Legislature(2015 - 2016)HOUSE FINANCE 519
04/13/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB190 | |
| HB123 | |
| HB154 | |
| HB105 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 190 | TELECONFERENCED | |
| + | HB 105 | TELECONFERENCED | |
| + | HB 154 | TELECONFERENCED | |
| += | HB 123 | TELECONFERENCED | |
| + | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED |
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."
CYNTHIA FRANKLIN, DIRECTOR, ALCOHOLIC BEVERAGE CONTROL
BOARD, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, discussed the legislation. She reported that
HB 123 created a five member volunteer board that would be
housed under the same agency as the Alcoholic Beverage
Control Board (ABC). Both boards would share one director
and a staff of 16 employees statewide who were tasked with
licensing, enforcement, and administrative duties.
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson CLOSED public testimony.
Representative Wilson questioned the fiscal note. She cited
the $756.4 thousand appropriation for services and wondered
what services were included.
Ms. Franklin replied that the budget included an initial
outlay of $500,000 for technology to track both licensees
and marijuana. She detailed that the services category
included a database for licensees and software to track
marijuana. Software called "Seed to Sale" was available and
was designed to track marijuana sold in retail outlets to
ensure it was legally grown. Once the software and required
technology was implemented the costs in the out-years would
be reduced.
Representative Wilson inquired about the remaining $256
thousand.
Ms. Franklin answered that the remainder included expenses
for enforcement vehicles, office lease costs, and costs
associated with additional employees.
Representative Wilson asked whether eventually the board
costs would be divided by the number of licensees and
included in the licensing fees in 2017.
Ms. Franklin replied in the affirmative. She expected that
the board costs would be "receipt supported."
Representative Wilson wondered what the estimated cost of a
license would be based on other states with legalized
marijuana.
Ms. Franklin answered that the closest comparison was the
city of Denver, Colorado with a population of 650 thousand.
The city issued approximately 900 marijuana licenses. The
city had 37 full-time employees at a total cost of $5.9
million to regulate marijuana. The city had made $14
million in tax revenue in 2014.
2:03:11 PM
Co-Chair Thompson OPENED public testimony.
LEIF ABLE, SELF, KASILOF (via teleconference), supported
the bill. He believed that the regulatory structure set up
in HB 123 was a "good idea" for regulating marijuana and
associated costs to the state. He felt Ms. Franklin had
done a good job educating herself about the topic and would
perform her duties as Chair well.
Co-Chair Thompson CLOSED public testimony.
Representative Kawasaki related that the bill delineated
the required background of potential Marijuana Control
Board members and noted that the requirements for board
membership were more extensive than the ABC board and asked
why the difference existed.
Ms. Franklin answered that the composition of the ABC board
was designated under Title 4 rules and was limited to two
members from industry and three public member; one of whom
must be from a rural area. A Title 4 stakeholders group met
and discussed composition of the ABC board and recommended
revisions that ABC board members reflected the composition
and requirement of the Marijuana Control Board. The group
responded to concerns from the public safety and public
health partners of the ABC board to expand the requirements
of board members. She noted that SB 99 (ALCOHOLIC BEVERAGE
CONTROL; ALCOHOL REG) contained the revised ABC board
designee requirements.
Vice-Chair Saddler asked how the board would determine the
license fees.
Ms. Franklin answered that the bill contained a $5000 cap
on licensing fees. She added that other fee provisions
required that half of the licensing fees must be be
refunded to municipalities if a licensed premise was
located within a municipality. She detailed that fees for
alcohol licensing varied from approximately $1,250 to
$3500. on a biennial (renewed every other year) basis and
increases were recommended by the Title 4 group to reflect
the work and time associated with regulation. She
anticipated that the marijuana fees would cost close to the
$5000 cap based on sister states (Colorado and Washington)
that had legalized marijuana, the state's alcohol liquor
license, and the work involved in licensing and regulation
in order for the board to be properly funded by program
receipts.
Representative Guttenberg wondered about the ability to
track marijuana as a new legal industry. He wondered how it
was possible to track an industry that was not able to
bank. He referred to a National Conference of State
Legislatures (NCSL) conference that invited representatives
from the banking industry and the state of Colorado that
concluded that the marijuana industry was prohibited from
banking. He wondered how the legalized states dealt with
receiving money from an industry that the federal
government considered an illegal source.
Ms. Franklin agreed that the banking industry issue was
challenging. She shared that initially, the marijuana
industry in the state would be "unbanked." She noted that
Colorado had come up with banking solutions for 40 percent
of the industry and was considered "underbanked." The state
would analyze the Colorado solutions for possible
resolutions in Alaska. The "Cole Memorandum" [federal
guidance on marijuana enforcement issues] required a
"strict enforcement scheme that lessens or minimizes
criminal activity" for states with legal recreational or
medical marijuana. The states of Washington and Colorado
had dealt with the banking issue by collecting taxes in
cash. The state was working with the tax division to ensure
that if taxes were missed on growing operations the state
had the statutory authority to collect taxes from any
licensed establishment that obtained marijuana that had not
been taxed. She conveyed that the statute prevented a black
market or criminality in the "downstream" marijuana
industry (retail shops). She indicated that the Seed to
Sale software tracking system was an essential tool in
Washington and Colorado to ensure that the marijuana sold
was legally grown. She believed the task was formidable,
but could be achieved.
Representative Guttenberg asked whether specific tracking
software existed to meet Alaska's needs.
Ms. Franklin answered that there were several options for
the software. She referred to software in use by Washington
and Colorado called "Biotrack." Twenty-two other states had
medical marijuana and used tracking systems. The board
intended to research software best suited for Alaska's
needs.
Representative Gattis wondered why dealing in cash was
legal since cash money was issued by the federal
government.
Ms. Franklin answered that the issue of using cash had not
been legally challenged for use in the marijuana industry.
Vice-Chair Saddler wondered how other states tracked the
sale of marijuana.
Ms. Franklin replied that other states utilized an ID
tagging system. She explained that in legal states,
marijuana was grown from cuttings from mother plants. When
the plant reached 8 inches tall the plant was tagged. The
tag remained with the product from bud, leaf, trim, and
even THC extraction and followed it throughout its product
life in any form via sales.
2:15:35 PM
Representative Pruitt referred to the license fees
contained in the bill. He acknowledged that license fees
were determined by the board but felt that the state should
benefit from the value of the licenses.
Ms. Franklin responded that the ABC board had the statutory
authority under AS 1738 to determine how to issue licenses
or whether to issue population limits. The Marijuana
Control Board would have the same authority. Alcohol
regulation contained a population limited system with
transferability. Discussion among the ABC board on the
"concept of a secondary market value" had taken place. The
board had considered the concept of going with a high-
quality merit based matrix system where an applicant would
receive points for meeting qualifications. Licenses would
be issued to the highest quality applicants as opposed to a
minimum qualification system chosen by lottery as employed
in Washington State. The minimum qualification system
potentially lead to businesses least likely to succeed or
comply with regulations. The merit based matrix system did
not limit licenses on the front end. However, AS 17.38
clearly established municipalities' authority to set
numerical limits on licenses. The combination of no
population limits and a merit based system without
transferability so that the licenses would transfer back to
the state in the event of a business failure was being
discussed among the preliminary regulations team and would
be openly and publically debated in the actual regulation
process.
Representative Pruitt wondered if the board had the
authority to increase licensing fees based on the board's
expenses if a merit based system was adopted.
Ms. Franklin replied that the license selection process and
fee rate were intended to be set by regulation. She added
that the $5 thousand limit on license fees was placed in
the referendum to limit the ability of the legislature or
regulatory entity to institute extremely high fees as a way
to discourage licensure.
Representative Pruitt asked for a definition of high fees.
Ms. Franklin indicated that in one state the initial fee
was $25 thousand and naturally limited the ability of
applicants from entering the industry. She believed if fees
were set "logically" reflecting the board's workload and
services, the fee would be deemed reasonable. She believed
the fee approach was supportable versus setting an
arbitrarily high fee structure.
Representative Pruitt did not want a barrier to recovering
licensing and regulatory costs because of the cap.
Ms. Franklin answered that the initiative stated that a
regulatory body shall implement "reasonable" fees not to
exceed $5 thousand. She communicated that once the board
and licensure was established and it became apparent that
$5 thousand would not cover the services required to issue
the licenses the board would take appropriate action. She
expressed confidence that a legal solution could be reached
if the cap was inadequate to cover costs and the board
maintained proof of insufficient funds. The division did
not know the cost of regulation because marijuana licensure
was entirely new. The fiscal note costs to establish the
board were initially much higher and had been trimmed
because of the state's fiscal situation. The division
attempted to implement the voter initiative in the safest
way possible for the least amount of money and keep the
second and third year costs conservative while implementing
the will of the voter in a fiscally conservative way.
Representative Pruitt asked the division to keep the
legislature apprised if the fee was not sufficient to cover
costs.
Representative Wilson MOVED to REPORT CSHB 123(JUD) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 123(JUD) was REPORTED out of committee with a "do
pass" recommendation and with two previously published
fiscal impact notes: FN2 (ADM) and FN3 (CED).
2:27:03 PM
AT EASE
2:29:23 PM
RECONVENED