SB 60-ESTABLISH MARIJUANA CONTROL BOARD  1:31:06 PM CHAIR COSTELLO announced the consideration of SB 60. "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." 1:31:50 PM JOHN BITTNER, Deputy Commissioner, Department of Commerce, Community and Economic Development (DCCED), introduced SB 60 on behalf of the administration. He explained that following the passage of Ballot Measure 2, DCCED explored a variety of regulatory structures for regulating marijuana in Alaska and settled on a hybrid of a stand-alone entity. SB 60 creates a stand-alone Marijuana Control Board that is housed within the ABC agency in order to take advantage of the existing Alcoholic Beverage Control (ABC) Board executive director and staff. He acknowledged that alcohol is a distinct substance from marijuana and posited that a lot of the issues and difficulties that will arise are likely to be the same. This structure will reduce the costs associated with standing up a stand-alone entity while still achieving the intent of the initiative and meeting the deadlines within the proposition. 1:34:58 PM MR. BITTNER provided the following sectional analysis: Section 1: Amends Title 4 naming the director of the Alcoholic Beverage Control Board as the director of the Marijuana Control Board. It also establishes the process for appointment and removal of the director, requiring a majority vote from both boards. Section 2: Establishes the five-member Marijuana Control Board in Title 17 with designated seats for public health, rural representation, public safety, and industry members. This section reflects the way DCCED wishes alcohol was regulated, not the current structure. Subsections (d) and (e) provide that in certain circumstances the director may fulfill the obligation of a public safety or public health member. That person would then be replaced with a general public member. Section 3: Establishes the terms of office for board members and the chair, sets out requirements for board meetings, and provides for board members' per diem. It also 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 adopt regulations according to AS 44.63. It also establishes the board's enforcement powers as mirroring those of the Alcoholic Beverage Control Board outlined in AS 04.06.110. And it provides for appointment and removal of the director and establishes the duties of the director. Section 4: Defines the board in AS 17.38.900(1) to mean the Marijuana Control Board created by this Act to reflect the changes made in Ballot Measure 2. Section 5: Defines the term "director" as the director of the Alcoholic Beverage Control Board and the Marijuana Control Board. It also 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, similar to the way DCCED provides support to the ABC Board. Section 7: Amends the uncodified law for initial appointment of board members. Section 8: Provides for the transition of 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 9: Provides for an immediate effective date. 1:38:37 PM SENATOR MEYER asked how the makeup of this new board compares to the makeup of the ABC Board. 1:38:59 PM CYNTHIA FRANKLIN, Director, Alcoholic Beverage Control (ABC) Board, Department of Commerce, Community and Economic Development (DCCED), explained that the ABC Board is a five- member volunteer board; two seats are designated for industry, two seats are public, and one seat is designated as rural. The proposed Marijuana Control Board also consists of five members; not more than two members may be involved in the marijuana industry, one member shall be from public safety, one member shall be from public health, and one member shall be from a rural area. She noted that the stakeholder group that has been working for several years on revisions to Title 4 recommended changing the composition of the ABC Board to include public safety and public health designations similar to the new marijuana board. That group also recommended that the background of the agency director be taken into account when determining the designated seats. For example, if the agency is led by a director who has a background in the alcohol industry, that would reduce the industry seat on the board by one. SENATOR MEYER asked if there were other options to bring down the cost of this new board. MS. FRANKLIN answered that DCCED looked at options such as adding additional members to the ABC Board, but that would upset the balance between the public and industry. To maintain the balance while not giving industry a majority vote it would be necessary to add two public and two industry members. Based on the current travel costs for the five-member ABC Board, extending the membership to nine members would yield little savings and increase the difficulty of getting nine members together five times a year for required meetings. The balance that was struck was to keep the agency staffing the same to serve the two boards. 1:45:39 PM SENATOR MEYER asked how SB 30 the criminal bill, SB 62 the regulatory civil law bill, and SB 60 that creates the Marijuana Control Board interrelate. MS. FRANKLIN opined that the regulatory bill doesn't have to pass in order for this bill to have an effect. SB 60 is stand- alone legislation for fleshing out the regulatory authority contained in AS 17.38. If SB 60 or similar legislation doesn't pass, the ABC Board will undertake the responsibility of regulating marijuana. However, AS 17.38 only gives the agency the authority to control licensees, not unlicensed marijuana businesses. She said that's a problem. 1:49:41 PM SENATOR MEYER asked if the silver lining of legalizing marijuana is that spice and bath salts will be used less. MS. FRANKLIN opined that the legislation on spice and bath salts made a big difference in terms of retail sales, and that the demand for other types of "legal" highs will fall as marijuana licenses are issued. SENATOR MEYER asked if spice could still be sold in a licensed marijuana establishment. MS. FRANKLIN stated that the intention is to have marijuana tracking software similar to what's used in Colorado and Washington so the plant can be tracked from cultivation to the retail outlet. This is to ensure that the marijuana was grown by a licensed grower, processed by a licensed processor, tested by a licensed testing facility, and sold by a licensed retailer. 1:52:22 PM CHAIR COSTELLO asked if a person with industry experience leaves the position of director, would preference be given to an applicant whose background fulfills the missing designation. MS. FRANKLIN answered that is her understanding. CHAIR COSTELLO expressed concern that this approach might be adopted by other boards and commissions. She also asked why some of the restrictions on board members extends to family members. MS. FRANKLIN explained that the language is in Title 4 with regard to the industry designation. It's intended to avoid the potential circumstance of a public member essentially acting on behalf of the industry because he/she has such a vested interest. CHAIR COSTELLO asked if the intention is to set up a board that registers participants in the marijuana industry or licenses participants like is done with alcohol, because the bill uses the terms interchangeably. MS. FRANKLIN replied the intention is to use the terms "license" and "licensure." The word "registration" appears in AS 17.38, which is the reason for the definition that equates the two terms. 1:56:51 PM CHAIR COSTELLO asked about the lack of a sunset provision. MS. FRANKLIN responded that an amendment is being drafted to add a sunset; the omission was an oversight. CHAIR COSTELLO asked her to speak to the fiscal note. MS. FRANKLIN explained that the costs of the separate board are the per diem and travel for the additional five board members. She said the fiscal note reflects higher costs than for the ABC Board in 2014 because the new board might need to meet more often the first year to work on regulations. The staffing costs reflect six additional agency staff over the FY2015 supplemental and the FY2016 budget cycles. The fiscal note also reflects startup costs, the majority of which was $500,000 for software in FY2016. There is also some cost associated with moving the current staff to accommodate the additional people, which is included in the FY2015 supplemental budget. 1:58:57 PM SENATOR GIESSEL joined the committee. 2:00:50 PM At ease. 2:02:29 PM CHAIR COSTELLO reconvened the meeting. MS. FRANKLIN delivered a PowerPoint titled "State Regulation of Recreational Marijuana - Structures of Government Agencies." She explained that Colorado does not have a regulatory board structure. Marijuana, alcohol, and gaming are overseen by state employees in three divisions in the Colorado Department of Revenue. The Marijuana Enforcement Division has four offices statewide with 55 full-time employees, many of which are criminal investigators and compliance investigators. There are also 13 licensing employees and a few administrative employees. She noted that any commercial establishment is required to hold both a state and local license to sell marijuana. MS. FRANKLIN reviewed data for the Marijuana Licensing Division for the City and County of Denver, noting that the population is similar to that of the state of Alaska. The division initially requested 16 new employees in the 2014 budget and then 21.5 more in the supplemental budget to cover the additional work created by licensing. The revenue from the commercialization of marijuana more than covers the cost of these employees. 2:07:14 PM She highlighted that Washington State uses the Washington Liquor Control Board to issue and enforce marijuana licenses, which is a more similar structure to Alaska's. The board consists of three full-time state employees who meet three times a week. There is a director and 297 employees statewide. She noted that some of the employees were hired short-term with the expectation that they wouldn't be needed later on. 2:08:36 PM MS. FRANKLIN noted that Oregon legalized recreational marijuana at the same time as Alaska and the Oregon Liquor Control Commission is the regulatory authority. For alcohol, there are five citizen commissioners appointed by the governor who meet monthly for 1-2 days. One commissioner is a representative of the alcohol/food industry. The commission has an alcohol director with 211 employees to oversee about 15,000 liquor licenses. A marijuana director was hired and 1 marijuana industry representative was added to the citizen commission. At this time it isn't clear how many full-time employees will be needed for the regulation and licensure of marijuana statewide. She offered to follow-up with the data as it becomes available. She highlighted that unlike Alaska, Oregon has no local option; the rules the state adopts for marijuana will apply for the entire state. MS. FRANKLIN reviewed the current data for the Alcoholic Beverage Control (ABC) Board for comparison purposes. The five- member volunteer board meets five times per year in each of the jurisdictions. The current employees include a director, an enforcement supervisor, 4 enforcement officers - 2 in Anchorage and 1 each in Fairbanks and Juneau, a licensing supervisor, 2 licensing specialists, 1 administrative assistant, and 1 clerk. She noted that the FY2015 supplemental budget request is not included in the fiscal note, but would add 1 administrative officer and 1 additional business registration examiner. The FY2016 budget request is for 1 additional business registration examiner and 3 additional enforcement officers for a total of 17 employees. She said the board and staff has done quite a bit of work on marijuana since the initiative passed and more staff will likely be needed going forward if the board regulates both alcohol and marijuana long term. CHAIR COSTELLO noted that the revised fiscal note includes the supplemental request. She stated that SB 60 would be held in committee for further consideration.