Legislature(2017 - 2018)HOUSE FINANCE 519
02/06/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB274 | |
| HB275 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 273 | TELECONFERENCED | |
| + | HB 274 | TELECONFERENCED | |
| + | HB 275 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 6, 2018
1:32 p.m.
1:32:44 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Sam Kito, Sponsor; Crystal Koeneman, Staff,
Representative Sam Kito; Kris Curtis, Legislative Auditor,
Alaska Division of Legislative Audit; Sara Chambers,
Operations Manager, Division of Corporations, Business, and
Professional Licensing, Department of Commerce, Community
and Economic Development; Representative Louise Stutes.
PRESENT VIA TELECONFERENCE
Erika McConnell, Director, Alcohol and Marijuana Control
Office; Christine Lumba, Auditor, Legislative Audit
Division; Bruce Schulte, Campaign to Legalize Marijuana,
Anchorage; Mark Springer, Chairman, Marijuana Board,
Bethel; Jason Brandeis, Self, Anchorage; Kim Kole, Self,
Anchorage; Leah Levinton, Self, Anchorage; Edward Martin,
Self, Cooper Landing; Allen Levy, Chair of the Board,
Psychologists and Psychological Associate Examiners; Robert
Lane, Alaska Psychological Association, Anchorage; David
Edwards-Smith, Chair, Board Of Massage Therapists; Linda
Day, Audit Manager, Legislative Audit Division.
SUMMARY
HB 273 EXTEND: MARIJUANA CONTROL BOARD
HB 273 was HEARD and HELD in committee for
further consideration.
HB 274 EXTEND: BD OF PSYCHOLOGISTS/PSYCH ASSOC.
HB 274 was HEARD and HELD in committee for
further consideration.
HB 275 EXTEND: BOARD OF MASSAGE THERAPISTS
HB 275 was HEARD and HELD in committee for
further consideration.
Co-Chair Seaton relayed the agenda for the day.
HOUSE BILL NO. 273
"An Act extending the termination date of the
Marijuana Control Board; and providing for an
effective date."
1:34:19 PM
REPRESENTATIVE SAM KITO, SPONSOR, introduced the bill. He
relayed that the purpose of the bill was to extend the
termination date for the Marijuana Control Board for six
years. He communicated that the extension was for six years
instead of the full 8 years, which indicated that the board
was functioning in the public's interest but acknowledged
that the board was still in a "formative" stage. The
current sunset period lasted 3 years, which provided the
opportunity for the board to become operational and time
for the legislature to access how the board was
functioning.
1:35:38 PM
CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, noted
that Erika McConnell, Director of the Alcohol and Marijuana
Control Office (AMCO) was online for questions.
Representative Wilson asked why the board was not self-
supporting. She ascertained that the two boards funds were
"mingling." She wanted the marijuana board to take care of
its own needs. Representative Kito deferred to the
Department of Commerce, Community and Economic Development
(DCCED) and the legislative auditor. He mentioned that the
two boards shared the same staff and costs. The situation
was unique, and he was uncertain how the costs were
distributed. He explained that general funds (GF) were
appropriated to establish the board and $500 thousand was
appropriated in the current fiscal year. The marijuana
board was expected to be self-sustaining the next fiscal
year based on its fee structure.
Representative Wilson thought that the GF was supposed to
be reimbursed. Representative Kito was unable to answer the
question.
Representative Pruitt heard that currently the board was 70
percent sufficient. He recently read that "there was a
request to reduce the tax" on marijuana. He asked whether
the board would be self-sustaining by FY 2020 and how that
would happen if the board wanted to reduce its revenues.
Representative Kito responded that there were 2 distinct
issues to his question. He elaborated that the board's
responsibility was to control the application process and
ensure that the process was fully sustainable. The license
fees became designated general funds (GDF) allowing the
board access to the funds for its budget. The marijuana tax
set at $50 per ounce was deposited into the GF and was not
governed or accessible by the board.
1:39:15 PM
Representative Pruitt asked if the board was confident they
would be able to be self-supporting by FY 2020.
Representative Kito deferred to Ms. McConnell.
ERIKA MCCONNELL, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL
OFFICE (via teleconference), indicated that the marijuana
board was expected to be financially self-supporting
through license and application fees by FY 2020.
Representative Pruitt wondered whether the licensing fees
would be lowered in the future or if the fees would remain
the same for a period to potentially build up an excess of
funds. He asked what the board would do with an excess
funds. Ms. McConnell responded that it was difficult to
guess whether the fees would need to be raised or lowered
in the future. The board would evaluate the fee structure
on a yearly basis to ensure self-sufficiency.
Representative Pruitt thought that intent language was
added to the budget at the time the initial $1.5 million GF
was appropriated for start-up expenses, which specified
that the GF was expected to be reimbursed. He asked whether
the expectation remained and if he was correct about the
expectation of repayment. Ms. McConnell was unable to
answer the question. She would provide follow-up.
1:43:20 PM
Representative Guttenberg acknowledged the unique situation
of having one administrative entity for two industries. He
addressed the audit recommendations and surmised that some
recommendations were related to "conflicting priorities"
between the boards. He asked whether Ms. McConnell engaged
in discussions about or saw a future where both boards
would "stand alone." Ms. McConnell replied that currently 2
separate boards existed. She wondered if he was asking
whether both boards would be combined. Representative
Guttenberg clarified that he was referring to AMCO. He
wondered whether there were any conflicts of priorities
because of the shared staff. Ms. McConnell replied that the
answer was a policy call for the legislature. She related
that the staff worked very hard to meet the priorities for
both boards and that things were operating well. She
reiterated that if the legislature wanted to split up the
support staff, the action would be a policy call.
Representative Guttenberg referred to recommendations
regarding timing and following up on investigations in a
timely manner. He wondered if she needed additional staff
to support the marijuana board. Ms. McConnell explained
that the recommendation regarding creating a prioritization
plan for enforcement applied to both boards. The office had
8 enforcement staff for a "very large state." The support
staff recognized the level of resources available and was
working diligently to address the recommendation concerning
health and safety. She related that AMCO agreed with the
auditor's recommendation for a written prioritization plan.
Co-Chair Seaton acknowledged that Representative Grenn
joined the meeting.
1:47:25 PM
Representative Wilson referred to page 8 of the Legislative
Audit [A Sunset Review of the Department of Commerce,
Community, and Economic Development, Marijuana Control
Board October 6, 2017 Audit Control Number: 08-20100-17]
(copy on file). She read the following:
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.
Ms. McConnell replied that the board was not currently
reviewing fees and she would follow-up with a plan to
reimburse the initial operating costs.
Representative Kito interjected that the legislature
authorized the board's expenditures. He suggested that
additional legislative authorization might be required if a
board was spending money to reimburse the GF. He was
uncertain whether a board could statutorily reimburse the
GF.
Representative Wilson commented that the repayment was a
cost and doubted additional authorization was required.
Representative Thompson understood that other boards did
not have their own investigative staff. Ms. McConnell
responded that AMCO had 8 investigators on staff.
Representative Thompson deduced that other boards had to
reimburse for investigative time but AMCO would not be
accessed additional investigative fees since the
investigators were on AMCO's staff and already paid for
their work.
1:50:22 PM
Vice-Chair Gara suggested that when the initiative was
passed it was estimated that marijuana tax revenue would
generate $4 million or $7 million in tax revenue. He asked
for the amount of tax revenue generated to date. Ms.
McConnell reported that through the end of December taxes
collected to date were $6.314 million. She clarified that
the amount was collected from October 2016 through December
2017. Vice-Chair Gara voiced that the initiative should be
honored as written. He asked whether she was concerned that
the board had been too strict when issuing licenses. Ms.
McConnell did not think the board had been too strict. They
had approved 95 percent to 97 percent of the applications
received.
1:52:56 PM
Representative Guttenberg knew that the industry had a plan
to change the tax structure that did not lower taxes. He
inquired whether the industry had approached the board
regarding taxes. Ms. McConnell responded in the
affirmative. She delineated that about two weeks prior the
board decided to draft a resolution that suggested changing
the tax from an excise tax to a percentage-based sales tax.
The resolution would be reviewed and voted on at the next
meeting in April 2018. Representative Guttenberg asked what
the expected impact would be on revenue. Ms. McConnell was
unaware of what the percentage would be. She informed
committee members that the concern over a flat tax was that
it kept the wholesale price artificially high. The current
wholesale price was $800 per pound. She noted that in other
legalized states the marijuana wholesale price was $100 per
pound. The issue for the board was to allow the price of
marijuana to naturally fluctuate with supply and demand.
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, reminded members that the purpose of the
audit was to determine whether the board was meeting its
mission of serving the public's interest. She referred to
the Background Information section on page 3 and noted that
the section summarized the boards implementation process.
Ms. Curtis read from the Legislative Audit Report
Conclusions on page 5:
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.
Ms. Curtis reported that the audit recommended a six-year
extension. She characterized the findings of the audit as
"positive." She continued to read from the audit's
conclusions:
Board operations were conducted in an effective
manner. The audit found that from July 2015 through
April 2017, the board held 21 meetings and met in each
judicial district of the state during calendar year
2016 as required by statute. Board meetings were
public noticed and each meeting allowed time for
public comment. The audit also found that board
membership and composition complied with statutes and
a quorum was consistently met. The board met its
statutory mandate to adopt regulations necessary for
implementing statutes.1 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 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.
Additionally, 93 percent of local government survey
respondents rated the board's effectiveness in
enforcing marijuana laws in their area as good or
excellent
Ms. Curtis cited a table on page 8, titled "Exhibit 2" that
reported the board's licensing activity from July 2016
through April 2017. She noted that 122 licenses had been
issued during the time and 80 percent of licensee survey
respondents rated their overall licensing experience as
good or excellent. She addressed the application and
licensing fees and read the following:
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.
Ms. Curtis pointed to "Exhibit 3" on page 9 and mentioned
that the table presented a schedule of application and
license fees established by the board. She elaborated that
the audit contained 4 recommendations beginning on page 11.
She moved to 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." She read the
following:
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.
Ms. Curtis moved to Recommendation 2, "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." She noted that the first two
recommendations also applied to the Alcohol Control Board
audit. She read the following from the audit"
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.
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.
Ms. Curtis reviewed 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." She conveyed that
47 of 53 marijuana handler permits tested were issued by
AMCO with incorrect expiration dates. The auditors
discovered that the errors resulted from the lack of
written procedures and insufficient training contributed to
AMCO staff's varying interpretations for calculating permit
expiration dates and felt that the issue was easy to
remedy. She turned to Recommendation 4, "The AMCO director
should develop and implement procedures to segregate the
duties for calculating and remitting fees to local
governments." She read the following:
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.
Ms. Curtis delineated that $113 thousand in fees were
remitted to local governments. She believed the issue would
be easily solved. She indicated that the department's
response was located on page 33 and the board's response
was on page 35 and both DCCED and the board agreed with all
the recommendations.
2:00:37 PM
Co-Chair Seaton announced that Co-Chair Foster joined the
meeting and handed the gavel over to Co-Chair Foster.
Representative Kawasaki referred to the Recommendations 1
and 2. He asked whether the alcohol board was supporting
the marijuana board's enforcement duties under AMCO. Ms.
Curtis replied that the board was partially covered by GF
but was able to track the activity for the board
separately. Representative Kawasaki wondered whether
statute dictated that both boards "must have receipts that
support the services they provide." Ms. Curtis deferred the
question to the auditor who lead the audit.
Representative Kawasaki repeated his question and asked
whether both the alcohol and marijuana boards "had to seek
the same receipts? to make the board work."
CHRISTINE LUMBA, AUDITOR, LEGISLATIVE AUDIT DIVISION (via
teleconference), answered that no "explicit statutory
requirement" existed but noted the existence of the
legislative intent language. Representative Kawasaki asked
if the same requirement applied to a business license. Ms.
Lumba replied that the marijuana statutes included
authority for the board to employ enforcement agents that
were considered necessary to carry out their purposes.
2:04:24 PM
Representative Kawasaki questioned whether a statute
prohibited colleting revenues more than what was necessary
to address the board's recommendations. Ms. Lumba was not
unaware of any statutory requirements relating to excess
fees. Representative Kawasaki thought that occupational
licensing seemed different from the marijuana license
because fees were expected to cover enforcement. Ms. Lumba
agreed that the marijuana board was a bit different and was
not under the Division of Corporations, Business, and
Professional Licenses. She explained that both boards had
its own supporting office, AMCO that employed its own staff
to support the board's activities.
Vice-Chair Gara asked if the auditors reviewed board
actions for their legality. Ms. Curtis answered in the
negative and specified that was the case for all sunset
audits. Vice-Chair Gara remembered that the marijuana
initiative authorized the use of concentrates, but the
board prohibited its use. He supported the use of
concentrates for medical marijuana. He inquired whether the
issue was something an audit would address. Ms. Curtis
responded that during the survey phase of the audit, if
auditors discovered that it was an issue, Legislative Audit
would evaluate the concern. She noted that auditors did not
find any issue relating to concentrates.
2:08:00 PM
Representative Guttenberg referred to the audits
recommendations regarding procedures and timeliness. He
asked whether addressing the recommendations would create
the efficiencies that allowed the board to carry out the
duties specified in the audit. He wondered whether AMCO had
requested authority for additional staff from Office of
Management and Budget (OMB). Ms. Curtis reported that it
was not something auditors had looked at in the audit. She
was aware the board had limited resources, but the audits
results were positive consequently, the audit focused on
how the board was using its limited resources and if
improvements could be made within the resources available.
Representative Guttenberg asked if the recommendations
could be mitigated with the board's current resources. Ms.
Curtis reported that the survey results were positive, and
the audit found that the board was operating effectively.
Co-Chair Foster asked Ms. McConnell to address the fiscal
note.
2:10:24 PM
Ms. McConnell reviewed the fiscal note. She explained that
the previously published fiscal impact note for DCCED FN1
(CED) appropriated to AMCO requested a total of $1.815 for
$920 thousand in Personal Services, and $73 thousand in
travel expenses. She reminded committee members that the
board was mandated to meet in each judicial district at
least once per year and the board had a minimum of 5 board
meetings per year. She added that $750 thousand was
allocated to services that included Information Technology,
support from DCCED and the Department of Law (DOL),
administrative hearing services from the Department of
Administration, leases, and meeting space rental. Finally,
$71 thousand was the total for Commodities like printing
regulation books, cleaning and office supplies, etc. The FY
2019 request included $523.8 thousand in Unrestricted
General Funds (UGF). She relayed that UGF was expected to
be zero in outlying years and anticipated the program would
be fully supported by program receipts by FY 2020.
Representative Pruitt asked whether she foresaw any
increase in costs for personal or other services over the
timeframe on the fiscal note. Ms. McConnell did not have a
sense of what would be needed in the future. Representative
Pruitt wanted to ensure they were currently setting the
right fees to recover costs. He expected that costs would
increase, and wanted the scenario considered when setting
licenses and application fees.
Co-Chair Foster OPENED Public Testimony.
2:12:43 PM
BRUCE SCHULTE, CAMPAIGN TO LEGALIZE MARIJUANA, ANCHORAGE
(via teleconference), supported HB 273 in its current form.
He commented on the auditor's recommendation to have a
concise policy on enforcement. He hoped that the
recommendation became a "priority" for the board. There had
been occasions where a "somewhat objective interpretation"
of regulation or statute had been enforced, which "created
some angst" amongst the industry. He indicated that the
board granted "fairly broad authority" to enforcement
staff, which created some problems. He thought that
addressing enforcement would reestablish "trust and
credibility" with industry. He commented about testing. He
informed the committee that presently, there were only 2
labs in the state. He reported that a committee was
established to address the issue. He hoped that the
committee would develop positive recommendations. He
suggested that one remedy would employ existing state
laboratory resources as third-party validations for these
labs. He wished that the legislature would consider the
option and provide funding. However, he agreed that "the
effort needed to be self-sustaining." Finally, he commented
on taxes. He mentioned that the ballot initiative specified
a $50 per ounce excise tax that equated to $800 per pound
cost. He indicated that a change in the tax was only
possible via legislative action. The initiative also
authorized the Department of Revenue (DOR) to establish a
different tax on other parts of the plant. He detailed that
the board recommended a $10 per ounce tax on the lower
quality parts of the plant in 2015 and DOR implemented the
tax at $15. He was not suggesting that the state should not
receive revenue from the industry but recommended that the
state adopt a more creative approach to taxation. He
thought it would translate to more consistent revenue for
the state. He voiced that by the following year the
industry would have two solid years of market data to
examine and make more informed decisions regarding any
changes to the tax structure.
2:18:42 PM
Representative Wilson asked whether he thought that the
fees were adequate to support board activities without
extra support from the alcohol fees. Mr. Schulte was not
aware of the exact finances of the board. He surmised that
her question related to whether to separate or combine the
boards. He supported the structure of separate boards with
a shared staff. Representative Wilson commented that she
was not concerned with the structure. She was concerned
that the fees were not adequate to cover the board's
functions. She asked whether he had determined if the fees
were adequate to cover the needs of industry. Mr. Schulte
originally thought the state was setting the fees high, but
he discovered that the fees were necessary to fund the
board's efforts. He did not think any licensees would
"balk" at the fee structure if they were treated fairly.
Representative Pruitt acknowledged that Mr. Schulte had
mentioned that he had encouraged the board to request more
state support related to laboratory use and additional
funding to help maintain the industry. He asked whether he
understood him correctly.
2:24:20 PM
Mr. Schulte replied that he could not speak for the board
and was alluding to discussions he had with industry
representatives. He elaborated that the industry was
challenged by the limited lab testing facilities; only 2
testing sites operated in the state and their results
varied, raising the question about which test results were
valid. Testing could be done in labs outside of the state.
In terms of validating actual results, "it might be more
economical" to validate the results by turning to a
laboratory that was not affiliated with the industry. He
supported the marijuana industry paying for the testing
validation. However, if using a state laboratory facility
was a viable option "to achieve surety in the public's mind
he hoped the legislature would be open for a discussion on
the matter.
MARK SPRINGER, CHAIRMAN, MARIJUANA BOARD, BETHEL (via
teleconference), relayed that he was the chairman and rural
member of the board since its inception in 2015. He
responded to Vice-Chair Gara's concerns about concentrates.
He reported that the board did license concentrate
manufacturers and had never ruled against concentrates. He
reported that the Marijuana Control Board had 5 members,
met every 2 months, and had a "significant workload". He
noted his appreciation of the AMCO staff and the DOL
counsel of William Milks, Attorney V, Civil Division. He
believed that the board was successful in protecting the
public's health and safety and keeping the industry
"Alaskan" via regulation. He stated that "as citizen
regulators they took their responsibilities very seriously"
through their enforcement and regulatory actions. He noted
that the board did not regulate medical marijuana. He
reported the board refused to license some products out of
concern and caution that they were attractive to children.
The board followed the guidelines set out in the U.S.
Department of Justice's "Cole Memorandum". He spoke to fees
and pointed out that the fees were a function of the number
of applications received. He did not want to put the board
in a position of maintaining a quota of licenses to approve
if the fees were calculated by the number of applications.
2:28:06 PM
Representative Guttenberg thanked Mr. Springer for serving
on the board. He referred to the bill on hemp farming [SB 6
(Industrial Hemp Product.; Cannabidiol Oil - CHAPTER 5 SLA
18 - 04/12/2018). He noted that a significant issue was the
distance between a hemp farm and a marijuana facility. He
asked whether the board had examined the issue in terms of
the "safety" of marijuana licenses. Mr. Springer answered
that he had not looked at that bill. He had received
comments via email related to hemp farming. He shared that
marijuana licensees had a restricted area around their
establishments. He imagined there were some licensed
individuals who would also like to cultivate hemp. He noted
that hemp did not appear in the board's statute, but as the
hemp farming bill progressed the board would learn about
the provisions in the bill and make recommendations on the
distance issue. Representative Guttenberg related that in
Colorado a marijuana facility could not be located within 5
miles of a hemp farm and in Canada the distance was 10
miles due to pollen traveling in the air. He indicated that
the hemp bill included a provision that both departments
would come up with a reasonable restriction relating to
distance.
2:33:38 PM
JASON BRANDEIS, SELF, ANCHORAGE (via teleconference),
shared information about his professional background as a
Professor of Justice and Legal Studies and attorney
representing clients on a variety of marijuana related
issues. He was testifying on behalf of his clients and the
marijuana industry. He had monitored the board's and AMCO's
work in developing a strong regulatory framework for the
marijuana industry in Alaska. He believed the board had
functioned in a fair and professional manner and that
maintaining the board was necessary to the future success
of the industry and ensuring the public's safety. He
strongly supported the bill.
KIM KOLE, SELF, ANCHORAGE (via teleconference), owned
Raspberry Roots, a cultivation and retail business. She
spoke in support of the board. She thought it was critical
for the board to remain in place as the industry grew and
matured.
2:36:37 PM
LEAH LEVINTON, SELF, ANCHORAGE (via teleconference), spoke
in support of HB 273. She owned the business Enlighten
Alaska. She firmly believed that the board was critical to
the development of the industry. She though the board would
help keep the industry consistent. Her relationship with
the board had been very positive. She reiterated her
support for the bill.
EDWARD MARTIN, SELF, COOPER LANDING (via teleconference),
commented about the initial chairman of the board recently
resigning.
Co-Chair Foster asked the testifier to refrain from making
negative comments about individuals.
2:40:40 PM
Mr. Martin continued to discuss his disgruntlement over the
board and the conflicts the state had with federal law. He
mentioned Mr. Schulte's testimony regarding out-of-state
testing facilities. He stated that the legislature did not
approve the board members replacements and thought the
approval process should happen before considering the bill.
He favored the immediate authorization of the use of hemp
in the state. He made comments about his loss of the
Permanent Fund Dividend and licensing. He continued to make
comments unrelated to the topic of HB 273. He requested
that the legislature "get its act together."
2:42:42 PM
Co-Chair Foster CLOSED Public Testimony on HB 273.
Representative Wilson asked for a breakdown of revenues and
expenditures for the Alaska Marijuana Control Board prior
to bringing up the bill in committee again.
Representative Kito responded that the statute indicated
that the board had authority to set and collect fees and
specific expenditures were not restricted. He had learned
that the board had the statutory authority to repay the GF
start-up money. The board was still operating with the $1.5
million initial funding and was uncertain when the board
could adequately "quantity their costs."
Ms. Koeneman interjected that in AS.08.01.065, the central
licensing statutes that governed professional licenses
stated that the regulatory costs must be maintained by the
board and there was no such restriction for the Marijuana
Control Board. She suggested that the statute that governed
the marijuana board AS.17.38.121 did not explicitly mandate
that the fees cover the regulatory costs. She deduced that
that was the reason a breakdown of board costs was not
included.
2:45:51 PM
Representative Wilson replied that the state was in a
financial crisis. She was mistaken that the board was not
required to be self-sufficient but thought that the voters
wanted the industry to become self-sustaining. She
understood that UGF monies were being used for the board.
She wanted assurances that the board would not be in
arrears in six years and need GF. Ms. Koeneman would work
with the board to get the information.
Representative Kito noted that the fiscal note included
information regarding an estimate of revenues and expenses
through 2024. He related that a more accurate set of
expenses was not yet achievable since a full year had not
been completed.
Co-Chair Foster relayed that amendments for the bill would
be due on Friday, February 9 at 5:00pm.
HB 273 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 274
"An Act extending the termination date of the Board of
Psychologist and Psychological Associate Examiners;
and providing for an effective date."
2:47:43 PM
REPRESENTATIVE SAM KITO, SPONSOR, explained that the bill
extended the Board of Psychologist and Psychological
Associate Examiners to June 30, 2026 in accordance with the
8-year recommendation of the Legislative Audit Division. He
summarized that the long-standing board provided services
and licensing for psychologists in the state and was "doing
a fine job."
Co-Chair Foster indicated that the committee had been
joined by
Representative Stutes.
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, read a portion of the Legislative Audit
Report, "A Sunset Review of the Department of Commerce,
Community and Economic Development Board of Psychologist
and Psychological Associate Examiners (board) (copy on
file):
Overall, the audit concludes the board served the
public's
interest by effectively licensing and regulating
psychologists and
psychological associates. The board monitored
licensees and
worked to ensure only qualified individuals practice
in Alaska.
In accordance with AS 08.03.010(c)(18), the board is
scheduled
to terminate on June 30, 2018. We recommend that the
legislature
extend the board's termination to June 30, 2026
Ms. Curtis continued with page 5 of the audit that
contained " Exhibit 2" a table that included a schedule of
licensing activities. She noted that the board had 285
active licenses, which represented a 174 percent increase
since the prior sunset audit in 2009.
2:50:35 PM
Ms. Curtis turned to page 7, "Exhibit 4" that contained a
table reflecting revenue and expenditures. She offered the
following from the audit:
fees were increased in FY 17 for the initial
application and the associate license. At the end of
FY 17, as shown in Exhibit 4, the board had a surplus
of $399,525. Per the board, associate fees were
increased to equal the fees for psychologist licenses.
The application fee was increased to fully account for
the costs of processing incoming applications. DCBPL
management did not adequately consider the surplus
when setting the fees, which resulted in licensees
paying higher than justified fees in FY 17.
Ms. Curtis communicated that the audit contained two
recommendations: Recommendation 1, "DCBPL's director, in
consultation with the board, should reduce fees." and
Recommendation 2: "DCBPL's director should develop and
implement procedures to ensure courtesy licensees comply
with monthly reporting requirements." She detailed that
courtesy licenses were limited to 30 days per year.
Courtesy licensees must submit a monthly report to the
board during the period of licensure indicating the number
of days they practiced during the month. The audit found
that the monthly reports were not being required. She
continued that the agency's response was on page 21 and the
board's response was on page 23 and both entities concurred
with the conclusions and recommendations of the audit.
Co-Chair Foster invited Ms. Chambers to review the fiscal
note associated with the bill.
2:52:53 PM
SARA CHAMBERS, OPERATIONS MANAGER, DIVISION OF
CORPORATIONS, BUSINESS, and PROFESSIONAL LICENSING,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
explained that when the division's boards sunset without
renewal the operations would return to the division to
manage. The fiscal notes did not reflect the operational
costs of the board. She pointed out that the previously
published fiscal impact note from DCCED FN1 (CED)
appropriated $21.4 thousand for the board's expenses. She
reported that $19.9 thousand was allocated for travel costs
and the remaining $1.5 thousand was allocated for services
like member stipends, advertising public notices, and
training. She offered that the boards were effectively
reducing travel expenses using video conferencing and the
actual costs could be lower.
Co-Chair Foster OPENED Public Testimony for HB 274.
2:55:05 PM
ALLEN LEVY, CHAIR, BOARD of PSYCHOLOGISTS AND PSYCHOLOGICAL
ASSOCIATE EXAMINERS (via teleconference), concurred with
the legislative audit report. He favored the bill. He
reported that the board had already taken steps to
implement the recommendations and looked forward to serving
the citizens of the state.
2:56:16 PM
ROBERT LANE, ALASKA PSYCHOLOGICAL ASSOCIATION, ANCHORAGE
(via teleconference), supported HB 274. He indicated that
the board had protected the citizens of Alaska and had
served them well. He believed that board regulations
provided great guidance for the practitioners. He
reiterated his support for the legislation.
Co-Chair Foster CLOSED Public Testimony on HB 274.
2:57:36 PM
Co-Chair Foster relayed that amendments were due by Friday,
February 9, 2018 by 5:00 pm.
HB 274 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 275
"An Act extending the termination date of the Board of
Massage Therapists; and providing for an effective
date."
REPRESENTATIVE SAM KITO, SPONSOR, reported that the board
was recently created and was operating effectively. He
believed extending the Board of Massage Therapy was
warranted.
Co-Chair Foster invited Ms. Curtis to the table.
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, reported that the board was new, and the
audit was the board's first sunset. She read directly from
the audit:
In all areas except licensing, the audit found the
board was operating in the public's interest. In
general, meetings were conducted effectively,
investigations were appropriately processed, and the
board actively issued or changed regulations to
improve the industry and better protect the public.
The audit concluded the board and DCBPL staff should
improve its licensing procedures. Testing found that
applicants were not consistently issued licenses in
accordance with statutes, regulations, and/or
procedures. Additionally, improvements are needed to
comply with the federal standards over criminal
history record information obtained as part of the
licensing process.
Ms. Curtis offered that the Federal Bureau of Investigation
(FBI) audit discovered the deficiency in federal standards
over criminal history records. She highlighted that page 11
contained the scheduled licensing activity in the table "
Exhibit 2" and reported that from July 2016 through August
2017, the board issued 1,186 new licenses. The number was
almost double the 600 licenses that DCBPL management
expected. She moved to the Schedule of Revenues and
Expenditures in "Exhibit 3" on page 14. The board had a
surplus of $265,128 thousand at the end of FY 2017 and
license fees were lowered in FY 2018. She turned to the
audit's three recommendations beginning on page 17.
Recommendation 1, "Division of Corporations, Business, and
Professional Licensing's (DCBPL) director, in consultation
with the Board of Massage Therapists (board), should take
action to improve procedures to ensure licensure
requirements are met." She elaborated that 3 of 31 license
applications tested as part of the audit were licensed
without adequate supporting documentation. She reviewed the
findings on page 17 and read the following excerpts:
A background check report for one initial applicant
was not completed. Th e licensee operated without a
background check report from licensure date of
September 2015 through receipt of the background check
report July 2017 during the license renewal process.
Regulation6 requires applicants submit their
fingerprints for a background check report in order to
obtain a license to practice massage therapy. Per
regulation,7 licenses can be issued to applicants even
though a background check report has not been
received. However, DCBPL staff must ensure the
background check is completed timely. Th e applicant's
fingerprint card was sent back multiple times due to
incomplete information. DCBPL staff did not perform
additional follow-up to obtain a completed fingerprint
card because staff failed to list the applicant on the
DCBPL spreadsheet used for tracking background
reports.
One applicant answered "yes" to a professional fitness
question, however no evidence could be located to
demonstrate that the applicant provided an
explanation. Furthermore, it is unclear whether the
board considered an explanation prior to licensing.
One applicant answered "yes" to a professional fitness
question and provided an explanation which included
evidence of a permanent revocation of a national board
certification for violating the respective code of
ethics and standards of practice. DCBPL staff and the
board did not forward the application to the
investigative section for review. A license was
granted with the requirement that the individual take
a two-credit ethics course. The background check did
not show any convictions, and according to the board
chair, the board believed that a license could not be
denied based on the revocation of a national certifi-
cate. However, DCBPL procedures called for the
application to be forwarded to investigations for
further review.
3:03:30 PM
Ms. Curtis addressed Recommendation 2, "DCBPL's director
should address the Federal Bureau of Investigations (FBI)
audit findings and concerns." She reviewed the findings and
read the following:
DCBPL did not comply with federal standards over
criminal history record information. The FBI audit
conducted in April 2017 found DCBPL did not have
secure channels of communication. Additionally,
applicants were not notified in writing that their
fingerprints were to be used for an FBI background
check and were not advised of the procedures for
obtaining, changing, correcting, or updating an FBI
identification record. Additionally, the federal audit
found inadequate chain of custody for fingerprint
cards. A chain of custody ensures the integrity of the
applicant/fingerprint process. DCBPL addressed one of
the findings by including verbiage in the application
that submitted fingerprints will be sent to the FBI
for a federal background check. However, as of October
2017, the other issues remain outstanding.
Ms. Curtis pointed to Recommendation 3, "The director of
the Office of the Governor, Boards and Commissions should
work to fill the public member position." She read the
following finding:
The public member position on the board became vacant
March 2017 and remained vacant as of October 2017. Per
AS 08.61.010, the board is statutorily required to
consist of five members appointed by the governor, one
of which is a public member who is not a licensed
health care provider, employee of the State, or a
current or former member of another occupation
licensing board. According to Boards and Commissions
staff, stringent requirements make it difficult to
find interested applicants.
3:04:20 PM
Ms. Curtis noted that the response relating to
Recommendation 3 from the Office of the Governor was found
on page 29. The office concurred with the audit and
recommended a legislative solution. She offered that the
agency response was on page 31 and agreed with
Recommendation 1 but felt that additional supervisory
resources were necessary to ensure the license files met
the standards. The department stated that the division had
been unaware of the issue until recently and was responding
quickly to address the finding. The board's response was on
page 33 and concurred with the audit conclusions.
Representative Guttenberg asked what other boards had the
same licensing requirement on fingerprinting and whether
the FBI audited the other boards and what the results were.
Ms. Curtis deferred the question to the department.
3:06:39 PM
Representative Pruitt asked if Ms. Curtis thought the
faults of the department were systemic and enabled
unqualified applicants to become licensed or was unique to
a few applications. Ms. Curtis responded that for the first
recommendation the audit discovered 3 out of 31 licensing
errors. The division felt it was a "significant problem."
The audit discovered an issue with staff that was
corrected. She characterized the issue as the "growing
pains" of a new inexperienced board.
Co-Chair Foster OPENED Public Testimony.
Co-Chair Foster CLOSED Public Testimony.
3:08:55 PM
Co-Chair Seaton asked if the chair of the massage board was
available. He understood there was a concern with
background checks. He asked for the boards position on
background checks.
DAVID EDWARDS-SMITH, CHAIR, BOARD OF MASSAGE THERAPISTS,
answered that the board felt that the initial licensure
should require a background check. However, the board's
official position was to reduce the burden on applicants
and lessen the requirement to every third renewal cycle
rather than every cycle. Co-Chair Seaton asked what the
cost of the background checks were and who paid for the
checks. Mr. Smith answered that the background check was
approximately $80. The burden was placed on the licensee.
Co-Chair Foster asked Ms. Chambers to walk through the
fiscal note.
3:10:09 PM
Ms. Chambers spoke to the previously published fiscal
impact note from DCCED FN1 (CED) and noted that the total
cost of the board was $21.4 thousand. She explained that
$19.9 thousand was allocated for travel costs and that the
board was trying to keep its travel costs down by using
teleconferencing capabilities when possible. She added that
the remaining $1.5 thousand was allocated for $400 for
public notice of board meetings, $1 thousand for training
and conference fees, and $100 for meeting per diem.
Representative Pruitt referred to the commissioner's
response to recommendation 1 and read "with over 13,000 new
licenses issued in FY 17, additional supervisory resources
are needed to ensure that all license files are reviewed to
meet this standard." He asked if additional staff was
necessary. He wondered how the fees would be spread across
all the various boards. Ms. Chambers commented that at
present the board was not requesting additional personnel.
The division was assessing the information provided in the
audit to determine whether some of the challenges were due
to the startup of a new board and the unexpected
significant increase in estimated applications. She thought
that the process would stabilize. She stated that the
boards were "constantly" growing, and the division wanted
to ensure the resources were available to meet the public's
expectations. Representative Pruitt asked if enough notice
would be provided to the boards of the need for additional
staff, so fees could be increased to avoid any impact on
UGF. Ms. Chambers reported that the division was not
authorized to accept UGF and was entirely supported by
licensing fees. The staff maintained positive time keeping.
The license programs were only being charged the amount the
staff worked on their program. She commented that managers
and certain administrative staff dealing with all
licensures charged their time to a general indirect
category that involved a specific methodology. However, the
lion's share of the staff and costs were being accurately
assessed to each board for the amount it cost to manage
them. If the division expected a dramatic increase in staff
time for a board. it would discuss the matter with the
board and put the licensees on notice of a potential fee
increase.
3:16:13 PM
Co-Chair Seaton referred to the first page of the audit
relating to improving licensing procedures. He read the
following: "?comply with the federal standards over
criminal history record information obtained as part of the
licensing process." He asked whether the conclusion was a
department issue or a board matter. Ms. Chambers reported
that the FBI findings "were specifically administrative"
and lied with the division. She explained that the issue
was "new information" that was received immediately before
the audit started. The division resolved two out of the
three issues. The unaddressed issue dealt with the chain of
custody and the division worked with the Department of
Public Safety (DPS) to help find a resolution. The
department confirmed that no legal mechanism in the
division's statutes addressed chain of custody. The
division was looking into "alternative plans" to ensure a
proper chain of custody was in place. Co-Chair Seaton asked
if there was any fallout from not maintaining the required
chain of custody. Ms. Chambers informed committee members
that the division was audited by the FBI every three years
for the five licensing programs that required
fingerprinting. She was unaware of any negative
repercussions to the licensees and acknowledged that it was
the divisions responsibility to resolve the issue.
Representative Guttenberg wondered whether the FBI's audit
findings were the same for the 5 boards that required
fingerprinting and if the division was addressing the
problem for all 5 boards. Ms. Chambers responded in the
affirmative.
Representative Wilson asked whether four years was the
proper amount of time for an extension or if a longer
period worked. Ms. Chambers had not questioned the audit
recommendations and was unable to offer an opinion about
the sunset. She was working with the board to address its
growing pains and felt confident that within four years all
the findings would be addressed. Representative Wilson
asked what the cost of the audit for each board was. Ms.
Chambers deferred to Ms. Curtis for the answer. She noted
that the cost was not born by the division. Representative
Wilson ascertained that the boards also did not pay audit
costs and the costs were assumed by the legislature. Ms.
Chambers responded that she was correct. Representative
Wilson asked for the information.
Co-Chair Foster requested that Ms. Curtis provide the
information.
Ms. Curtis had anticipated the question. She did not
currently have the information. She had asked Ms. Day to
compile the number of hours an audit took to complete. She
informed committee members that the rate was $77. per hour.
She deferred to Ms. Day.
3:20:57 PM
LINDA DAY, AUDIT MANAGER, LEGISLATIVE AUDIT DIVISION (via
teleconference), did not have the number of hours in front
of her and offered to provide the information quickly.
3:21:15 PM
Representative Pruitt asked about the concern over filling
the vacant board seat. He concurred that the criteria were
challenging and noted the requirement that the board member
was not a former member of another occupational licensing
board. He wondered whether removing the requirement would
facilitate finding the public board member more easily. Ms.
Chambers responded that the appointment of board members
was managed through the governor's office. She reported
that she worked closely with the Board and Commissions
director, Shirley Marquardt. She knew that the varying
board requirements made it prohibitive and she wanted more
people to apply for board seats. Her general response was
in favor of removing restrictions for people to serve on
boards. She deferred to Ms. Marquardt to provide the
specific answer. Representative Pruitt clarified that he
was only asking for the specific board. He asked Director
Marquardt to contact the committee if his suggestion would
be helpful without creating additional issues.
Co-Chair Seaton was trying to determine the licensing fees.
Ms. Curtis reminded the committee that the fee schedule was
on page 15 of the audit. She relayed that the renewal few
was $290 plus $60 totaling $350. Co-Chair Seaton asked if
the $60 was for a background check.
Ms. Chambers interjected that there were costs incurred by
the licensees for fingerprinting. She concurred that the
fess were $290 every two years to renew the license and an
additional $60 for DPS to process the fingerprints. Co-
Chair Seaton asked whether it was typical to require
fingerprinting and background checks with every renewal
cycle. Ms. Chambers replied that it was the only board
where subsequent fingerprinting was required. She related
that the board had recently tried to strike a balance
between too frequently and not enough. Co-Chair Seaton
asked if she knew the approximate cost of fingerprinting.
Ms. Chambers answered in the negative.
3:27:15 PM
Representative Guttenberg asked why repeated fingerprinting
was necessary. Ms. Chambers responded that the chief
investigator and DPS was looking into the possibility of
renewing the requirement without additional fingerprinting.
Co-Chair Foster indicated amendments were due on Friday,
February 9, 2018 by 5:00 pm.
HB 275 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following day.
ADJOURNMENT
3:31:22 PM
The meeting was adjourned at 3:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB273 Support letters 1.19.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 273 |
| HB273 Sponsor Statement 01.19.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 273 |
| HB273 Legislative Audit 01.19.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 273 |
| HB274 Sponsor Statement 1.29.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 274 |
| HB274 Supporting Document - 2017 Legislative Audit 1.29.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 274 |
| HB275 Sponsor Statement 01.19.18.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 275 |
| HB275 Legislative Audit 10.11.17.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 275 |
| HB275 letter of support.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 275 |
| HB 275 letter of support HFIN.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 275 |
| HB 275 Board of Massage Audit Followup Memo.pdf |
HFIN 2/6/2018 1:30:00 PM |
HB 275 |