WSLCB - Board Caucus
(March 3, 2020) - Summary

Discussion of “problematic” budget provisos and a review of what happened with HB 2870 engaged the Board while concerns about COVID-19 began to spread.

Here are some observations from the Tuesday March 3rd Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• WSLCB Director of Legislative Relations Chris Thompson provided a briefing on the Legislature’s supplemental budget bill which included provisos for cannabis data sharing and a cannabis odor task force.
  • Thompson’s last legislative briefing was February 12th. He framed the state’s supplement to the biennium budget as the “biggest thing going on right now” with lawmakers focused on SB 6168 - “Making 2019-2021 fiscal biennium supplemental operating appropriations.” Thompson outlined provisos in the bill which, if written into law, would impact WSLCB.
  • Economic and Revenue Forecast Council Data Sharing Agreement (audio - 9m). Thompson said “the more problematic budget proviso” required sharing "really granular data about the price and sales amount for marijuana by specific product category” with the Washington State Economic and Revenue Forecast Council (ERFC) found in Section 140(12) of the engrossed senate substitute bill.
    • He said that “this staff person” on the Senate Ways and Means Committee (WA Senate WM) had pushed for the data, telling Thompson that “we used to get that until October 2017” when WSLCB’s contract with traceability vendor BioTrackTHC ended and the State’s struggles with MJ Freeway began. Thompson readily agreed there had not been as much cannabis data available since that time but told the staffer that “this data is not available and cannot be created." Nonetheless, the bill passed by the Senate on February 27th included a provision to provide information to ERFC.
      • Specifically, “The data must include price and quantity of product type information. Product type includes at least extracts, smokable cannabis, and edibles.”
      • See ERFC’s presentation on “Cannabis Forecasting in Washington State” published in October 2018.
    • Acknowledging it would be “helpful in doing [ERFC’s] analytical work” and claiming WSLCB was “very willing to share with them the data that we have,” Thompson preferred to “put together a data sharing agreement and do it under that umbrella” absent some of the requirements in the proviso. His assessment was that “this is not coming from” ERFC but from “one staff person” on WA Senate WM “who has turned a deaf ear to what we’ve said about the situation.” Thompson claimed his comments to this person were “just being dismissed” subsequent to dialog starting in July 2019.
    • Thompson claimed the proviso “flew under the radar” and presented no evidence that it was a legislative or public priority. He intended to speak to Michael Bezanson, WA Senate WM’s Senior Staff Coordinator, and Committee Chair Christine Rolfes. While acknowledging committees “like to keep their staff happy,” he believed lawmakers hadn’t been “aware of the problems with this directive.”
    • The proviso required WSLCB meet with the ERFC by the end of April, “conclude a data sharing agreement by the end of May,” and then “provide monthly data to them that we do not have and cannot obtain under any timeline remotely resembling the directive in the proviso.” Thompson claimed providing this information would necessitate creating a “whole new system” and undertaking unknown agency costs. He imagined “what kind of burden it would impose on industry” following the "trauma and angst and disruption" the cannabis sector sustained during the bumpy switchover and subsequent troubled releases of LEAF Data Systems. Thompson claimed the State’s traceability woes were “in part, due to this very type of thing...mission creep on the traceability system to try and get it to do things that aren’t necessary for it to function and fulfill its purpose.”
    • After the initial Senate passage of SB 6168 on February 27th, the House adopted a striking amendment which had the effect of removing the Senate proviso, and did not amend it back before the House version of the bill was engrossed and passed by the chamber on February 28th. On March 3rd, the Senate chose not to concur with the House revisions and requested a conference committee to iron out differences. The Senate appointed Rolfes and Senators David Frockt and John Braun to represent the chamber on the Committee and, at the time of publication, the House had not yet appointed representatives to the Committee. Thompson intended to write the conference committee members to ask that they not include the proviso. He remained “eager to emphasize” a willingness to work with the ERFC on cannabis revenue data sharing, so ERFC could “meet their responsibility.”
    • Board Member Russ Hauge asked if Thompson had information about the Office of the Governor’s position on the proviso. Thompson answered that he hadn’t spoken with the Governor’s staff about the matter but anticipated they would "understand the dilemma here and the risk of pushing this." Were the proviso to remain, Thompson advocated for agency leadership to request a partial veto by Governor Jay Inslee to remove the language. Hauge later asked if the proviso was “something our license holders are aware of.” Thompson said, “I doubt there’s much, if any, awareness of this out there among the stakeholder community or the licensee network.”
      • Cannabis Observer described this proviso for its readers on Monday March 2nd, the day before Thompson’s comments.
    • Thompson noted Deputy Director Megan Duffy, CIO Mary Mueller, Cannabis Examiner Manager Kendra Hodgson, Enforcement Chief Justin Nordhorn, “and others” were engaged in forward-looking conversations about traceability with stakeholders as part of the Traceability 2.0 Work Group which last met on February 24th. The work group was helping WSLCB redefine the scope of supply chain tracking by asking questions such as “what do we really need it to do? And how can we limit it to what is really necessary?” Thompson believed “those discussions and that vision does not include, or have any room for this kind of stuff.”
    • Hauge said the staff of ERFC he’d interacted with were ”pretty reasonable.” Thompson said he’d spoken to Stephen Lerch, the Council’s Executive Director and Chief Economist, and expressed confidence that “this isn’t coming” from that agency. Thompson planned to meet with Lerch after the session to see what information could be made available.
  • Marijuana Odor Task Force (audio - 15m). Also in the Senate version of the supplemental budget bill, language was added to WSLCB’s budget in Section 140(13) appropriating $30,000 for the agency to form and staff “a task force on marijuana odor.”
    • The task force would be tasked with reviewing “The available and most appropriate ways or methods to mitigate, mask, conceal, or otherwise address marijuana odors and emissions and the potentially harmful impact of marijuana odors and emissions on people who live, work, or are located in close proximity to a marijuana production or processing facility, including but not limited to: (a) Filtering systems; (b) natural odor masking mechanisms or odor concealing mechanisms; (c) zoning and land use controls and regulations; and (d) changes to state laws and regulations including, but not limited to, laws and regulations related to nuisance and public health.”
    • Thompson said the language matched SB 6089, a bill sponsored by Senator Judy Warnick, which hadn’t been granted a public hearing by the Washington State Senate Labor and Commerce Committee (WA Senate LBRC).
      • The one time the WSLCB leadership publicly discussed SB 6089 on January 29th, Board Member Russ Hauge described the bill as “a terrible thicket” for the agency to wade into.
    • Board Chair Jane Rushford observed that WSLCB was “not a science agency" and that the task force’s mandate may fall “outside of our regulatory domain.” Hauge countered that "it's something that needs to be done, though.”
    • Thompson admitted smells were “one of the most frequent complaints" fielded by the agency, although "there is absolutely nothing that we do with those complaints" as there were no “laws or rules under our purview” to limit or control smells. Regional air quality authorities had that power, and where such jurisdictions didn’t exist, the Washington State Department of Ecology (DOE) retained authority. Thompson noted some regional clean air agencies had taken action against the “cannabis odor issue and licensees,” and DOE had expressed some “displeasure with our agency referring people to their agency on this issue because they see authority that they don’t have.” DOE would participate on, but not lead, the task force as defined by the proposed language.
      • The Spokane Regional Clean Air Agency (SRCAA) voted to collect annual registration fees from licensed producers and processors within Spokane County in March 2019. Learn more about the cannabis policies of the SRCAA and Puget Sound Clean Air Agency (PSCAA).
    • Hauge asked if the budget proviso dealt with hemp odors. When Thompson said it didn’t, Hauge’s reply was “boy, that’s wacky.” Thompson added the task force wouldn’t address scents from alcohol production, “manure,” or any other odors.
    • Besides air quality, “the only other angle” Thompson suggested was designation of cannabis smells as a “public nuisance...something that’s regulated by local governments” many of which "have ordinances and enforce ordinances” on the subject. Hauge, a former county prosecutor, said nuisance enforcement was a "cumbersome process" frequently involving protracted legal actions. He believed “cash strapped” municipalities would be hesitant to pursue that approach in all but the most egregious circumstances.
    • Thompson had reached out to Warnick “to talk about her thinking on this” and did not receive a response. He said he’d also contacted DOE’s Director of Governmental Relations, Denise Clifford in anticipation of further discussion should the measure be adopted. Thompson suggested WSLCB use the appropriation of $30,000 to "see what we can get" in the way of an outside consultant.
    • Rushford asked what other legal cannabis states had done around cannabis odor mitigation. Hauge expected "we're not going to find a lot of examples" and figured “it's going to cost a lot more than [$30,000] if we’re going to really try to grapple with this issue, which has to happen.” While “not a bad thing,” he still found it “awkward” for WSLCB to be responsible for the task force. Thompson agreed that the money for the task force and its required report was woefully lacking. He also felt the issue wasn’t going away, recounting speaking to property owners who felt they couldn’t invite their grandchildren over for risk of exposure to the scent of cannabis.
    • Director Rick Garza, who had arrived during Thompson’s update, chimed in to say it was a problem that WSLCB had fielded for five years. He believed it was more suited to regional clean air authorities or DOE as "we don't have any expertise around this.” He shook his head, “as usual things get sent to us because it has the word ‘cannabis’ in it."
    • Garza noted clean air authorities commonly required indoor growers to invest in additional heating, venting, and cooling (HVAC) systems; but “I don’t know what you do” for outdoor cannabis production. Hauge observed inconsistent policies among current air quality regulators who made no effort to “coordinate their efforts and apply the same standards.” Frustrated licensees told Hauge that they didn't “know what I can do to satisfy my regional authority.” While he believed the offensiveness of cannabis odor was a subjective determination, consistent standards could benefit licensees and “protect the public, or make it less annoying for them.”
    • Like the revenue forecast, the marijuana odor task force appeared in the Senate version of SB 6168 but was “not in the House budget.” Thompson planned to advocate that the conference committee not include the proviso.
• After quick updates on WSLCB’s request legislation, agency leadership engaged in an extended discussion about HB 2870, the oft-revised cannabis equity legislation.
  • At “nine days from the end of session," Thompson noted most cannabis legislation was “not proceeding." Reviewing the agency’s request legislation, he indicated “two of our three agency request bills” were in the Washington State Senate Rules Committee (WA Senate RULE) awaiting pulls to the chamber floor (audio - <1m).
    • HB 2826 - “Clarifying the authority of the liquor and cannabis board to regulate marijuana vapor products.” (audio - <1m) Thompson said the bill text hadn’t been changed since introduction and was passed out of WA Senate WM “with only one no vote.” Overall, he felt the agency was “in pretty good shape” and would see the measure pass the legislature.
      • The engrossed House version of the budget bill included a dedicated appropriation of $65K to implement HB 2826.
    • HB 2870 - “Allowing additional marijuana retail licenses for social equity purposes.” (audio - <1m) Thompson explained that the bill had been “stripped down to a study measure” and wouldn’t create any new licensing applications or technical assistance grants for equity applicants. As he was still “having discussions on that” with senators and staff, he wasn’t certain “whether those are going to go anywhere or pan out.”
      • The engrossed House version of the budget bill included a dedicated appropriation of $348K to implement HB 2870.
    • HB 2871 - “Establishing a retail privilege endorsement to a marijuana producer license.” Thompson last acknowledged the agency’s ill-fated medical patient/small producer bill on February 12th when he confirmed it “did not make it out” of the Washington State Commerce and Gaming Committee (WA House COG).
  • Board Member Ollie Garrett wanted to dive deeper into the agency’s legislative activity around HB 2870 following a chilly public hearing on the bill on January 16th as she’d been “a little surprised to hear in talking to legislators" that there was “mistrust of LCB” (audio - 29m).
    • Thompson first blamed that impression on unnamed licensees “who think they’ve not been treated well by the agency.” Garza expanded on that claim, saying those with "hard feelings" about the cannabis licensing process came from communities of color and felt “excluded from the process for whatever reason." He argued that with 9,000 applications for the initial 2,000 licenses there were bound to be disappointed parties but he didn’t believe legislators distrusted the agency. 
    • Hauge smiled, “except for the letter that was orchestrated last session," also noting he’d “picked up on latent hostility" from individuals “with an axe to grind in the community.” Garrett said that situation had spilled over into “legislators getting that same type of feeling" and wondered if WSLCB could do more to address it. Garza replied that the agency had “done everything we can to address that issue head on" calling attention to the Hillard Heintze report on WSLCB’s enforcement practices.
    • As far as social equity, Garza said that "no good deed goes unpunished." He felt the request bill had become a “vehicle” for constituents unhappy with WSLCB’s past processes to speak out against the agency. Garrett countered that the City of Seattle was considering their own cannabis equity program “so the conversation around it was occuring regardless whether we had our bill or not.”
    • Garza shared that staff had begun discussing what WSLCB would do with existing retail licenses if social equity legislation were not passed. “Are we just going to leave the queue open" for new applications, he wondered, or would the agency continue to refine a proposal for a social equity program? Rushford asked for a potential deadline on Garza’s efforts but he cautioned that if HB 2870 passed "we're going to have to go in there and help people understand what this landscape looks like as far as licenses available." Thompson added the agency was unlikely to know if the bill would advance or not until the last day of the regular session on March 12th.
    • “Ollie,” Thompson said, “I don’t think you’re wrong” that many “negative perceptions of the agency that have come from licensees and others in the community have been channelled through legislators and some of it has stuck, to some degree.” On HB 2870, he claimed he’d “already seen some legislators say ‘I was sold a bill of goods’” to generate support for equity in the cannabis industry, while other lawmakers told him "I don't have a problem with" WSLCB’s handling of the issue. Thompson warned there may be work on the agency’s reputation “indefinitely” as legislators could be subject to misinformation about WSLCB and might feel obligated to “be sympathetic with” constituents.
    • Rushford remarked that "regulators aren't easy to love" and all board members had heard “criticism” about the agency’s activities. She suggested the cannabis industry’s “maturity” was revealing "the scratches and dents" in the legal system and WSLCB should be ready to address them. Garza said that HB 2870 had been an effort to change public perception of the agency and he had “expected” opposition based on “what we’ve heard the last two or three years about how people felt like they were left out of the integration when medical and recreational occurred.” Thompson echoed those remarks, and believed some had leveraged HB 2870 as "a chance to use us as a target for their frustrations and for their past experience." WSLCB was a public face for cannabis policy that was “easy to blame" for problems beyond their control, such as the closure of former dispensaries under SB 5052, the 2015 law which Thompson said WSLCB wasn’t involved in drafting “but we’re a convenient scapegoat for that.” He said HB 2870 offered individuals “a chance to use us as a foil to generate sympathy” even if they didn’t appreciate the agency’s responsibilities and limits of their authority.
    • Duffy spoke up to say that "at [the] 30,000 foot level, Ollie's observation is an important one" because there was "a constant self reflection" required of them as regulators to “always constantly be doing that question around ‘well, how do we do it better?’” Garrett said "in listening to everyone so far" she was concerned that "we're missing the big picture" because if there’s "a core group of folks that are expressing over and over their frustration" about not getting licensed by WSLCB, the agency should be big enough to say “everything didn't go perfect [in licensing] and we should be taking a look to see were there opportunities and areas” to do things better. Rushford commented that "we've shifted into a different generation of this industry" with changes happening faster and taking more of the agency’s attention. Thompson also agreed with Duffy’s perspective, telling the Board that "even when a criticism is not legitimate, I try to think about where it's coming from, and...what's fueling that” as criticism would always be an “opportunity to improve” if people were willing to “hear between the lines” of some arguments.
    • Garrett suggested social equity "maybe...shouldn't be agency request" legislation. Garza felt that HB 2870 had been doing “very well” until the February 24th public hearing in WA Senate LBRC when “we lost our sponsor for a day." He also blamed “folks out there who have a difficult time increasing competition in the industry” who opposed creating retail licenses for equity or any other purpose. Beyond that, Garza believed "most people out there who looked at this at a high level" were supportive of the idea. "That's quite an accomplishment" given that WSLCB was “looked upon as part of the problem.”
    • Regardless of HB 2870’s prospects for passage he was confident that work on the issue would continue after the session. Thompson agreed that "win, lose, or draw...we've built some political capital around this issue." He was doubtful that another entity could do a better job, pointing to the Washington CannaBusiness Association (WACA)’s failed effort to fund social equity efforts while enabling out-of-state ownership of cannabis licenses.
• Preparations for the coronavirus outbreak in Washington state had begun to impact agency activities. 
  • The outbreak of coronavirus disease 2019, also called COVID-19, became a lethal threat provoking a state of emergency in Washington on February 29th. Learn more about ongoing federal response efforts and updated information from the Department of Health (DOH) and Department of Social and Health Services (DSHS)’s COVID-19 webpage.
  • At the beginning of his legislative update, Thompson said he’d been delayed by a management team meeting on “response and agency preparedness” for the virus. He explained that Washington State Secretary of Health John Wiesman had asked the legislature for $100M to address COVID-19 in the state, a “ten fold” increase in funding “beyond what was just being discussed a few days before that.”
    • Wiesman and Jaime Bodden, Washington State Association of Local Public Health Officials Managing Director, briefed the WA Senate WM and fielded questions on Monday March 2nd for the first hour of the committee meeting (presentation, video).
  • Thompson expected impacts on the agency would be “minimal, if at all.” Noting his interaction with many people from around the state at the legislature, Thompson was accepting of “social distancing” from him if people were concerned about virus transmission (audio - 2m).
  • Later, Garza mentioned communications from Governor Inslee’s office as well as DOH, and said he’d emailed agency staff to begin looking at how WSLCB might scale back actions including having staff work from home where possible. Duffy described the agency’s “precautionary phase” focused on communicating with staff and following directives from other agencies. She said staff were focused on simple things like being sure the agency was stocked up on hand sanitizer while “planning for if you have a high absentee rate and/or if there comes to a place where there’s a directive from the Governor’s office that says folks have to work from home.” Duffy indicated WSLCB staff were anticipating COVID-19’s continued spread across Washington. Garza added that other aspects of agency activity potentially impacted included renewal of licenses, as that required staff to use software they couldn’t access from home, and Enforcement and Audit field visits to licensee premises. Compared to other state agencies planning for COVID-19, Garza felt WSLCB was ahead of the curve (audio - 5m).