Legislature(2017 - 2018)BARNES 124

01/22/2018 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 273 EXTEND: MARIJUANA CONTROL BOARD TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HB 274 EXTEND: BD OF PSYCHOLOGISTS/PSYCH ASSOC. TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HB 275 EXTEND: BOARD OF MASSAGE THERAPISTS TELECONFERENCED
Heard & Held
-- Public Testimony --
+= HB 180 MONEY SERVICES BUSINESS: REQS; LICENSING; TELECONFERENCED
Scheduled but Not Heard
-- Public Testimony --
             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