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