Legislature(2015 - 2016)BUTROVICH 205
03/05/2015 09:00 AM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings: Alaska Police Standards Council | |
| SB62 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 62 | TELECONFERENCED | |
| *+ | SB 24 | TELECONFERENCED | |
| *+ | SB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 62-REGULATION OF MARIJUANA BUSINESSES; BOARD
9:24:21 AM
CHAIR STOLTZE announced the consideration of SB 62.
9:24:33 AM
SENATOR COGHILL explained that SB 62 is a product of the Senate
Judiciary Committee. The issues presented by Ballot Measure 2
are how to deal with the penalties of misuse and how to regulate
the marijuana industry, which is what SB 62 addresses. He noted
that the federal government considers marijuana a schedule 1
drug - a controlled substance.
9:26:38 AM
CHAD HUTCHISON, Staff, Senator John Coghill, Alaska State
Legislature, explained SB 62 on behalf of the sponsor. He said
SB 62 deals with the commercial marijuana industry and has two
major focuses, to protect young people and to eliminate the
black market.
9:28:25 AM
MR. HUTCHISON began by explaining that Ballot Measure 2 provides
that the marijuana industry is now a legitimate taxpaying
business and marijuana must be labelled to ensure that consumers
are informed and protected. He listed the provisions available
to persons 21 years of age or older and the restrictions on
marijuana use in public places.
9:29:49 AM
MR. HUTCHISON addressed marijuana-related facilities and
establishments, which all must have current, valid registration.
9:31:01 AM
MR. HUTCHISON discussed rulemaking deadlines as they apply to
marijuana. For example, the board has nine months to implement
regulations related to chapter 38, the marijuana provision, such
as civil penalties, labelling requirements, and security
requirements. The board has one year from February 24, 2015 to
begin accepting and processing applications for registration.
Also, 45 to 90 days after receiving an application the board
must issue annual registration or notification of denial.
MR. HUTCHISON reviewed local participation and control options.
For example, local governments may prohibit establishments,
enact ordinances, and establish operating fees and civil
penalties. They may also create local regulatory authority.
9:33:35 AM
CHAIR STOLTZE asked Mr. Hutchison to explain the parameters of
local control.
MR. HUTCHISON explained that the bill provides local control
authority much like the alcohol provisions that currently exist
regarding wet and dry communities. About one-third of Colorado's
counties have decided not to have marijuana establishments.
CHAIR STOLTZE summarized that it would be legal to possess and
use, but the local government could control whether or not it
could be manufactured.
MR. HUTCHISON answered yes.
MR. HUTCHISON reviewed that the Ravin Decision is unaffected by
SB 62, as are the marijuana DUI and medical use laws. Employers
may still restrict use in the workplace and private property
owners/occupiers and public facilities may prohibit or regulate
marijuana on their property.
9:35:38 AM
MR. HUTCHISON addressed how taxes are assessed on marijuana
businesses. The Department of Revenue will excise a tax of $50
per ounce when sold or transferred from a cultivation facility
to a retail store and records must be kept of the transactions.
These provisions will help to diminish the black market.
9:36:43 AM
CHAIR STOLTZE said it would be safer for all people.
MR. HUTCHISON agreed.
CHAIR STOLTZE asked if local governments are limited from also
charging taxes.
MR. HUTCHISON replied that they can charge municipal taxes at
the retail level.
CHAIR STOLTZE asked if there were any Title 29 restrictions that
applied.
MR. HUTCHISON said he is not aware of any.
CHAIR STOLTZE he compared it to the alcohol industry, which has
some Title 29 restrictions.
MR. HUTCHISON offered to get back to the committee on that.
9:38:13 AM
MR. HUTCHISON turned to the state's involvement with the
initiative. The legislature has broad power to amend the
initiative and various related laws. Departments can promulgate
regulations.
MR. HUTCHISON listed the number of bills Ballot Measure 2 has
spawned. He noted there is also a companion bill to SB 62.
9:39:28 AM
MR. HUTCHISON began a sectional analysis of SB 62. Section 1
deals with the inspection and certification of marijuana testing
facilities, which is done through the Department of
Environmental Conservation. The intent is to have samples of
marijuana sent to the facility for testing.
He explained that Section 2 deals with marijuana accessories.
Section 3 deals with limitations on advertising. It will ensure
that there is no advertising to minors. Section 4 says the board
is required to adopt regulations for commercial licenses.
CHAIR STOLTZE asked Mr. Hutchison to describe the board's
requirements.
MR. HUTCHISON clarified that he is referring to the Marijuana
Control Board, if it is approved, or the Alcohol Beverage
Control (ABC) Board, which is the current board with presumptive
authority.
CHAIR STOLTZE asked if the ABC Board is the default board as
named by the initiative sponsors.
MR. HUTCHISON said yes.
9:41:05 AM
MR. HUTCHISON continued with Section 5 which deals with
regulations for packaging and labeling of marijuana for persons
that have a marijuana retailer license. It contains child
protection elements. Section 6 discusses applications or
renewals. Section 7 is the fee payment provision. Section 8
provides that the board has 90 days to issue an annual license.
CHAIR STOLTZE asked whether the 90 days is to issue a license or
to make a determination on the issuance of a license.
MR. HUTCHISON answered that it is to issue the license. If a
license is not issued, the applicant has the ability to go to a
local regulatory authority.
9:42:48 AM
MR. HUTCHISON related that Section 9 says the board shall
consider local municipality numerical limits. It is a local
control option.
CHAIR STOLTZE asked if it is similar to alcohol regulations.
MR. HUTCHISON said it is equivalent to the process for
determining the number of liquor licenses.
CHAIR STOLTZE asked if a municipality can set up limits based on
population numbers.
MR. HUTCHISON suggested asking Ms. Franklin from the ABC Board.
CHAIR STOLTZE thought the target was similar to local control of
alcohol licensing.
MR. HUTCHISON answered correct.
9:44:23 AM
MR. HUTCHISON said that Section 10 provides that marijuana
establishments shall disclose where they will operate. Section
11 says a municipality may prohibit a marijuana establishment
through enactment of an ordinance or voter initiative. Section
12 says a municipality may enact ordinances that govern the
time, place, manner, and number of marijuana establishment
operations.
MR. HUTCHISON continued to explain that in Section 13 a
municipality may process applications within the boundaries of
the municipality if the board fails to adopt regulations.
Section 14 allows a municipality the ability to issue, suspend,
or revoke a license. Section 15 allows a municipality to
establish a schedule for annual licensing, renewal, and
application fees to marijuana establishments. Section 16 says an
applicant may resubmit their application for license to a local
regulatory authority if the board does not issue a license after
May 24, 2016, and does not provide reason/notice of denial.
9:46:39 AM
MR. HUTCHISON said Section 17 says if the board does not adopt
regulations on time, the local regulatory authority may issue an
annual license. Section 18 says a local regulatory authority
shall issue a license within 90 days after they receive an
application. Section 19 says a license issued by a municipality
shall have the same force and effect as the license issued by
the board. Section 20 provides that AS 17.38.110(j) is amended
to read that a renewed license, issued by a municipality, may be
issued on an annual basis upon resubmission to the municipality.
MR. HUTCHISON turned to Section 21 which states that a renewed
license may be issued by a local regulatory authority. He said
Section 22 is the area people are most interested in because it
deals with types of licenses: (1) producer license; (2)
processor license; (3) retailer license; (4) boutique producer
license; (5) broker license; and (6) home-grower license,
testing, notice provisions, license procedures.
9:49:16 AM
MR. HUTCHISON reviewed basic licenses and vertical licenses,
such as producer/processor/retailer licenses. There is interest
in having a license where one entity provides all three
services, hence the vertical license.
MR. HUTCHISON showed a slide that listed all the alcohol
industry licenses and predicted there would be a similar number
in the marijuana industry.
MR. HUTCHISON went into detail about the marijuana producer
license whose facilities are the only premises where more than
50 plants can be grown. They can sell to retailer or processors
and they have the state tax obligation of $50 per ounce sold.
9:51:37 AM
MR. HUTCHISON described the marijuana processor license for the
facility that produces marijuana infused products. It does not
have a tax burden.
SENATOR COGHILL asked what tinctures are.
MR. HUTCHISON explained that a tincture is an infused solution.
9:53:48 AM
SENATOR HUGGINS asked if the state has a claw-back provision if
it is losing money on the marketing of marijuana.
MR. HUTCHISON explained that the tax is built into the marijuana
produced.
SENATOR HUGGINS restated his question and said he does not want
the state to subsidize the industry.
9:55:50 AM
MR. HUTCHISON replied that they have had those conversations and
some believe that will happen at first. The hope is that
regulations provide positive results.
CHAIR STOLTZE noted Commissioner Hoffbeck would address that
concern.
MR. HUTCHISON explained the marijuana retailer license, which is
for a facility from which any individual 21 or older may
purchase marijuana. This licensee does not have a state tax
burden, but could be responsible for additional municipal taxes.
9:58:10 AM
MR. HUTCHISON related information about the marijuana boutique
producer license. This licensee is permitted to grow not more
than 50 plants at one time and may sell only to a licensed
marijuana broker. The tax burden is absorbed by the broker. The
license is to encourage legal grows.
CHAIR STOLTZE requested further information on the cost of
licenses for comparable industries.
MR. HUTCHISON explained that the board will determine what the
licensing fees will be.
SENATOR HUGGINS said it reminds him of legalizing moonshine.
MR. HUTCHISON brought up the problem of trying to eliminate the
black market.
CHAIR STOLTZE said there has been a lot of discussion about
cottage industries and the possibility of large business
involvement.
10:02:26 AM
MR. HUTCHISON explained provisions related to the home grower in
an attempt to eliminate the black market. He noted a unique
provision that provides that an individual will obtain a unique
ID number that verifies the grower's age and Alaska residency.
It is similar to provisions in Colorado.
CHAIR STOLTZE asked if the state has the technology to do the
tracking.
MR. HUTCHISON shared Colorado's procedures using radio frequency
ID tags and a computer verification system.
He noted that the tax burden for the home grower license is also
absorbed by the broker.
CHAIR STOLTZE asked if it would be a public process or a
confidential one.
10:05:16 AM
MR. HUTCHISON said the presumption is that the data is
confidential.
CHAIR STOLTZE wished to have an open discussion about it at some
point.
10:06:00 AM
MR. HUTCHINSON discussed the marijuana broker license, which
applies to those authorized to purchase any amount of marijuana
and marijuana products from licensed processor, boutique
producer or home grower and to sell any amount to licensed
processor or retailer. It is responsible for the state tax the
same as a producer is.
SENATOR COGHILL commented that this is where testing becomes
important.
MR. HUTCHISON agreed. He described the producer/processor/retail
license, which allows the retailer to exclusively sell their own
product. They are liable for the state and municipal tax
burdens.
CHAIR STOLTZE said that differs from the regulation of alcohol
which prohibits this type of integration.
MR. HUTCHISON agreed.
10:08:13 AM
MR. HUTCHISON briefly mentioned the producer/processor license
which is somewhat the same as the previously mentioned license.
He shared the definitions from Sections 23 - 27.
He said Section 28 states that marijuana can be regulated by
municipalities; Section 29 discusses the state tax of $50;
Section 30 deals with record keeping by producers and brokers.
CHAIR STOLTZE asked if the metric system would be used in the
industry for weights.
MR. HUTCHISON said he is open to suggestions.
CHAIR STOLTZE compared it to measurements of alcohol, such as
liters.
10:10:30 AM
MR. HUTCHINSON said Section 31 deals with penalties for tax
deficiencies; Section 32 cleans up definitions; Section 33 lists
the statutes that are repealed; Section 34 states that the Act
takes effect immediately.
10:12:08 AM
DR. TIM HINTERBERGER, Member, Campaign to Regulate Marijuana
Like Alcohol, addressed recommended changes to SB 62. He voiced
appreciation for the work on the bill and the incorporation of
some of the group's ideas. He spoke in support of the inclusion
of registration for home growers, boutique producers, and
brokers.
He pointed out that he has detailed several concerns in a letter
to the committee. The most serious concern is the deletion of AS
17.38.070, which contained comprehensive legal protections for
businesses and their employees. There is also concern with the
provision limiting the amount that can be sold per day, per
person. It would require extensive, intrusive record-keeping and
would be illegal under the initiative because individual
purchase records cannot be maintained by businesses. There is
also concern that the licensing fees would increase the total
amount of the maximum application fee to beyond $5,000. There is
also concern about revoking or suspending registration because
it is excessively burdensome on businesses.
He pointed out that it is clear the sponsor is aware of the goal
of the initiative is to eliminate the black market industry.
Burdensome regulations will make it more difficult to meet that
goal.
10:15:30 AM
DR. HINTERBERGER proposed several changes to the current version
of SB 62. He said the current version of the bill deletes the
quote "notwithstanding" in the paraphernalia provisions, which
is an important protection for users. It also uses broad
language in Section 3 regarding banning advertising and
packaging that may be enticing to minors. He said he supports
reasonable restrictions on advertising and efforts to prevent
advertising from targeting minors.
He also noted that the current version of the bill changes
"registration" to "license" throughout. The word registration
was carefully chosen in light of court decisions on federal
preemption. It also increases the total application fees beyond
the $5,000 cap stated in the initiative and it requires rather
than allows, a municipality to establish local licensing fees.
That should be optional.
He continued to say that the bill limits the amount that retails
the amount retailers can sell per day to adults, illegally
requiring intrusive record-keeping. To protect personal privacy,
Measure 2 prohibits regulations from requiring retailers to
collect and record personal information about their consumers.
10:18:20 AM
DR. HINTERBERGER continued to specify changes, noting the
requirement of retailers to be closed from midnight to 8:00 a.m.
He pointed out that bars do not have those restrictions. Hours
of operation are best left to the regulatory board or
localities. SB 62 forbids retailers from selling to other
licensees. They should not be prohibited from selling excess
inventory to other retailers. The bill says that a marijuana
processor cannot sell to a broker, but a broker may buy
marijuana from a processor, which seems like a contradiction.
He addressed community notices in the bill, which he deemed
excessive, especially for home growers. It says each application
and transfer would have to be posted at the proposed location,
which is unnecessary and would put small-scale growers at risk
for theft. Also, it would allow a black market grower to protest
the application of a regulated business. Similarly, SB 62 says
the board may require three weeks of paid notices in newspapers
for applicants and would be extremely costly. It says the board
"shall suspend or revoke" a license if it finds the continued
sale or manufacture of marijuana by the licensee would be
contrary to "the best interests of the public." He termed that
vague and overly broad language. He maintained that licensees
need notice of the rules and what is not permitted and should
not be subject to personal judgement of the board.
10:20:59 AM
DR. HINTERBERGER continued to specify changes. He said SB 62
says the board "shall suspend or revoke a licensee" if it finds
that the licensee has failed to correct a defect that is in
violation of "other applicable law." Given that marijuana
cultivation and sales violate federal law, this should be
revised to clearly apply only to state law. He noted that in
several places SB 62 says that a suspension or revocation of a
regulation "is required" by the board. It should say a
revocation "should be allowed." He stressed that the board
should have discretion to impose a reasonable penalty rather
than be forced to suspend or revoke a license.
He maintained that SB 62 grants the board overly broad authority
to "impose conditions or restrictions on a license." SB 62 says
that only a licensee may have a direct or indirect financial
interest in a license, which would create unnecessary obstacles
to raising capital. SB 62 repeals comprehensive legal
protections for marijuana establishments and their staff and
replacing them with language that is problematic. He said that
the bill was crafted to make marijuana establishments and their
staff's conduct lawful and exempt from criminal penalties under
state law. This proposal would delete such comprehensive legal
protections and replace them with sections "authorizing
conduct." This would make the law more susceptible to a
preemption challenge.
He offered to answer questions.
10:23:11 AM
CHAIR STOLTZE announced that SB 24 and SB 4 would not be heard
today.
10:25:35 AM
BRUCE SCHULTE, Board Member, Coalition for Responsible Campus
Legislation, testified on SB 62. He voiced appreciation for the
efforts of committee members and staff on the bill. He noted he
has submitted written comments. He first discussed an item he
supports, such as the addition of more license categories,
especially the integrated licenses. He said he can envision the
need for more licenses in the future and suggested defining a
broader framework for the licenses.
10:28:00 AM
MR. SCHULTE opined that confidentiality is an important
consideration regarding record-keeping and reporting.
CHAIR STOLTZE asked to what degree he was considering privacy.
MR. SCHULTE specified that he was thinking of the requirements
for reporting and record-keeping, not licensing.
CHAIR STOLTZE noted community concerns about reporting.
MR. SCHULTE suggested there could be a balance.
CHAIR STOLTZE asked if the state or local communities should
determine privacy conditions.
MR. SCHULTE said he thought it should be up to local
communities.
10:30:23 AM
MR. SCHULTE turned to the topic of revenue sharing. He provided
a suggestion to retain the provision in the initiative that 50
percent of the application fee be given to the municipalities.
He thought that removing that provision would increase the total
cost of licensing application fees above $5,000.
MR. SCHULTE addressed the stipulation that a municipality shall
establish both a regulatory board and regulations. He suggested
that be optional and hoped the state regulations would be
adequate.
He echoed Dr. Hinterberger's opposition to limiting the one
ounce limit at the retail level.
CHAIR STOLTZE asked if he had an opinion about the use of the
metric system for measurements.
10:33:40 AM
MR. SCHULTE replied that historically marijuana has been sold in
ounces and grams.
CHAIR STOLTZE countered that doses of THC are measured in
milligrams.
MR. SCHULTE said that is correct for purposes of measuring for
potency and for labeling; for marketing and commerce purposes,
it is typically ounces and grams.
CHAIR STOLTZE said his concern is for regulation, taxing, etc.
He said Colorado has the ounce-per-day limit for retailers. He
wondered if Mr. Schulte disagreed with that.
10:35:06 AM
MR. SCHULTE answered that Colorado has a good model, however, it
is problematic to actually put that provision in place. In order
to guarantee that one individual is not buying more than one
ounce per day, onerous, intrusive record-keeping would be
needed.
CHAIR STOLTZE contrasted that with alcohol requirements. He
asked if marijuana has any parallels to those.
MR. SCHULTE said not that he is aware of.
CHAIR STOLTZE said he was defaulting to "regulate it like
alcohol."
MR. SCHULTE said he does not dispute that. He noted that
inebriates are recognizable, whereas stoned persons do not
present the same dynamic.
10:37:06 AM
CHAIR STOLTZE summarized his concern.
MR. SCHULTE agreed it was a valid concern.
He continued with a concern about the board's ability to deny a
license under many circumstances. He agreed that some
circumstances would merit denial, however, the wording "shall"
limits the board from applying other sanctions. He also
maintained that the wording "not in the best interests of the
public" is too vague.
CHAIR STOLTZE agreed it is subjective.
MR. SCHULTE hoped that the statutes would define an overall
regulatory environment and leave some of the detail to the
regulatory board.
10:39:49 AM
MR. SCHULTE addressed a concern regarding prohibitive financial
interest. He said Alaska-based businesses support the intent of
keeping the business in Alaska, but there are situations where
out-of-state investors will be involved. He provided an example
of the expense of a testing lab and the potential need for
outside investors. He said he does not have a specific
recommendation for changing this provision.
MR. SCHULTE noted a concern during the campaign to keep "big
marijuana" out of the Alaska industry. He said he supports that
but also recognizes the need for adequate financing. He pointed
out that interstate commerce regulations may impact this section
of the bill.
10:42:32 AM
SENATOR COGHILL opined that financing is an issue, as is
interstate commerce and transportation, when planning a
regulatory scheme.
CHAIR STOLTZE asked if there should be an economic value
attached to licenses and whether they should be transferrable.
10:43:36 AM
MR. SCHULTE answered that marijuana licensing should not be like
alcohol licensing, due to potential expense.
CHAIR STOLTZE asked if the initiative has an intent to limit or
prohibit licenses from being owned outside Alaska.
MR. SCHULTE could not recall seeing that specific provision in
the initiative. He said he is speaking from an industry
perspective.
CHAIR STOLTZE thought the intent was to have Alaska-based
businesses.
10:45:16 AM
SENATOR WIELECHOWSKI stated that it should be for Alaska
businesses and Alaska residents.
SENATOR HUGGINS asked if pilots and others should be prohibited
from buying marijuana.
MR. SCHULTE answered that he is a commercial pilot and
recognizes the limits in respect to marijuana use required by
his employment. He maintained it is up to the individual, not
the retailer. It is a personal choice.
Responding to a previous question, Mr. Schulte defined tincture
as a diluted form of hash oil. He said it is often found in
medical applications. He referred to a special on CNN on the
topic of tinctures.
10:48:07 AM
CHAIR STOLTZE asked Mr. Schulte to provide commentary at a later
date on insurance, as it relates to the marijuana industry.
CHAIR STOLTZE held SB 62 in committee.