Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/08/2024 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB196 | |
| SB234 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 196 | TELECONFERENCED | |
| *+ | SB 234 | TELECONFERENCED | |
SB 234-EXTEND MARIJUANA CONTROL BOARD
1:49:38 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 234, "An Act relating to the
Marijuana Control Board; and providing for an effective date."
1:49:54 PM
KONRAD JACKSON, Staff, Senator Jesse Bjorkman, Alaska State
Legislature, Juneau, Alaska, presented SB 234 on behalf of the
Senate Labor and Commerce Standing Committee. He said that this
legislation proposes to extend the Marijuana Control Board
sunset date by 3 years. He drew attention to the recent
legislative audit, which noted three issues that need to be
addressed. He noted that the legislative auditor would be
discussing these in more detail. In addition, he stated that the
director of the Alcohol & Marijuana Control Office and the chair
of the Marijuana Control Board would also be testifying. He
noted that the proposed three-year extension is significantly
shorter than the typical 8-year extension. He explained that
there are several reasons for this, including changes with the
Marijuana Control Office, Marijuana Control Board, and Alcohol &
Marijuana Control Office (AMCO), which may create significant
changes that the legislature will want to be aware of.
Additionally, a three-year sunset extension would put the
Marijuana Control Board sunset and audit date in-line with that
of the Alcohol & Marijuana control office.
1:52:27 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Alaska State Legislature, Juneau, Alaska, testified by
invitation on SB 234. She presented report findings from "A
Sunset Review of the Department of Commerce, Community, and
Economic Development, Marijuana Control Board." She paraphrased
from the following report conclusions:
[Original punctuation provided.]
Overall, the audit concluded that the Marijuana
Control Board (MCB or board) served the public's
interest by holding its meetings in compliance with
state law, actively amending regulations and
conducting investigations in a timely manner. The
audit also concluded that licenses were issued in
accordance with statutes and regulations; however,
applications were not processed in a timely manner.
Additionally, Alcohol and Marijuana Control Office
(AMCO) staff did not maintain adequate documentation
to show compliance with marijuana handler permit laws.
MS. CURTIS directed attention to page 9 of the report and said
that exhibit 3 provides a summary of all regulations passed
during the audit period. She explained that for MCB, a vote by
the majority of board members, with a quorum present, is needed
for action. She noted that licensing actions require a vote by a
majority of the board. She explained that because MCB is a five-
member board, approval of licensing actions requires a "yea"
vote from three members. Non-licensing actions require a quorum
to be present and a "yea" vote from two of the three members
present. She drew attention to the June 2021 meeting, when MCB
passed a regulation increasing the allowable THC levels for
edibles with two "yea" votes and one "nay" vote by the board's
public safety member. She noted that there were only three
members present at this meeting (the rural member was absent,
and the [public health] seat was vacant). She stated that the
audit questions whether this was in the public's best interest
and added that she would return to this question when discussing
the audit's recommendations.
1:54:20 PM
MS. CURTIS drew attention to exhibit 4 on page 10 of the report
and explained that, as of April 2023, there were 475 active
licenses and just over 6,600 active marijuana handler permits.
Auditors reviewed 10 new licenses and 8 renewed licenses and
found that all were issued in accordance with state law;
however, applications were not handled in a timely manner. She
directed attention to page 13, exhibit 6, which summarizes these
results. She noted that, on average, it takes approximately one
year for applicants to obtain a new marijuana license. She
stated that, given the high financial investment required to be
eligible for a marijuana license, this lengthy processing time
represents a barrier to entry into the marijuana industry. In
addition, the audit reviewed 25 marijuana handler permits for
compliance with state law and found that AMCO staff did not
maintain background checks. Further, six of the 25 were missing
additional documentation, which prevented auditors from
determining whether the permits were operating in accordance
with statutes and regulations.
1:55:34 PM
MS. CURTIS directed attention to page 16 and stated that, as of
April 2023, there were 59 marijuana cultivators who were
delinquent in paying their marijuana excise taxes. She noted
that this is a high number, representing over half of the
marijuana cultivators. Collectively, they owed $3.1 million in
delinquent taxes. She pointed out that marijuana fees are set at
a level that exceeds the cost of regulating the industry;
however, when the program was created, legislative intent
directed the board to establish a fee structure that would cover
the costs of regulating the industry while also recouping the
$5.5 million of state general funds that were spent to establish
the program. She stated that management reported an expectation
that the $5.5 million debt would be repaid in full by the end of
FY24. Directing attention to survey questions and responses on
page 33 of the report, she explained that the survey went out to
the 319 licensees and had a 35 percent response rate. She said
that, in general, respondents expressed a low degree of
satisfaction with the board. She pointed out that 37 percent of
respondents said that the board was not effective at serving the
public's interest - a marked difference from the 2017 audit,
which showed that licensees were very satisfied with the board's
performance.
MS. CURTIS said that the audit recommends the board be extended
for three years. This recommendation is made in recognition of a
report issued by the Governor's advisory task force on
recreational marijuana. She explained that this report may lead
to significant changes in MCB and AMCO duties and processes. She
noted that a new information system (which would significantly
change licensing and enforcement processes) was expected to be
implemented by 2023. A three-year extension would allow for a
more timely evaluation of these significant changes and would
align the MCB sunset date with that of the Alcoholic Beverage
Control Board (ABC). She stated that the audit contains three
recommendations. The first is that AMCO establishes procedures
to ensure that the marijuana handler permit documentation is
properly maintained.
1:58:30 PM
MS. CURTIS discussed the second audit recommendation that MCB
and the AMCO director should continue to implement a new license
and enforcement information system. She explained that the audit
showed that license and enforcement processes were being
administered via many spreadsheets, which were prone to error
and inefficient. The new information system is expected to
address these findings. Finally, the audit recommends that the
legislature consider requiring that MCB regulation changes be
made by a majority of board members. She reiterated that certain
changes related to THC content were made without input from the
rural and public health members - and despite a "nay" vote from
the public safety board member. While this action was lawful,
the audit questions whether it was in the public's best
interest. She noted that the Department of Commerce, Community
and Economic Development (DCCED) commissioner concurs with
recommendations one and two but believes that requiring a
minimum number of three board members would not serve the
public's interest in moving forward regulatory projects. The TCB
chair also concurs with recommendations one and two but not
recommendation three. She stated that, with respect to
recommendation three, the TCB chair stressed that the board did
not fail to consider public health, public safety, or the rural
board position when approving the regulations to increase
allowable THC levels. Further, the TCB chair believes that
requiring a majority vote on regulation changes would likely
lead to greater delays in reviewing and updating regulations.
2:00:29 PM
CHAIR BJORKMAN asked for clarification that during the June 21,
2021 meeting, one board member was absent, and one seat was
vacant.
2:00:47 PM
MS. CURTIS replied that this is correct.
2:00:53 PM
CHAIR BJORKMAN asked if there was agreement that the action
taken by the board with regard to increasing the allowable THC
levels for edibles was lawful.
2:01:07 PM
MS. CURTIS replied yes. She explained that all board actions -
with the exception of licensing actions - require a majority
vote with a quorum present. This is a five-member board with a
three-person quorum requirement - two "yea" votes are needed.
2:01:31 PM
CHAIR BJORKMAN expressed his understanding and asked for more
information regarding how an action may be "lawful" and not
being in the best interest of the public.
2:01:49 PM
MS. CURTIS explained that the audit questions whether it is
prudent to change regulations that may directly affect rural
areas, public health, and public safety - when those seats are
absent or vacant. She pointed out that, according to the board
chair, some members may have voted for the regulations to be
posted for public comment. She asserted that voting for
regulation changes to be posted for public comment is very
different from voting for regulation changes to occur. She
opined that the concern about needing more votes in order to
move regulation projects forward is valid and acknowledged that
the need for more board member input must be weighed alongside
what will allow administrative responsibilities to proceed.
However, she pointed out that licensing actions are required to
have a majority (3 "yea" votes) to pass. She added that the June
21, 2021 meeting was the only meeting that did not have at least
4 members in attendance. She noted that audit criteria are
included in the last pages of the audit and reiterated that the
actions taken were not unlawful. Rather, the audit brings
attention to this so that the legislature is aware.
2:04:08 PM
JOAN WILSON, Director, Alcohol and Marijuana Control Office
(AMCO), Department of Commerce, Community and Economic
Development (DCCED), Anchorage, Alaska, testified by invitation
on SB 234. She said that she took over as director of AMCO in
May of 2022 and much of the audit period was prior to this date.
She said that there are many positive things to report about MCB
and AMCO - which are reflected in the audit. She added that
there are other changes which support extending the sunset date
for three years, as the audit recommends. She stated that there
are currently 461 operating and licensed marijuana licensees in
Alaska. This includes 98 limited cultivators, 133 standard
cultivators, 22 concentrate manufacturers, 40 product
manufacturers, 176 retail stores, and 2 testing facilities.
MS. WILSON directed attention to the audit survey and pointed
out that while [37 percent] of respondents said the board was
"ineffective", approximately 63 percent of survey respondents
found the board "effective" or "very effective". She opined
that, while there is room for improvement, it is worth focusing
on the 63 percent. She responded to points raised by Ms. Curtis
and said that AMCO is very excited about changes to the
application review process. She explained that AMCO is currently
reviewing applications submitted in early January 2024 - which
reflects a 60-day application processing time. She noted that
much of the processing time reflected in the audit report is
outside of AMCO's control. She explained that once an
application is complete, AMCO waits for local governments and
others to give any reasons why an application should not be
approved. Once all approvals are in place, the board waits for
the licensee to indicate that they are ready to move forward.
She emphasized that both she and the MCB chair are committed to
reducing any unnecessary barriers for the industry.
MS. WILSON indicated that the new licensing system, AK Access
will be available for marijuana licensees in the future. She
expressed her confidence that AMCO would be able to address any
concerns regarding marijuana handler permits. She noted that
AMCO had concerns about maintaining confidential information
about applicants, such as social security numbers and criminal
history. She opined that AMCO and MCB have done an excellent job
ensuring that those who are entitled to a marijuana handler
permit get one while those who are not entitled do not. She
expressed support for maintaining documentation to back up these
decisions.
2:07:54 PM
MS. WILSON referred to the final audit recommendation regarding
voting requirements and stated that MCB is very active in
reviewing regulations 3 AAC 306. She explained that the statute
is skeletal and added that most of the regulations for the
marijuana industry come through 3 AAC 306. She stated that the
board is very responsive to public health and public safety
concerns, consumer needs, and economic growth. She stated that
while a vote was taken during a meeting with only three members
in attendance, in compliance with the law, this was after a long
consideration of other votes in prior meetings. She asserted
that the board knew where each member stood on the issue - and
added that if members thought it was detrimental or that a voice
was not being heard, the vote would have been delayed. She
acknowledged that the board's public health seat is currently
vacant and is not likely to be filled in time for the April 2024
meeting. She noted the board's small size and shared her belief
that the statute is working well. She shared her belief that
members consider potential public health and safety concerns -
even if they are not filling these seats on the board. She
stated that both she and the commissioner's office disagree with
the audit's final recommendation.
2:09:23 PM
MS. WILSON said that while most boards extend four or five
years, there is a benefit to aligning the audits of the ABC and
MCB audits. She expressed hope that MCB would be able to show
its success of AK Access and license review time. She added that
the board would also be considering licensing fees and
acknowledged that current fees were set at a rate that would
allow for the repayment of the $5 million to the operating
budget. She said that MCB will be able to repay in the current
fiscal year. In addition, MCB will be able to either reduce
licensing fees or request additional AMCO support. She shared
that her preference would be the latter; however, she responds
to the board and the needs of licensees. She expressed pride in
MCB and AMCO and acknowledged that there is room for
improvement. She expressed appreciation for the oversight
provided by the legislature.
2:10:47 PM
SENATOR GRAY-JACKSON asked if the budget shortfall was due to
the $3 million in delinquent taxes.
2:10:59 PM
MS. WILSON sought clarification of "budget shortfall."
2:11:07 PM
SENATOR GRAY-JACKSON clarified that she heard Ms. Wilson refer
to a budget shortfall.
2:11:10 PM
MS. WILSON clarified that she was referring to the audit finding
that licensing fees were too high. She explained that the
current licensing fees were set at this level in order to pay
back the operating budget loan that allowed for the creation of
MCB. She asked if this clarifies the budget question and offered
to also address the question regarding taxes.
2:11:37 PM
SENATOR GRAY-JACKSON replied yes and asked for more information
regarding the $3 million in unpaid taxes.
2:11:53 PM
MS. WILSON referred to the February 2024 delinquent taxes list.
She said this list shows 19 cultivators (19 out of 232
cultivators) on the tax delinquency list. She added that three
on the list have a significant amount - over $70 thousand - and
the board has directed AMCO to file to revoke these licenses.
She said that 1-2 are behind $25-$50 thousand and the remainder
owe less than $10 thousand. She clarified that of the $3.5
million due in back taxes, approximately $400 thousand is from
active licensees. This is the only group that the board has some
ability to address by potentially revoking these licenses. She
stated that collecting back taxes from expired licenses falls to
the Department of Revenue and added that it can be very
difficult to collect back taxes once licenses expire.
2:13:36 PM
MS. WILSON explained that if a previous cultivator is on back
taxes list and applies for a retail or a manufacturer license,
the board will consider the actions taken as a cultivator and
determine whether this should bar them from receiving a new
license in the industry. She stated that the board consistently
refuses licenses for those who do not pay taxes. However, she
noted that this industry has the highest tax rate at the
cultivation level and there is currently legislation to adjust
this. She surmised that changing the tax rate may help to ensure
that licensees remain in good standing with respect to their tax
payments.
2:15:00 PM
SENATOR GRAY-JACKSON said that her questions were answered.
2:15:16 PM
CHAIR BJORKMAN asked if the rural seat was vacant for the
entirety of 2021.
2:15:40 PM
MS. WILSON replied that the seat was held by three different
individuals in 2021 and said she could provide information on
the length of the vacancies at a later date.
2:16:15 PM
CHAIR BJORKMAN commented that it would be helpful to know how
long the vacancies lasted. He asked how long the public health
seat has been vacant.
2:16:35 PM
MS. WILSON replied that the public health seat has been vacant
since February 28, 2024. She noted that while there have been
attempts to find members, the search is still ongoing. The seat
will most likely remain vacant for the next board meeting. She
added that this seat is the most difficult to fill due to the
requirements for this position.
2:17:09 PM
CHAIR BJORKMAN asked if there are specific requirements under
subhead of public health that present significant barriers to
filling this position.
2:17:23 PM
MS. WILSON shared an example of an applicant who worked in the
medical profession, had experience working with patients, and an
understanding of the public health risks - but did not hold a
public health position and therefore did not meet the
requirements to fill this vacancy. She acknowledged that
requiring that the individual hold a public health position in
state or municipal government is within the legislature's
purview; however, she opined that a doctor or pharmacist would
have the relevant knowledge and understanding of the public
health risks.
2:18:21 PM
BRUCE SCHULTE, Chair, Marijuana Control Board, Anchorage,
Alaska, testified by invitation on SB 234. He said that
outstanding taxes that went unpaid have been a problem for
years. He noted that there is a proposed legislative solution
that the board supports. He stated that in 2019, the board began
to work more diligently to collect back taxes. This was done by
requiring that licensees be up-to-date on tax payments prior to
license renewal or that they be on a repayment plan with the
Department of Revenue. He shared his belief that this stance was
welcomed by those in the industry who were paying taxes. In
addition, it helped to keep the tax burden to a minimum. He said
that he is not sure what avenues are available to collect back
taxes from businesses that are now closed and corporate
structures make this even more difficult. He shared his belief
that the proposed legislation to change the tax structure would
be of great benefit.
MR. SCHULTE said that MCB members shared concerns regarding the
timeline for license approval. He added that AMCO staff have
worked to shorten the timeline as much as possible, although
some parts of this process are out of AMCO's control. He stated
that 60 days is a significant improvement. With regard to the
audit's concerns about the voting process, he explained the
issue being considered (increasing THC levels for edibles) had
been a topic of discussion at several board meetings and was
sent out for public comment for an extended period. He stated
that Alaska's allowable THC level was notably lower than that of
other states; the board voted to bring Alaska's level in-line
with other states.
2:21:52 PM
MR. SCHULTE stated that the board members work well together. He
said that if members know that a particular issue is important
to a certain member, this issue is held until that member can be
in attendance. He added that several discussions on significant
issues were rescheduled. He stated that it has been difficult to
have all board members present (and all seats filled) at
meetings. He noted that these are volunteer positions and
explained that one member left the state on short notice to
pursue a degree while others were not available for some
meetings due to other responsibilities. He expressed concern
that requiring a majority of "all board members" rather than a
majority of those present would create even greater barriers to
board actions. He shared examples of why members may not be
present at the meeting and reiterated that he is concerned about
this change.
2:23:37 PM
MR. SCHULTE discussed the licensing fees and shared his
understanding that the initial fee structure was intended to
match the operating costs of the AMCO office. He said that it is
encouraging that the fees may be reduced over time - or that
more services would be made available to licensees. He shared
his belief that either reducing fees or increasing services
would be supported by the industry and the board. He
acknowledged the work done by AMCO to streamline the process.
2:24:33 PM
SENATOR MERRICK asked if there would be a benefit to increasing
the number of board members.
2:24:46 PM
MR. SCHULTE answered no. He opined that the board is robust and
has a broad representation of viewpoints. He explained that MCB
was modeled after ABC.
2:25:19 PM
MS. WILSON clarified an earlier comment regarding the board's
public health seat and provided additional details about this
requirement. She said that the legislature previously amended
ABC regulations to allow someone who is retired from these
professions to fill this vacancy and suggested that this might
be something to consider.
2:26:33 PM
CHAIR BJORKMAN opened public testimony on SB 234; finding none,
he held public testimony open.
2:27:00 PM
CHAIR BJORKMAN held SB 234 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB196 ver A.pdf |
SL&C 3/8/2024 1:30:00 PM SL&C 3/20/2024 1:30:00 PM |
SB 196 |
| SB196 Sponsor Statement Version A.pdf |
SL&C 3/8/2024 1:30:00 PM SL&C 3/20/2024 1:30:00 PM |
SB 196 |
| SB196 Sectional Analysis Version A.pdf |
SL&C 3/8/2024 1:30:00 PM SL&C 3/20/2024 1:30:00 PM |
SB 196 |
| SB196 Fiscal Note-DOLWD-WH 03.02.24.pdf |
SL&C 3/8/2024 1:30:00 PM SL&C 3/20/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter-RDC 03.05.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter AK Chamber 03.05.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter-Alliance 02.16.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter-AOGA 03.05.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter-APA 02.28.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB196 Supporting Document-Letter-ATA 02.23.24.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 196 |
| SB234 ver A.pdf |
SL&C 3/8/2024 1:30:00 PM |
SB 234 |
| SB234 Sponsor Statement.pdf |
SFIN 4/3/2024 9:00:00 AM SL&C 3/8/2024 1:30:00 PM |
SB 234 |
| SB234 Supporting Documents-Sunset Audit 0.30.23.pdf |
SFIN 4/3/2024 9:00:00 AM SL&C 3/8/2024 1:30:00 PM |
SB 234 |
| SB234 Fiscal Note-DCCED-AMCO 03.01.24.pdf |
SFIN 4/3/2024 9:00:00 AM SL&C 3/8/2024 1:30:00 PM |
SB 234 |