Legislature(2017 - 2018)HOUSE FINANCE 519
02/20/2018 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB299 | |
| Public Testimony | |
| HB301 | |
| Public Testimony | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 299 | TELECONFERENCED | |
| += | HB 273 | TELECONFERENCED | |
| + | HB 301 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 273
"An Act extending the termination date of the
Marijuana Control Board; and providing for an
effective date."
1:37:16 PM
ERIKA MCCONNELL, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL
OFFICE, introduced the PowerPoint presentation: "Alcohol
and Marijuana Control Office." She turned to Slide
2: "Agency and Board Structure:"
Alcohol and Marijuana Control Office
• Alcoholic Beverage Control Board
• Marijuana Control Board
The Alcohol and Marijuana Control Office serves both
the Alcoholic Beverage Control Board and the Marijuana
Control Board. The boards were two separate entities.
Ms. McConnell reviewed slide 3: "Marijuana Control Board
Accomplishments":
• In nine months, developed and adopted the regulatory
structure for marijuana licensure through a robust
public process
• Between being constituted in July 2015 and present,
met over 24 times, including in each judicial district
each year as required by statute
• Between June 2016 and present, approved 278 license
applications, denied 8 applications, and revoked 2
licenses
• Opened 45 regulations projects, of which 8 are in
effect, and an additional 11 are adopted
Representative Ortiz asked about slide 3. He referenced the
third bullet point and asked how the application approval
process worked. Ms. McConnell responded that on occasion
the board tabled an application that was deficient or
incorrectly done. The applicant was given an opportunity to
correctly complete the application and once approved was
included in the 278 number. She estimated that between 6
and 12 approved applications had been temporarily tabled.
Representative Ortiz asked whether there were currently any
applications in an indeterminate state. She recollected
that one or two applications were tabled during the last
board meeting.
1:41:32 PM
Representative Tilton asked for a general idea of how many
applications were considered in one board meeting. Ms.
McConnell replied that the board reviewed 20 to 30
applications in one meeting. Representative Tilton asked
how many applications were currently pending for the next
meeting. Ms. McConnell answered that the application
process went through certain phases. Once the applications
were reviewed and deemed complete by staff they were
reviewed at the next board meeting. She was aware of 62
applications awaiting board review but was uncertain how
many were in the initial phase.
Representative Kawasaki had questions regarding the
licensing portion. He referred to a sunset review from July
2016. The audit mentioned 122 issued licenses. He wondered
whether approximately 150 licenses were issued since the
audit. Ms. McConnell answered in the affirmative.
Representative Kawasaki asked if each type of licenses took
a different amount of time to review. Ms. McConnell replied
that each license application was " extensive" and certain
license types took a significant amount of time to review.
She relayed that product manufacturers licenses had to
obtain approval for each product they produced. One
licensee had 91 products that needed approval, so the staff
had to review each one for compliance with the regulations.
Representative Kawasaki asked about an average wait time
from the time the applicant submitted the application until
it was reviewed by the board. He shared that he heard from
potential licensees waiting for the regulatory approval
process. He remarked that more license examiners were not
yet hired, and the license application process was backed
up. He wanted to better understand where the delays were to
help expedite the process.
1:46:12 PM
Ms. McConnell referred to a Flow Chart from February 2017
from the control office (copy on file) and explained that
the entire process took approximately 6 to 7 months. She
elucidated that the primary reason for the lengthy process
was staff turnover. As of November 2017, the office only
had three license examiners and were granted two more
positions in FY 2018 that were hired after November 2017.
However, the office had received 950 alcohol renewal
applications and the new staff was limited to processing
the renewals. Recently, one of the three examiners
resigned. The office attempted to keep the application
process moving forward. Additionally, the board was very
aware of the need to keep the process moving and scheduled
an extra meeting to accommodate the review of applicants.
The office was arduously working to hire and train
examiners.
Representative Kawasaki asked how Alcohol and Marijuana
Control Office (AMCO) decided what the examiners focused on
between alcohol and marijuana. Ms. McConnell replied that
ideally every examiner would be able to handle both types
of applications. However, examiners relayed challenges when
switching between processing for both substances. The
office tended to allow specialization. She determined that
the best structure was two examiners assigned to alcohol,
two examiners assigned for marijuana, and one that floated
between the two depending on marijuana license renewal or
alcohol license renewal periods.
1:49:36 PM
Representative Kawasaki asked about what the legislature
could do to ease the process. Ms. McConnell was not sure
there was anything currently necessary. The staff should be
adequately trained, and the backlog reduced in the time it
would take to hire and train new staff.
Representative Grenn complimented Ms. McConnell and felt
that AMCO had accomplished a lot in a short time period. He
inquired about sensitive business information that was
required by applicants. He asked whether the board acted to
protect the information or change the process. Ms.
McConnell responded that several break-ins had occurred at
various marijuana facilities. There was a suspicion with
one burglary that occurred in December 2017, that the
thieves accessed the floor plans from the application
proposal. In response, AMCO took two steps to mitigate the
problem. One action revised the application form and
eliminated the requirement to show the location of security
cameras and devices on the floor plan. The second step was
that once an application was considered by the board the
floor plan diagram was removed from the website. The
application was included online for the public to provide
input during the application process.
Representative Ortiz asked whether the staff recommended
approval or denial after the initial reviewing process. Ms.
McConnell responded that the staff completed a cover memo
that highlighted dates and included opportunities to raise
issues. The staff did not engage in the approval or denial
process but might urge the board to take a particular look
at something specific in an application. Representative
Ortiz asked whether there was a "commonality" in board
rejections. Ms. McConnell answered in the negative.
Representative Tilton asked whether the staff spent a
significant portion of time reviewing initial applications
and requesting more or corrected information from the
applicants. She wondered whether the licensing process
could be streamlined in any way. Ms. McConnell indicated
the staff had not seen a "perfect" application when
initially submitted. When staff discovered errors a list of
what was needed was sent to the applicant. The office
recently revised its forms, resulting from what was learned
and experienced through the application process to date.
She recommended that applicants should listen to or attend
board meetings prior to submitting their application and
felt that the applicants had a certain level of
responsibility for a correct application.
1:56:22 PM
Vice-Chair Gara pointed out that the cost of labor or
commodities did not change from 2019 to 2023 according to
the fiscal note. He wondered whether the board would
increase license fees as wages and costs increased. Ms.
McConnell replied that she was not certain of future needs
and therefore left the numbers the same in the out years
considering the board's authority to alter fees as
necessary.
Co-Chair Foster asked members to hold their questions until
the end of the presentation.
Ms. McConnell turned to slide 4: "Alcohol and Marijuana
Control Office: Current Organization." She explained that
the organizational structure included 3 sections:
Enforcement, Administration, and Licensing and Education.
The enforcement section included one Special Investigator,
five Special Investigators, and one Criminal Justice
Technician based in Anchorage, two of the special
investigators were based in Fairbanks and one in Juneau.
The licensing and education section included a Local
Government Specialist that performed community outreach for
both alcohol and marijuana programs that was added in FY
17. The remaining positions were comprised of Occupational
Licensing Examiners and one administrative assistant.
Ms. McConnell continued to slide 5: "Marijuana Regulation
History":
• November 2014: Voter initiative to regulate marijuana
like alcohol passes
• April 2015: HB123 establishes the Marijuana Control
Board (Sec. 2 Ch. 4 SLA 2015, primarily changes AS
17.38)
• February 2016: Marijuana Control Board establishes
regulations, including fees for marijuana businesses
(enacted as 3 AAC 306)
• February 2016: Marijuana licensing begins
(applications are accepted)
• July 2016: Commercial marijuana operations begin
• October 2016: First retail marijuana store opens
• June 2017: First renewal period for all marijuana
licenses
1:59:52 PM
Ms. McConnell read from slide 6: "Marijuana Budget
History":
• November 2014: Voter initiative to regulate marijuana
like alcohol passes
• Spring 2015: UGF funding appropriated for FY2015 and
FY2016 for program implementation ($2,360.1 UGF,
supplemental multi-year appropriation for FY2015-
FY2016)
• Spring 2016: UGF and GFPR funding appropriated for
FY2017 for continued program operations ($1,470.7 UGF,
$100.0 GFPR) Component retitled from Alcoholic
Beverage Control Board (ABCB) to Alcohol and Marijuana
Control Office (AMCO)
• Spring 2017: UGF and GFPR funding appropriated for
FY2018 ($1,052.5 UGF, $756.6 GFPR)
Intent language in the budget regarding marijuana fees
• Spring 2018: UGF and GFPR funding requested for FY2019
($532.8 UGF, $1,282.6 GFPR)
HB273 introduced to extend the Marijuana Control Board
HB299 introduced to extend the Alcoholic Beverage
Control Board
Ms. McConnell reported that AMCO expected to be fully
supported by program receipts and carry forward funds by FY
2020.
Ms. McConnell read from slide 7: "Marijuana Fees":
• License and application fees are set by the Marijuana
Control Board in regulation (3 AAC 320)
• Fees were last set in February 2016
• Annual fees for marijuana licenses are $1,000 for
limited cultivation, concentrate manufacturing, or
testing licenses, and $5,000 for retail, unlimited
cultivation, and product manufacturing licenses
• Application fees are $1,000 for new and transfer
applications and $600 for renewal applications
• Half of each application fee is transferred from AMCO
to the appropriate local government
o This is different than alcohol licensing revenue
transfers, which are transferred from the
Department of Revenue's tax
• collections to the appropriate local government
• Intent language in the FY2017 budget
• The board will likely revisit fees in FY2019 or FY2020
Ms. McConnell advanced to slide 8: "Alcohol Fees":
• License fees are set by statute for all license types
in statute; licenses created by regulation have
license fees set by regulation
• Application fees are set by regulation
• Application fees were raised for the first time in at
least 20 years, to take effect 7/1/18
• Biennial fees for alcohol licenses range from $400
(golf course license; wholesale-malt beverage and wine
license) to $2,500 (beverage dispensary license)
• Application fees are $100 for new and transfer
applications and $200 for renewal applications; these
are increased to $500 for new and transfer
applications and $300 for renewal applications,
beginning 7/1/18
• License fees are transferred to the appropriate local
government from the Department of Revenue's tax
collections upon showing of local enforcement of
applicable laws
2:04:55 PM
Ms. McConnell highlighted the intent language on slide 9:
"2017 Legislative Intent Language":
Development, Alcohol and Marijuana Control Office
Operating Budget (CCS HB 256)
It is the intent of the legislature that the
Department of Commerce, Community and Economic
7 Development, Alcohol and Marijuana Control
Office, set marijuana application and licensing
8 fees to cover the cost of regulation and
recover unrestricted general fund appropriations
made
9 in prior fiscal years while the program was
being established.
Ms. McConnell moved to slide 10: "AMCO Budget History and
Projection." She highlighted that in both FY 2016 and FY
2017 expenditures were less than revenues and some funds
were returned to the general fund (GF) for alcohol
operations.
2:05:43 PM
Ms. McConnell indicated that slide 11 "Alcohol and
Marijuana Control Office: Current Organization" was a
duplicate slide from earlier in the presentation. She
turned to slide 12: "Alcohol and Marijuana Control Office:
Organization to Support One Regulated Substance." She
offered that slide 12 was the same duplicate denoting the
positions that would be eliminated if one of the boards
were not extended. She detailed that three special
investigators and the criminal justice technician would be
eliminated from the enforcement section, two occupational
licensing examiners and one supervisor from the licensing
and education section, and the administrative assistant
from the director's office would all be eliminated.
Representative Kawasaki cited the fee structure on slide
10. He asked why license fees for alcohol were set by
statute and the marijuana licensing fees were set by
regulation. Ms. McConnell was unable to answer the question
regarding alcohol licensing. She explained that the
marijuana statutes were initially adopted from the voter's
initiative and were limited. Some of the statutes were
further developed by the legislature in 2016. Many of the
rules relating to the marijuana program were in regulation
unlike alcohol, where most were in statute. Representative
Kawasaki asked whether the alcohol program had the same
rules when setting fees. Ms. McConnell explained that the
alcohol program was required to be self-supporting like the
marijuana program. Representative Kawasaki asked if the
alcohol fee structure was in statute. Ms. McConnell was
uncertain and would follow up. Representative Kawasaki
reported that the marijuana program was required to repay
the initial general fund expenditures. He asked how
repayment would be accomplished through the fee structure.
Ms. McConnell replied that essentially the office had one
year of data with all the licenses renewing. However, she
was uncertain how the licensure would settle out; how many
licenses would remain viable and supported by the public.
She needed a few more years of data to be able to project
expenses and revenues and set fees that would recover the
funding. Representative Kawasaki asked if the board would
set the fees to meet the goals and requirements of the
repayment mandate. Ms. McConnell responded in the
affirmative.
2:09:58 PM
Representative Wilson asked whether the Department of
Commerce, Community and Economic Development (DCCED) was
planning to submit a new fiscal note that reported the $1.5
million in GF expense that would eventually be repaid to
the general fund. Ms. McConnell explained that because the
office was still requesting GF to support the program. The
office was proposing to delay repayment until the program
was self-sufficient.
2:11:21 PM
Representative Wilson suggested a current fee adjustment in
anticipation of repayment might be necessary. She
reiterated that the fiscal note did not reflect the GF
obligation. She wanted the board to become self-sufficient
sooner rather than later. Representative Wilson inquired
about the exorbitant cost of an alcohol permit. Ms.
McConnell responded that alcohol licenses were capped based
on population. She explained that certain types of alcohol
licenses; beverage dispensary licenses (bar licenses) and
package store licenses were limited by population. The
situation created a secondary market for the licenses and
was a private transaction between two individuals; the
money was not part of the licensing program. Representative
Wilson wondered whether the board tracked active licenses
and licenses that were not being utilized. Ms. McConnell
indicated that minimum operation requirements were
established that mandated operating a certain number of
hours each year or a waiver was necessary. The board only
issued a limited number of waivers via regulation. The
licenses could not be hoarded.
2:15:38 PM
Vice-Chair Gara asked how the boards attempted to be cost
neutral through its fee structure. Ms. McConnell replied
that for the alcohol program the refund to the local
government came from taxes and did not affect the board's
budget. She elaborated that the marijuana program collected
2 fees; a licensing fee and an application fee. The license
fee was higher than the application fee. The licensure fees
were retained entirely, which could be adjusted to help the
program become self-sufficient. Vice-Chair Gara asked for
clarification. He inquired about remittances to local
governments. Ms. McConnell clarified that on the alcohol
side, local government assessed and collected taxes and was
a function of the Department of Revenue (DOR). She
clarified that on the marijuana side the money came from
the application fees and half of the amount collected was
refunded to the local government. The state retained the
other half of the fees. Vice-Chair Gara referenced the same
issue as the inquiry made by Representative Grenn regarding
floor schematics as part of the marijuana licensure. Ms.
McConnell reiterated that the marijuana application was
placed online for the benefit of the public and the
regulation deeming application documents public records was
set in statute. She reminded that the licensees premise was
part of the application but once the board ruled on an
application AMCO removed the diagram online and was only
made available via a public records request. Vice-Chair
Gara asked why a floor plan had to be posted. Ms. McConnell
replied that the internet was the easiest way to provide
access to the public and the regulations provided for a
thorough public process that included viewing the entire
application.
2:19:53 PM
Representative Ortiz asked whether the use of marijuana on
site was not allowed anywhere in the state. Ms. McConnell
answered that the prohibition for onsite use covered the
entire state. Representative Ortiz asked about the
reasoning behind the on-site consumption ban and if the
board considered the revenues gained through elimination of
the prohibition. Ms. McConnell answered in the negative.
She related that the provision in statute contemplated
onsite consumption as part of a retail outlet but was
subject to development of the regulations. The board
embarked on a regulation development project in February
2016 that was open to public comment and voted against
adopting the regulations. In March 2017, the board reopened
a new regulatory project on onsite consumption that was in
progress. Representative Ortiz asked if the number of
alcohol licenses was capped. Ms. McConnell responded in the
affirmative. Representative Ortiz questioned whether the
marijuana licenses would be capped. Ms. McConnell responded
that she was uncertain whether a limit would ever be
established.
Representative Thompson cautioned that a bill [SB 63
Regulation of Smoking - Adopted 5/12/2018] that prohibited
smoking in public buildings was moving through the
legislature. He asked how a smoking prohibition would be
affected by adoption of onsite marijuana consumption. Ms.
McConnell understood that the bill contained a "carve out"
provision that allowed for marijuana consumption in a
stand-alone marijuana retail store. However, smoking
marijuana in a marijuana store that was not "discrete"
would be prohibited. She reminded committee members that
other methods of marijuana consumption existed and might be
universally legal in marijuana retail stores.
Representative Thompson asked about common walls and the
exclusion. Ms. McConnell understood that the retail store
was supposed to be an entirely separate and standalone
building.
2:24:17 PM
Representative Ortiz asked how often the board met to
review licenses. Ms. McConnell responded that once an
application was deemed complete the board had 90 days to
offer a ruling. She added that the board met approximately
every two and one-half months. Representative Ortiz asked
whether the board could meet more often to clear a backlog
of applications. Ms. McConnell observed that currently the
backlog was produced at the staff level and she was not
sure if adding board meetings was an effective way to
address a backlog if the applications were not ready for
board review. The board typically still met if the number
of applications was lower than what was usually addressed
in one meeting.
2:26:30 PM
AT EASE
2:27:53 PM
RECONVENED
Vice-Chair Gara noted that the committee had heard public
testimony on HB 273.
HB 273 was HEARD and HELD in committee for further
consideration.