HOUSE BILL NO. 123 "An Act establishing the Marijuana Control Board; relating to the powers and duties of the Marijuana Control Board; relating to the appointment, removal, and duties of the director of the Marijuana Control Board; relating to the Alcoholic Beverage Control Board; and providing for an effective date." 1:35:07 PM CHRIS HLADICK, COMMISSIONER, DEPARTMENT OF COMMERCE, COMMUNITY, AND ECONOMIC DEVELOPMENT, relayed that the bill was the funding vehicle for the marijuana initiative and would also create a board to regulate marijuana (an option left to the legislature in the initiative language). He discussed that the administration had spent considerable time reviewing a variety of options for the regulatory framework. Following its work the administration recommended a new five-member volunteer board with a shared staff with alcohol. He explained that while some additional staff was needed for the increased workload associated with the implementation of the initiative and a new license pool, the cost of the board remained reasonable at $50,000 annually for board travel and per diem. He relayed that the cost was comparable to what would be required for the Alcoholic Beverage Control (ABC) Board to hold additional meetings to address marijuana regulations and licensing; it would provide a board solely dedicated to the responsible and safe regulation of the new industry. 1:37:22 PM CYNTHIA FRANKLIN, DIRECTOR, ALCOHOLIC BEVERAGE CONTROL BOARD, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, provided a sectional analysis of the bill: Section 1: Amends Title 4 naming the director of the Alcoholic Beverage Control Board as the director of the Marijuana Control Board. Establishes the process for appointment and removal of the director. Ms. Franklin elaborated that a majority vote would be required for both boards. She continued with the sectional analysis: Section 2: Establishes the 5 member Marijuana Control Board in Title 17 with designated seats for public health, rural, public safety, and industry. Ms. Franklin added that the section reflected the way the division wished alcohol was regulated; not the way the ABC Board was currently structured. The structure for the ABC Board was currently contained in SB 99, Title 4 revisions. She stated that there was no requirement for a public health or public safety representative on the current makeup of the ABC Board. The division felt the seats were essential in the new marijuana industry. She addressed Section 3: Section 3: Establishes terms of office for board members and chair, sets out requirements for board meetings and provides for board member per diem. Outlines the powers and duties of the board to propose and adopt regulations, establish qualifications for licensure, review applications for licensure, hear appeals from the actions of the director, reduce the area of a licensed premise, and to adopt regulations according to AS 44.63. Establishes the board's enforcement powers as mirroring those of the Alcoholic Beverage Control Board outlined in AS 04.06.110. Provides for appointment and removal of the director and establishes the duties of the director. Ms. Franklin elaborated that Section 3 included the first change from the House Labor and Commerce committee substitute; it put into statute the intent that the marijuana board would meet immediately following the ABC Board in order to reduce spending on staff travel. She moved to Sections 4 through 11: Section 4: Defines board in AS 17.38.900(1) to mean the Marijuana Control Board created by this act. Section 5: Defines "director" as the director of the Alcoholic Beverage Control Board and Marijuana control board. Defines "registration" to mean registration or licensure as determined by regulation. Section 6: Amends the duties of the Department of Commerce, Community, and Economic Development to include providing clerical and administrative support for the Marijuana Control Board. Section 7: Places the Marijuana Control Board on the list of entities whose procedural hearings are held by the Office of Administrative Hearings. Section 8: Provides for a sunset date. Section 9: Amends uncodified law for initial appointment of board members. Section 10: Provides for transition regulations such that if the Alcoholic Beverage Control Board adopts any regulations before the Marijuana Control Board is created, those regulations can be implemented, enforced, amended or repealed by the Marijuana Control Board and provides that regulations adopted by the board in any transition period take effect after the effective date of the act. Section 11: Provides for an immediate effective date. 1:40:34 PM Co-Chair Thompson relayed that the bill would come before the committee again at a later date for additional discussion and public testimony. Vice-Chair Saddler asked why Sections 1 and 2 both included provisions for the appointment and removal of the director. Ms. Franklin replied that Section 1 amended existing Title 4 law so that the statutes regarding alcohol also indicate that the director of the ABC Board was simultaneously the director of the Marijuana Control Board. Section 2 addressed the same issue in Title 17. Representative Gara thanked Ms. Franklin for her work on the bill. He observed that enforcement would be needed when commercial operations began. He believed that extra enforcement staff (beyond current police officers, troopers, and law enforcement) were not necessary until revenue was generated from marijuana. Additionally, regulations would need to be developed; however, he disagreed with the process where the Department of Law charged the ABC Board for work done by its attorneys. He did not believe the services represented a real cost. He questioned whether the cost should be included in the fiscal note. Co-Chair Thompson believed Commissioner Hladick had a comment about the possibility of not needing to hire two sets of enforcement officers. Commissioner Hladick replied that any new enforcement officers would be cross-trained in order to work together when traveling throughout the state. The administration believed that before commercial operations began there would be commercial operations starting, which would keep officers busy. Co-Chair Thompson surmised that officers would be cross- trained in order for one person to have the ability to handle both alcohol and marijuana issues. Representative Guttenberg pointed to the 2018 expiration date for the board. He wanted to ensure that the date allowed sufficient time for the Division of Legislative Budget and Audit to do an accurate job to provide the legislature with a report. Ms. Franklin replied that the division would follow up with the timeline. She added that the sunset matched the date of the ABC Board extension. Representative Guttenberg understood. However, he thought the initial audit of the Marijuana Control Board may need to be a bit different. Representative Pruitt addressed board membership. He thought the public health, rural, public safety, and industry seats were fairly clear; however, the fifth seat was either filled by a member of the general public or from the marijuana industry. He cited Sections 2(e) and 2(f) of the bill: (e) Not more than two members of the board may be engaged in the same business, occupation, or profession. (f) A board member representing the general public, the public safety sector, the public health sector, or a rural area, or the member's immediate family member may not have a financial interest in the marijuana industry. Representative Pruitt continued that due to the language related to the fifth board seat, there could potentially be two individuals with a financial interest in the marijuana industry on the board. He asked if that was the intent. He wondered about the reason for the potential duplication. Ms. Franklin answered that the "or" was included because the background of the director was taken into consideration. For example, if the director had a marijuana industry background, the industry would lose a seat on the board. Likewise, if the director had a public safety background, the public safety seat on the board would be replaced by a member of the general public. The language was a recognition that with a five-member volunteer board that would only meet a few times per year, the director's background had a significant impact on the agency; it was an attempt to avoid background duplication between the director and a board member. The replacement by a member of the general public would only occur if the director had one of the designated backgrounds. 1:47:40 PM Co-Chair Thompson noted that the committee would hear the bill the following week. Representative Guttenberg referred to the board membership, specifically related to a member from the marijuana industry. He reasoned that there were different components of the industry. He wondered if the concept had been taken into account. Ms. Franklin replied that there had been significant discussion related to the industry seat, particularly in the first two years when regulations would be developed. The department recognized there would be different aspects of the industry just as there were in the alcohol industry. The makeup of the board did not include a prohibition on any certain section of the marijuana industry. She noted that there was a section in Title 4 that prevented a wholesaler from having a seat on the ABC Board. The division had not identified any aspect of the industry that would eliminate a person from consideration as a board member. She added that it was anticipated that there would not be a way to represent all aspects of the industry on the board. HB 123 was HEARD and HELD in committee for further consideration.