Legislature(2015 - 2016)BARNES 124

03/04/2015 03:15 PM LABOR & COMMERCE

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Audio Topic
03:18:30 PM Start
03:18:57 PM HB123
04:14:25 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 123 ESTABLISH MARIJUANA CONTROL BOARD TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 4, 2015                                                                                          
                           3:18 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Jim Colver                                                                                                       
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 123                                                                                                              
"An  Act establishing  the Marijuana  Control  Board; relating  to                                                              
the powers  and duties  of the Marijuana  Control Board;  relating                                                              
to the  appointment, removal,  and duties of  the director  of the                                                              
Marijuana  Control  Board;  relating  to  the  Alcoholic  Beverage                                                              
Control Board; and providing for an effective date."                                                                            
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 123                                                                                                                  
SHORT TITLE: ESTABLISH MARIJUANA CONTROL BOARD                                                                                  
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/23/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/15       (H)       L&C, JUD, FIN                                                                                          
03/04/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MICHAELA FOWLER, Legislative Liaison                                                                                            
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions during the                                                              
discussion of HB 123.                                                                                                           
                                                                                                                                
CYNTHIA FRANKLIN, Executive Director                                                                                            
Alcoholic Beverage Control Board (ABC Board)                                                                                    
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during the  discussion of                                                            
HB 123.                                                                                                                         
                                                                                                                                
CHRISTOPHER M. KENNEDY, Deputy Chief - Administrative Law Judge                                                                 
Office of Administration Hearings (OAH)                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during the  discussion of                                                            
HB 123.                                                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:18:30 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR SHELLEY  HUGHES called  the House  Labor and  Commerce                                                            
Standing    Committee   meeting    to   order    at   3:18    p.m.                                                              
Representatives Kito,  LeDoux, Tilton, Josephson, and  Hughes were                                                              
present at the call to order.                                                                                                   
                                                                                                                                
            HB 123-ESTABLISH MARIJUANA CONTROL BOARD                                                                        
                                                                                                                                
3:18:57 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR  HUGHES announced  that  the  only order  of  business                                                              
would be  HOUSE BILL NO. 123,  "An Act establishing  the Marijuana                                                              
Control  Board;   relating  to  the  powers  and   duties  of  the                                                              
Marijuana  Control Board;  relating to  the appointment,  removal,                                                              
and  duties  of  the director  of  the  Marijuana  Control  Board;                                                              
relating to  the Alcoholic Beverage  Control Board;  and providing                                                              
for an effective date."                                                                                                         
                                                                                                                                
3:19:25 PM                                                                                                                    
                                                                                                                                
MICHAELA  FOWLER,  Legislative Liaison,  Department  of  Commerce,                                                              
Community  &  Economic  Development  (DCCED),  on  behalf  of  the                                                              
administration,  stated that  HB  123 is  the  governor's bill  to                                                              
create  the Marijuana  Control Board  (MCB).   She explained  that                                                              
following  passage  of Ballot  Measure  2  in November  2014,  the                                                              
administration  began  exploring different  regulatory  structures                                                              
that  might  be   appropriate  for  regulating  marijuana.     The                                                              
initiative  specified that  the legislature  has the authority  to                                                              
create  a  separate  control  agency for  marijuana,  but  if  the                                                              
legislature does  not create a control  board, it will  default to                                                              
the Alcoholic  Beverage Control  Board ("ABC Board").   Initially,                                                              
the administration  favored creating  a separate marijuana  board,                                                              
but logistically  and economically  it did not  make sense  to set                                                              
up a new  agency and board.   Further, the administration  did not                                                              
favor  having  the   ABC  Board  as  the  only   board  regulating                                                              
marijuana so  it developed  a hybrid solution.   Under  the hybrid                                                              
solution,  the  Alcoholic  Beverage   Control  Board  (ABC  Board)                                                              
agency  would support  two boards:   the  Marijuana Control  Board                                                              
and the ABC Board.                                                                                                              
                                                                                                                                
3:20:58 PM                                                                                                                    
                                                                                                                                
MS.  FOWLER  offered that  the  hybrid  proposal would  allow  the                                                              
administration  to use the  experience of  the ABC Board's  staff,                                                              
in  particular,  its  enforcement  staff, while  reducing  set  up                                                              
costs  associated with  setting  up an  entire  new entity,  while                                                              
achieving the intent  of the initiative and meeting  the statutory                                                              
deadlines  set out  within the initiative.    The majority  of the                                                              
bill  parallels  statutes  that  set  up  the  Alcoholic  Beverage                                                              
Control Board (ABC  Board), with changes to reflect  the substance                                                              
being regulated  and the  Title 4  [Alcoholic Beverages],  working                                                              
group  product including  suggestions  from  over 60  stakeholders                                                              
who participated in a multi-year process.                                                                                       
                                                                                                                                
3:21:53 PM                                                                                                                    
                                                                                                                                
MS. FOWLER  provided a  section-by-section  analysis of the  bill.                                                              
Section  1  would  amend  Title   4,  name  the  director  of  the                                                              
Alcoholic Beverage  Control Board (ABC  Board) as the  director of                                                              
the Marijuana Control  Board (MCB), and establish  the process for                                                              
appointment and removal of the director.                                                                                        
                                                                                                                                
3:22:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  for the rationale  for changing  who                                                              
may remove the director from the governor to the board.                                                                         
                                                                                                                                
MS.  FOWLER   answered  that  currently  the   Alcoholic  Beverage                                                              
Control Board  (ABC Board), and  not the governor, can  remove the                                                              
director.  This  language would amend it so both  boards will have                                                              
a say since the same executive director will serve both boards.                                                                 
                                                                                                                                
3:22:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO asked what  would happen  if one  board votes                                                              
to remove  the executive  director, but the  other board  does not                                                              
concur.                                                                                                                         
                                                                                                                                
MS. FOWLER  answered that  the other board  would have  to concur.                                                              
She explained  that  each board  would separately  need to  have a                                                              
majority  vote to remove  the executive  director.   If one  voted                                                              
for and the  other one voted  against removal, it would  result in                                                              
a  situation where  the  director  will remain.    In response  to                                                              
Representative LeDoux,  she directed attention to  Section 4, page                                                              
5, line  5, Section 17.38.085,  of the  bill and read,  "The board                                                              
may remove  the director by majority  vote of the  full membership                                                              
...."    She said  this language is  reiterated in Section  1, [AS                                                              
04.06.070]  which  allows the  Marijuana  Control  Board (MCB)  to                                                              
remove the director  by a majority vote of the  full membership of                                                              
the ABC Board  and a majority of  the full membership  of the MCB.                                                              
She explained  that the executive  director position falls  in two                                                              
titles  so  it  was  necessary  to  address  the  removal  of  the                                                              
director in each title.                                                                                                         
                                                                                                                                
3:25:07 PM                                                                                                                    
                                                                                                                                
MS.  FOWLER   continued  with  the  section-by-section   analysis.                                                              
Section 2  would establish a  five-member Marijuana  Control Board                                                              
MCB) in Title  17 with designated seats for public  health, rural,                                                              
public  safety,  and  industry.    She  said  that  this  language                                                              
reflects   the  way   the   administration   wishes  alcohol   was                                                              
regulated,  but it does  not represent  the way  the ABC  Board is                                                              
currently  structured  since  the  ABC  Board does  not  have  any                                                              
requirement for a  public health or public safety  member to serve                                                              
on the board.   She indicated that the administration  believes it                                                              
the  emerging  marijuana  industry   should  have  both  of  those                                                              
representatives on the board.                                                                                                   
                                                                                                                                
3:25:50 PM                                                                                                                    
                                                                                                                                
MS. FOWLER stated  that Section 3 establishes terms  of office for                                                              
board  members  and the  chair,  set  out requirements  for  board                                                              
meetings, and provide  for board member per diem.   Section 3 also                                                              
outlines the powers  and duties of the board to  propose and adopt                                                              
regulations,  establish   qualifications  for   licensure,  review                                                              
applications for  licensure, hear appeals from the  actions of the                                                              
director,  reduce  the  area  of a  licensed  premise,  and  adopt                                                              
regulations  according  to AS  44.63.    This section  would  also                                                              
establish  the board's enforcement  powers  by mirroring  those of                                                              
the Alcoholic  Beverage Control  Board outlined  in AS  04.06.110,                                                              
as well as providing  for appointment and removal  of the director                                                              
and establishes the duties of the director.                                                                                     
                                                                                                                                
3:26:32 PM                                                                                                                    
                                                                                                                                
MS. FOWLER  stated that  Section 4  would define  the board  in AS                                                              
17.38.900(1)  to mean the  Marijuana Control  Board (MCB)  created                                                              
by this act, and  Section 5 defines "director" as  the director of                                                              
the Alcoholic  Beverage Control  Board (ABC  Board) and  Marijuana                                                              
Control  Board (MCB).   She clarified  that it  would also  define                                                              
"registration"  to mean  registration or  licensure as  determined                                                              
by regulation.                                                                                                                  
                                                                                                                                
MS. FOWLER  related that Section 6  would amend the duties  of the                                                              
Department  of  Commerce,  Community,   and  Economic  Development                                                              
(DCCED)  to include  provisions  for clerical  and  administrative                                                              
support  for  the  Marijuana  Control   Board  (ABC  Board)  which                                                              
mirrors the language in the ABC Board.                                                                                          
                                                                                                                                
3:27:10 PM                                                                                                                    
                                                                                                                                
MS. FOWLER  stated that Section  7 would amend uncodified  law for                                                              
initial  appointment  of the  MCB  board  members, and  Section  8                                                              
would  provide for  transition  on regulations  such  that if  the                                                              
Alcoholic   Beverage  Control   Board  (ABC   Board)  adopts   any                                                              
regulations  before   the  Marijuana   Control  Board   (MCB)  was                                                              
created, those  regulations can be implemented,  enforced, amended                                                              
or repealed  by the Marijuana Control  Board (MCB) and  it further                                                              
provides that regulations  adopted by the board  in any transition                                                              
period  will take  effect after  the  effective date  of the  act.                                                              
Finally,  Section  9  would provide  for  an  immediate  effective                                                              
date.                                                                                                                           
                                                                                                                                
3:27:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO  directed  attention  to  Section  2  to  the                                                              
membership  composition of the  board.   He noted the  requirement                                                              
for two  industry members with  experience in the  industry within                                                              
the  previous five  years.   Since  the state  does not  currently                                                              
have an industry, he wondered how that could occur.                                                                             
                                                                                                                                
MS.  FOWLER  answered that  the  intent  would  be to  fill  those                                                              
positions by selecting  people who have been active  in passage of                                                              
the initiative  or have been lobbying  on behalf of  the marijuana                                                              
industry.   She envisioned  the  department would  need to  take a                                                              
very broad  perspective when filling  the positions;  however, the                                                              
department  does not  mean this  language will  pertain to  people                                                              
who have  been involved in the  illegal marijuana industry  in the                                                              
past five years.                                                                                                                
                                                                                                                                
3:28:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO  said he  saw  a distinction  between  people                                                              
advocating  for an  interest  and  those with  an  active role  in                                                              
overseeing a  business.  He  expressed concern that  board members                                                              
must develop regulations  to regulate businesses but  if they lack                                                              
the  expertise to  do  so, the  regulations  might not  accurately                                                              
protect public health and safety.                                                                                               
                                                                                                                                
VICE CHAIR  HUGHES related  her understanding  that Alaska  is the                                                              
only  state with  two  industry people  serving  on the  alcoholic                                                              
beverage  control  board  since   most  states  do  not  have  any                                                              
industry  participation, with  the exception  of one state  having                                                              
one industry board member.  She asked for confirmation of this.                                                                 
                                                                                                                                
3:30:05 PM                                                                                                                    
                                                                                                                                
CYNTHIA FRANKLIN,  Executive Director, Alcoholic  Beverage Control                                                              
Board (ABC  Board), Department of  Commerce, Community  & Economic                                                              
Development (DCCED),  acknowledged that it was true  that Alaska's                                                              
board  is unique;  however,  the  way  in which  different  states                                                              
regulate  alcohol is  quite varied.   Fifteen  states are  control                                                              
states, in  which the states sell  the alcohol so one  could argue                                                              
the entire  board is  in the industry.   A  few other  states have                                                              
"all-volunteer" boards  similar to Alaska's  board.  The  way this                                                              
bill  was  written,  up  to  two  members  could  be  employed  by                                                              
industry;  however,  there  isn't  any  requirement  for  industry                                                              
representation, just  a limit on  the total number of  people that                                                              
can  have that  industry  connection,  she said.    If there  were                                                              
fewer than  two industry people,  these members would  be replaced                                                              
with general  public members.  Since  one board member  will serve                                                              
a one-year term,  the boards and commissions office  could address                                                              
Representative  Kito's  concern that  industry  has  not yet  been                                                              
established  by  appointing someone  who  has been  advocating  on                                                              
behalf of  the industry to serve  a "bridge" industry  member into                                                              
the  one-year seat.    The  seat could  later  be  filled once  an                                                              
industry person was identified, she said.                                                                                       
                                                                                                                                
3:32:50 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR  HUGHES   asked  whether  other  states   who  have  a                                                              
marijuana  industry have  board  compositions similar  to what  is                                                              
being proposed in HB 123.                                                                                                       
                                                                                                                                
MS. FRANKLIN  answered that  Colorado does not  have a  board, but                                                              
has a Division  of Marijuana Enforcement within  its Department of                                                              
Revenue  comprised  of  state employees.    The  Washington  State                                                              
Liquor  Control   Board  regulates   marijuana,  but   it  doesn't                                                              
regulate  liquor,  although  the  state was  initially  a  control                                                              
state until the  state privatized the industry  and dismantled the                                                              
board's  regulatory  authority  over alcohol  several  years  ago.                                                              
She  elaborated   that  Washington's   board  members   are  state                                                              
employees who  conduct three board  meetings per week,  and Oregon                                                              
is  a control  state, with  state  employee [commission]  members,                                                              
without any  local option with respect  to marijuana.   The Oregon                                                              
initiative   gave   control   to   its   Oregon   Liquor   Control                                                              
[Commission]  without an option  for the  legislature to  create a                                                              
separate board.   She  was unsure  whether the [commission]  would                                                              
be expanded to handle the added function.                                                                                       
                                                                                                                                
3:35:10 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR HUGHES  directed attention  to the  public health  law                                                              
enforcement provision  in the bill and the  director's background.                                                              
She  related   her  understanding   that  something   similar  was                                                              
proposed  in the Title  4 revisions  and asked  whether this  bill                                                              
was based on those revisions.                                                                                                   
                                                                                                                                
MS.  FRANKLIN  said  that  was  correct;  that  it  represented  a                                                              
carefully-crafted  compromise  in   the  role  of  the  ABC  Board                                                              
subcommittee to  the Title  4 [alcoholic beverages]  stakeholders'                                                              
revisions.   She explained that  public health representatives  on                                                              
the stakeholder's  group wanted to  see the ABC Board  more evenly                                                              
balanced  with   less  industry   focus.    However,   significant                                                              
resistance  from many  stakeholders  arose in  terms of  expanding                                                              
the  board.   First,  it  often  has been  difficult  to  schedule                                                              
meetings  for  the  five-member  all volunteer  ABC  Board.    She                                                              
described the  ABC Board meetings  as consisting of  heavy working                                                              
meetings  with   significant  tasks  to  be  accomplished.     The                                                              
compromise  reached was that  the director's  background  would be                                                              
taken  into account  when balancing  the  board out  since it  was                                                              
perceived that  the director  has quite a  bit of influence.   For                                                              
instance, if  a member of the  liquor industry had  been appointed                                                              
as the agency director  one of the liquor industry  seats would be                                                              
replaced  by a public  member; similarly,  if  the director  had a                                                              
public  health  background  or a  public  safety  background,  she                                                              
said,  even though  the  director does  not  vote, the  director's                                                              
background is considered when balancing out the board.                                                                          
                                                                                                                                
3:37:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KITO  referred  to   page  2,  lines   15-21,  to                                                              
subsection (c)  of HB 123 related  to the Marijuana  Control Board                                                              
(MCB) appointment  and qualifications,  which read, "Of  the board                                                              
members  and the director,  one  person shall  be from the  public                                                              
safety  sector,  one  person  shall  be  from  the  public  health                                                              
sector, one person  shall be from a rural area, and  not more than                                                              
two  people may  be actively  engaged in  the marijuana  industry;                                                              
the  remaining  person  or  persons  shall  be  from  the  general                                                              
public."    He  said  this language  seemed  to  imply  two  board                                                              
members would  be selected  from the  marijuana industry,  but not                                                              
more than  two could  serve.   He maintained  his concern  that an                                                              
advocate  for the  legalization  of marijuana  could serve  during                                                              
the  start-up  phase  when  regulations   will  be  developed  for                                                              
commerce or business  aspects since this language  doesn't require                                                              
anyone with  business experience.   This  could be very  important                                                              
for  the  state  especially  in the  first  term,  when  licensing                                                              
requirements   and  regulations   governing  businesses   will  be                                                              
established, he said.                                                                                                           
                                                                                                                                
MS. FRANKLIN  replied that  the distinction is  the choice  of the                                                              
language  "shall" and  "may."   Thus, the  language requires  that                                                              
one  person "shall"  be  from the  public  health  sector and  one                                                              
person "shall"  be from a  rural area, but  and not more  than two                                                              
people "may" be  actively engaged in the marijuana  industry.  She                                                              
interpreted  this  language to  provide  flexibility  in terms  of                                                              
potential  board   members  who  are  engaged  in   the  marijuana                                                              
industry.    She  suggested  that the  governor  could  appoint  a                                                              
business person  not engaged  in the  marijuana industry  to serve                                                              
on  the board  since  it may  be  impossible  to find  appropriate                                                              
candidates  for the  emerging industry.    She agreed  it will  be                                                              
challenging since the  proposed AS 17.38 seems to  set up numerous                                                              
"chicken  and  egg"  scenarios.   She  reported  that  significant                                                              
interest has been  expressed by a number of people  who would like                                                              
to serve on the proposed Marijuana Control Board (MCB).                                                                         
                                                                                                                                
3:40:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  directed attention to the proposed  MCB board                                                              
composition.     He  said  that   three  seats  were   designated,                                                              
including  the public  safety sector,  public  health sector,  and                                                              
the  rural area,  with  two available  seats  remaining for  those                                                              
actively  engaged in  the  marijuana industry.    He envisioned  a                                                              
circumstance  could arise  in which  two members  were engaged  in                                                              
marijuana  industry, without  a spot  for the  public member.   He                                                              
expressed  concern that  the board  may not have  a public  member                                                              
designee.                                                                                                                       
                                                                                                                                
VICE  CHAIR HUGHES  pointed  out  that subsection  (c)  of HB  123                                                              
includes the  director so  the proposed  board membership  is five                                                              
plus one,  which totals six.   She related her  understanding that                                                              
the board  membership for  industry reads  "may" and the  "public"                                                              
reads "shall," so one person must serve from the public sector.                                                                 
                                                                                                                                
MS.  FRANKLIN  discussed  the  proposed  Marijuana  Control  Board                                                              
(MCB)  membership.    The  background   of  six  people  would  be                                                              
considered   as   board   members,   including   considering   the                                                              
director's background.   If the  director's background was  any of                                                              
the  three  designations  -  public   health,  public  safety,  or                                                              
industry - the  seat on the board  would be filled by  a member of                                                              
the general public.    She said  that the rural member  would be a                                                              
public member  from a rural area.   The only situation  that could                                                              
arise,  in terms  of Representative  Kito's concern,  would be  if                                                              
the   director's   background   was   not   any   of   the   three                                                              
aforementioned designations.   Thus if  the director was  not from                                                              
public  health,  public safety,  or  industry, and  two  marijuana                                                              
representatives  were selected,  the  only public  member in  that                                                              
case would be the rural public member.                                                                                          
                                                                                                                                
MS. FRANKLIN assured  members that the proposed  Marijuana Control                                                              
Board  (MCB) composition  was crafted  after months  of input  and                                                              
numerous  controversial meetings  deliberating over  what a  board                                                              
regulating  [marijuana]  should   look  like.    She  stated  that                                                              
stakeholder's participation  included representatives  from public                                                              
health,  public  safety,  the  general  public,  and  members  the                                                              
alcohol  industry  crafted  this   compromise  with  the  goal  of                                                              
keeping the board  small enough to be workable.   She said that if                                                              
the  legislature were  to  create  a larger  board  or expand  the                                                              
proposed  board, it  will  be important  to  consider whether  the                                                              
board will be able reach a majority vote and not be tied.                                                                       
                                                                                                                                
3:44:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  asked whether the director in  question would                                                              
be the  state employee  who serves  as the  executive director  of                                                              
the  proposed Marijuana  Control Board  (MCB).   He further  asked                                                              
whether the person would have voting rights.                                                                                    
                                                                                                                                
MS.  FRANKLIN  answered  yes;  the director  would  serve  as  the                                                              
executive director  of the Marijuana Control Board  (MCB), but the                                                              
position does  not have  any voting rights.   She reiterated  that                                                              
the executive director's  background would be considered  in terms                                                              
of board  composition.   The alcohol  industry, the public  health                                                              
and  public  safety   members  of  the  stakeholder's   group  all                                                              
expressed strong  opinion that the  background of the  director of                                                              
a  volunteer  board  that  meets  five times  per  year  was  very                                                              
important  since the  director  will be  very  influential in  the                                                              
day-to-day  operations of  the  agency.   Further,  the ABC  Board                                                              
chair indicated  that the  background of  the director  matters as                                                              
much as  board members'  backgrounds,  since so  much of the  work                                                              
will be performed  outside board meetings - such  as approvals and                                                              
transfers.   She offered  that proposed Title  4 revisions  and HB                                                              
123 contain substantial delegation to the director.                                                                             
                                                                                                                                
3:46:29 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR HUGHES  asked to  focus on  the rural  member for  the                                                              
proposed  Marijuana  Control  Board  (MCB).    She  asked  whether                                                              
subsection  (f)  was  fashioned  on  rural  membership  for  other                                                              
boards since  it requires the  board member  to have resided  in a                                                              
rural area  for not  fewer than  180 days  within the  five years.                                                              
She  said  she  was also  curious  whether  the  6,000  population                                                              
figure is  used throughout statute  in terms of identifying  rural                                                              
areas.                                                                                                                          
                                                                                                                                
MS. FRANKLIN  answered that the  language in this bill  related to                                                              
the  size  of  the  community  for  the  rural  public  member  is                                                              
identical to the  language in the proposed Title  4 revisions, but                                                              
she was unsure  whether this language  was used to define  a rural                                                              
public  member on  other  boards.   She  explained  that the  "180                                                              
days" language  came out of the  proposed Title 4 revisions.   The                                                              
composition of  the proposed MCB  is different than the  ABC Board                                                              
since  the ABC  Board does  not  specify public  health or  public                                                              
safety  designees, just  industry designees.   She  said that  the                                                              
"180  days"  language was  developed  when  the  Title 4  [AS  04]                                                              
revisions  were  made,  since  it  could  help  ascertain  whether                                                              
someone  has  a   rural  background,  for  example,   someone  who                                                              
previously  resided  in rural  Alaska  would  not qualify.    This                                                              
rural  member language  was also  included  in the  draft Title  4                                                              
revisions  to  the   ABC  Board  membership.     The  under  6,000                                                              
population  language exists  in  Title 4  has been  used for  many                                                              
years to help determine a rural public member, she added.                                                                       
                                                                                                                                
VICE  CHAIR HUGHES  expressed concern  that  a town  in the  Kenai                                                              
Peninsula or in  the Matanuska-Susitna Valley that  is under 6,000                                                              
probably wouldn't  be the type of rural participation  that should                                                              
be considered for the MCB.                                                                                                      
                                                                                                                                
3:50:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX gathered  that the  idea for including  the                                                              
background for the director came from the current ABC Board.                                                                    
                                                                                                                                
MS.  FRANKLIN answered  that  the Title  4  stakeholders group,  a                                                              
group  of  60-70  stakeholders considered  revisions  to  Title  4                                                              
assigned a  subcommittee to review the  role of the ABC  Board and                                                              
that group  primarily reviewed  the composition  of the  board, in                                                              
part, due  to the  sense that the  ABC Board  has been  listing to                                                              
the industry  side.  She commented  that she just  became director                                                              
September 2014  and while  she was not  party to the  discussions,                                                              
she  understood  that  the  alcohol   industry  fought  very  hard                                                              
against  losing any  designations or  expanding the  designations.                                                              
As previously  mentioned, this compromise  was agreed upon  by the                                                              
Title 4  review committee,  and by  Jess Jessee, Director,  Mental                                                              
Health Trust  and Bob Klein, the  current chair of the  ABC Board,                                                              
who specifically  worked on  this compromise  together as  a means                                                              
to balance  the industry  interest without  having to  numerically                                                              
expand the board.                                                                                                               
                                                                                                                                
3:53:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   LEDOUX   referred  to   AS   04.06.020,  to   the                                                              
qualifications of  the ABC Board,  which doesn't seem  to consider                                                              
the background of the ABC Board director.                                                                                       
                                                                                                                                
MS. FOWLER answered  that these provisions were part  of the draft                                                              
rewrite of Title  4, but that language is not  in current statute.                                                              
She offered to provide the committee with the recommendations.                                                                  
                                                                                                                                
3:54:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  referred to  page 4, to  subsection (c),                                                              
of HB 123 to  the language that reduces the area  to be designated                                                              
as the licensed premises.                                                                                                       
                                                                                                                                
MS.  FOWLER answered  that  subsection  (c) mirrors  the  proposed                                                              
Title 4 language.                                                                                                               
                                                                                                                                
MS. FRANKLIN explained  that the way alcohol is  licensed includes                                                              
a diagram  of  the premise,  which means  the ABC  Board wants  to                                                              
know where on the  premise of any business that  substance will be                                                              
contained.   She related  a scenario in  which a licensee  applied                                                              
for  a  beer  and wine  license,  but  submitted  a  diagram  that                                                              
required a server  to cross a public sidewalk to  reach a separate                                                              
patio.   The language  in subsection  (c) gave  the ABC  Board the                                                              
authority to  allow the specific  establishment to serve  beer and                                                              
wine in its  restaurant, but it  also allowed the board  to excise                                                              
off the  part of the  designated premises  for the patio  since it                                                              
required  servers to  cross a public  area.   This language  would                                                              
give  the  board  the authority  to  reduce  the  premise  without                                                              
throwing out the application.                                                                                                   
                                                                                                                                
3:57:16 PM                                                                                                                    
                                                                                                                                
CHRISTOPHER M. KENNEDY,  Deputy Chief - Administrative  Law Judge,                                                              
Office of  Administration  Hearings (OAH),  said he was  available                                                              
for questions.                                                                                                                  
                                                                                                                                
3:57:48 PM                                                                                                                    
                                                                                                                                
VICE CHAIR HUGHES asked for a brief review of the fiscal note.                                                                  
                                                                                                                                
MR. KENNEDY answered  that the fiscal note was  a standard formula                                                              
fiscal note  that the OAH  would submit any  time a new  board was                                                              
established if  it was likely  the board  would send case  work to                                                              
the Office  of Administrative  Hearings on  disciplinary  cases or                                                              
when for administrative  hearings resulting from  license denials.                                                              
The  legislative   drafters  indicated  it  was   the  intent  for                                                              
hearings  to be referred  to OAH,  which is  in keeping  with what                                                              
currently  occurs with  the ABC  Board.  The  projected costs  for                                                              
hearings for  the MCB were  based on the  current need by  the ABC                                                              
Board for  hearings; however, he  has since understood  that there                                                              
might be a  surge in hearings in  the early part of  the Marijuana                                                              
Control Board  (MCB) as people  may litigate more  vigorously over                                                              
licensure  and as  licensees try  to figure  out the  "lay of  the                                                              
land" in  regulation.  He suggested  that the OAH fiscal  note was                                                              
probably a fairly conservative fiscal note for FY 16 and FY 17.                                                                 
                                                                                                                                
3:59:48 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR HUGHES  asked  whether  the OAH  plans  to revise  the                                                              
fiscal note to reflect the surge.                                                                                               
                                                                                                                                
MR.  KENNEDY  answered  that  the  OAH  probably  should  consider                                                              
whether  to  revise  it  slightly  upward,  although  he  did  not                                                              
anticipate that  the fiscal  note changes would  be dramatic.   He                                                              
said  the Office  of Administrative  Hearings (OAH)  will want  to                                                              
consider a  potential surge;  however, he  acknowledged it  may be                                                              
difficult to  project.  In  response to Representative  Josephson,                                                              
he  clarified  that the  vast  majority  of board  and  commission                                                              
hearings are conducted  by the OAH; however, in  this instance the                                                              
OAH  confirmed with  the  legislative drafter  the  intent was  to                                                              
have any  appeals heard by  the Office of Administrative  Hearings                                                              
(OAH).                                                                                                                          
                                                                                                                                
4:01:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOSEPHSON  referred  to   page  4,   lines  19-21                                                              
paragraph (4),  of HB 123 which  states that the board  would hear                                                              
appeals.   He  asked  whether the  OAH  would  accept the  board's                                                              
facts or how does that work.                                                                                                    
                                                                                                                                
MR. KENNEDY  answered that  the voluntary  boards do not  normally                                                              
hear any evidence  first hand.  He explained  the hearing process,                                                              
such  that  the Office  of  Administrative  Hearings (OAH)  has  a                                                              
statutory  procedure for  hearing cases  on behalf  of boards  and                                                              
commissions, in  which the evidence is presented  and subsequently                                                              
findings  and  conclusions are  submitted  as  a proposal  to  the                                                              
board.  The board then would deliberate with the OAH, he said.                                                                  
                                                                                                                                
4:02:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked whether  this bill would  give the                                                              
board appellate authority.                                                                                                      
                                                                                                                                
MR. KENNEDY answered  that he was aware of the  language, which is                                                              
the  same as  the ABC  Board, such  that  it gives  the board  the                                                              
authority  to hear  the appeal;  however, the  board refers  those                                                              
hearings  to  the  Office  of  Administrative   Hearings  (OAH  to                                                              
conduct the hearing,  but the board makes the final  decision.  He                                                              
characterized  his  office  as   being  the  hearing  arm  of  the                                                              
Marijuana  Control  Board (MCB),  followed  by  an appeal  to  the                                                              
court system, in terms of the bill's structure.                                                                                 
                                                                                                                                
4:03:37 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR  HUGHES   asked  for  further  clarification   on  the                                                              
Alcoholic  Beverage  Control  Board  (ABC  Board),  Department  of                                                              
Commerce, Community  and Economic Development (DCCED)  fiscal note                                                              
of  $1.574  million  to  establish  the  Marijuana  Control  Board                                                              
(MCB).  She was unsure how those funds would be used.                                                                           
                                                                                                                                
MS. FRANKLIN  related her  understanding that  the budget  did not                                                              
survive the House  Finance Committee process.   She explained that                                                              
the  figure for  FY 16  budget represents  4  additional staff  be                                                              
added in  addition to the current  10 statewide staff  to regulate                                                              
alcohol.   The  DCCED  has asked  for 2  additional  staff in  the                                                              
supplemental budget  since work has already begun.   She explained                                                              
that the  funding covered  travel costs  for enforcement  officers                                                              
to check  on licensees, as well  as $500,000 for a  database since                                                              
the ABC Board  currently operates as a paper-based  agency.  Other                                                              
states that  have legalized marijuana  have had a  constant demand                                                              
for  data.    Further, public  safety  tracks  marijuana  sold  in                                                              
commercial  marijuana establishments  to  ensure  the product  was                                                              
grown  in legal  establishments,  which also  requires  electronic                                                              
support.   She  characterized the  proposed  software as  seed-to-                                                              
sale  software,  which  allows  marijuana  tracking  to  occur  to                                                              
ensure  that  black market  marijuana  is  not funneled  into  the                                                              
distribution facilities.   She noted that it is all  broken out in                                                              
the governor's budget.                                                                                                          
                                                                                                                                
4:06:42 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR  HUGHES  asked for  further  clarification  that  this                                                              
fiscal note was removed in the House Finance Committee.                                                                         
                                                                                                                                
MS.  FOWLER  said  that  the funding  was  removed  in  the  House                                                              
Finance  Committee and  the  department was  asked  to submit  the                                                              
request in fiscal notes.                                                                                                        
                                                                                                                                
4:07:15 PM                                                                                                                    
                                                                                                                                
VICE  CHAIR  HUGHES  asked  for clarification  on  the  number  of                                                              
employees proposed for the MCB Board.                                                                                           
                                                                                                                                
MS. FRANKLIN  answered that 2  additional employees were  added in                                                              
the  FY 15  supplemental  budget  request that  has  not yet  been                                                              
approved,  with 4  additional  employees requested  in  the FY  16                                                              
budget request.   In response to Vice Chair Hughes,  she said that                                                              
the ABC  Board has 10 employees  statewide, including  3 licensing                                                              
employees,  5 enforcement  officers, and  2 administrative  staff.                                                              
She  stated that  an  additional  2 staff  were  requested in  the                                                              
supplemental budget,  and an additional 4 staff  were requested in                                                              
the fiscal  note [dated  1/20/15].   She said  if all the  budgets                                                              
were  passed,  it  would  bring  the  number  of  statewide  staff                                                              
working on  the ABC  Board and the  Marijuana Control  Board (MCB)                                                              
to a grand total of 16 employees.                                                                                               
                                                                                                                                
VICE CHAIR  HUGHES remarked that it  would be helpful to  have the                                                              
electronic means  for tracking marijuana  listed in  the narrative                                                              
for the fiscal note.                                                                                                            
                                                                                                                                
4:08:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX directed  attention to  the fiscal  note to                                                              
$610.5  thousand   for  personnel   services.     She  asked   for                                                              
information  on the $756.4  thousand for  services, asked  whether                                                              
that covers  the database,  and  if so, what  the additional  $250                                                              
thousand would be used for.                                                                                                     
                                                                                                                                
MS.  FRANKLIN  answered  yes;  that  the  $500  thousand  for  the                                                              
database is contained  in services; however, she did  not have the                                                              
full  breakout of  the budget  in front  of her.   She offered  to                                                              
provide it to the committee.                                                                                                    
                                                                                                                                
4:09:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  for further  clarification  on  the                                                              
line  item  for capital  outlay,  which  it  seemed is  where  the                                                              
database  costs would  be listed.    She further  asked why  there                                                              
were not any costs listed in the out years of FY 17-FY 21.                                                                      
                                                                                                                                
MS.  FOWLER  answered  that  part of  the  commodities  line  item                                                              
funding would  be to purchase  computers, desks, and  vehicles for                                                              
enforcement officers.   Since the costs for the  Marijuana Control                                                              
Board  (MCB) were  included in  the governor's  budget, the  costs                                                              
were not  reflected in  the FY 17-21  budget request;  however, if                                                              
there  had  been  an appropriation,  the  costs  would  have  been                                                              
reflected in  the out years.   She explained  that if  the funding                                                              
for marijuana is  not put back in the budget,  the department will                                                              
revise the  fiscal note to include  it in the FY  16 appropriation                                                              
requested column  and at that  point it would  show up in  the out                                                              
years.                                                                                                                          
                                                                                                                                
4:11:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX said  that she  would like  to the  see the                                                              
projections for the bill listed in the fiscal note.                                                                             
                                                                                                                                
MS.  FOWLER  explained  that  one   reason  the  fiscal  note  was                                                              
prepared  in  this  format  was   to  reflect  the  costs  of  the                                                              
initiative, since it  was not possible to attach a  fiscal note to                                                              
the initiative  when it was passed.   She understood  the request,                                                              
and  offered  her  belief  that  the  committee  will  receive  an                                                              
updated fiscal note.                                                                                                            
                                                                                                                                
VICE  CHAIR  HUGHES  added  that  it  would  be  helpful  for  the                                                              
committee to know  how much of the $1.575 million  represents one-                                                              
time costs.                                                                                                                     
                                                                                                                                
4:12:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked   if  this  bill  does  not  pass                                                              
whether  the  regulation of  marijuana  would  be handled  by  the                                                              
Alcoholic  Beverage Control  Board  (ABC Board);  however, if  so,                                                              
the board  would not have  any financial resources  to do so.   He                                                              
wondered how to remedy the funding issue.                                                                                       
                                                                                                                                
MS. FOWLER  reported that the fiscal  notes for all  the marijuana                                                              
bills  were   currently  being   amended  to  include   costs  for                                                              
implementation,  noting that clearly  funding will only  be needed                                                              
for  one  of  the  bills.   She  said  that  was  one  reason  the                                                              
department  initially asked  for funding  in the proposed  budget;                                                              
however, the department  understands the need for  the fiscal note                                                              
as requested by the House Finance Committee.                                                                                    
                                                                                                                                
[HB 123 was held over.]                                                                                                         
                                                                                                                                
4:14:25 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:14 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB123 ver A.pdf HL&C 3/4/2015 3:15:00 PM
HB 123
HB123 Transmittal Letter.pdf HL&C 3/4/2015 3:15:00 PM
HB 123
HB123 Sectional Analysis.pdf HL&C 3/4/2015 3:15:00 PM
HB 123
HB123 Fiscal Note-DCCED-ABC-02-20-15 .pdf HL&C 3/4/2015 3:15:00 PM
HB 123
HB123 Fiscal Note-DOA-OAH-02-27-15.pdf HL&C 3/4/2015 3:15:00 PM
HB 123
HB123 Draft Proposed Amendment-Josephson 3-3-15.pdf HL&C 3/4/2015 3:15:00 PM
HB 123