Legislature(2015 - 2016)BELTZ 105 (TSBldg)
04/14/2015 01:30 PM Senate LABOR & COMMERCE
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HB 116-EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD 1:59:51 PM CHAIR COSTELLO reconvened the meeting and announced the consideration of HB 116. "An Act extending the termination date of the Alcoholic Beverage Control Board; and providing for an effective date." 2:00:06 PM LAURA STIDOLPH, Staff, Representative Kurt Olson, introduced HB 116 on behalf of the sponsor. She stated that the bill would extend the sunset date for the Alcoholic Beverage Control (ABC) Board to June 30, 2018. The Division of Legislative Audit reviewed the activities of the ABC Board to determine whether there is a demonstrated public need for the ABC Board's continued existence and whether it has been operating in an effective manner as per AS 24.44. MS. STIDOLPH reported that the board has resolved all issues found in prior audits with two being resolved and one being partially resolved. She directed attention to the five findings and recommendations in the most recent audit. First, the legislative auditors recommended the board director ensure that all board meetings are properly published on the state's online public notice system. Second, the legislative auditors recommended that the board notify local governing bodies of applications for new and transfer licenses within 10 days of receipt. Third, the legislative auditors recommended that the board issue catering permits in accordance with statutory requirements. Fourth, the legislative auditors recommended that the board issue recreational site licenses in accordance with statutes; and finally, the legislative auditors recommended that the board implement a process to monitor and track all complaints to ensure they are resolved in a timely manner. MS. STIDOLPH reported that the Division of Legislative Audit recommended that the ABC Board be extended three years to June 30, 2018. The opinion of the legislative auditors is that the board serves the public's interest by effectively licensing and regulating the manufacture, barter, possession and sale of alcoholic beverages in Alaska. She pointed out that until HB 123 establishing a marijuana control board is passed, regulation for marijuana falls under the ABC Board per the initiative passed last fall. That is why the fiscal note reflects expenditures for the regulation of marijuana. However, this money was not allocated and can be removed if HB 123 passes. 2:02:36 PM CYNTHIA FRANKLIN, Director, Alcoholic Beverage Control (ABC) Board, Department of Commerce, Community and Economic Development (DCCED), reported that she joined the agency in September 2014 and was able to oversee the final responses to the legislative audit team. She opined that many of the issues in the audit have been addressed. She stated support for HB 116 and posited that the audit recommended a shorter three-year sunset to accommodate marijuana potentially being added to the board's duties if Ballot Measure 2 passed. CHAIR COSTELLO asked her to review the fiscal note. MS. FRANKLIN explained that the fiscal note relating to the marijuana regulation is a match to the fiscal note attached to HB 123 creating the marijuana control board. The $1.78 million for the alcohol duties of the board is contained in the governor's budget. The budget originally contained the $1.54 million for the marijuana regulation. That was separated and the legislature requested that those monies be included in the fiscal note process as marijuana bills made their way through the legislative process. The $1.54 million for the marijuana regulation reflects a $50,000 cost for the marijuana control board. The remainder is for personnel and services relating to the new substance. The fairly significant expenditure in the services section is for a software tracking system that will enable the regulating agency to tag marijuana plants to ensure that marijuana sold in licensed establishments has been grown by licensed cultivators. This is to prevent black market marijuana from being sold in licensed premises and ensure that the marijuana has been tested according to the regulations written by the board. There is also some funding in the marijuana portion of the fiscal note for a database so the board can report to the legislature and public. She said that accommodating anticipated requests for data will requires staff research time, which translates to time and money. The marijuana fiscal note includes the services related to personnel, to vehicles for investigators, for legal services related to the writing of the regulations in addition to the technology expenditures. CHAIR COSTELLO asked how many staff are anticipated. MS. FRANKLIN explained that the ABC Board currently has a staff of 10, not including herself; five are enforcement officers, three are licensing specialists, and two are administrative personnel. The FY15 supplemental adds two positions to accommodate the time that has been spent since November 4 working on marijuana issues. That is one licensing specialist and one administrative personnel. The FY16 budget asks for four additional personnel; one additional licensing specialist and three additional enforcement officers. That brings the agency staff to 16 plus the director for both substances statewide. This is adequate to start but will likely need to be increased going forward. MS. FRANKLIN noted that questions have been raised about adding enforcement in the first year when there aren't any licenses in effect until May, 2016. She explained that the board has already spent quite a bit of enforcement personnel time answering questions about what can and cannot be done legally with marijuana, and at least three businesses are engaging in commercial marijuana activities without licenses or being subject to regulations. The board is relying on local law enforcement to shut those businesses down which has resulted in spotty enforcement. For this reason, the board believes it is imperative to fund enforcement officers early to ensure that everyone waits until the rules are in place and personnel is available to address the businesses open for business before it is legal. 2:09:45 PM CHAIR COSTELLO opened and closed public testimony. SENATOR MEYER asked what the issues were that the sunset audit identified and how they were corrected. MS. FRANKLIN said the first issue was whether or not the board was publicly noticing its meetings in the correct place. That matter was resolved with staff training. The audit also identified two issues related to licenses and permits. Catering permits were being issued to businesses that were in ownership transition and they were using the catering permit process to cover the gap. That process has been halted by the board. The recreational site license issue was that they were being issued outside of what the statute clearly contemplated. That issue was resolved through discussions with the board about the limitations of the statute and the director and staff making sure that the board understands they must stay within the statutory limits on those license. Another issue was that the previous licensing supervisor was saving applications in batches and then sending them to the municipalities, which caused her to miss the ten-day deadline. That was solved with the new staff person who strictly complies with the 10-day notice requirement. The final issue related to tracking complaints. This was addressed by instituting excel spreadsheets to track the complaints. SENATOR MEYER recalled that in years past when the Anchorage Assembly protested the renewal of a license, the ABC Board reviewed the decision and either upheld it or made a determination that the decision was arbitrary or capricious. MS. FRANKLIN said the protest process for local government says the board shall uphold the protest unless it is found to be arbitrary, capricious and unreasonable. She opined that some of the previous issues have been resolved on their own with a new iteration of the board combined with the audit, the stakeholder process and changes in staff. SENATOR MEYER described determinations of arbitrary, capricious and unreasonable as subjective. MS. FRANKLIN said the new boards and agencies attorney for the Department of Commerce, Community and Economic Development (DCCED) has provided excellent advice to the board about the legal meaning of those terms and the board has made it clear to local governments that that is a very high standard for the board to overcome. SENATOR STEVENS asked if the sunset could be extended to the regular six years if marijuana doesn't fall under the ABC Board in order to save time and money. MS. FRANKLIN said she believes that the first time around it's a good idea to have a three-year sunset, although she agrees in theory that the earlier audit does represent a cost to the agency. 2:20:04 PM SENATOR GIESSEL moved to report HB 116, labeled 29-LS0596\A from committee with individual recommendations and attached fiscal note(s). CHAIR COSTELLO announced that without objection HB 116 is reported from the Senate Labor and Commerce Standing Committee.