HOUSE BILL NO. 273 "An Act extending the termination date of the Marijuana Control Board; and providing for an effective date." 9:13:05 AM CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, thanked the committee and relayed Representative Kito's apologies for his absence. The bill would extend the Marijuana Control Board for six years. She appreciated the time the committee took to address issues raised in the audit. She noted the licensing program and industry were new. Vice-Chair Gara noted that Representative Wilson had asked in a previous meeting what could be done to get General Fund (GF) money back [that had been used to get the program running] that would have been paid by license fees if the industry had been up and running. He asked for detail. Ms. Koeneman referenced discussion about the $1.5 million [in state funds] used to help startup the program so the initial licensees were not burdened with additional costs. She did not believe there was any issue from the industry or the board to have the money paid back. She explained that the money could not be contained in the fiscal note. She noted it was possible for the House Finance Committee to put intent language in the language section of the operating budget. Representative Wilson stated that all of the money currently generated went there [to the General Fund]. She stated that revenue was tracked for other boards. She surmised the industry had probably started paying the money back. She stated that all of the taxes earned on revenue businesses made went into the General Fund, but it was not necessarily tracked separately. She wanted to make sure the industry was paying its way and remarked that it was not tracked the same as other boards. They had to make sure whatever came in went out. 9:15:58 AM Co-Chair Foster listed other individuals available for questions. He asked the Department of Commerce, Community and Economic Development (DCCED) to address the fiscal note. ERIKA MCCONNELL, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL OFFICE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference), reviewed the fiscal impact note from DCCED. The note illustrated that if the board was discontinued, the Alcohol and Marijuana Control Office (AMCO) would eliminate eight positions and the associated costs of approximately $1.66 million. The positions included three investigators, one records and licensing supervisor, two occupational licensing examiners, one administrative assistant I, and one criminal justice technician I. Representative Wilson asked how AMCO planned on making up the $532,800 in the current budget that it would not be receiving in the following year. She wondered how many more licenses the agency would need. Alternatively, she questioned whether the agency would be close to having the same $1.6 million at the end of FY 19. Ms. McConnell answered that the board continued to receive new license applications. It was difficult to specify the precise number of needed licensees to maintain self- sufficiency. She expounded that the different license types submitted different licensing fees. The board was on track to becoming self-sufficient in FY 20 or soon thereafter. The board felt confident that ending state unrestricted general fund (UGF) support was acceptable in FY 20 with the board evaluation of licensing fees at that time. Representative Wilson asked for verification that the board counted on licensing fees to hire positions. Whereas, marijuana taxes went through DOR to the General Fund. She surmised the board was not involved in tracking tax revenue. Ms. McConnell answered in the affirmative. The board received licensing and application fees but did not receive any support from marijuana taxes. Vice-Chair Gara referenced that the state had been paying for the board's operation costs with GF and marijuana tax revenue. He asked if the board intended to reimburse the state. Ms. McConnell replied in the affirmative. Vice-Chair Gara surmised the reimbursement to the state would come from surplus or increased license fees in future years. Ms. McConnell answered it would be a combination of more licenses and an evaluation of whether license fees needed to be adjusted. The board was clear on the legislative intent that the money would be repaid. 9:20:29 AM Co-Chair Seaton asked if the department believed there was adequate legislative intent that the fees would not be reduced to pay the direct cost only of the operating board until the money had been repaid to the GF. He wondered if there needed to be more specific legislative intent to allow the collection and use of fees to cover past operations. He asked whether the board had authority to use excess fees to repay GF. Ms. McConnell responded there had been clear legislative intent in FY 17 that the legislature wanted the $1.5 million to be repaid. At the same time, the board had been authorized to repay any excess dollars as carry forward to help stabilize the board's revenue for the next couple of years. She did not have the experience to know whether it was appropriate to recommend for the legislature to add intent language in the FY 19 budget. She believed the legislature's intent was clear and the board would be working over the next several years to repay the startup costs. She communicated that the board was amenable to the addition of intent language in the operating budget if the legislature felt it appropriate to do so. 9:22:54 AM Representative Guttenberg asked if the board's reading of the intent of the legislation that the board would pay back the startup costs with fees. Ms. McConnell replied in the affirmative. Co-Chair Seaton MOVED to REPORT HB 273 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 273 was REPORTED out of committee with a "do pass" recommendation and with one new fiscal impact note from the Department of Commerce, Community and Economic Development. [Note: additional discussion on HB 273 took place after the following "at ease."] 9:24:17 AM AT EASE 9:28:44 AM RECONVENED Co-Chair Seaton made clarifying remarks to HB 273. He noted the committee had been advised there should be a language amendment in the budget describing the legislature's intent. He noted there had been two different amounts mentioned in terms of what the board would repay the General Fund. He asked the Legislative Finance Division to address the committee on the subject. LACEY SANDERS, ANALYST, LEGISLATIVE FINANCE DIVISION, relayed that AMCO had received several years of appropriations. The initial appropriation had been a supplemental made in FY 15. Each year after that AMCO had received GF. She noted that earlier in the meeting it had been stated there was a $1.5 million repayment of GF. She clarified that the total GF received from FY 15 through the FY 19 governor's proposed budget was $5.4 million. If some type of language was added to the operating budget, there would need to be clarification on which amount needed to be repaid. There had been conversation about how it could be done - one way to address the issue was to amend the carry forward language allowing AMCO to carry forward the receipts. The carry forward language had been included to allow AMCO to ramp up as it brought on licensees. The language could be amended to limit the amount to the amount of the board's annual operating budget. She explained the change would cover the board for a year and anything that lapsed could be counted towards the GF repayment. Co-Chair Seaton stated that generally on professional boards there was a fee structure supporting the operation of the board. He explained that typically fees were reduced if they were bringing in more than needed for the board's operation. There needed to be some clarification that any excess revenue from fees would go towards repaying GF prior to making a reduction to fees. Representative Pruitt appreciated the conversation. He shared that he had chaired the DCCED budget subcommittee right after the board had been established. He agreed the intent had been for the board to repay all of the costs it took to get the program up and running. He noted the process was taking four to five years. He agreed clarification needed to be made to provide a clear understanding that extra fees would go towards recouping the state's cost for establishing and regulating the board. He reasoned the board had to appropriately manage its fees to do so. He continued that the board could not just lower fees once it had attained the amount needed to cover its operations for a year. 9:33:48 AM Representative Ortiz asked what the agency's annual budget amount was. He supported the intent of the previous speaker; however, he wondered if passing the intent language would put the board and industry in a difficult position to meet the obligations. Ms. Sanders replied that she did not have the precise cost breakdown on hand. She would have to consult with the department first. The intent would be for the agency to have an entire year of operating revenue, which should not limit the agency. She elaborated that the agency could carry forward an entire year of revenue annually, to ensure it would be covered if revenue came in lower during a given year. Vice-Chair Gara stated was discussing different legislative intent options. He noted the legislature always hoped someone would follow legislative intent. One option would be to put the language in a bill, which he believed would be sloppy. He hoped to receive something in writing - potentially in regulation - from the board outlining how it intended to pay back the funds in a way that did not harm the industry. He did not believe including the language in a bill was the right approach. 9:36:04 AM Representative Guttenberg was thinking about the operation of AMCO. He asked if the operation of the Marijuana Control Board was similar to the Alcoholic Beverage Control (ABC) Board operation. Ms. Sanders believed the Marijuana Control Board was the only board with carry forward language. The ABC Board was lapsing a small amount and did not have carry forward language. Representative Guttenberg pointed out that AMCO was one agency with two boards, operating with different sets of rules. He stated, "we just need to do the right thing at the end of the day." Representative Wilson clarified it was not the legislature's intent to implement a time limit [on the time it took the board to pay the state back]. She elaborated that the board would not lower the fees until its obligation was met (e.g. in five to ten years). She noted Ms. McConnell had said the board could pay back the $1.5 million. She reasoned the board could pay back the $5.4 million, which would just take longer. She clarified the legislature was not expecting the board to pay the state back in one year. She added there would be more license applications and there were more in the queue at present. Vice-Chair Gara asked to hear from the department. Ms. Sanders relayed that the legislature would work with the department to make sure the language was clear and did not hinder the agency. Vice-Chair Gara believed it would behoove the board to provide the legislature with a written document specifying a timeline that did not harm the industry. Co-Chair Foster noted there was some intent language to consider.