03/29/2018 01:30 PM Senate LABOR & COMMERCE

              HB 273-EXTEND: MARIJUANA CONTROL BOARD                                                                        
                                                                                                                                
1:35:42 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration of HB 273. She stated  the intent is to hold public                                                               
testimony and move the bill.                                                                                                    
                                                                                                                                
1:36:17 PM                                                                                                                    
CRYSTAL  KOENEMAN, Staff,  Representative  Sam  Kito III,  Alaska                                                               
State  Legislature,   Juneau,  Alaska,  said   Legislative  Audit                                                               
recommended a  six-year extension  for the new  Marijuana Control                                                               
Board to  the year 2024.  Voters legalized marijuana  in November                                                               
2014. The board has  met 24 times since July 2015.  This is a new                                                               
industry and is  bringing in revenue to the state.  The audit had                                                               
four recommendations.                                                                                                           
                                                                                                                                
1:37:31 PM                                                                                                                    
KRIS  CURTIS, Legislative  Auditor,  Legislative Audit  Division,                                                               
Alaska State  Legislature, Juneau,  Alaska, reviewed  the October                                                               
2017 audit  findings related to HB  273. She said that  since the                                                               
board is  new, this is its  first sunset audit. The  purpose of a                                                               
sunset audit  is to  determine whether a  board or  commission is                                                               
serving the public's interest and  whether it should be extended.                                                               
She  directed the  committee's attention  to  the conclusions  on                                                               
page 5 of the audit:                                                                                                            
                                                                                                                                
     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.                                                                                                  
                                                                                                                              
     In accordance  with AS  44.66.010(a)(13), the  board is                                                                    
     scheduled to  terminate on June 30,  2018. We recommend                                                                    
     the legislature extend the  board's termination date to                                                                    
     June 30, 2024.                                                                                                           
                                                                                                                                
MS. CURTIS  said the  audit conducted a  survey of  licensees and                                                               
had a 70 percent response rate  and a survey of local governments                                                               
and  had  an  88  percent response.  The  responses  were  fairly                                                               
positive overall. One hundred percent  of local government survey                                                               
respondents  and 75  percent of  licensee  respondents rated  the                                                               
board's overall effectiveness at  serving the public interests as                                                               
excellent.                                                                                                                      
                                                                                                                                
MS. CURTIS  said Exhibit 2 on  page 8 shows the  board issued 122                                                               
licenses from  July 2016  through April  2017. Eighty  percent of                                                               
licensee  respondents  rated their  license  process  as good  or                                                               
excellent.                                                                                                                      
                                                                                                                                
MS.  CURTIS said  page  8 explains  that for  FY2017  "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." The  audit team looked  at the process  the Alcohol                                                               
and Marijuana  Control Office (AMCO)  uses for  tracking revenue.                                                               
Processes are  in place, but  management reported that it  is too                                                               
early to  determine if fees  are sufficient to  cover regulation.                                                               
They do expect to be fully funded by fees by FY2020.                                                                            
                                                                                                                                
MS. CURTIS  reviewed the first  recommendation beginning  on page                                                               
11:                                                                                                                             
                                                                                                                                
     Recommendation 1:  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.                                                                                      
                                                                                                                                
MS. CURTIS explained that without  a formal enforcement plan, the                                                               
enforcement  section  had  no  guidance  for  prioritizing  their                                                               
limited  resources  and  runs  the risk  of  not  protecting  the                                                               
public.                                                                                                                         
                                                                                                                                
MS. CURTIS reviewed the second recommendation:                                                                                  
                                                                                                                                
     Recommendation  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.                                                                                
                                                                                                                                
MS. CURTIS  said they have  a process to receive  complaints, but                                                               
they are only  tracked if the complaint results  in an inspection                                                               
or   investigation.  The   basis  for   not  inspecting   or  not                                                               
investigating is not documented.                                                                                                
                                                                                                                                
MS. CURTIS reviewed the third recommendation:                                                                                   
                                                                                                                                
     Recommendation  3:  The  AMCO director  should  develop                                                                    
     written  procedures  for  establishing  the  expiration                                                                    
     dates  of marijuana  handler permits  and ensure  staff                                                                    
     receive the appropriate training.                                                                                          
                                                                                                                                
MS.  CURTIS  said  they  tested  53  permits  and  found  47  had                                                               
incorrect expiration dates.  This was because of  lack of written                                                               
procedures  and insufficient  training. They  believe this  is an                                                               
easy fix.                                                                                                                       
                                                                                                                                
MS. CURTIS reviewed the fourth recommendation:                                                                                  
                                                                                                                                
     Recommendation 4: The AMCO director should develop and                                                                     
        implement procedures to segregate the duties for                                                                        
     calculating and remitting fees to local governments.                                                                       
                                                                                                                                
MS.  CURTIS explained  that  upon  receipt of  a  new or  renewal                                                               
application,  the  statute  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. In FY2017                                                               
the board  remitted $113,000  of fees  to local  governments. The                                                               
audit  found only  one employee  responsible for  calculating the                                                               
amount and  approving the  payments out.  Those duties  should be                                                               
segregated, which is an easy administrative fix.                                                                                
                                                                                                                                
MS. CURTIS said both the  board and department concurred with all                                                               
four recommendations.                                                                                                           
                                                                                                                                
1:42:24 PM                                                                                                                    
SENATOR MICCICHE asked why a six-year extension was recommended.                                                                
                                                                                                                                
MS. CURTIS  replied that the board  is operating well. It  is too                                                               
early in  the process  to look at  enforcement of  marijuana laws                                                               
and the renewal  process, so they weren't  comfortable with eight                                                               
years. They  decided on six years  because of how well  the board                                                               
is operating right out of the gate.                                                                                             
                                                                                                                                
SENATOR MICCICHE wondered  if it shouldn't be  shorter, saying it                                                               
might not be  living in the right place. He  said he doesn't know                                                               
if  the  ABC [Alcoholic  Beverage  Control]  Board and  AMCO  are                                                               
overloaded.  He supposed  future  legislation  could split  those                                                               
into two entities.                                                                                                              
                                                                                                                                
MS.  CURTIS said  the ABC  Board has  a recommended  extension of                                                               
four years. There  are efficiencies in auditing both  at the same                                                               
time because they share the  same staff but because the Marijuana                                                               
Control Board is  operating so well, they did  not recommend less                                                               
than six years.                                                                                                                 
                                                                                                                                
1:44:14 PM                                                                                                                    
SENATOR MICCICHE said they have been doing a good job.                                                                          
                                                                                                                                
1:44:35 PM                                                                                                                    
CHAIR COSTELLO found no one who wished to testify on HB 273.                                                                    
                                                                                                                                
1:44:54 PM                                                                                                                    
SENATOR  MICCICHE  moved  to report  HB  273,  30-LS1183\D,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
1:45:13 PM                                                                                                                    
SENATOR MICCICHE rescinded the previous motion.                                                                                 
                                                                                                                                
CHAIR COSTELLO closed public testimony on HB 273.                                                                               
                                                                                                                                
SENATOR  MICCICHE  moved  to report  HB  273,  30-LS1183\D,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
1:45:44 PM                                                                                                                    
CHAIR  COSTELLO announced  that without  objection, HB  273 moves                                                               
from the Senate Labor and Commerce Standing Committee.