SB 5052 Testimony to Ways & Means Committee

This is a copy of my testimony for the Ways & Means Committee regarding Senate Bill 5052 (Sub.). They’re specifically interested in the financial aspects of the bill, so my testimony is mostly from analyzing its fiscal note. I emailed a copy of this to each member of the committee. I’m sharing so that you may refer to these fiscal problems when you write or speak to the legislators (in your own words- please don’t copy & paste because legislators ignore form letters). The state has huge budget troubles this year & this bill is too expensive & risky. If patients don’t comply, the state will fall short in millions. If the committee passes this, it will go to the Senate Floor for a vote in the next week or two. NOW is the time to tell them (the Ways & Means Committee & your reps.) the financial problems with this bill and why patients and WA can’t afford SB 5052!

Senate Bill 5052 Way and Means Committee Testimony

I have been an authorized medical cannabis patient since 2006 for qualifying conditions related to a genetic disorder. I rely on Social Security Disability income and my only financial interest in the cannabis industry is the cost of my medicine. I spoke in opposition to SB 5052 at the public hearing before the Ways and Means Committee and submit this additional written testimony. I’m no fiscal expert but this bill has some obvious problems, as follows:

1. SB 5052 would close approximately 1100 successful businesses (over 300 in Seattle alone, est. 1100 statewide according to fiscal note), most of which do have business licenses and pay taxes. The Department of Revenue recorded $14 million in taxes paid last year by medical dispensaries. Their closure would mean the loss of revenue in commercial rentals and other overhead costs as well as thousands of workers unemployed.

2. At least 40 cities and 3 counties have banned cannabis businesses and approximately 80 cities have moratoriums in place against new ones. Approximately 40% of WA cities are prohibiting the cannabis industry against the will of the majority of voters who approved legalization. The State Superior Court has ruled several times in agreement with the State Attorney General, who has stated that I-502 rules do not override local jurisdictions. This issue is pending appeal to the State Supreme Court. These bans and moratoriums cause a serious lack of access & revenue and are an obstacle that must be resolved in order for the existing system to succeed and proposed changes of SB 5052 to be implemented.

3. A new section added to SB 5052 (Sec. 32) would prohibit patients from producing their own extracts from the cannabis plant. While butane oil explosions have made the news and are an unnecessary hazard, it is not the only or standard method used by most patients for extraction. There are multiple types of extraction that are not dangerous but would be prohibited by this bill, including: simply shaking the trichomes (resin “crystals”) from the flowers to form keif powder, using iced-water, agitation, and filtration to make hash, using glycerin or liquor to make tincture or extract oil from the flowers, or infusing cooking oils or foods or making topical applications. Utilizing the entire plant (including so-called waste) is a logical and regular part of the harvesting process and patients need to be able to create various products specific to their condition and manners of medicating. Extracts and infused products are the most potent form and essential to patients but are also the most expensive products to obtain. The sickest patients require large amounts of extract in a daily regimen that is extremely cost-prohibitive. In addition, the recreational system does not currently produce or sell the products that patients require and are accustomed to. Because of all the above reasons, prohibiting patients from fully processing their plants or obtained cannabis into extracts or infusions is an unrealistic regulation that will discourage compliance, stimulate the illegal market, and prevent revenue.

4. There are inconsistencies in the Agency Fiscal Reports for this bill. The Attorney General’s Office assumes that the Liquor Control Board will issue 3000 medical marijuana retail licenses within the first two fiscal years of enactment. However, the LCB report anticipates just 110 total retail licenses will be issued. Meanwhile, the Office of Administrative Judges has no estimate of possible future licenses and thus is unable to estimate cost to the agency but assumes it will be high.

5. The Liquor Control Board fiscal report estimates cash receipts to be just 28% of the amount of expenditures for 2015-17. This is estimated to slowly improve through 2021 but only if the new changes meet projected expectations.
a. The LCB plans on hiring just one additional Liquor Enforcement Officer for the additional workload of all the new licensees. Most field tasks would fall to just one officer per task. One officer each for inspections, premise & compliance checks, and new licensee support seems a low estimate that would slow implementation and lack efficiency.
b. Multiple plaintiffs have filed lawsuits against the LCB regarding the recreational marijuana system (I-502). A Thurston Co. Superior Court judge ruled last fall that they violated the Open Public Meetings Act seventeen times while forming the rules for the 502 system. The LCB recently settled a suit related to those violations for nearly $200,000, with a condition that the plaintiff cannot pursue future legal action against them pertaining to the regulation of cannabis. Several cannabis license applicants and investors have filed suits regarding denials and rules conflicts. The Liquor Control Board faces an uncertain future and should not be entrusted with additional responsibility of overseeing a new medical cannabis system.

6. The Department of Health estimates no cash receipts under this bill until 2017, while expenditures are estimated at $2.4 million from the State General Fund because there is no funding currently allotted from the Dedicated Marijuana Account. The total estimate is actually $3 million through 2017, plus ongoing expenditures of $1.2 million biennially through 2021, and they hope to fund the remainder from future profits. Most of the department’s costs are related to the licensee and patient registries. Medical cannabis patients overwhelmingly oppose a registry due to the risk of privacy breaches and federal subpoenas, which have occurred with other state’s registries. The DOH’s only current plan for future funding is through fees yet to be determined.
a. A new section added to Substitute SB 5052 (Sec. 41) directs the DOH to determine training standards and rules to establish a medical marijuana consultant certification program. This was not included in the fiscal note and would require additional funding.

7. The Department of Revenue fiscal note on SB 5052 assumes that:
Two-thirds of the medical sales will move to the illegal market where prices on dried flowers range from $9 to $12 per gram. [Prices are even lower when obtained directly from growers and compassion clubs that offer free or discounted products for low-income seriously ill patients.] They only expect a third of medical sales to move to the recreational market (where prices range from $25 to $40 per gram for dried flowers).

The feasibility of this bill relies upon the participation and compliance of the medical cannabis community. Many patients are on a very low fixed disability income averaging just $733 (SSI) to $1100 (SSD) per month and cannot afford these proposed changes. Excessive taxation, costs, and restrictions would inevitably drive the industry back underground, resulting in a fiscal crisis for the state and causing sick and disabled patients to suffer. Please do not pass SB 5052.

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