Legislature(2015 - 2016)BUTROVICH 205
04/07/2015 09:00 AM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB93 | |
| SB62 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 93 | TELECONFERENCED | |
| += | SB 62 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 62-REGULATION OF MARIJUANA BUSINESSES; BOARD
9:16:22 AM
CHAIR STOLTZE called the committee back to order and announced
the consideration of SB 62.
9:16:40 AM
CHAD HUTCHINSON, Staff, Senator John Coghill, Alaska State
Legislature, Juneau, Alaska, introduced himself.
JESSE LOGAN, Staff, Senator Lesil McGuire, Alaska State
Legislature, Juneau, Alaska, introduced himself.
MR. HUTCHINSON said SB 62 is the regulatory bill for marijuana
businesses. He noted that Senator McGuire has a heightened
interest in some of the provisions and discussions as it relates
to advertising, labeling, serving size, and packaging. He
remarked that the issues previously noted have been mentioned
constantly in other bills.
MR. LOGAN explained that based on various discussions and floor
debate on SB 30, major areas of interest were identified and
addressed. He specified that marketing and advertising,
packaging of products, labeling, and serving size of edible
marijuana were looked at. He detailed that brief excerpts were
taken from the issues that SB 62 addressed and compared against
recommendations made from the Alaska State Medical Association
(ASMA) and the Colorado Task Force Report on the Implementation
of Amendment 64. He specified that Amendment 64 is the
constitutional amendment that legalized marijuana in Colorado.
He added that the some of the recommendations made by the
Colorado Task Force (CTF) were not fully implemented and some of
the state's actual laws will differ from the recommendations.
9:18:36 AM
He addressed "Marketing and Advertising of Marijuana, Marijuana
Products, and Marijuana Accessories." He said in SB 62, Section
17.38.075 states that marijuana may not be advertised or
marketed in a manner enticing to minors. He stated that the
section relating to minors was the most important provision of
the marijuana advertising allowables. He said ASMA similarly
recommended that products are ensured to not be advertised or
marketed directly to those under 21 years of age. He specified
that ASMA recommended allowances for in-store advertising,
publically visible advertising, web-based advertising, etc. He
revealed that the bill's sponsors are awaiting legal opinion on
the extent to restrictions that can be placed on advertising and
marketing relating to the First Amendment.
MR. LOGAN revealed that CTF recommended that the legislature
should provide certain guidelines on a state level, but allow
for further limitations at a local level. He detailed additional
CTF marketing recommendations as follows:
· Prohibit mass marketing campaigns that have a high
likelihood of reaching children: television, radio, and
direct mail.
· Prohibit health or physical benefit claims.
· Allow for "opt in" marketing programs such as e-mail clubs.
· Allow marijuana to be offered in retail stores only and not
allow for regular non-marijuana products to be sold as
well; example, a soda could not be purchased at a marijuana
retail store.
· Allow for "opt in" based location services; example, text
messaging on mobile devices.
· Prohibit unsolicited pop-up ads on the internet and only
allow advertising banners on adult orientated websites.
Advertising on websites such as Facebook where minors use
would not be allowed.
· Allow marijuana retailers to host their own websites.
9:21:07 AM
He addressed "Packaging Requirements for Marijuana and Marijuana
Products." He noted that Colorado and Washington vary in their
approaches to packaging. He explained that SB 62 allows the
control board to adopt regulations regarding packaging and
labeling, which was in Ballot Measure 2. He noted that SB 62
specifies that marijuana products can only exit the retail
establishments in a child-proof container. He added that a
wording change to the bill was advised where child-proof should
be changed to child-resistant.
He revealed that ASMA had similar recommendations that products
are ensured to not be packaged or marketed to entice or attract
children. He pointed out that ASMA vacillated between
identifying people under 21 or children. He added that there was
confusion on the difference between marketing to someone who is
age 20 versus age 21, so SB 62 stuck with the definition of
"minor." He said ASMA also recommended that marijuana should be
prohibited from packaging that appears familiar, e.g. anything
that looks like a normal product like a candy bar or a soda.
He explained that CTF recommended that packaging in Colorado be
addressed in three ways: packaging by the manufacturer that
meets certain standards set by the control board, packaging by
the retail establishment's operator prior to the point of sale,
or the use of an exit shopping bag or container with a child-
resistant lock. He revealed that Colorado decided to go with the
child-resistant shopping bag or container. He added that an
opaque rather than a clear child-resistant bag was recommended.
He noted that the intent was to add language pertaining to an
opaque child-resistant bag in the drafting of Section C-1 of AS
17.38.090, but the drafting created some confusing language. He
said a variety of different languages were considered as to how
to implement an exit-bag in statute. He set forth that an
overall definition for an exit-bag would be:
A child-resistant package which meets all of the
requirements and definition of child-resistance in the
American Society for Testing and Materials (ASTM)
standards. If the package is not for one-use, then the
package should be re-closable and when closed should
meet the same ASTM standards.
MR. LOGAN summarized that an exit-bag would provide a
concealable way to exit and transport marijuana so that children
are not enticed or cannot view the marijuana.
9:24:01 AM
He addressed labeling for marijuana and said there are a variety
of safety factors to consider. He referenced image examples of
labeling used in Colorado and Washington. He said SB 62 states
the following:
A container must be packaged and clearly labeled with
the contents, it may not have pictures or other
representations that would be enticing to minors, and
it should be labeled for potency and a certification
of safety. The certification of safety would be done
by a testing lab certified by the Alaska Department of
Environment Conservation (DEC).
He said ASMA recommended that labeling should show the
following:
· Tetrahydrocannabinol (THC) content.
· Number of servings contained in edible products.
· Warnings that the product contains marijuana.
· Marijuana potency.
· Warning similar to tobacco for use while pregnant.
MR. LOGAN said CTF recommended labeling should show the
following:
· Total content of THC by weight or a milligram dose of
active THC in the total THC for edibles.
· Listing of pesticides, herbicides, fungicides, and solvents
that were used in the cultivation of processing.
He added that all testing for labeling requirements is assumed
to be done by a laboratory certified by DEC.
He addressed "Serving Size and Packaging of Edible Marijuana
Products." He said there was recent debate on edible serving
sizes. He said SB 62 specifies that individual THC doses cannot
be more than 10 milligrams. He pointed out that some people are
interested in lowering the individual dose threshold. He added
that SB 62 recommends that each edible dose be wrapped
individually, but marijuana packages could be sold with multiple
doses inside. He noted that ASMA recommended the following for
serving size and packaging for edible marijuana products:
· Require edible products to be stamped or shaped into
distinct and easily recognizable ways.
· Labeled for THC content, number of servings, and a warning
that the product contains marijuana.
He said CTF had a variety of serving size and packaging
recommendations that are very similar to the recommendations
made in SB 62. He specified CTF's recommendations as follows:
· Appropriate limitations on THC.
· Amount of servings in a dose should be set at 10
milligrams.
· Serving size clearly labeled on the package.
He explained that the intent for smaller serving sizes,
labeling, and packaging requirements is to get at the
possibility for over consuming THC.
9:27:16 AM
CHAIR STOLTZE noted that ASMA had some things that were even
more important that were not mentioned. He pointed out that ASMA
made recommendations for strict testing requirements, strict
liability in identifying responsibility, and requirements for
insurance and bonding. He asked if the three important items
dismissed in the presentation will be addressed by the Senate
Judiciary Committee.
MR. LOGAN answered that the Senate Judiciary Committee will be
happy to address the items noted by Chair Stoltze.
CHAIR STOLTZE remarked that the three ASMA recommendations that
were not mentioned in Mr. Logan's presentation are three of the
most important features for the public's protection. He asserted
that there must be an assurance that dosages are accurate, the
product is safe when compared to other regulated drugs, and
liability must be addressed for litigious reasons. He remarked
that he questioned the public's protection without a bonding or
insurance requirement.
9:28:56 AM
MR. HUTCHINSON replied that SB 62 does touch on the testing and
certification process for the marijuana testing facilities. He
said the bill's sponsors are open to suggestions to better
articulate the language.
CHAIR STOLTZE asked that bonding and insurance be addressed.
MR. LOGAN answered that bonding and insurance were not addressed
in the bill.
SENATOR WIELECHOWSKI recommended that Legal Services be
contacted to address the possible interplay of marijuana
labeling regarding pesticides, herbicides, and fungicides. He
noted that the U.S. Supreme Court ruled in a case that the
Federal Insecticide, Fungicide and Rodenticide Act (FIFRA)
preempts inconsistent rules on labeling.
9:30:05 AM
SENATOR COGHILL asked to confirm that the state would have to
initially use out-of-state testing.
MR. HUTCHINSON answered yes.
SENATOR COGHILL remarked that certification is going to be at
least problematic due to a lag in time and expense. He asked if
the logistics with out-of-state testing has been looked at.
MR. LOGAN answered that his understanding is the Interstate
Commerce Clause would be violated if recreational marijuana is
sent out-of-state. He revealed that a few private companies are
interested in establishing testing facilities in Alaska.
SENATOR COGHILL remarked that out-of-state testing would be one
of the industry barriers where the state makes requirements that
the industry will have to figure out how to comply.
CHAIR STOLTZE opined that testing is a barrier that DEC has
pretty much been hands-off on. He remarked that DEC testified
that they are not going to receive any assistance from federal
agencies on how to regulate an illegal substance. He said DEC
will have to clarify what their statutory testing involvement
will be and set up testing requirements to bring in an out-of-
state entity. He pointed out that the initiative's sponsors have
testified that they want to self-regulate and test in-house with
their own testing companies. He asserted that addressing testing
regulations has been all over the map. He remarked that he does
not know if a product can be guaranteed as safe, but informing
the public what is in a product can be guaranteed.
MR. LOGAN explained that testing facilities were addressed in SB
62 and certification for facilities would be done by DEC. He
said the testing facilities can test for a wide variety of
things, but safety is probably the most important one.
CHAIR STOLTZE commented that the Department of Labor should be
involved due to possible workers' compensation issues. He
remarked that he does not know how dangerous testing marijuana
is.
9:32:50 AM
SENATOR HUGGINS asked what will be used for marijuana to keep
kids from being able to have access marijuana when they are
unsupervised at home.
MR. LOGAN responded that child-resistant exit-bags was the
solution that Colorado came to. He noted that similar to pill
bottles, child resistant exit-bags will not work for children
over 10 years of age.
SENATOR HUGGINS asked if there have been cases in Colorado or
Washington where child-resistant bags did not work.
MR. HUTCHINSON revealed that Colorado and Washington have seen
an increase in emergency room visits due to children ingesting
marijuana. He said the states are looking at funding a campaign
to educate parents. He said child-resistant packaging is one
issue that SB 62 is trying to address.
9:34:45 AM
At ease.
9:35:27 AM
CHAIR STOLTZE called the committee back to order.
9:35:36 AM
KEN ALPER, Director, Tax Division, Alaska Department of Revenue,
Juneau, Alaska, introduced himself.
CHAIR STOLTZE asked for an overview of the state's tax regime on
the marijuana legislation as defined by the initiative. He
inquired what net gain the state can expect in the coming fiscal
year and the years after.
MR. ALPER replied that the Department of Revenue (DOR) provided
a fiscal note on tax revenue that projects a range of $5 million
to $17 million with a mid-line number of $12 million for FY17.
He specified that tax collections are anticipated to start the
first month of FY17 in July 2016. He detailed that in 2016, the
first licenses are expected to be issued in May, the first legal
sales roughly in June, and the first tax collection to occur in
July.
He revealed that the marijuana consumption projections were
based on academic studies and poling. He opined that the data
acquired from poling may be inherently flawed because people are
not honestly answering if they consume marijuana. He added that
calculating marijuana consumption also involves projecting the
proportion of people who will buy legal marijuana versus the
black market. He remarked that people converting from the black
market to the legal market is going to be dependent on the
actions taken in the Legislature.
He detailed that maximizing marijuana's "legal umbrella size"
will depend on legislation that makes it easier to conform, get
a license, and making sure that taxes create the chain of
custody in the regulatory oversight that will enable adequate
law enforcement.
He said the tax disposition is anticipated to be regulated and
enforced the way alcohol is. He explained that half of all
alcohol taxes are diverted to dependency programs. He detailed
that $40 million in alcohol taxes come into the state every year
with $20 million going to the mental health budget and $20
million going to the general fund. He explained that the
entirety of the $50 an ounce marijuana wholesale tax would go to
the general fund; however, the eventual writing of that would be
up to the will of the Legislature.
9:38:43 AM
CHAIR STOLTZE asked if Mr. Alper meant the will of the people.
MR. ALPER answered yes. He specified that tax laws, details, and
making sure all of the pieces fit together is most certainly the
responsibility of the Legislature.
CHAIR STOLTZE replied that he wanted to confirm that Mr. Alper
said success is dependent on the Legislature. He asserted that
Mr. Apler's budget submission is a panacea.
SENATOR COGHILL noted that a lingering question with legislators
addresses cash and how transactions will be brought in. He said
currently the banking industry is not willing to step up. He
asked if DOR has addressed tax payments made with cash.
MR. ALPER answered that DOR has addressed tax payments with
cash. He specified that DOR has decided not to take any steps
until the legislation has been reviewed after the session. He
noted that Colorado collected $65 million in their first
calendar year through marijuana excise and sales taxes. He
revealed that 40 percent of Colorado's tax payments were brought
to their front-door via cash. He said the department will have
to consider security measures such as safes, armored cars, and
security guards due to the possibly of dealing with cash.
9:40:47 AM
CHAIR STOLTZE asked if DOR has projected the fiscal impact from
the safety measures due to cash tax payments.
MR. ALPER answered that DOR has not. He said DOR hopes that the
tax payments do not come down to paying with cash. He asserted
that cash payments are dependent on the federal government. He
noted that a bank in Colorado is trying to receive approval from
the federal government to allow interbank transfers. He said all
of the banking problems would go away if the federal government
relents and lets some degree of marijuana industry banking. He
admitted that current banking regulations for marijuana is in a
gray-area.
CHAIR STOLTZE asked if DOR is working with any institutions to
resolve the cash issues.
MR. ALPER answered no. He reiterated that the department is
waiting to see the legislation and then begin a fairly robust
regulatory process during the summer that will include reaching
out to the banking and cash handling industry.
SENATOR COGHILL addressed Section 29 in the bill and asked to
confirm that licensing is tied to accountability where excise
taxes are reported through a statement submission and
enforcement is done through maintaining a license.
9:42:32 AM
MR. ALPER answered that the concept fits into what Colorado has
described as the seed-to-sale chain of custody where the
marijuana is tracked to see where it is and where it comes from.
He specified that the reporting process identifies whether
marijuana was purchased from a licensed grower. He noted that
DOR has submitted expanded and proposed language that will
increase the department's ability to track marijuana, enforce
taxes, and identify people who might be selling unlicensed
marijuana.
SENATOR HUGGINS asked if illegal marijuana from Mexico that was
confiscated would be auctioned off for tax purposes.
MR. ALPER answered that scenario that Senator Huggins described
is hard to envision where the state is involved. He surmised
that federal or local officials would be involved with illegal
contraband and the marijuana would ultimately be destroyed. He
said the Alaskan marijuana growing community is going to try to
establish themselves as the source for Alaska's marijuana
consumers. He specified that DOR's concern is that unlicensed
marijuana grown in Alaska is sold by a retailer or processor.
9:45:48 AM
CHRIS HLADICK, Commissioner, Alaska Department of Commerce,
Community, and Economic Development (DCCED), Juneau, Alaska,
stated that he is not aware of any insurance companies that are
interested in being involved with the marijuana industry. He
noted that he will find out if any bonding companies are
involved with the marijuana industry. He asserted that legalized
marijuana has many questions surrounding it and will continue to
have many questions for many years.
CHAIR STOLTZE remarked that without insurance there would be,
for example, no aviation or seafood industries. He detailed that
insurance is a fabric of a societal compact on sharing risk. He
asked if the insurance issue is solvable within the next year.
9:47:04 AM
COMMISSIONER HLADICK answered that he does not know what
Colorado is doing, but DCCED will work with the insurance
industry. He agreed that insurance is extremely important.
CHAIR STOLTZE said the legal sector is not ready for a general
immunity for the marijuana industry. He pointed out that a
liquor store has certain requirements from a municipality and
the initiative specifies regulation like alcohol. He asked how
the public will be protected if marijuana exists. He asserted
that the assignment of risk and responsibility will not change.
COMMISSIONER HLADICK answered that the insurance aspect will
have to be figured out because municipalities will face the same
issue.
CHAIR STOLTZE asked if Commissioner Hladick received input from
municipalities regarding their half of marijuana taxation
revenue and risk.
COMMISSIONER HLADICK responded that municipalities will have at
least half of the risk from the regulations that they might do.
CHAIR STOLTZE stated that the initiative sponsors are adamant
about boutique-growers and smaller operations within
neighborhoods having an inherent right to privacy. He noted that
the Attorney General's office and realtors have said the public
has a right to know. He asked where the Administration stands on
the privacy of operations issue.
COMMISSION HLADICK answered that he is not aware of the right to
privacy issue.
9:50:28 AM
CYNTHIA FRANKLIN, Director, Alcoholic Beverage Control (ABC)
Board, Department of Commerce, Community, and Economic
Development, Anchorage, Alaska, answered that the ABC Board will
follow the same scheme as alcohol licensing where all licenses
are publically noticed. She specified that the public is made
aware of where an establishment is proposed to be created and
the public has the opportunity for input. She said the ABC Board
anticipates that the same scheme will initially be used for
marijuana licenses. Public input on the process, locality, and
communities knowing exactly where the licenses exist and being
operated are integral and essential to the process. She asserted
that a regulatory scheme would not exist that is secretive.
CHAIR STOLTZE asked Commissioner Hladick if what Ms. Franklin
described is the official position of DCCED.
COMMISSIONER HLADICK answered yes.
CHAIR STOLTZE replied that he appreciates the DCCED's position
and noted that the issue pertains to public safety. He pointed
out that DCCED has become the default agency for all marijuana
questions. He asked if Commissioner Hladick is going to defer
most of his policy questions to the ABC Board and will other
divisions within DCCED be involved with other commerce
questions.
COMMISSIONER HLADICK answered that issues and regulations will
be vetted out through a board-process. He surmised that
regulation approval will be done by the designated marijuana
control board.
CHAIR STOLTZE asked if Commissioner Hladick sees any overall
responsibility in overseeing the board that ultimately controls
marijuana.
COMMISSIONER HLADICK answered yes. He specified that DCCED wants
to ensure that things are done correctly from a public safety
and health perspective. He said he would have a role in
overseeing and making sure DCCED is meeting the legislation's
intent.
CHAIR STOLTZE remarked that he did not expect Ms. Franklin to be
involved with the insurance issue. He asked if insurance would
be an example of an issue where a higher level commissioner or
director would be more involved.
9:53:46 AM
COMMISSIONER HLADICK answered yes. He specified that DCCED will
be more involved with insurance, banking, and working closely
with the Department of Environmental Conservation (DEC) on
testing issues to meet the legislation's intent.
CHAIR STOLTZE asked if Commissioner Hladick had an opinion if
the marijuana law will help or hurt.
COMMISSIONER HLADICK replied that the marijuana law is here and
DCCED needs to take the next steps to implement the initiative's
intent. He remarked that marijuana has been in the black market
and now the state will have the ability to enforce legal
marijuana regulations.
CHAIR STOLTZE asked how DCCED would regulate the marijuana
edibles.
9:56:47 AM
COMMISSIONER HLADICK answered that the first step is to
establish a statutory framework with maximum flexibility for a
board to deal with situations that are not yet known. He
remarked that nobody can predict how many growers or what the
interest for marijuana will be. He remarked that DCCED will
probably be coming back to the Legislature in the coming years
to address things that have not been thought about.
CHAIR STOLTZE asked to confirm that Commissioner Hladick wants
the maximum amount of flexibility with a rigid framework.
COMMISSIONER HLADICK specified that oversight is a tension
between policy and regulation.
CHAIR STOLTZE asked if the committee can receive at its next
meeting some suggestions on a policy directive from the
department's "top of the food chain." He emphasized that his
statement is no disrespect towards Ms. Franklin. He continued as
follows:
It's probably too much of a burden on her to come up
with a policy and the implementation; I think that is
our job as a policy and it is certainly the
Administration's job at the high levels of the food-
chain other than putting it on an agency director to
come up with all of the solutions. I think we need to
know what the compass is of the Walker administration
on this and be involved in the process and not just
say, "All things point to Ms. Franklin and don't
bother us with the details." That's not a request, I
think that is the imperative. Maybe I'm speaking
singularly here, but if we don't know at the highest
levels what the commitment to fulfilling our mandates
in this role are, it's really tough and I hate to just
turn it over to an agency which the Legislature has
expressed a lack of confidence in as recently as just
a couple of years ago.
9:59:44 AM
SENATOR COGHILL commented as follows:
For us, as we come into the next legislative session,
the licensing procedure has to be proceeded by the
economic factors, the bonding, and the licensing. We
need to have a long conversation with those people who
are going to be handling the money and who are going
to be undergirding the businesses, because almost any
business plan that I have ever seen starts with that
risk management profile as you come in; I totally
agree with the Chairman on that and I think we just
need to see some of those things set out. Even though
we set out regulations for licensing, there's the
consumer public safety, but there is also entering
from a black market into a legal market, there needs
to be clarity on that and we just don't have it yet.
SENATOR HUGGINS noted that DCCED becomes the lead agency on the
economics by default if SB 62 or its equivalent does not pass.
He asked what DCCED's actions will be if SB 62 fails to pass.
COMMISSIONER HLADICK answered that the ABC Board by default
would become the board and would work at trying to get some
regulations in place for next year.
SENATOR HUGGINS recommended that having DCCED's experts push
information to the Legislature would be more productive.
COMMISSIONER HLADICK replied that he agreed.
10:02:11 AM
SENATOR WIELECHOWSKI asked if DCCED needs SB 62 or can the
department regulate the industry on its own without the bill.
COMMISSIONER HLADICK answered that DCCED supports the bill.
SENATOR WIELECHOWSKI asked if DCCED will be capable of
regulating the industry if SB 62 does not pass.
COMMISSIONER HLADICK replied that he would rather have SB 62. He
specified that SB 62 gives DCCED good guidelines and a good
starting place.
CHAIR STOLTZE commented that the committee is left with more
questions than answers. He noted his appreciation that
Commissioner Hladick is not looking at marijuana regulation with
"rose colored glasses." He remarked that Commissioner Hladick
has shown interest in marijuana regulation prior to becoming
commissioner when he attended the Chiefs of Police Conference.
COMMISSIONER HLADICK answered correct.
CHAIR STOLTZE commented that SB 62 might not be the vehicle for
regulation and noted the bill's committee assignments.
SENATOR HUGGINS remarked that many people hold Commissioner
Hladick in high regard as a person that makes things happen. He
opined that Commissioner Hladick is the right person, especially
if SB 62 fails to pass, and he looks forward to working with
him.
10:04:20 AM
CHAIR STOLTZE echoed Senator Huggins' comments. He announced
that SB 62 would be held in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB62 Letter DOR Tax Division on SB 62 Tax Language 3-11-15.pdf |
SSTA 4/7/2015 9:00:00 AM |
SB 62 |
| SB62 Consolidated Public Input as of 4-7-15.pdf |
SSTA 4/7/2015 9:00:00 AM |
SB 62 |
| Legal Services Memorandum on HB 93 prepared by {by}.pdf |
SSTA 4/7/2015 9:00:00 AM |
HB 93 |
| SB62 - Colorado Task Force Report on Implementation of Amendment 64.pdf |
SSTA 4/7/2015 9:00:00 AM |
SB 62 |
| SB62 Presentation to SSTA on 4-7-15.pdf |
SSTA 4/7/2015 9:00:00 AM |
SB 62 |
| SB62 DNR Division of Agriculture Memo on Agriculture & Marijuana 3-31-15.pdf |
SSTA 4/7/2015 9:00:00 AM |
SB 62 |