 appropriation from the Dedicated Marijuana Account for Fiscal Year 2023 to the Liquor and Cannabis Board (LCB) to conduct a study, in consultation with the Department of Commerce, to determine if the statewide limit on retail cannabis outlets is sufficient to meet the consumption rate and population of the state as well as the Legislature's social equity goals. Requires the LCB to submit its recommendation for approval by the Legislature if the LCB determines that an increase in the number of retail outlets in existence on January 1, 2020, is necessary.”
      • Amendment H-2611.2 by MacEwen
        • “Specifies that marijuana producer, processor, or retailer licenses under which no sales of marijuana or marijuana products have been made for more than one year must be forfeited.”
    • WA House APP Committee Counsel Linda Merelle informed lawmakers that amendment H-2620.1 would increase the legislation’s fiscal note due to allocating funds for the requested study, whereas removing the requirement to issue additional licenses under amendment H-2610.1 “may have the impact of a savings” by reducing “grants and loans” issued (audio - <1m, video).
  • Following a motion to recommend the bill, two amendments were withdrawn and the others rejected after brief remarks from committee members.
    • MacEwen moved to incorporate amendment H-2609.1 into HB 2022 (audio - <1m, video). 
      • He argued the state cannabis sector was “saturated,” claiming licenses were for sale on Craigslist for “substantially below what their costs were just a few years ago.” MacEwen wanted to remove the provision of new producer/processor licenses since “there’s a number of licenses that they can reissue already, so why would we put a mandate out there to put even more into a market that’s overly saturated?” (audio - 1m, video
      • Representative Larry Springer countered that HB 2022 attempted to remedy “the inequibilities [sic] that have…emerged in the cannabis field, particularly disadvantaging communities of color.” He found that “only 1% of the ownership of producer/processors…are people of color” and asked for a no vote on the amendment (audio - 1m, video).
        • A voluntary survey of producer/processors by WSLCB in February 2020 showed 1% of those license types were held by African Americans.
      • MacEwen claimed that his change “wouldn’t hinder the issuance of licenses in the social equity portion of this bill at all” as there was “a stack of [retail] licenses that are not being used that we could issue out.” Regarding producer/processor licensure, he favored “using the ones that aren’t being utilized right now,” referencing another of his amendments that had yet to be discussed (audio - 1m, video).
      • The amendment failed to pass a voice vote (audio - 1m, video).
    • MacEwen formally withdrew amendment H-2610.1 from consideration (audio - <1m, video), and moved that H-2610.3 be added to the bill (audio - <1m, video). 
      • Referencing HB 2870, the 2020 legislation establishing the social equity program, MacEwen said WSLCB leaders needed to issue retail licenses to equity applicants as soon as possible. “Let’s take those licenses that are already there and available, and let’s issue those out,” argued MacEwen (audio - 1m, video).
      • Springer noted “expedited" was not defined, and said “that’s the kind of thing that needs to be worked through in more detail” (audio - 1m, video). 
      • The majority of members were against addition of the amendment (audio - <1m, video).
    • MacEwen next moved for amendment H-2612.1 to become part of the bill (audio - <1m, video)
      • He described how the retail cap for jurisdictions was “based off of population demographics” and, as a national census had been completed in 2020, the amendment would instruct WSLCB staff to “recalibrate based on our…new census data” (audio - 1m, video). 
        • The agency possessed “the legal authority to engage in rulemaking to increase the overall license cap pursuant to RCW 69.50.3[4]5(2)” for all license applicants according to an “Assessment of LCB rulemaking authority for cannabis retail licenses” revealed in May 2021. However, WSLCB representatives wanted to defer to WA SECTF recommendations as the document described how “any policy change of this nature may hinder the goals of the social equity taskforce, and create further disproportionate industry representation in relation to social equity.” 
      • Springer called the concept an “interesting idea that….probably bears some further discussion" as the bill moved ahead, but “the underlying bill has some numbers that it has already put forward. Somewhere in between there is probably the sweet spot.” He nonetheless asked for the amendment not to be approved at the moment, even as it could be a consideration “going forward when the bill gets out of committee” (audio - 1m, video). 
      • The proposal was defeated in a voice vote (audio - <1m, video). 
    • Dolan withdrew CLOD 152 (audio - <1m, video). 
    • Caldier moved to have amendment H-2620.1 incorporated into the legislation (audio - <1m, video).
      • She said adding an analysis from WSLCB, the Department of Commerce, and Office of Equity staff was needed since HB 2022 needed “a lot of work” to see if the cannabis market could “handle an increase in” the amount of retail stores. Calidier claimed the delay for a market analysis could avoid having new equity licensees get to the market “and have them not be able to adequately sustain themselves” (audio - 1m, video).
      • Springer wasn’t opposed to analysis, but felt it was “probably not necessary to have this in the bill, this could be done by proviso.” He added that he didn’t want to “load up” the bill with spending on things “that may have to be re-discussed when we try to refine the bill later” (audio - 1m, video).
      • Most of the committee concurred, defeating the amendment (audio - <1m, video). 
    • MacEwen moved for his last amendment, H-2611.2, to become part of the legislation (audio - <1m, video).
      • He said that mandating inactive cannabis producer/processor licenses be reissued to equity applicants would avoid “saturation in this market right now,” insisting the value of licenses was in decline and license holders were “struggling to survive.” MacEwen wanted “licenses that aren’t being actively used” to be made available to equity applicants as a way to achieve equity goals without increasing total licensure (audio - 1m, video). 
      • Representative Eileen Cody expressed interest in the idea, but opposed the amendment, thinking one year of inactivity “might be too short” to ascertain business viability. She encouraged MacEwen to continue working with Representative Emily Wicks, the bill’s prime sponsor (audio - 1m, video).  
      • The change didn’t muster enough support in a voice vote to advance (audio - <1m, video).
  • Four committee members shared their perspectives on the bill before a close vote resulted in HB 2022 advancing despite two dissenting votes in the majority caucus.
    • Dolan favored passage of the bill, saying she’d worked with “small cannabis producers in Thurston County” and that the “initial vision” for legal cannabis was to “let it grow from the ground up" into an inclusive and diverse market. “It was not meant to be an industry where large companies would take it over,” she insisted, but focus “on small producers.” Dolan wanted to see HB 2022 move ahead because she sensed “a lot of common ground” on the issue but, she admitted, “based on the discussion just now” there was more work “that needs to be done” (audio - 1m, video).
    • MacEwen offered several complaints about the bill, which he said had been “rushed through on committee” in WA House COG where he was Ranking Member (audio - 2m, video).
      • MacEwen said he’d often heard testimony speaking to the “saturation of the market…and we’re now going to issue more licenses.” He didn’t want to expand a market where existing businesses were “still trying to get [their] footing,” a view he alleged was unrelated “to the social equity component of it.”
      • MacEwen considered it to be “a real legal issue” that the state would grant tax money “to for-profit entities.” He complained about advancing the bill during a short legislative session when “it has a lot of issues”---again stressing that his remarks had “nothing to do with the social equity component”---as he believed consumer demand was being met by existing businesses. He compared grants to equity businesses as tax dollars “going into the abyss.”
      • MacEwen changed tack, complaining that his amendments were agreed to, in principle, by opposing speakers before being voted down on the grounds they were rushed into the bill. Saying the “far from ready” bill should be opposed, he asserted he was “happy to have more of these discussions” but was unsatisfied with the bill process. He suggested pulling the bill rather than try “to fix it all on the [House] floor, we know how that goes”.
      • MacEwen opposed the original bill creating WA SECTF and the social equity program, as well as HB 1443, a 2021 bill expanding the group’s scope.
    • Assistant Ranking Minority Member Chris Corry recognized “a lot of merit to the social equity piece” but was against moving HB 2022 further, not due to concerns over market saturation, but rather “what are we saying our state's priority is right now?" He felt MacEwen’s changes would have helped get licenses out “to the community,” but didn’t understand why cannabis licensure should expand. He claimed to be concerned about telling his constituents that lawmakers chose “to grow retail weed, and we decided to spend some of your money to make sure we did that.” Corry shared how he was bothered “as a parent” by having to explain the scent and sight of cannabis to his children “out in public,” which reflected his discomfort about the “direction for us.” He questioned whether HB 2022 was about “growing and building stronger communities, or is this going to put more drugs into communities?” (audio - 2m, video)
    • Assistant Ranking Minority Member Kelly Chambers, a task force appointee for the house minority caucus, made several claims about the bill while lodging her protests.
      • She did not support the bill as WA SECTF recommendations were not “a well worked concept.”
      • Chambers claimed the proposal threatened a “massive expansion of cannabis in our state,” an “80% increase in retail licenses, and a 30% increase in those producer processor licenses.”
        • Reviewing WSLCB data published on February 8th, there were 482 active cannabis retail stores in Washington state at that time. Given the existing 38 returned licenses plus 38 new licenses each year between 2022 and 2029, 342 retail licenses would enter the market—a 71% increase—over the next eight years.
      • Chambers rhetorically wondered “if we replaced the word ‘cannabis’ with ‘alcohol’” or “vape shops” whether the members would still vote to add more licenses.
        • Legislators need not vote to increase alcohol or vapor retail licensure because there are no caps, you can apply today.
        • Even an 80% increase in cannabis retail outlets would leave cannabis access points a fraction of the number of locations selling alcohol or vapor products. WSLCB staff reported there were 26,600 alcohol licenses and 3,900 vapor retail locations during a public hearing on HB 2022.
      • Although the bill “seems to seek to right some wrongs, that some people were left out of the opportunity to get a license,” Chambers claimed that WSLCB staff “has licenses and can issue them tomorrow” something that hadn’t “been done in the last two years.” This left her miffed as to why more licenses would be allowed, and skeptical legislators could even “vote it off the floor of the house this year.”
        • Chamber’s view that licenses were ready to be issued since the task force first met in October 2020 was misleading as WSLCB staff were required by law to obtain WA SECTF input on disproportionately impacted areas and applicant prioritization.
        • When WA SECTF members finalized a scoring rubric for prioritization in November 2021, WSLCB Licensing staff amended the language and sought approval from the Office of Equity, as discussed by task force members on January 24th (Chambers was again absent). The accompanying letter to the WA SECTF Chair, Representative Melanie Morgan, from Licensing Director Becky Smith indicated that references to applicant race were removed because the “federal Equal Protection Clause prohibits the LCB from using explicit racial preferences in licensing. We have taken steps to identify an alternative option that includes race neutral factors we hope will achieve the social equity goals expressed in the legislation.”
    • A voice vote of the committee revealed bipartisan opposition to the bill as written. While the majority of members approved its advancement, Democrats Senn and Vice Chair Steve Bergquist joined Republicans in dissenting on the bill, leading to a narrow 17-16 passage (audio - 3m, video).
  • A news story on the bill’s prospects published on Monday February 14th predicted difficulty moving it further before the house of origin cutoff the following day.
    • The article cited Wicks, the primary sponsor of HB 2022, as having heard from caucus leadership “that they don’t see a way for HB 2022 to advance out of the House.”

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