Legislature(2017 - 2018)BARNES 124
01/22/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB274 | |
| HB275 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 273 | TELECONFERENCED | |
| *+ | HB 274 | TELECONFERENCED | |
| *+ | HB 275 | TELECONFERENCED | |
| += | HB 180 | TELECONFERENCED | |
HB 273-EXTEND: MARIJUANA CONTROL BOARD
3:22:40 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 273, "An Act extending the termination date of
the Marijuana Control Board; and providing for an effective
date."
3:22:51 PM
CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State
Legislature, paraphrased from the Sponsor Statement [Included in
members' packets], which read:
House Bill 273 extends the termination date for the
Marijuana Control Board until June 30, 2024.
Per statute, this board is scheduled to sunset on June
30, 2018 with a one-year wind down if the legislature
does not pass legislation extending it. The licensing
function will remain after this date; however, the
administrative functions of the board would transfer
to the department.
Legislative Audit reviewed the board's operations and
determined that it is in the best interest of the
state to extend this board. The audit makes four
recommendations and recommends a six-year extension
with a new termination date of June 30, 2024. This is
shy of the full eight-year extension that Legislative
Audit is authorized to provide.
The recommendations are as follows:
1. The board members, Alcohol and Marijuana Control
Office (AMCO) director, and enforcement supervisor
should work together to formally establish an
enforcement plan to direct limited enforcement
resources.
2. The board and the AMCO director should implement a
process to monitor and track complaints to ensure they
are assessed for follow up action and investigated in
a timely manner.
3. The AMCO director should develop written procedures
for establishing the expiration dates of marijuana
handler permits and ensure staff receive the
appropriate training.
4. The AMCO director should develop and implement
procedures to segregate the duties for calculating and
remitting fees to local governments.
The Marijuana Control Board is a regulatory and quasi-
judicial board consisting of five members appointed by
the governor, created for controlling the cultivation,
manufacture, and sale of marijuana in the state. The
board consists of one member from the public safety
sector, one from the public health sector, one
residing in a rural area, one actively engaged in the
marijuana industry, and one who is either from the
general public or actively engaged in the marijuana
industry.
The continuation of the Marijuana Control Board is
important to the health and safety of Alaskans.
3:24:14 PM
REPRESENTATIVE BIRCH asked how the duties and responsibilities
of the board in terms of state law interacted with federal law.
CHAIR KITO offered his understanding that previously the
administration implemented a memo which stated that the federal
priorities were "not on enforcing the drug situation locally
except in the cases of significant crimes." He noted that, as
the memo had since been withdrawn, it would be best to hear
about implementation of state statute on the role between the
state and federal government.
REPRESENTATIVE BIRCH related that he had served on various
boards and there was always a concern for board liability. He
expressed his concern for the protection of board members.
CHAIR KITO offered his belief that this could be brought up
later.
REPRESENTATIVE KNOPP offered his belief that the former chair of
the Alcohol and Beverage Control Board was a police chief, and
when the memo was revoked, the chief had felt it was his duty to
step aside.
3:28:17 PM
KRISTIN CURTIS, Legislative Auditor, Legislative Audit Division,
Alaska State Legislature, directed attention to the Sunset
Review [included in members' packets] and stated that the
purpose of the sunset review was to determine whether the
Marijuana Control Board was serving the public interest and
whether it should be extended. She explained that this was a
new board created as a result of the 2014 ballot measure, that
there was background information on page three, and report
conclusions on page five of the review. She paraphrased from
the Report Conclusions in the review, which read, in part:
Overall, the audit concludes the board is serving the
public's interest by effectively licensing marijuana
establishments and developing and adopting regulations
necessary to implement statutes that allow for the
cultivation, manufacture, and sale of marijuana in
Alaska. The audit makes four recommendations for
operational improvements.
The board met its statutory mandate to adopt
regulations necessary for implementing statutes.
Significant regulations (3 AAC 306) specify
requirements for the issuance, renewal, suspension,
and revocation of registrations to operate marijuana
establishments; qualifications for registration; and a
schedule of application, registration, and renewal
fees. The board operated in the public interest and
did not duplicate the efforts of other entities,
registration, and renewal fees. The board also amended
regulations to clarify submissions to the board and
conduct of board meetings. Regulatory additions and
changes during the audit period were public noticed
according to the Administrative Procedures Act.
To help evaluate board effectiveness, surveys were
conducted as part of the audit. A survey was sent to
101 licensees and 71 (70 percent) responded. A second
survey was sent to 16 local governments that had a
license issued in their jurisdiction and 14 (88
percent) responded. Licensee and local government
survey questions and responses are presented as
Appendices B and C of this report.
One hundred percent of local government survey
respondents and 75 percent of licensee survey
respondents rated the board's overall effectiveness in
serving the public interest as effective or very
effective. Eighty-six percent of local government
survey respondents believe the board does not
duplicate efforts.
3:30:15 PM
MS. CURTIS directed attention to page 8 of the review and
reported that the [Marijuana Control] Board had issued 122
licenses from July 2016 through April 2017, with 80 percent of
the licensee survey respondents rating the overall license
experience as good or excellent. She further paraphrased from
page 8, which read:
Additionally, as included in AMCO's FY 17 operating
budget,3 it is the intent of the legislature that
application and licensing fees cover the cost of
regulation and recover unrestricted general fund
appropriations made while the program was being
established. AMCO staff has implemented a process for
tracking both revenues and expenditures, but reported
it is too early in the development of the board to
determine whether the current fees are set at
sufficient levels to cover the cost of regulating the
marijuana industry. AMCO management expects to be
fully funded by application and licensing fees by FY
20. Exhibit 3 presents a schedule of fees established
by the board.
MS. CURTIS directed attention to page 11 of the review, which
listed the first of four recommendations made by the audit,
titled, "The board members, the Alcohol and Marijuana Control
Office (AMCO or control office) director, and enforcement
supervisor should work together to formally establish an
enforcement plan to direct limited enforcement resources," which
read:
The audit identified the enforcement section is
operating without a formally established enforcement
plan. Neither the Marijuana Control Board (board) nor
AMCO director had considered the need for or
importance of establishing enforcement goals or plans
to ensure the effective allocation of enforcement
resources. Per AS 17.38.121, the board is vested with
the powers necessary to enforce laws related to
marijuana and may employ enforcement agents and staff
it considers necessary to carry out its duties. The
board has tasked the enforcement section with the
responsibility of detecting violations and enforcing
marijuana laws. By not formally establishing an
enforcement plan, the enforcement section has no
guidance for prioritizing its limited resources and
runs the risk of not adequately protecting the public.
We recommend the board members, the AMCO director, and
enforcement supervisor work together to formally
establish an enforcement plan to direct AMCO's limited
enforcement resources.
MS. CURTIS paraphrased from the second recommendation, titled
"The board and the AMCO director should implement a process to
monitor and track complaints to ensure they are assessed for
follow up action and investigated in a timely manner," beginning
on page 11, which read:
The board and AMCO management have not maintained a
process to monitor and track all actions taken on
complaints to ensure they are resolved in a timely
manner. The board does have a process to receive
complaints from licensees, law enforcement agencies,
and the general public through their website,
telephone, or emails; however, complaints are only
tracked if they result in an inspection or
investigation. Furthermore, the basis for a decision
not to investigate is not documented and maintained.
According to AMCO staff, a process to log all
complaints received previously existed for the
Alcoholic Beverage Control Board; however, when the
Marijuana Control Board was created, staff
responsibilities were realigned, and the maintenance
of the complaint log took a lower priority compared to
new responsibilities associated with marijuana
regulation.
The efficiency with which complaints are investigated
is one of the sunset evaluation criteria used in the
legislative oversight process. Alaska Statute
44.66.050(c)(6) specifies the sunset review must
evaluate:
The efficiency with which public inquiries or
complaints regarding the activities of the board or
commission fi led with it, with the department to
which a board or commission is administratively
assigned, or with the office of victims' rights or the
office of the ombudsman have been processed and
resolved.
By not tracking complaints, there is an increased risk
that board staff may not investigate complaints and/or
not investigate complaints in a timely manner. Such
instances could reduce the board's ability to
effectively enforce marijuana laws. Additionally,
complaints received directly by board staff via
telephone or email may never be resolved in the event
of staff turnover.
We recommend the board and the AMCO director implement
a process to monitor and track complaints received to
ensure they are assessed for follow up action and
investigated in a timely manner.
3:32:57 PM
MS. CURTIS paraphrased from the third recommendation, titled
"The AMCO director should develop written procedures for
establishing the expiration dates of marijuana handler permits
and ensure staff receive the appropriate training," beginning on
page 12, which read:
Forty-seven of 53 marijuana handler permits tested
were issued by AMCO with incorrect expiration dates.
Of these, 45 were issued for a longer period than
allowed by regulation. Regulation at 3 AAC 306.700(c)
states that:
To obtain a marijuana handler permit, a person who has
completed the marijuana handler permit education
course described under (b) of this section shall
present the course completion certificate to the
director. Th e director shall issue a marijuana
handler permit card valid for three years from the
date of issue.
Management interprets the three-year validity period
to start on the date of the course completion. In most
instances, expiration dates of the handler permits
were established at three years from the date the
individual applied for the permit. The lack of written
procedures and sufficient training contributed to AMCO
staff's varying interpretations for calculating permit
expiration dates.
By not issuing permits in accordance with regulation,
AMCO is allowing permit holders to handle marijuana
and marijuana products beyond the period set in
regulation without obtaining updated training on
marijuana laws.
We recommend the AMCO director develop written
procedures for establishing the expiration dates of
marijuana handler permits and ensure staff receive the
appropriate training.
3:33:20 PM
MS. CURTIS paraphrased from the fourth recommendation, titled
"The AMCO director should develop and implement procedures to
segregate the duties for calculating and remitting fees to local
governments," beginning on page 13 of the review, which read:
AMCO management does not adequately segregate duties
over remittances of application fees to local
governments. The audit found one AMCO employee is
responsible for calculating and approving the amounts
to be remitted to local governments, and no separate
review is performed.
Upon receipt of a new or renewal application, AS
17.38.200(c) requires the board to immediately forward
a copy of each application and half of the
registration application fee to the local regulatory
authority for the local government in which the
applicant desires to operate. Management is
responsible for establishing internal controls to
ensure fees remitted are accurate and complete.
Segregation of duties is a key internal control for
appropriately receiving and distributing funds.
AMCO management did not consider the need for
segregating the duties for remitting fees to local
governments. The lack of adequate segregation of
duties increases the risks of error or fraud.
We recommend the AMCO director develop and implement
procedures to adequately segregate the duties for
calculating and remitting fees to local governments.
MS. CURTIS shared that the response from Department of Commerce,
Community & Economic Development was on page 33 and the response
from the Marijuana Control Board was on page 35. She added that
both expressed agreement to all four of the recommendations.
3:34:20 PM
CHAIR KITO offered his belief that there had not been withdrawal
of the aforementioned memo during the completion of the sunset
review. He asked if that decision by the federal government
would have any impact on the efficacy or the applicability of
the Alaska Marijuana Control Board.
MS. CURTIS replied that it was outside the scope of the review,
and it had not been considered during the audit.
3:35:24 PM
ERIKA MCCONNELL, Director, Alcohol and Marijuana Control Office
(AMCO), in response to Representative Birch, said that there was
a work project to develop regulations regarding on-site
consumption. This proposal had received more than 500 pages of
comment when it had been opened for public comment and that
several issues had been identified which needed work through the
regulations. These issues had been forwarded to a sub-committee
for work with a new proposal due at the April meeting.
REPRESENTATIVE JOSEPHSON referenced a break-in in Anchorage
resulting in the loss of more than $100,000 in assets in less
than 65 seconds. He asked if it was necessary to show the
floorplan of the business on-line.
MS. MCCONNELL expressed concern for the security of the
licensees. She explained that the application forms had been
revised to no longer request that the applicant show any
security apparatus. She added that the AMCO was also trying to
find the balance between public access to information for the
board and the security concerns of the licensees. She
acknowledged that the licensed premise diagram would still be
required for review, but it would be removed from the website
once the facility began operation.
REPRESENTATIVE JOSEPHSON noted that the Alaska State Legislature
had introduced many bills after the marijuana initiative had
been passed, although very few were passed. He asked if this
hands-off approach by the Legislature was working, or if there
was a need for "greater guidance."
MS. MCCONNELL shared her belief that the Marijuana Control Board
had been very responsive throughout the regulatory process, to
address issues that had been found in reviews by the AMCO. She
deferred to the board members for their comments.
REPRESENTATIVE WOOL asked about the investigations for
complaints.
MS. MCCONNELL replied that, in general, AMCO only investigated
submitted complaints and was not looking for problems.
REPRESENTATIVE WOOL asked if there were "stings" or operations
to intentionally get people to break the rules.
MS. MCCONNELL relayed that, with alcohol, there was the
compliance check and the shoulder tap program. She noted that
AMCO was working to resurrect those programs and would also
apply them for marijuana. She explained that the compliance
check was an attempt by underaged people to purchase the
regulated product, and the shoulder tap was an underaged person
waiting outside the facility and asking people to purchase for
them. She offered her belief that these were important ways to
enforce the laws for regulated substances.
REPRESENTATIVE WOOL asked if there was enough staff to enforce
both marijuana and alcohol.
MS. MCCONNELL offered her belief that it made sense to have
these two substances regulated through the same office, even as
the staff was extremely busy. She relayed that although they
could use more people, she was not going to ask for more staff
and that the office was managing.
REPRESENTATIVE WOOL referenced an infraction for inaccurate
labeling by a Fairbanks business, in which the business was
fined $500,000. He asked if there was a schedule of fines, or
if this was an arbitrary amount, as it appeared to be a very
high fine for a new business.
MS. MCCONNELL explained that the situation went far beyond a
labelling issue, that this was a product manufacturing facility
that was not testing the vast majority of its product, a major
health and safety issue. She shared that it was the result of a
tip that the business was not testing or tracking the product as
required. She explained that she then wrote an accusation with
a recommendation for the license to be revoked and submitted it
to the Board for consideration. She reported that the Board
decided that a fine was important, and although there was not a
table of fines, there was a proposal for certain amounts for
each subsequent violation or three times the profit of the
licensee. She noted that, as the business had a profit of more
than $1 million, the board decided that a high fine was
warranted.
3:46:14 PM
CHAIR KITO referenced the fiscal note [Include in members'
packets] which identified $532,000 from general funds and asked
about the necessity for this funding.
MS. MCCONNELL offered her understanding that when the program
was created there was a requirement that it be funded by the
fees. In FY16 and FY17, the office was funded by unrestricted
General Funds, with the understanding that there would be
subsequently less in the ensuing years and for it to be entirely
self-supported by FY2020. She explained that for FY19, the
general fund allocation request was for half of the FY18 amount.
She pointed out that the industry was still determining the
number of licenses to determine the income necessary to support
the needs of this regulated industry.
CHAIR KITO mused that this was in recognition for the transition
from start up to regular operations.
MS. MCCONNELL expressed her agreement.
REPRESENTATIVE BIRCH offered his understanding that "there's a
lot of cash moving around." He asked if the annual license fees
were paid with "a fistful of cash."
MS. MCCONNELL relayed that most people paid with checks or
cashier's checks, and that they did not receive very much cash.
REPRESENTATIVE KNOPP asked how the shoulder tap program worked
and who was held accountable under the program.
MS. MCCONNELL explained that every store must have a security
person at the front entrance to make sure that no one under 21
[years of age] entered. She said that the shoulder tap program
was a bit challenging because someone had to notice that after
the purchaser went outside, they gave it to someone who appeared
to be underage. She said that they tried to address each
situation on a case by case basis for accountability.
REPRESENTATIVE JOSEPHSON shared his observation that in
Anchorage there were "dozens of retail operations." He asked
about the determination for the number of licensees. He
questioned whether there was enough demand for them to all be
profitable.
MS. MCCONNELL replied that there was not a limit to the number
of state licenses; however, the local governments were able to
set a limit, even though the Municipality of Anchorage had not
done so.
3:52:21 PM
BRANDON EMMETT, Industry Seat Board Member, Marijuana Control
Board, stated his support for the proposed bill and offered his
belief that the Marijuana Control Board had done "quite a lot of
great work for the State of Alaska" and that he would like to
see that work continued. He opined that a functional regulated
marijuana industry was more in line with the needs of the state
than the previously unregulated system.
REPRESENTATIVE JOSEPHSON asked if the board was seeking any
guidance from the legislature or would they prefer a hands-off
approach.
MR. EMMETT replied that the board currently "does not have any
specific asks of the legislature." He acknowledged that there
were some issues that he believed could be addressed by the
legislature.
REPRESENTATIVE WOOL drew attention to page 23 of the sunset
audit [APPENDIX B] depicting survey data for the overall
licensing experience, the overall renewal experience, and the
overall board effectiveness. He pointed out that the percentage
of responses for poor, creates an unnecessary barrier, or not at
all effective was at least 20 percent and asked if any of these
applicant responses concerned him as a board member.
MR. EMMETT offered his understanding that many of the complaints
had been made at the beginning of the process, as there had been
significant barriers at entry, mainly financial barriers which
made it "a pay-to-play system." He opined that although some
applicants found it difficult to enter the industry, as it
matured the number of complaints would diminish. He suggested
that the process was relatively smooth in comparison to that of
other states.
REPRESENTATIVE WOOL asked if the merger of the alcohol and
marijuana boards had been effective or divergent.
MR. EMMETT stated that there were some subtle differences
between the alcohol and the marijuana industries and that the
greatest challenge was for total resources. He opined that the
staff has "been stretched to the limit," working very hard with
very limited resources. He acknowledged that, although the
State of Alaska was in trying economic times, an expansion of
resources would be applicable.
3:59:28 PM
CHAIR KITO opened public testimony on HB 273.
3:59:57 PM
JANA WELTZIN, Owner, JDW Counsel, LLC, stated that her law firm
serviced about 40 percent of the marijuana licenses in Alaska,
as well as marijuana licensee holders in Washington, Oregon,
Arizona, and Nevada. She declared her support of the proposed
bill, pointing out that the Marijuana Control Board had worked
hard to create an evolving structure for the industry, and had
built an efficient office.
4:01:20 PM
LEAH LEVINTON, Enlighten Alaska, stated that she was one of the
first marijuana retail license holders in Alaska. She added
that the license process was very involved, and that she had
learned a lot alongside the Marijuana Control Board. She lauded
the hard work of Ms. McConnell and declared support for the
Marijuana Control Board in the progress and development of
responsible regulation to help keep the industry consistent.
She stated support for the proposed bill, noting that the AMCO
office could use additional staff.
4:03:46 PM
BRUCE SCHULTE, Campaign to Regulate Marijuana, shared that he
had served on the Marijuana Control Board and he praised the
office staff. He referenced an earlier recommendation to
establish enforcement priorities, which he declared to be
"imperative." He shared that although it was a new process,
there had been enforcement of subjective interpretation for what
the regulation should be. He stated that this was unfair and a
misapplication of law. He offered hope that the Legislature
would not have to become involved in this, unless the AMCO
office was not able to arrive at specific limitations on the
enforcement staff and protect the due process.
REPRESENTATIVE JOSEPHSON asked for an example.
MR. SCHULTE offered an example of an incident when the Marijuana
Control Board had met on a Thursday and Friday, and received
input from the staff, although nothing had been said about CBD
oil on the shelves of the retail stores. On the following
Monday, several stores around the state were raided and the CBD
oil was confiscated under an interpretation of regulation. He
reported that many of the products were identical to products
carried on other retailer shelves. He acknowledged that,
although the discussion about CBD oil was valid and appropriate,
this could have been handled differently. He opined that it
would have been appropriate for the staff to have discussed this
at the meeting of the Marijuana Control Board. It was not until
several months later that the head of enforcement asked the
board for guidance in areas that enforcement was unsure of how
to respond. He expressed his concern that, although there was
law enforcement authority, they were not bound by the same
levels of due process.
REPRESENTATIVE WOOL asked if the dual enforcement
responsibilities for the two separate areas was a good thing.
MR. SCHULTE said that, given the economic environment, it made
sense to "keep things as lean as possible." He offered his
belief that, when affordable, it would be better to maintain
separation of the two offices. He acknowledged that there were
similarities in the two industries and that the staff was
stretched thin.
4:10:54 PM
CHAIR KITO announced that public testimony would remain open.
CHAIR KITO announced that HB 273 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB274 Sponsor Statement.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 274 |
| HB274A.PDF |
HL&C 1/22/2018 3:15:00 PM |
HB 274 |
| HB274 Legislative Audit 10.5.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 274 |
| HB273 Sponsor Statement 01.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 273 |
| HB273 Ver D 01.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 273 |
| HB273 Legislative Audit 01.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 273 |
| HB275 Version D 01.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |
| HB275 Sponsor Statement 01.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |
| HB275 Legislative Audit 10.11.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |
| HB180 Fiscal note DCCED-DBS 5.8.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 HLC Follow Up 5.15.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 Support Document Money Services Act Powerpoint 5.8.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 Sectional Analysis 5.2.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 ver. A 5.2.17.PDF |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 Sponsor Statement 5.2.17.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB275 Fiscal Note DCCED-CBPL 1.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |
| HB274 Fiscal Note DCCED-CBPL 1.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 274 |
| HB273 Fiscal Note DCCED-CBPL 1.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 273 |
| HB180 Fiscal note DCCED-DBS 1.19.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| PrepaidAccountsFinalRule CFPB 2016-24503.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB180 Money Services Business 1.22.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 180 |
| HB275 Opposition Letters 01.22.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |
| HB275 Support Letters 1.24.18.pdf |
HL&C 1/22/2018 3:15:00 PM |
HB 275 |