Legislature(2021 - 2022)BARNES 124
02/09/2022 04:30 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB289 | |
| HB295 | |
| HB276 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 289 | TELECONFERENCED | |
| *+ | HB 295 | TELECONFERENCED | |
| + | HB 276 | TELECONFERENCED | |
| + | SJR 15 | TELECONFERENCED | |
HB 289-AK MARIJUANA INDUSTRY TASK FORCE
4:32:14 PM
CO-CHAIR FIELDS announced that the first order of business would
be HOUSE BILL NO. 289, "An Act establishing the Alaska marijuana
industry task force; and providing for an effective date."
4:32:34 PM
REPRESENTATIVE GRIER HOPKINS, Alaska State Legislature, as prime
sponsor of HB 289, introduced the bill. He spoke as follows:
This bill would establish the Alaska Marijuana
Industry Task Force to take a holistic look at our
state's growing marijuana industry, analyze its
strengths and weaknesses, and propose a package of
reforms. These nonbinding reforms would be submitted
to the Marijuana Control Board, the governor, and the
legislature for consideration and possible action.
This legislation does not create a permanent task
force, nor does it create a permanent state funded
position. Rather, this task force would complete its
work between the time this bill is passed, probably
this legislature, and over the 2022 legislative
interim, and deliver its final report at the beginning
of next session, disbanding itself at the end of the
year and giving us that report.
This bill does not require the expenditure of any
unrestricted general funds. Instead, the cost of this
task force would be borne by the program receipts
generated by Alaskan marijuana industry. While I am a
firm believer in free markets and the inevitable
sorting out of winners and losers, Alaska's marijuana
industry is ours and ? we as elected officials can and
should set the rules for the thousands of Alaskans who
have seen fit to invest their hard-earned dollars into
this market, as well as their time and energy. We can
and should ensure that the rules that we put forward
to govern our various industries are fair and
reasonable and offer those Alaskans who pursue a
career or business investment in Alaska can work hard
and achieve that success while playing by the rules.
We can and should ensure that the local governments
continue to play a vital role in authorizing,
monitoring, and gaining revenue from this industry as
well. As our uniquely Alaskan owned, operated, and
supported marijuana industry continues to evolve, the
work of this task force can help place the industry on
firmer economic footing and ensure that those Alaskans
who have entered into this industry can compete on a
level playing field. Additionally, this task force
carves out a role for Alaska's local governments to
assure that the local control of this industry
endorsed by Alaska's voters as they passed the
initiative in 2014 is strengthened and continued. We
would have the opportunity after the initiative's
passage in 2014, almost a decade later, to be able to
reform this growing and vital industry.
4:35:27 PM
JOE HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, on behalf of Representative Hopkins, prime
sponsor of HB 289, addressed why the bill is necessary. He
spoke as follows:
Why is this legislation necessary?
In 2014, Alaska voters legalized recreational
marijuana. Since that time, thousands of Alaskans
have sought to participate in this new industry as
business owners, workers, investors, consumers and
more. This industry is a uniquely Alaskan one. State
law requires that license holders be Alaska residents,
resulting in an Alaska marijuana market owned and
operated by Alaskans selling their products grown,
tested, processed, and purchased here in the Last
Frontier.
The industry which has emerged from the passage of the
voter initiative in 2014 is supported by Alaskans
across the state, but it is facing some challenges.
Many business owners are struggling to comply with the
letter and the spirit of the law, and several factors
including taxation, licensing, and enforcement
continue to challenge the industry. Recent reporting
by the Anchorage Daily News which is included in
your bill packet - shows ongoing frustration amongst
the Alaskan entrepreneurs who've invested time,
resources, and energy in this new market. Our flat
wholesale tax model makes each cultivator's crop an
expensive roll of the dice and can result in entire
harvests being discarded for fear of not generating
sufficient revenue to pay state taxes or insufficient
overhead to cover the cost of facilities, salaries,
and utilities. Unlimited licenses have resulted in a
high number of retail outlets and tying licenses to
specific properties and locations have resulted in
business owners being forced to close shop when rents
increase, or when their buildings are sold.
Make no mistake, there are solutions to these
problems, but finding and defining these solutions
will involve give and take amongst the members of the
industry, state regulators, and local governments. In
order to pursue a strategy that strengthens our Alaska
businesses, protects local control and places our
industry on a firmer economic footing, HB 289 proposes
that this task force reviews the issue, develops ideas
for industry reform, utilizes state resources to model
how those changes would affect businesses, local
governments, and state tax revenue. A simplistic one-
size-fits-all solution to this complex issue will most
likely result in additional challenges to the industry
and may cause unforeseen circumstances which compound
problems instead of rectifying them. As we've
repeatedly heard from representatives of all the
different businesses and resource development
activities in Alaska, fiscal certainty and good data
are essential components of any successful business
enterprise.
So, how will this task force operate?
The selection process for the twelve members of the
task force has been crafted to ensure representation,
expertise, and geographic diversity. The task force
will be chaired by the chair of the Marijuana Control
Board. The two state agencies most closely involved
in Alaska's marijuana industry the departments of
Commerce and Revenue - will be represented by their
commissioners or those commissioners' designees.
Because so many of these questions are economic in
nature, we've reserved a seat for an economist from
the University of Alaska. Because the voter
initiative carved out specific roles and rights for
local governments, we've included three municipal
government representatives, with a requirement that
those officials come from different judicial districts
and represent the breadth of Alaska's local
governments cities and boroughs. Because those most
affected by a decision should have a role in making
that decision, we've reserved three seats 25 percent
of the task force's membership for representatives
of the Alaska marijuana industry. Like the local
government seats, these task force members must hail
from different judicial districts and represent the
breadth of the industry cultivators, processors, and
retailers. Finally, there are two legislative seats,
in the hopes that the input and advice of legislators
can help craft a final product with a greater chance
of enactment.
As [Representative] Hopkins mentioned, this task force
is not a permanent creation. Rather, it must meet
four times over this legislative interim, conduct
their work, craft their proposals, model their data,
and submit their findings to the executive and
legislative branches for consideration and potential
action. This legislation does not create a new,
permanent position but rather relies on a temporary
position to assist the task force in crafting its
final product. The findings of this task force are
first and foremost nonbinding and are not limited [to]
suggestions for legislative fixes suggestions may
include statutory, regulatory, and administrative
changes.
Additionally, I think it is fitting and worth noting
that the cost of these efforts will be borne by
program receipts from Alaska's marijuana industry.
That's correct the cost of this task force will be
paid for by the hundreds of thousands of Alaskans
who've invested in and patronized Alaska's marijuana
industry.
4:40:37 PM
MR. HARDENBROOK provided the sectional analysis for HB 289. He
spoke from a written analysis provided in the committee packet,
which read as follows [original punctuation provided]:
Section 1:
Subsection (a): Creates the Alaska Marijuana Industry
Task Force and describes its purpose.
Subsection (b): Details membership of the task force
and those responsible for nominating members to serve.
Subsections (c) & (d): Details how vacancies on the
task force will be filled and that members are unpaid
but are eligible for travel expense reimbursement and
per diem.
Subsection (e): Details duties of the task force,
deadlines, and instructions for submitting
recommendations.
Subsection (f): Terminates the task force upon the
convening of the Thirty-Third Legislature.
Section 2:
Contains an immediate effective date.
4:41:48 PM
CO-CHAIR FIELDS opened invited testimony on HB 289.
4:42:17 PM
)LACY WILCOX, President* Alaska Marijuana Industry Association
(AMIA)* Anchorage, Alaska* Provided invited testimony in support
of HB 289.{ provided invited testimony in support of HB 289.
She noted AMIA is currently the only statewide industry
association. She spoke from a letter of support, dated 2/1/22,
which she said was approved by her board of directors, and which
read as follows [original punctuation provided]:
The Alaska Marijuana Industry Association (AMIA) would
like to offer our support for HB 289.
The excise tax on Alaskan marijuana cultivation has
set a static price floor for marijuana and marijuana
products. This static price floor is creating
instability in our industry and resulting in an
inequitable taxation burden imposed on the cannabis
industry. For example, the excise tax of $800/lb of
cannabis flower in Alaska is similar to the total
wholesale price in states like Oregon. The problem is
evident, the impacts are negative, and a solution is
needed. The solution will only be found if we have a
comprehensive task force with the right tools and the
right folks to dig in and find a solution to better
[protect] the industry and protect consumers. The AMIA
has been analyzing the current scheme against
potential new tax structures, however, without access
to state experts and data we are just shooting darts
at the wall with blindfolds on. We are hopeful that
with the passage of this legislation we will be able
to see robust, smart, and data driven conversation
occur between industry, regulators, and tax experts,
as well as municipal stakeholders and the legislature.
We are grateful to be named in the bill regarding the
selection of qualified industry representatives. We
understand that while we do not represent the entire
industry, the AMIA is the only statewide industry
trade group that exists, so we therefore feel it is
appropriate language. We promise to send forward our
best and brightest and take this responsibility very
seriously.
The bright goal for the AMIA is to help identify a
sustainable, enforceable, and above all else, fair tax
structure. This tax structure should allow for growth,
not hardship and should provide a path to compliance
without subjective review or punitive action wherever
possible.
We are grateful to be considered a valuable industry,
job provider, taxpayer, and general business community
asset to Alaska. We see a bright future and are
hopeful that this task force will come to fruition,
and we can move forward together.
MS. WILCOX added that it is no secret that [the industry] is
struggling. She urged the committee's support for the bill.
4:44:55 PM
REPRESENTATIVE NELSON asked how many of the businesses in Alaska
are covered by AMIA.
MS. WILCOX replied that AMIA is currently in a membership drive,
so she doesn't have a percentage. She said there are about 500
licensees and AMIA probably represents close to 100 of them on
its normal post-membership drive season. She added that the
pandemic has slowed down the outreach to get members.
REPRESENTATIVE NELSON noted the bill provides that AMIA will
appoint three members to the [task force], two of which would be
AMIA members and the third which would not be an AMIA member.
He asked whether AMIA has anything it will be holding itself to
that will alleviate his concern that the other 400 licensees
would not be involved.
MS. WILCOX responded that with the passage of HB 289 she would
like to build a process to open applications to any licensee.
She said being able to advertise this as something AMIA can do
for people will encourage membership among those who have not
considered joining. Many Alaskans and Alaska businesses are not
joiners, but she still talks to those people as they are an
important and valuable part of the industry. She will work to
honor the spirit of the task force. It isn't AMIA's members who
have the most to say, some of the smartest people are the
quietest people and she would like to find them.
4:46:55 PM
REPRESENTATIVE SCHRAGE inquired about the makeup within AMIA's
membership between cultivation, manufacturing, and retail. He
further inquired about the unification of views regarding where
taxes should go with respect to the industry and whether the
balance is right.
MS. WILCOX answered that roughly 240 small and large licensed
growers and 145 retail licenses are operating, and there are
about 50 manufacturing licenses. Much is going to be heard
about market saturation, potential license caps, and other
solutions for helping to find market equilibrium, she continued.
She herself is a proponent of fixing the things that are broken
before going to the extreme measure of instituting a license
cap. If asked about taxes, cultivators are going to say the tax
should be shifted away from them, retailers are going to suggest
the tax stay where it is or perhaps reduced, and manufacturers,
who are kind of in the middle or vertically integrated, are
going to be kind of indifferent because they are protected by
their own business model. So, she advised, there is not
consensus and consensus can only be found if modeling is done.
4:48:32 PM
REPRESENTATIVE MCCARTY referred to page 2 of the bill, lines 29-
30, regarding task force members serving without compensation.
He asked if it is anticipated that the meetings will be virtual,
rather than live, to reduce per diem and travel expenses.
MS. WILCOX responded that AMIA would be happy to meet virtually.
She deferred to the sponsor to answer the question.
MR. HARDENBROOK replied that in discussions with Glen Klinkhart,
director of the Alcohol and Marijuana Control Office, Mr.
Klinkhart said that throughout the [COVID-19] pandemic the board
has been meeting mostly virtually, which the board would
continue doing with this task force. The fiscal note currently
includes money to cover the cost of travel and lodging but if
the legislature chose to make the task force meet virtually or
put that intent in, it would be a substantial cost savings on
the total fiscal note of the task force.
REPRESENTATIVE MCCARTY stated that virtual meetings would be his
recommendation.
4:50:03 PM
REPRESENTATIVE KAUFMAN asked why a bill is needed given other
industries meet and discuss how to improve their industries.
MR. HARDENBROOK answered that a key reason for government
involvement in this task force is specifically the data that is
collected by the state as the enforcer of the laws through the
commerce department as well as the collection of revenues
through the revenue department. By having those two aspects of
state government involved and mandated to participate, modeling
can be done by the industry and local and state governments on
how changes to taxation would impact revenue flows to the state,
to the industry, and to the local governments. As a participant
in that, the state can access the data and do that modeling and
can make sound fiscal decisions that protect the bottom lines of
the state and municipalities, and that put the industry on
firmer economic footing.
REPRESENTATIVE KAUFMAN said it seems that those are simply
deliverables that could just be pulled down and he isn't sure a
government partnership is needed when just the deliverables, the
data, are needed and that data should be available.
MR. HARDENBROOK replied that any industry would prefer fiscal
certainty and good data when it comes to making business
decisions. When talking about adjusting the levers of taxation
and an industry that is entirely located within Alaska and
producing revenue for local governments, changing those levers
without good data to inform how those decisions will impact the
industry, state government, and local government, perhaps could
make the situation worse as opposed to solving the problems.
Modeling changes to the taxation scheme has been difficult to
develop and data has been difficult to procure. Perhaps setting
up a task force to ensure that people who have the data, folks
who have the expertise on the industry, and those who have the
expertise on how the industry works at the local level can get
together and formulate a solution is the most responsible way
forward.
4:53:18 PM
REPRESENTATIVE SCHRAGE offered his understanding that revenue
from marijuana taxes could go to several places. He asked which
designated general fund (DGF) would be used in this fiscal note.
MR. HARDENBROOK deferred to Mr. Klinkhart to provide an answer
to the question because he developed the fiscal note.
4:53:46 PM
GLEN KLINKHART, Director, Alcohol and Marijuana Control Office
(AMCO), Department of Commerce, Community, and Economic
Development (DCCED), responded that the sources are going to be
the DGF from the program funds specifically, so it would be
coming out of the receipts that are received.
4:54:43 PM
JANA WELGZIN, Owner, JDW Counsel, provided invited testimony in
support of HB 289. She stated that her firm represents hundreds
of marijuana licenses in the state of Alaska. She said the
questions being asked show that members are thinking about this
industry and how to move it forward and make it sustainable for
Alaska. These issues need to be discussed in a meaningful way,
not just a few industry folks getting together, she continued,
because federal legalization is on the horizon. Without
preparation, Alaska's marijuana industry will be demolished when
federal legislation arrives. To be prepared the industry needs
to be strong enough to stand on its own or relevant enough to be
bought out. The industry cannot do that with a product price
war that for some cultivators results in a 50 percent taxation
while another cultivator growing the same pounds and same
strain, but selling it for more, is taxed at around 27 percent.
This regressive tax structure isn't fair or sustainable. [The
proposed task force] would allow Alaska's marijuana industry to
work with local governments and experts in the Department of
Revenue to develop a system that is going to make the state more
money in the long run because the industry will survive if this
is done right. This bill will be of benefit to Alaska for many
years; detrimental consequences will be faced if nothing is
done.
4:56:42 PM
NICHOLAS MILLER, Chair, Marijuana Control Board, Alcohol and
Marijuana Control Office (AMCO), Department of Commerce,
Community, and Economic Development (DCCED), provided invited
testimony in support of HB 289. He said he is a licensee and
that there has been lots of discussion about the taxes and ways
to improve commerce in Alaska through statutory and regulatory
changes. Partnership is needed from an economist and holders of
the data so that good decisions can be made. Making decisions
based on the information that is had now is not in the interest
of anybody in the state.
[HB 289 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 295 ver. A 2.9.22.PDF |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Sponsor Statement 2.9.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Sectional Analysis 2.9.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Letter of Support - DEN 2.1.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Letter of Support - ADS 2.9.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Fiscal Note DCCED-CBPL 2.4.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Fiscal Note DOH-LABS 2.4.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 295 Fiscal Note DOH-MAA 2.4.22.pdf |
HHSS 3/31/2022 3:00:00 PM HL&C 2/9/2022 4:30:00 PM |
HB 295 |
| HB 289 ver. B 2.9.22.PDF |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Sectional Analysis 1.31.2022.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Sponsor Statement 1.31.2022.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Letter of Support - AMIA 1.31.2022.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Letter of Support - AMIA 1.31.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Research - ADN Article on Alaska Marijuana Industry 11.07.2021.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Research - ADN Article on Alaska Marijuana Industry 11.30.2021.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 289 Fiscal Note DCCED-AMCO 2.4.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |
| HB 276 ver. A 2.7.22.PDF |
HL&C 2/9/2022 4:30:00 PM |
HB 276 |
| HB 276 Sponsor Statement 2.7.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 276 |
| HB 276 Sectional Analysis 2.7.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 276 |
| HB 276 Fiscal Note DCCED-CBPL 2.4.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 276 |
| HB 276 MLA Overview Presentation 2.7.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 276 |
| HB 289 Letter of Support - AMIA 1.31.22.pdf |
HL&C 2/9/2022 4:30:00 PM |
HB 289 |