Legislature(2017 - 2018)HOUSE FINANCE 519

02/20/2018 01:30 PM FINANCE

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Audio Topic
01:35:39 PM Start
01:37:16 PM HB273
02:28:48 PM HB299
02:53:04 PM Public Testimony
03:17:20 PM HB301
03:39:11 PM Public Testimony
03:52:26 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 299 EXTEND: ALCOHOLIC BEVERAGE CONTROL BOARD TELECONFERENCED
Heard & Held
-- Public Testimony --
+= HB 273 EXTEND: MARIJUANA CONTROL BOARD TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ HB 301 ALCOHOL LIC.: BEV DISPENSARY/RESTAURANT TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 299                                                                                                            
                                                                                                                                
     "An  Act   extending  the   termination  date   of  the                                                                    
     Alcoholic Beverage Control Board;  and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
2:28:48 PM                                                                                                                    
                                                                                                                                
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE  AUDIT, referenced  the audit  report pertaining                                                                    
to  the   Alcoholic  Beverage  Control  Board   (ABC)  dated                                                                    
November 17,  2017 [Sunset Review  Audit Control  Number 08-                                                                    
20099-17](copy on file). She read the report conclusions:                                                                       
                                                                                                                                
     In  all areas  except  licensing, the  audit found  the                                                                    
     board was operating in  the public's interest. Meetings                                                                    
     were   conducted   effectively,   investigations   were                                                                    
     processed timely,  and the board developed  and adopted                                                                    
     regulations necessary to  implement statutes. The audit                                                                    
     concluded the  board should improve its  procedures for                                                                    
     issuing  renewals,  recreational   site  licenses,  and                                                                    
     beverage  dispensary licenses  that encourage  tourism.                                                                    
     Testing  found  these  licenses were  not  consistently                                                                    
     issued  in  accordance   with  statutes.  Additionally,                                                                    
     operational improvements are  needed in enforcing laws,                                                                    
     monitoring   board-related    local   law   enforcement                                                                    
     activity, and processing  refunds to municipalities. In                                                                    
     accordance  with  AS   44.66.010(a)(1),  the  board  is                                                                    
     scheduled to  terminate on June 30,  2018. We recommend                                                                    
     the legislature extend the  board's termination date to                                                                    
     June 30, 2022                                                                                                              
                                                                                                                                
Ms. Curtis  cited page 8  of the audit and  reported further                                                                    
on the  conclusions. She  announced the  boards "enforcement                                                                    
efforts had declined, and operational improvements were                                                                         
needed." She read the following:                                                                                                
                                                                                                                                
     The    board,   through    AMCO   investigators,    has                                                                    
     historically   conducted    compliance   checks   where                                                                    
     investigators employ  underage individuals  who attempt                                                                    
     to purchase  alcoholic beverages. Licensees who  fail a                                                                    
     compliance   check   receive    criminal   summons   or                                                                    
     citations. According  to management, the  federal grant                                                                    
     funding for this  program was terminated at  the end of                                                                    
     2012,  and the  board  received  supplemental funds  to                                                                    
     keep  the  program  going  through  June  2014.  AMCO's                                                                    
     enforcement  section  continued to  conduct  compliance                                                                    
     checks  funded by  program receipts  until April  2015.                                                                    
     Although   there   is   no  statutory   or   regulatory                                                                    
     requirement   to   conduct  compliance   checks,   AMCO                                                                    
     management  reported  it is  an  integral  part of  the                                                                    
     enforcement   of  alcoholic   beverage   laws  and   is                                                                    
     evaluating   alternative   means  for   providing   the                                                                    
     enforcement   through   shared  services   with   other                                                                    
     agencies.   The  audit   noted  the   board  and   AMCO                                                                    
     management have  not established a  written enforcement                                                                    
     plan  to  direct  its  limited  enforcement  resources.                                                                    
     (Recommendation  4)  For  example, the  board  has  not                                                                    
     formally  established   how  often   licensed  premises                                                                    
     should  be inspected.  Furthermore, the  control office                                                                    
     does  not monitor  and track  all complaints  to ensure                                                                    
     complaints  are  assessed  for  follow  up  action  and                                                                    
    investigated in a timely manner. (Recommendation 5)                                                                         
                                                                                                                                
Ms. Curtis turned to page 9 and read:                                                                                           
                                                                                                                                
     As  discussed   in  the  Background   Information,  for                                                                    
     communities                                                                                                                
     designated  as a  restricted area  for controlling  the                                                                    
     availability   of   alcoholic  beverages,   the   board                                                                    
     enforces limits  on alcoholic beverages  purchased from                                                                    
     package stores. However, the audit  found the board and                                                                    
     control office  staff have not  maintained the  list of                                                                    
     restricted purchasers within  the statewide database of                                                                    
     written   orders   in   accordance   with   regulation,                                                                    
     potentially  allowing  persons convicted  of  illegally                                                                    
     selling  alcoholic  beverages  to  continue  purchasing                                                                    
     alcohol via written order. (Recommendation 6)                                                                              
                                                                                                                                
Ms. Curtis indicated that the audit contained 8                                                                                 
recommendations for improvements that began on page 12.                                                                         
2:30:47 PM                                                                                                                  
                                                                                                                                
Vice-Chair Gara handed Co-Chair Foster the gavel.                                                                               
                                                                                                                                
Ms.  Curtis continued  to provide  details  about the  audit                                                                    
report.  She   addressed  the  first   recommendation.  "The                                                                    
authority  to  renew  licenses  should  be  limited  to  the                                                                    
board." She read the following from page 12:                                                                                    
                                                                                                                                
     Per  AS 04.11.070,  only the  board  may issue,  renew,                                                                    
     transfer, relocate, suspend, or  revoke a license under                                                                    
     AS   04.   Alaska   Statute   04.06.080   states   that                                                                    
     notwithstanding  AS 04.11.070,  the board  may delegate                                                                    
     authority to the director to  temporarily grant or deny                                                                    
     the  issuance, renewal,  or  transfer  of licenses  and                                                                    
     permits. In  a past board  meeting, the board  voted to                                                                    
     delegate  its  authority  to   renew  licenses  to  the                                                                    
     director  under the  incorrect understanding  that such                                                                    
     delegation  was  legal.  The AMCO  director,  in  turn,                                                                    
     assigned the function to license examiners.                                                                                
                                                                                                                                
Ms.  Curtis  highlighted  the  second  recommendation:  "The                                                                    
board should issue recreational  site licenses in accordance                                                                    
with  statutory requirements."  She  reported the  following                                                                    
findings:                                                                                                                       
                                                                                                                                
     Ten of 29 recreational  site licenses active during the                                                                    
     audit  period were  judgmentally selected  for testing.                                                                    
     All  10 did  not  meet the  statutory  definition of  a                                                                    
     recreational site?.  This same finding was  reported in                                                                    
     the   prior   2014   sunset   audit.   Alaska   Statute                                                                    
     04.11.210(c)  defines recreational  sites as  locations                                                                    
     where  baseball games,  car  races,  hockey games,  dog                                                                    
     sled racing  events, or  curling matches  are regularly                                                                    
     held  during a  season. The  10 noncompliant  licensees                                                                    
     noted  above included  travel  tour companies,  bowling                                                                    
     alleys,  an art  council, a  pool hall,  movie theater,                                                                    
     and a spa?.                                                                                                                
                                                                                                                                
     Review  of board  meeting minutes  revealed that  board                                                                    
     members                                                                                                                    
     understood   these   businesses   did  not   meet   the                                                                    
     definition of a recreational  site license yet believed                                                                    
     it  to  be  in  the  public  interest  to  issue  them.                                                                    
     Furthermore,  board  members anticipated  the  criteria                                                                    
     for recreational site licenses  would be addressed in a                                                                    
     future  rewrite  of AS  04.06.  The  issuance of  these                                                                    
     licenses   expanded   the  number   of   establishments                                                                    
     licensed  to sell  alcohol over  the number  allowed by                                                                    
     statute.                                                                                                                   
                                                                                                                                
Ms. Curtis  summarized recommendation  3: "The  board should                                                                    
issue  beverage  dispensary   licenses  in  accordance  with                                                                    
statutory requirements." She read:                                                                                              
                                                                                                                                
     In a sample of 169  of 126 beverage dispensary licenses                                                                    
     issued  to  encourage  tourism, the  audit  found  five                                                                    
     licenses were transferred and  six were renewed despite                                                                    
     not  meeting  statutory  requirements.  Alaska  Statute                                                                    
     04.11.400(d) states the board  may approve the issuance                                                                    
     or  transfer  of  ownership of  a  beverage  dispensary                                                                    
     license without  regard to statutory  population limits                                                                    
     if  it  appears  that  the issuance  or  transfer  will                                                                    
     encourage  tourism. Statutes  provide  for the  minimum                                                                    
     number of rental  rooms that must be met  by a business                                                                    
     to   encourage  the   tourist  trade.   Alaska  Statute                                                                    
     04.11.330(a)(4) states  the renewal of a  license shall                                                                    
     be  denied  if  the  board finds  the  issuance  of  an                                                                    
     existing   license  under   AS  04.11.400(d)   has  not                                                                    
     encouraged  the tourist  trade. The  board believed  it                                                                    
     was  appropriate  to  approve   the  licenses,  as  the                                                                    
     original  licenses  were  issued  before  June  1985;10                                                                    
     however,   there   was   no  statutory   provision   to                                                                    
     "grandfather"  the   licenses.  The  issuance   of  the                                                                    
     licenses   expanded   the  number   of   establishments                                                                    
     licensed  to sell  alcohol over  the number  allowed by                                                                    
     statute.                                                                                                                   
                                                                                                                                
Ms.  Curtis  reviewed  Recommendation 4:  "The  board,  AMCO                                                                    
director,  and enforcement  supervisor should  work together                                                                    
to formally  establish an enforcement plan  to direct AMCO's                                                                    
limited  enforcement resources."  She  noted  that the  same                                                                    
recommendation along with recommendation  5 were included in                                                                    
the   Marijuana   Control   Board  audit.   She   moved   to                                                                    
Recommendation  5:  "The  board  and  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."  Ms. Curtis  underlined                                                                    
Recommendation  6:  "The  board  and  AMCO  director  should                                                                    
develop  written  procedures   for  updating  the  statewide                                                                    
database   with  restricted   purchasers."  She   cited  the                                                                    
Background Information  section of  the audit  and explained                                                                    
that  the  section  described   the  Statewide  Database  of                                                                    
Written Orders. She explained that  the database was used to                                                                    
control and monitor the sale  of alcohol to restricted areas                                                                    
of  the   state.  Furthermore,  regulation  3   AAC  304.645                                                                    
requires the board  to maintain a list  of persons convicted                                                                    
of   a  violation   of  AS   04.11.0103  [illegal   sale  or                                                                    
manufacture  of alcohol]  and provide  the listing  of these                                                                    
restricted  purchasers to  package store  licensees. Package                                                                    
store  licensees  were  prohibited  from  selling  alcoholic                                                                    
beverages  to a  person who  is identified  as a  restricted                                                                    
purchaser  in   the  statewide  database.  She   noted  that                                                                    
restricted  purchasers were  not  entered  in the  statewide                                                                    
database,  and reports  of  convictions  were not  routinely                                                                    
forwarded to the office from the Court System.                                                                                  
                                                                                                                                
Ms. Curtis pointed to Recommendation  7: "The board and AMCO                                                                    
director should improve  procedures to ensure municipalities                                                                    
report violations of alcoholic  beverage laws." She reported                                                                    
that  municipalities  must  report   the  information  as  a                                                                    
condition  to receive  half of  the  biannual license  fees.                                                                    
The  audit  discovered  that  only   four  of  40  locations                                                                    
submitted reports in FY 17  regarding enforcement efforts by                                                                    
municipalities, yet the fees were routinely funded.                                                                             
                                                                                                                                
2:36:28 PM                                                                                                                    
                                                                                                                                
She summarized  Recommendation 8: "The AMCO  director should                                                                    
develop  and  implement  procedures  to  ensure  refunds  to                                                                    
municipalities  are appropriately  reviewed." She  indicated                                                                    
that the audit found one  employee in the control office was                                                                    
responsible for  calculating the  amounts to be  refunded to                                                                    
municipalities, and  the calculation was not  reviewed prior                                                                    
to  processing the  refund. By  not  having procedures  that                                                                    
require  a  separate  review, the  risk  that  refunds  were                                                                    
inaccurate was increased.                                                                                                       
                                                                                                                                
Ms. Curtis  highlighted the Agency Response  from the Office                                                                    
of  the  Governor on  page  27,  of  the audit  report.  She                                                                    
relayed  that  the  administration  agreed  that  the  board                                                                    
sunset  should  be  extended.  She   pointed  out  that  the                                                                    
department's response  was found  on page 29.  She indicated                                                                    
that  the  agency concurred  with  all  the audit's  finding                                                                    
except  Recommendation 1.  The  commissioner [Mike  Navarre}                                                                    
believed  that  an  alternative  interpretation  of  statute                                                                    
existed but  agreed to move forward  with corrective action.                                                                    
She mentioned  that the board's  response was found  on page                                                                    
33.  The board  concurred  with  all recommendations  except                                                                    
Recommendation   3   that   related  to   issuing   beverage                                                                    
dispensary licenses  to encourage  tourism. The  board chair                                                                    
felt  that grandfathering  the licenses  issued before  June                                                                    
1985   was  appropriate.   In   response   to  the   board's                                                                    
conclusions  regarding  recommendation  3, the  division  of                                                                    
audit wrote a  letter found on page 35,  that reaffirmed the                                                                    
audit's conclusion  and recommendation.  She noted  that the                                                                    
board chair provided no legal basis for his disagreement.                                                                       
                                                                                                                                
2:38:26 PM                                                                                                                    
                                                                                                                                
Representative Wilson asked if  the last audit was performed                                                                    
in   2014.  Ms.   Curtis   answered   in  the   affirmative.                                                                    
Representative   Wilson  thought   the  audit   had  several                                                                    
recommendations  that were  very serious.  She asked  when a                                                                    
board  "could  finally  get shut  down"  due  to  repeatedly                                                                    
ignoring findings and  recommendations. Ms. Curtis qualified                                                                    
her  earlier   statement.  She   revealed  that   the  audit                                                                    
originally granted the board  a conditional 6-year extension                                                                    
that  was reduced  to 3  years if  the marijuana  initiative                                                                    
passed. She interpreted  Representative Wilson's question to                                                                    
mean  how  bad findings  would  have  to  be to  reduce  the                                                                    
extension to one year. She  specified that a bad audit would                                                                    
never  receive less  than a  two-year extension  due to  the                                                                    
time it took  to perform an audit. She referred  to the list                                                                    
of "License Count  by Type" on page 7. She  noted that there                                                                    
were only  27 recreational site  licenses out of a  total of                                                                    
1,800  licenses.   She  indicated  that   "materiality"  was                                                                    
factored into  the audit  conclusions. The  issues regarding                                                                    
enforcement plans  and complaint  tracking was a  symptom of                                                                    
the  two  boards  lack  of  resources,  sharing  staff,  and                                                                    
defining their organizational structure.  She wanted to give                                                                    
at  least 4  years  to  allow time  to  establish a  working                                                                    
structure  between the  two boards  and allow  the Marijuana                                                                    
Control Board  to become functional. She  was very concerned                                                                    
about  the decrease  in enforcement  activities and  how the                                                                    
issue  factored into  the public's  interest. Representative                                                                    
Wilson  responded that  if there  was not  enough money  for                                                                    
enforcement  then  the  fees  needed  to  be  adjusted.  She                                                                    
related  that  the  lack  of  enforcement  was  her  largest                                                                    
concern. She wondered whether money was the issue.                                                                              
                                                                                                                                
2:42:59 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki contended  that the  audit was  not                                                                    
"clean" and wanted  the bill held over. He  repeated some of                                                                    
the  findings. He  commented that  in  Recommendation 3  the                                                                    
auditor sampled  16 of 126 beverage  dispensary licenses and                                                                    
discovered that  11 did not meet  statutory requirements. In                                                                    
Recommendation 1, 36 out of 40 licenses were renewed by                                                                         
AMCO license  examiners without board approval,  contrary to                                                                    
statute.  All   10  of  10  recreational   sites  tested  in                                                                    
Recommendation  2  did  not meet  statutory  definition.  He                                                                    
believed  the  audit  was "bad."  He  wondered  whether  the                                                                    
issues were  related to  AMCO and  the consolidation  of the                                                                    
functions  between both  boards. He  discerned that  merging                                                                    
two  boards   under  one  administrative   organization  was                                                                    
problematic.  He questioned  how AMCO  was functioning.  Ms.                                                                    
Curtis responded that  she did not routinely  hear that AMCO                                                                    
was "the cause of findings."                                                                                                    
                                                                                                                                
Vice-Chair Gara  apologized for not allowing  the sponsor to                                                                    
present his bill before Ms. Curtis testified.                                                                                   
                                                                                                                                
2:45:32 PM                                                                                                                    
                                                                                                                                
LAURA  STIDOLPH, STAFF,  REPRESENTATIVE  ADAM WOOL,  thought                                                                    
that  the members  had already  heard  a significant  amount                                                                    
about how the  ABC Board functioned. She  reiterated some of                                                                    
the  findings. She  related that  the sponsor  felt the  ABC                                                                    
Board  served an  important function  in  public safety  and                                                                    
appreciated the support of the committee.                                                                                       
                                                                                                                                
Vice-Chair Gara  mentioned the testimony that  the marijuana                                                                    
board set its license  fees for marijuana through regulation                                                                    
and  the  ABC  board  fees  were  set  through  statute.  He                                                                    
mentioned  a  change  in  the ABC  board's  fees  and  asked                                                                    
whether the fees were changing.                                                                                                 
                                                                                                                                
REPRESENTATIVE  ADAM WOOL,  SPONSOR,  remarked that  renewal                                                                    
fees  remained the  same and  acknowledged  that other  fees                                                                    
were increasing but did not have access to the information.                                                                     
                                                                                                                                
Representative Pruitt opined that  there were 2 policy calls                                                                    
beyond an  extension. He  asked why the  director was  not a                                                                    
member  of  the board  and  what  regulation the  board  was                                                                    
annulling. Representative Wool responded  to his question as                                                                    
to  why the  director  was no  longer able  to  cast a  tie-                                                                    
breaking vote nor  a voting member. The  related statute had                                                                    
been  repealed,  but  the  regulation  remained.  He  wanted                                                                    
regulations to remain consistent  with statute. He indicated                                                                    
that  the  board  hired  the director  and  he  thought  the                                                                    
director's tie-breaking vote was  a conflict of interest. He                                                                    
deferred to Ms. Stidolph to answer his second question.                                                                         
                                                                                                                                
Ms.  Stidolph cited  the  Administrative  Code, AAC  304.025                                                                    
"Conduct  of   Board  Meetings"  Section  C   and  read  the                                                                    
following:                                                                                                                      
                                                                                                                                
     For the  purposes of  AS.04.06060 the  whole membership                                                                    
     is all persons  appointed in serving as  members of the                                                                    
     board   if  necessary   the  director   shall  cast   a                                                                    
     tiebreaking vote with consent  of the board executed at                                                                    
     the beginning of the meeting.                                                                                              
                                                                                                                                
Ms. Stidolph identified  the regulation as the  one that was                                                                    
annulled.                                                                                                                       
                                                                                                                                
2:50:44 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg asked  for Representative  Wool's                                                                    
perspective  on   the  audit  based  on   his  own  personal                                                                    
experience from the  industries' perspective. Representative                                                                    
Wool remarked  that he agreed  with the staff's  handling of                                                                    
the renewal process  due to the high volume  of renewals. He                                                                    
had been satisfied  with the answer form  the board chairman                                                                    
and  director  regarding  the issue.  Overall,  even  though                                                                    
there were  administrative issues  with the board  and AMCO,                                                                    
he believed  the entities were  working through  the initial                                                                    
growth  stage  of  the   new  organizational  structure.  He                                                                    
thought it  was a heavy lift  to combine the two  boards and                                                                    
previously   shared   some  of   Representative   Kawasaki's                                                                    
concerns but believed that things were leveling out.                                                                            
                                                                                                                                
^PUBLIC TESTIMONY                                                                                                             
                                                                                                                                
2:53:04 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster OPENED Public Testimony.                                                                                        
                                                                                                                                
Co-Chair Foster CLOSED Public Testimony.                                                                                        
                                                                                                                                
2:53:34 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:53:58 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative   Wool   had   an  additional   response   to                                                                    
Representative  Guttenberg's question.  He  referred to  the                                                                    
questions regarding  enforcement and  whether the  board had                                                                    
adequate resources  to carry out  the function  properly. He                                                                    
surmised that  considering its  limited resources  the board                                                                    
should prioritize enforcement of more serious violations.                                                                       
                                                                                                                                
Representative  Wilson  declared  that  the  board  had  the                                                                    
authority to raise fees. She  was concerned that ABC was not                                                                    
enforcing  serious violations  like  underage drinking.  She                                                                    
asked whether  he discussed the  matter with the  board. She                                                                    
wondered what it  would take to change the  fees to maintain                                                                    
sufficient   staff  to   carry  out   adequate  enforcement.                                                                    
Representative  Wool  replied  that  he did  not  engage  in                                                                    
discussions over the  issue and was uncertain  how much fees                                                                    
needed  to  increase.  He related  his  personal  experience                                                                    
paying licensing fees and would  not advocate for the amount                                                                    
to increase. He  knew that some of the  fees were increasing                                                                    
and was  uncertain whether the increases  were sufficient to                                                                    
provide  adequate  enforcement. Representative  Wilson  knew                                                                    
that licensees  would not want fees  increased. She imagined                                                                    
that a  budget would be  proposed by the board  that enabled                                                                    
them  to carry  out its  statutory duties  and generate  the                                                                    
fees  from the  bottom line.  She  wanted to  know how  much                                                                    
would  be  needed  to  comply  and  fix  the  concerns.  She                                                                    
requested budgetary  information and reiterated  her concern                                                                    
over  lack of  enforcement.  Representative Wool  understood                                                                    
her request.                                                                                                                    
                                                                                                                                
2:58:29 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  ascertained that  currently  the                                                                    
board's  resources were  spread across  both boards  causing                                                                    
the  loss of  priorities by  the  ABC. He  guessed that  the                                                                    
problem was created by combing  the two boards since the ABC                                                                    
was self-sustaining when it operated  as a single entity. As                                                                    
a license  holder, he  wondered whether  Representative Wool                                                                    
thought things were  in a state of flux  until the marijuana                                                                    
board's  costs were  determined and  if ABC  was "suffering"                                                                    
under  the   combined  organization   and  newness   of  the                                                                    
marijuana  board.  Representative  Wool had  not  heard  any                                                                    
concerns   from  the   alcohol   industry  consistent   with                                                                    
Representative  Guttenberg's  supposition.  He  referred  to                                                                    
"sting operations"  to determine whether underage  youth was                                                                    
being  served alcohol.  He understood  that a  large federal                                                                    
grant  previously supported  sting operations  and had  been                                                                    
eliminated, which  affected the  frequency of  current sting                                                                    
operations. He did not feel  that his industry lacked proper                                                                    
enforcement  and oversight  and believed  the industry  "had                                                                    
done a good job" carrying  out enforcement. He was uncertain                                                                    
whether the limited  resources were due to  the inception of                                                                    
the  marijuana  board. He  related  that  most ABC  revenues                                                                    
collected  were from  license  renewals  and that  marijuana                                                                    
licenses were  new and there  were more revenue  streams for                                                                    
its board. He suggested that  an examination of whether less                                                                    
revenue from  some of  the ABC fees  could be  directed from                                                                    
municipalities  and   more  redirected  to  the   state.  He                                                                    
believed  that the  issue of  limited  resources should  not                                                                    
fall directly on the alcohol industry to raise fees.                                                                            
                                                                                                                                
3:03:22 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton  referred to the  analysis on page 2  of the                                                                    
fiscal note that  stated the license fee were  mostly set in                                                                    
statute. He  wondered whether the  issue was related  to the                                                                    
statutory fee structure  and if he thought  it was necessary                                                                    
for a  fee structure change in  statute. Representative Wool                                                                    
deferred to the AMCO director for the answer.                                                                                   
                                                                                                                                
Ms.  McConnell  reported that  the  fiscal  note was  almost                                                                    
identical  to  that  of  HB   273.  She  reiterated  that  8                                                                    
positions  would   be  eliminated  if  one   board  was  not                                                                    
reauthorized and  noted that the positions  were detailed in                                                                    
the fiscal note  analysis as well as the  portion of travel,                                                                    
services  and commodities  that would  not be  expended. She                                                                    
reported that  the ABC was  fully supported  through license                                                                    
and application fees  and if the board was  not extended the                                                                    
revenue loss  would total of roughly  $1.6 million. Co-Chair                                                                    
Seaton  inquired whether  "it  was a  characteristic of  the                                                                    
board that  it did  not set  the fees  to actually  fund the                                                                    
enforcement  by  the  department." Ms.  McConnell  clarified                                                                    
that  the  license  fees  for alcohol  were  set  mostly  by                                                                    
statute  and the  application fees  were set  by regulation.                                                                    
She was  uncertain of when  the last statutory  fee increase                                                                    
occurred.  She explained  that  ABC  recently increased  its                                                                    
application fees for  FY 2019. She listed  the fee increases                                                                    
from  $200   to  $300  totaling  $570   thousand  for  1,900                                                                    
applications.  She   informed  the  committee  that   SB  76                                                                    
(Alcoholic Beverage  Control; Alcohol  Reg) was  a "re-write                                                                    
of Title 4" statutes that  included a reexamining of alcohol                                                                    
license  fees,  but  she  was  uncertain  whether  the  fees                                                                    
increased. Prior  to the inclusion  of the  marijuana board,                                                                    
ABC had 5 enforcement  officers that had "clear" priorities.                                                                    
Currently,  AMCO  had  8 enforcement  officers.  She  shared                                                                    
Representative  Wilson's  concerns   about  enforcement  and                                                                    
agreed with  the audit's findings  on the need  to establish                                                                    
priorities  on  how  resources  would  be  distributed.  She                                                                    
thought  8  enforcement  officers  based on  the  number  of                                                                    
licenses in  the state might  be inadequate but  deferred to                                                                    
the  legislature to  make the  determination. She  commented                                                                    
that marijuana  licenses were generally  on the  road system                                                                    
due  to challenges  related  to  transporting the  substance                                                                    
that was  still illegal  on the  federal level.  The alcohol                                                                    
licenses  were  much  more   distributed  around  the  state                                                                    
including  many  rural areas  and  travel  costs related  to                                                                    
enforcement was  higher. She indicated that  the matters she                                                                    
just mentioned were the types  of issues needed to be worked                                                                    
out  in  terms of  setting  priorities  as directed  by  the                                                                    
audit.                                                                                                                          
                                                                                                                                
3:10:42 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton   asked  whether  the  extra   $570,000  in                                                                    
increased  revenue  was  sufficient enough  to  fulfill  the                                                                    
recommendations   listed  in   the   audit.  Ms.   McConnell                                                                    
apologized for  the mix-up and  clarified that  the $570,000                                                                    
was  the total  revenue over  a two-year  period. Currently,                                                                    
AMCO  collected $280,000  in renewal  fees and  the increase                                                                    
amounted  to  approximately  $310,000.  The  board  had  two                                                                    
programs and 8 enforcement  officers and believed that there                                                                    
was only  a certain  amount the board  could do  to mitigate                                                                    
the  situation, since  some  of its  fees  were set  through                                                                    
statute. Co-Chair  Seaton inquired whether the  $310,000 was                                                                    
sufficient  to   address  the  audit   recommendations.  Ms.                                                                    
McConnell determined  that the additional funds  would help.                                                                    
She could not  speak to the decisions that would  be made by                                                                    
the board.                                                                                                                      
                                                                                                                                
3:13:13 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki  compared  the two  board's  fiscal                                                                    
notes and  highlighted that  both boards  showed each  had 8                                                                    
full-time  positions.  He  referenced   slide  12  from  the                                                                    
previous  bill  and  asked what  the  yellow  lines  through                                                                    
certain  position  titles  denoted. Ms.  McConnell  answered                                                                    
that the  yellow "X" represented those  positions that would                                                                    
be eliminated if one board was not extended.                                                                                    
                                                                                                                                
Co-Chair  Foster   relayed  that  amendments  were   due  on                                                                    
Thursday, February 22, 2018.                                                                                                    
                                                                                                                                
HB  299  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Representative  Wilson   wondered  whether  the   policy  to                                                                    
combine  the two  boards was  appropriate. She  believed the                                                                    
question  was over  sufficient resources  and understood  it                                                                    
was  difficult  to  determine  given   the  newness  of  the                                                                    
marijuana board.  She wanted  to ensure  that one  board was                                                                    
not being disadvantaged due to  the other board's inclusion.                                                                    
She   requested   further  information   regarding   whether                                                                    
combining   the    board's   administration    and   sharing                                                                    
enforcement was the reason for  the lack of enforcement. She                                                                    
did not want to "stifle" either industry.                                                                                       
                                                                                                                                
Co-Chair Foster  agreed with getting things  right the first                                                                    
time and wanted the committee to take deliberate action.                                                                        
                                                                                                                                
3:16:29 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:17:14 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
HB299 Supporting Document Audit 11.17.17.pdf HFIN 2/20/2018 1:30:00 PM
HB 299
HB301 Supporting Documents ABC Memo Tourism BDL 9.13.17.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
HB301 Supporting Documents ABC Memo Duck Inn 1.23.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
HB301 Sponsor Statement 1.24.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
HB301 Supporting Documents ABC Memo Tourism BDL 1.23.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
HB301 Supporting Document Tailgaters Sports Bar Letter 1.31.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
CSHB301 ver M Sectional Analysis 2.12.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
HB299 Sponsor Statement 1.29.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 299
HB 273 Alcohol and Marijuana Control Office House Finance 2-20-18.pdf HFIN 2/20/2018 1:30:00 PM
HB 273
HB 273 MarijuanaFlowChart.pdf HFIN 2/20/2018 1:30:00 PM
HB 273
HB 273 HB 273 HFIN Followup final.pdf HFIN 2/20/2018 1:30:00 PM
HB 273
CSHB301 Explanation of Changes ver M to ver E 2.19.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
CSHB301 ver E 2.16.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301
CSHB301 ver E Sectional Analysis 2.19.18.pdf HFIN 2/20/2018 1:30:00 PM
HB 301