Legislature(2017 - 2018)ADAMS ROOM 519

02/27/2018 09:00 AM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 96(FIN) Out of Committee
Moved HB 273 Out of Committee
<Bill Hearing Canceled>
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                                                                    
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                                                                    
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                                                                    
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