HOUSE BILL NO. 289 "An Act establishing the Alaska marijuana industry task force; and providing for an effective date." 3:30:28 PM REPRESENTATIVE GRIER HOPKINS, SPONSOR, provided an of the bill and read from a prepared Good afternoon members of the committee and Co-Chairs Foster and Merrick, for the record, Representative Grier Hopkins representing Northwest Fairbanks, Ester, Goldstream, Steese, Farmers Loop, Birch Hill and Downtown Fox. With me today is my staffer, Joe Hardenbrook. Thank you for hearing House Bill 289 today. This bill would establish the Alaska Marijuana Industry Task Force to take a holistic look at our state's growing marijuana industry, analyze its strengths and weaknesses, and propose a package of reforms. These proposed reforms would be submitted to the Marijuana Control Board, the Governor and the Legislature for consideration and possible action in part or in whole. Why is this legislation necessary? In 2014, Alaska voters legalized recreational marijuana. Since that time, thousands of Alaskans have sought to participate in this new industry as business owners, workers, investors, consumers and more. This industry is a uniquely Alaskan one state law requires that license holders be Alaska residents, resulting in an Alaska marijuana market owned and operated by Alaskans selling products grown, tested, processed and purchased here in the Last Frontier. The industry which has emerged from the passage of the voter initiative in 2014 is supported by Alaskans across the state but it is facing some challenges. Many business owners are struggling to comply with the letter and spirit of the law, and several factors including taxation, licensing and enforcement continue to challenge the industry. Recent reporting by the Anchorage Daily News articles which are included in the bill packet - shows ongoing frustration amongst the Alaskan entrepreneurs who've invested time, resources, and energy in this new market. While I'm a firm believer in free markets and the inevitable sorting of winners and losers in a capitalist system, Alaska's marijuana industry is OURS, and we elected officials can and should set the rules for the thousands of Alaskans who've seen fit to invest their hard-earned dollars, time, and energy into this new market. We can and should ensure that the rules WE set to govern OUR industry are fair and reasonable and offer those Alaskans who pursue a career or business investment in Alaska can achieve success while playing by the rules. We can and should ensure that local governments continue to play a role in authorizing, monitoring, and generating revenue from this new industry. Make no mistake, there are solutions to these problems - but they involve give and take amongst members of the industry, state regulators and local governments. In order to pursue a strategy that strengthens our Alaska businesses, protects local control and places our industry on a firmer economic footing, HB 289 proposes that this task force review the issue, develop ideas for industry reform, utilize state resources to model how those changes would affect businesses, local governments and state revenue. Additionally, I think it is fitting that the cost of these efforts will be borne by license receipts from Alaska's marijuana industry. That's correct the cost of this task force will be paid for by the thousands of Alaskans who've invested in Alaska's marijuana industry. At this point, I'll turn to Mr. Hardenbrook to walk the committee through the bill. JOE HARDENBROOK, STAFF, REPRESENTATIVE GRIER HOPKINS, read from a prepared statement. He explained how the task force would operate. The selection process for the thirteen members of the task force has been crafted to ensure representation, expertise, and geographic diversity. The task force will be chaired by the chair of the Marijuana Control Board. The two state agencies most closely involved in Alaska's marijuana industry Commerce and Revenue - will be represented by their commissioners or their designees. Because so many of these questions are economic in nature, we've reserved a seat for an economist from the University of Alaska. Because the voter initiative carved out specific roles and rights for local governments, we've included three municipal government representatives, with a requirement that those officials come from different judicial districts and represent the breadth of Alaska's local governments cities and boroughs. Because those most affected by a decision should have a role in making that decision, we've reserved three seats a quarter of the task force's membership for representatives of the Alaska marijuana industry. Like the local government seats, these task force members must hail from different judicial districts and represent the breadth of industry cultivators, processors, and retailers. The governor will appoint a member representing public health interests. Finally, there are two legislative seats, in the hopes that the input and advice of legislators can help craft a final product with a greater chance of enactment. As Rep. Hopkins mentioned, this task force is not a permanent creation. Rather, it must meet four times over the interim, conduct their work, craft their proposals, model their data, and submit their findings to the executive and legislative branches for consideration and potential action. This legislation does not create a new, permanent position but rather relies on a temporary position to assist the task force in crafting its final product. The findings of this task force are, first and foremost non-binding, and are not limited to suggestions for legislative fixes suggestions may include statutory, regulatory, and administrative changes. A top-down, "one-size-fits-all" solution to this complex issue will most likely result in additional challenges to the industry and may cause unforeseen circumstances which compound problems instead of rectifying them. As we've repeatedly heard from representatives of all the different businesses and resource development activities in Alaska, fiscal certainty and good data are essential components of any successful business enterprise. And to reiterate what Rep. Hopkins mentioned - the cost of these efforts will be borne by program receipts and licensing fees from Alaska's marijuana industry. That's correct the cost of this task force will be paid for by the Alaskans who've invested in Alaska's marijuana industry. Chair Merrick, two amendments were adopted by the Labor & Commerce Committee. One change moves the proposed task force from in-person meetings to remote, video conferenced meetings, resulting in a substantial savings in travel and lodging costs. Another amendment added a public health seat to the task force. Chair Merrick, I'd also like to note for the committee that we have Glen Klinkhart, the Director of the Alcohol and Marijuana Control Office online for questions about the fiscal note. Thank you, and I'll conclude my presentation. 3:35:30 PM Co-Chair Merrick asked the department to review the fiscal note. GLEN KLINKHART, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL OFFICE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference), spoke to the fiscal note [FN 2 (CED)]. He indicated that the board was going to be a part of the task force and the Alcohol and Marijuana Control Office (AMCO) would act as the conduit to support its work. The fiscal note envisioned $52 thousand for a long-term non-permanent Project Assistant (Range 16) to assist with meetings, research, compiling information, and report finalization for eight months (June through January). In addition, travel was reduced to the bare minimum due to the positive use of Zoom meetings. He noted that AMCO was supported by program receipts and in some years, they returned some revenue to the general fund. He believed that the fiscal note was sufficient to support the bill. He furthered that the idea of the taskforce was that the Marijuana Control Board was a licensing and enforcing board. The larger issues were often not dealt with because they were trying to deal with day to day issue and ensuring public safety. The larger issues with the industry were not within its purview, but the board indicated it desired to address the issue. 3:38:21 PM Representative Wool applauded the efforts of the bill's sponsor and staff. He had several constituents approach him about the marijuana tax burden due to the flat tax structure of $800 per pound. He recalled that when the tax structure was adopted the wholesale price had been about $5,000 per pound and now it was approximately $2,000 per pound. He exemplified the Title 4 re-write and noted that it was difficult to find agreement among a large group; the task force had 13 members. He expressed concern that at first glance it seemed excessive and thought that the issue was confined to taxes. He worried that the task force was too large. Mr. Hardenbrook answered that the task force would primarily address the economic issues of the industry. He noted that the wholesale tax "incentivized and disincentivized certain behaviors within the industry." He elaborated that the task force wanted to take a 'holistic look" at the industry and try to put it on firm economic footings. He characterized the industry as "uniquely Alaskan." He respected the concern about the number of "cooks in the kitchen." He quoted the book of proverbs, "without advice plans go wrong but with many advisors they can succeed." He expressed hope that a group of well- informed people could find solutions to the problem. Representative Hopkins interjected that the task force would not only discuss economic issues, but also examine licensing, regulation, enforcement, as well as ways the industry could maintain its Alaskan owned and operated structure. 3:42:28 PM Representative Wool remarked that if the federal law was changed the industry could be nationalized. He deduced that the task force may not have so much control over nationalization. Mr. Hardenbrook replied that the task force was specifically charged with finding ways to maintain Alaska's marijuana industry. Currently, a marijuana license holder had to receive an Alaska Permanent Fund Dividend (PFD). He agreed that national legalization would pose a challenge for Alaska. The task force would address how the state could protect the industry should the national paradigm shift. Representative Wool thought that the market should also have a voice. HB 289 was HEARD and HELD in committee for further consideration. Co-Chair Merrick reviewed the schedule for the following meeting.