WA SECTF - Public Meeting
(September 14, 2021) - Legislative Proposals - TA and Mentorship

WA SECTF - Work Group - TA and Mentorship - 2022 Legislative Proposals

The task force adopted work group recommendations to significantly increase spending on grants, establish loans for equity applicants, and open grants to qualified existing licensees.

Here are some observations from the Tuesday September 14th Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) Public Meeting.

My top 4 takeaways:

  • Technical Assistance and Mentorship Work Group co-lead Raft Hollingsworth discussed the first of the task force proposals, a recommendation to use appropriated funds due to expire in fiscal year (FY) 2022 for a pre-applicant mentorship program.
    • Hollingsworth, a Hollingsworth Cannabis Company Co-Owner appointed to the task force to represent licensed producers, said the work group wanted the task force to formally advise the Washington State Department of Commerce (WA Commerce) to “use the funds that [were] allocated for the fiscal year 2022 to implement the...cannabis mentorship program,” one part of the state social equity technical assistance grant program. Indicating that FY 2022 would end in “June of next year,” he wanted to see that WA Commerce staff “has direction on how to use these funds” (audio - 2m, video).
      • Hollingsworth described how the recommendation included a call for “classes that are both general business and cannabis-specific” including a “variety of deliverables” such as “seminars, panels, in-person support structures, not one-on-one mentorship currently due to the timing...to verify social equity applicants.”
      • The state biennium operating budget signed on May 18th amended the WA Commerce appropriation in the original law by removing $1.1 million appropriated for the program for fiscal year (FY) 2021 which was not distributed. The funds were carried over into the next biennium by modifying the standing appropriation required under RCW 69.50.540 “to fund the marijuana social equity technical assistance competitive grant program under RCW 43.330.540 in FY 2022 and 2023, an increase from $1.1 million to $1.65 million.
    • Task force member Curtis King, appointed to represent the Washington State Senate Republican Caucus, wanted to know why there would be an “in-person support structure but not one-on-one mentorship, I don’t understand...are you giving the mentorship before they’re even selected or is it after they’re possibly selected?” (audio - 8m, video
      • Hollingsworth responded that the intent was “to put together literature in a structure to which to accept specific social equity candidates, but in anticipation of their not being social equity candidates before June 2022, we’re opening it up to all people who want to participate” until applicants could be accepted by the Washington State Liquor and Cannabis Board (WSLCB).
      • King asked if people who were not eligible “social equity candidates could apply for the mentorship program. Following a brief discussion, Task Force Chair Melanie Morgan, appointed to represent the Washington State House Democratic Caucus, interpreted King’s query as wanting clarification as to why people weren’t being vetted first “opening it up to the community at large, why would they go through this process knowing that it’s for social equity only?” Hollingsworth believed it could “educate the public to see if they want to participate, [and] prepare them for the process of running a cannabis business.” The goal was to have “people who do sit through this mentorship program, the general one that we’re proposing...learn about the process,” he said, combating misinformation and ensuring more applicants could be “better prepared.”
      • Task force member Ollie Garrett, appointed to represent WSLCB, asked "does that make sense, or not...should that be there or not" if TA and mentorship funds were intended for equity applicants, “why would anyone else want to be part of it?” Hollingsworth explained that “operationally, Commerce doesn’t have the capacity to verify eligibility to allow for one-on-one training...and this is our workaround.”
      • Task force member Rebecca Saldaña, appointed to represent the Washington State Senate Democratic Caucus, suggested the proposed approach could help identify those who “think they might be” applicants, and asked whether it would become exclusive once the application process was underway. If the intention was for WA Commerce officials to “start moving and spending this money,” she was open to recommending “that they can’t do one-on-ones if things move forward,” only the other formats mentioned.
      • Task force member Yasmin Trudeau, appointed to represent the Washington State Office of the Attorney General (WA OAG), clarified that “this is open, the money is there, it needs to get spent, so anybody could access this, but..it would provide some additional...footing or incentive for social equity applicants or people interested in that.” She was fine with the arrangement so long as it was allowed under law.
      • Work group co-lead Tamara Berkley, appointed to represent licensed retailers, suggested that the recommendation was about educating those waiting to apply.
    • Task force member Kelly Chambers, appointed to represent the Washington State House Republican Caucus, asked whether mentors needed “to meet some social equity criteria” (audio - 2m, video).
      • WA SECTF Manager Anzhane Slaughter replied that mentoring companies needed to be a “51% women or minority owned business.” Chambers interpreted this expectation for mentors as being “not about your experience as a professional” but “meeting social equity criteria first.” Slaughter cited RCW 43.330.540(4), which required mentors to “Have knowledge and experience demonstrating their ability to effectively advise eligible applicants and licensees in navigating the state's licensing and regulatory framework or on producing and processing cannabis” while also representing “a business that is at least 51% minority or woman-owned.”
      • Chambers then asked about whether there had been “an inventory taken...with like current licensees who might be eligible” and if there was “a bench of, of potential mentors. Do we know what that looks like?” Slaughter replied that mentors weren’t required to be “current license holders.” She invited any WA Commerce officials in attendance to respond, though none did (audio - 1m, video). 
      • Next, Chambers was curious if WA Commerce offered “general business classes” already as she hoped to avoid “duplicating efforts” even as she acknowledged “there are things very specific to cannabis.” Hollingsworth estimated classes would consist of “about 75 or 80% cannabis-specific guidance, 20% general business.” Slaughter indicated that WA Commerce officials weren’t in attendance but “we have been discussing this in parallel with the department” and there was no intention of “reinventing the wheel” (audio - 2m, video).
    • King asked how mentors would be compensated as he was familiar with the Retired and Senior Volunteer Program (RSVP) where “people come in and help businesses...provide this very guidance as to how you start a business...available, I think, at no charge.” Morgan said they’d mentioned SCORE and chambers of commerce as “volunteer-based” business guidance state officials would consider during “in depth” conversations with WA Commerce representatives (audio - 2m, video). 
    • Chambers was curious if mentors would invoice the state “like an attorney would” or charge an “average rate for a mentor in cannabis.” Berkley commented that there were likely to be “different rates for different professionals” (audio - 5m, video). 
      • Slaughter noted that the recommendation was “open for any amendment or suggestion from task force members on this topic” adding that there was “urgency” in ensuring FY 2022 money was spent before the fiscal year concluded. She reported that the remaining recommendations from the TA and Mentorship work group would cover “increasing the allotment for funds that are appropriated to this program as well as offering to current...license holders as well.”
      • Saldaña commented that she had worked with WA Commerce staff “on this piece of the legislation and they felt very confident and comfortable” that they could accommodate mentor compensation, only asking for clarification “around social equity or criteria of what would be the most useful” skills to prioritize in mentors. She asked the co-leads if the recommendation “would give [WA Commerce staff] enough clarity to then move forward in the next step?”
      • Morgan spoke to Chamber’s concern over “duplication” of business training: “It’s still general business to the cannabis industry” and might “look different than what is typically offered in a general business class.” She considered it “adding to, rather than a duplication.”
    • The task force voted to adopt the recommendation to WA Commerce on the mentorship program, with Chambers opposed and King excused from the vote (audio - 3m, video). 
  • The second work group recommendation was a proposal to lawmakers “to add financial assistance as a use of funds for the technical assistance grant program” by equity licensees.
    • The financial assistance proposal was moved for adoption by the task force and Morgan invited discussion (audio - 2m, video). Chambers asked what constituted financial assistance (audio - 2m, video).
      • Berkley responded that it could be used “for legal [assistance], for build outs possibly, for rent. There should be milestones that the applicant reaches and then they’d be able to apply for these grants or fundings to...help them, you know, open up and operate their business” 
      • Micah Sherman, Raven Co-Owner and a WA SECTF Licensing Work Group member who was later appointed to the task force, asked whether this would be a legislative proposal. Slaughter answered that WA Commerce representatives had interpreted “technical assistance" to mean “transfer of skills” rather than money (audio - 2m, video).
      • Task force member David Mendoza, appointed to represent “the Latinx community,” asked about a “legal evaluation of whether this would violate” the “state constitutional provision on a gift of public funds?” He also asked for clarity around the distinction between a “grant program and a loan program” (audio - 4m, video).
        • Berkley talked about how loans needed to be repaid while a grant program wouldn’t, leading Mendoza to ask “why would they be funded differently?” She replied, “to put a cap on the grants” which would go “up to a certain amount and then loan dollars would be available in the event...additional money’s needed.” Trudeau, emphasizing she was not a legal advisor for WA SECTF, offered to have the Washington State Solicitor General’s Office review the proposal.
        • Saldaña chimed in to say that federal and state officials “gave a lot of relief...to small businesses across our state” during the pandemic but cannabis businesses hadn’t qualified. She expected grants would help equity licensees who “incurred an expense, or you are about ready to lose your business” but not for “new things.” By contrast she viewed the banking challenges for cannabis businesses as potentially being helped by a dedicated loan program for social equity licensees who had faced “historic barriers” to business investment.
      • Chambers wondered about “differentiation in criteria” for social equity applicants versus current licensees to get grants, specifically a “financial threshold that a business would need to...meet or qualify for in order to get a grant.” She then asked about statutory changes about loan rates, “who gets to decide...what a low-interest loan is?” Berkley said research on other states’ banking policies showed “monies are being distributed by private entities” but specific loan rates and qualifications had not been determined aside from “a cap...as far as qualifying for grant monies, that you couldn’t have earned over” in the preceding year. Morgan said the task force members believed “financial assistance is something that’s extremely important to the communities that we’re exactly trying to serve” (audio - 3m, video).
      • Trudeau stated that the wording of the proposal could avoid the gifting concern voiced by Mendoza if adequately defined. Berkley said the WA Commerce “current statute allows for up to $75,000” but Morgan liked Trudeau’s suggestion, since “if we have these many members of the task force questioning that then for sure the legislature is going to question it as well.” She asked for any input to “clearly define what we’re talking about” (audio - 2m, video). 
      • Chambers called for “separate grants and loans.” While she “liked the idea” of a loan program, she preferred a “revolving loan program” that utilized “seed money” to support businesses. When the loans were repaid that money was “then available for future use.” Such a system wouldn’t entail “an ongoing ask to the legislature,” she argued. Trudeau said “you may even want to be more general” as a way to pass that decision making to lawmakers, as she’d found they like “putting in their own details.” Morgan proposed, and task force members accepted changing “‘add’ to ‘expand’ on the use of technical assistance dollars” as it would give “legislators more room to work in” (audio - 3m, video). 
    • The task force voted to adopt the amended language for the financial assistance proposal, with task force member Pablo Gonzalez, appointed to represent licensed retailers, voting against it and Sherman abstaining (audio - 3m, video). 
  • Work group co-lead Tamara Berkley introduced the third recommendation, a legislative proposal to increase technical assistance grant allotments to “ten percent of the cannabis tax revenue that currently goes into the state general fund...approximately $30 million” (audio - 1m, video). 
    • Berkley cited the WSLCB annual report for 2020, which reported that in 2019, Washington cannabis taxes amounted to “$390.4 million,” growing to “$469.2 million” in 2020.
      • The Washington State Economic and Revenue Forecast Council (WA ERFC) September 2021 forecast noted, “The final tally of [General Fund - State (GF-S)] distributions in the 2019-21 biennium was $361.0 million, unchanged from the June forecast. The forecast of GF-S distributions for the 2021-23 biennium has been decreased of $6.7 million to 393.7 million and the forecast for the 2023-25 biennium has been decreased $3.6 million to $416.8 million.”
    • Chambers wanted to know “where that money would go, if it wasn’t spent on this new program,” seeking assurance the money wouldn’t be taken from “some of the work we're doing in research or prevention” (audio - 1m, video).
      • Berkley reiterated that the money would be “from the general fund,” not removed from other programs. Chambers then asked how much grants would “increase this fiscal year over the previous” from the change. Berkley replied the increase would be “$78.8 million, collectively.” Morgan observed that “during the lockdown...cannabis businesses were still open” meaning that “revenue was still being added” by the sector.
    • Charie MacLeod, appointed to represent the Association of Washington Cities (AWC), asked about funding levels in other jurisdictions for “something similar to technical assistance funds” because she knew “the City of Oakland, California through the California State program, received $6.5 million...just for their city’s social equity in cannabis program.” She noted this program included “mentorship and technical assistance as well.” Berkley said “Illinois gave $30.1 million,” and WA SECTF Policy Analyst Joy Hollingsworth mentioned “the City of Portland [allocated] 2% of their tax dollars that go directly to [the] NuLeaf Program” which distributed grants to qualified businesses. Slaughter added that “Massachusetts’ Renew Reinvest Program also gave around $30 million” (audio - 2m, video).
    • Sherman inquired what increase the proposed amount would represent compared to the current grant funding. Slaughter said the current amount budgeted was $1.1 million. She then indicated that the “revenue forecast specifically for cannabis tax dollars to the general fund for the next biennium...already exceeded our...estimated revenue...flow for the next biennium” (audio - 1m, video).
    • Chambers asked whether the additional grant money was on top of the 5% of cannabis revenue being requested for low-interest loans to equity licensees. Slaughter confirmed that understanding, saying 15% of the general fund revenue from cannabis would be reserved between the two programs (audio - 4m, video).
      • Morgan shared her view that “there’s a lot of money being collected by the state” from cannabis retailers by WSLCB officials who deposited money in the dedicated marijuana account. Funds were then disbursed through various appropriations, including to the general fund, and she noted that legislation had already budgeted where these funds would go. Morgan argued that “we’re just simply making it equitable, at this point” between other issues the state had already funded, finding that the cannabis industry was “making enough money that this is possible.”
      • Joy Hollingsworth reported that “the state of Colorado introduced a $4 million program...reserved for social equity licenses” and that Oakland officials reserved “$6 million...for social equity programs” which didn’t include additional funds for programs like property purchasing and leases in an “incubator model.”
      • Berkley asked that the group “understand that Washington has the highest tax rate, at 37%, for cannabis retail.”
    • Sherman was curious how the general fund percentages for the grant and loan programs were determined (audio - 2m, video). 
      • Berkley remarked that while researching other state programs “it was apparent that our number just wasn’t going to cut it.” Raft Hollingsworth added that the increase reflected “listening to community.” Sherman wondered if a single increased budget request would prove more flexible for use as either loans or grants.
      • Morgan asserted that prospective equity licensees would often lack “seed money.” For those disproportionately affected by cannabis prohibition to participate as equity licensees, she said “we’re going to need to be asking for a lot more grant money to get them to the place of having seed money in order to even apply for a loan.” Grant money alone wouldn't be enough “for a business to be up and running and ready to go...this is just a beginning.”
    • Gonzalez asked about tax breaks, saying a retailer might need to operate for two years “to break even and start actually making some profit.” He speculated that equity retail licensees could be permitted to collect excise taxes at a lower rate. Helping equity licensees “get up on their feet” in a competitive market was “super important” he believed, adding the view that loans weren’t “healthy” for businesses. “They’re good to keep you alive, but they’re not really the healthiest thing, in my perspective,” said Gonzalez. Morgan was supportive of the idea, “but I’m gonna put that one piece of conversation on a parking lot for some future discussion” (audio - 3m, video).
  • The last recommendation, loans for existing licensees meeting social equity criteria, was only briefly mentioned before a final vote by the task force on the last two recommendations.
    • Berkley introduced the final recommendation “to allow current license holders that meet the...definition of social equity [applicants] be eligible for grant dollars.” Morgan and Berkley felt the issue was “straightforward” (audio - 1m, video).
    • Berkley moved that “we recommend increasing the allocation for the TA grant program to equal 10% of cannabis tax revenue...allocating 5% of the cannabis tax revenue that currently goes to the state general fund” instead be made available as “low interest loans for social equity license holders, and I move that we recommend that current license holders that meet the definition of social equity be eligible for grant dollars.” Raft Hollingsworth seconded the motion. Morgan acknowledged the “good, lively discussion” on the recommendations and called for a vote, resulting in 14 in favor, Chambers opposed, and Monica Martinez, a task force member appointed to represent licensed producers, abstaining (audio - 3m, video).
      • The issue of current licensees receiving grant money from the social equity program was initially raised at the January 25th WA SECTF meeting.

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