HCGA State Governmental Affairs Summary: 2019

2019 Governmental Affairs Launch:

In the area of state level public policy, this was a year of transformation, hard work and accomplishment for HCGA. In late 2018, the HCGA Board of Directors committed the organization to ensuring the voice of Humboldt County’s cannabis businesses were represented in the Capitol and gave staff the authority to launch a state level Government Affairs Program. Through this effort HCGA focused on initiating a transparent policy position process, influencing legislation and regulations in order to protect and promote the short- and long-term sustainability of our members.

The policy team focused its advocacy and work in the following key areas:

1. Developing a transparent process, including initiating a policy committee through a district election and board appointments, to democratically guide the organization's policy positions

2. Relationship development with North Coast lawmakers, other influential legislators, regulatory agency leadership and the Governor's office

3. Coalition building with regional associations, statewide associations, key stakeholders and labor organizations who share our public policy vision

4. Consistent representation, strategy and policy development led by HCGA’s public policy team of Executive Director Terra Carver, Policy Director Ross Gordon and Lobbyist Jason Bryant

2019 Member Engagement & Policy Committee Development:

In order for the organization to weigh in on legislation and regulatory action, the first point of the process was to develop an opportunity for members to bring their input to the policy committee and staff. Shortly following the initiation of the Governmental Affairs Program, staff launched the Industry Affairs Call (IAC), a once a week open floor call to discuss all things related to the cannabis industry, including active legislation. The intent was to create a space where staff could report to the membership on what was happening in Sacramento and in turn receive input. Following the IAC, staff would call a Policy Committee meeting the following week, and the committee would deliberate and take a position on the legislation that had been discussed with the members the previous week. The votes would be tallied and posted to SLACK under the “policy vote” channel for all the members to review. Following the vote, staff would send a letter to the author of the bill stating the position of the organization and begin the process of ensuing HCGA’s members voices were heard in the Capitol and beyond.

2019 Policy Committee Members:

Chairperson, Kaylie Saxon, Forbidden Fruit Farms HCGA Board Member

District 1, Dylan Mattole, Mattole Valley Organics

District 2, Galen Doherty, Whitethorn Valley Farm

District 3, Bryan Willkomm, Humboldt Patient Resource Center

District 4, Michael Kraft, Papa & Barkley

District 5, Hannah Whyte, Emerald Queen Farms

Appointed, Natalia Craig-Smith, Alderpoint Road Farms

Appointed, Edith Rosen, Northern Emeralds

Appointed, Gillian Levy, Humboldt Apothecary

Appointed, Thomas Mulder, Humboldt Redwood Healing

Appointed, Nigam Arora, Humboldt Legends/Flower Co.

2019 Political Climate:

As HCGA entered the public policy arena at the dawn of the 2019 Legislative Session, the policy team immediately recognized the opportunities for positive impact in California. HCGA’s policy team was fresh, the Legislature was newly sworn-in, and California had just elected a new Governor. Amidst that change, we felt we had an incredible opportunity to establish an effective voice and deliver tangible results for our members in Sacramento.

One of the major initiatives HCGA has endeavored to help lead is the development of a working coalition of associations that collectively enhance our mission. We operate under a belief system that success is best achieved by working with others who share a common vision. With that in mind, HCGA has joined an informal coalition of grassroots based cannabis organizations, including retailers across the state represented by the United Cannabis Business Alliance, the distribution segment represented by the Cannabis Distribution Association and labor allies represented by the United Food & Commercial Workers. Collectively our organizations have found common ground on policy resulting in collaboration and mutual respect.

2020, Looking Forward:

With the 2019 legislative season behind us, HCGA is looking forward to its plans for 2020. A key aspect of HCGA’s 2020 plans is the development and approval of a policy strategic plan that directs staff on HCGA’s goals for the coming year. The policy strategic plan’s development will be based on input from membership, policy committee, and staff, and include HCGA’s top policy priorities for 2020, as well as an overall strategic approach to achieving those priorities. Staff will draft a balanced strategic plan that addresses the most significant challenges that members are facing in the short-term, while also taking advantage of long-term opportunities to promote the long-term viability of Humboldt’s cannabis community.

The first step in the development of the strategic plan is the HCGA policy survey, which will be distributed to the membership in November 2019 to identify challenges and determine policy priorities. Staff will use the results of the survey to inform the development of a draft policy strategic plan for approval by policy committee. On approval by policy committee, the strategic plan will provide a framework and direction for HCGA’s 2020 policy activities. As the year progresses, staff will balance the strategic plan with developing political dynamics and input from membership and policy committee to decide where to best direct HCGA’s policy resources.

In general, staff anticipates that 2020 will involve an increased focus on federal and interstate cannabis policy. With attitudes on cannabis changing, and a presidential election set for November 2020 is likely to be a crucial year for negotiating the details of a federal cannabis legalization framework. Most Democratic presidential candidates have endorsed full-scale federal cannabis legalization, and it’s possible that a federal regulatory framework could be implemented as soon as 2021. HCGA has an opportunity to participate in these discussions and help shape key federal policies including interstate trade rules, protection for county of origin and appellations, and the involvement by federal regulators such as FDA and USDA.

Parallel to federal legalization, staff anticipates that states with existing legal cannabis industries will begin considering an interstate cannabis trade framework in 2020. Oregon legislation enabling interstate trade under certain conditions passed in 2019, California is likely to consider parallel legislation in 2020, and states on the East Coast including New York, Connecticut, and New Jersey may consider interstate trade as an aspect of their state legalization frameworks. HCGA anticipates playing a key role in this conversation, which has the potential to open new markets and set a common regulatory framework for interstate trade.

2020 Policy Committee Election:

Per the last HCGA Board of Directors meeting on October 17, 2019, staff was directed on a timeline to seat a 2020 policy committee. By January 6th, the Board of Directors will have reappointed or appointed new committee members. Once that process is done, staff will open up the application process for members to apply to run in their various districts. Polls will be open to the members from Jan. 20, 2020 to Jan. 31, 2020. A new policy committee will be seated February 3, 2020.

2019 Priority Legislation Supported by HCGA and Signed by the Governor

SB 185 (McGuire) - appellations and county of origin

Strengthens protections for appellations and county of origin, including prohibiting the use of any similar name that’s likely to mislead consumers.Builds on HCGA’s other efforts to ensure the defensibility and integrity of appellations based on terroir. SB 185 developed alongside CDFA’s Appellations Working Group, which HCGA participated in alongside other cultivation organizations as CDFA works towards establishing an appellation petition process. HCGA is also engaging with NCIA on establishing appellation and county of origin protections in interstate commerce.

SB 34 (Wiener) - compassion patients/consumers

Allows cannabis to be donated, for free, to qualified patients without being subject cultivation tax, excise tax, or sales and use tax.A cultivator is exempt from the cultivation tax when they designate cannabis for donation in track-and-trace.Cannabis designated for donation is still required to go through the full licensed supply chain and must be tested to the same standard as other cannabis goods.

AB 97 - Trailer bill

Allows provisional licenses to be reissued until January 1, 2022. Previously, they could only be issued until the end of 2019. Allocated additional state funding towards equity applicants.Allows cannabis licensing authorities to fine unlicensed actors up to $30,000 per day per violation. Previously, licensing authorities (BCC, CDFA, and DPH) only had the authority to fine or sanction businesses that hold a cannabis license.

AB 37 (Jones-Sawyer) - cannabis business expenses, deductions

Allows cannabis businesses to deduct normal business expenses from their state income taxes for each taxable year beginning on or after January 1, 2020 and before January 1, 2025.

SB 657 (Monning) - agriculture commissioner reports, cannabis activity

Allows county agricultural commissioners to include information on cannabis in their crop reports submitted to CDFA.

2019 Priority Legislation Supported by HCGA and Held in Committee

SB 67 (McGuire) Cannabis: Temporary Licenses

Developed as urgent legislation at the start of the year to address the cultivation licensing gap. Although the bill didn’t move forward, it was largely incorporated into the trailer bill with the extension of provisional licenses. SB 67 raised the profile of the licensing gap issue so that businesses didn’t face enforcement due to delays in application processing.

AB 1417 (Blanca Rubio) - Cannabis advertisement and marketing

Would have strengthened penalties against advertising platforms that promote unlicensed businesses. The bill died in committee, but only after Weedmaps agreed to voluntarily stop advertising unlicensed shops by the end of the year. AB 1417 influenced the introduction of 30k per day fine for unlicensed actors into the trailer bill

AB 286 (Bonta) - Taxation: cannabis

Would have eliminated the cultivation tax and decreased the excise tax to 10%.Despite strong support from HCGA and throughout the industry, the bill died in appropriations committee due to perceived impacts on revenue and opposition from groups that benefit from cannabis tax appropriations.

2019 Bills Opposed by HCGA

AB 858 (Levine) - Oppose unless amended position

As initially proposed, this bill would have created an Emerald Triangle cannabis commission that would have included an assessment on cultivators. After several weeks of discussion with membership, a unanimous vote of opposition by the HCGA Policy Committee, staff notified the author of the organization's formal opposition to a cannabis commission, and that part of the bill was removed.The bill moved forward with amendments to the outdoor cottage cultivation license. Outdoor cottage cultivators can now cultivate up to 2,500 square feet of canopy, rather than the previous 25-plant limit.

AB 228 (Aguiar-Curry) -Oppose unless amended position

Would have allowed the sale of hemp-infused foods and beverages in California, including at licensed cannabis dispensaries.In coalition with other industry groups, HCGA took an oppose-unless-amended position requesting parity in testing standards between cannabis products and consumable hemp products. HCGA also raised concerns about the traceability of hemp inputs and the integrity of definitions that differentiate “hemp” products from “cannabis” products.The bill was pulled in committee and is likely to be reconsidered in 2020.

Other Cannabis-Related Legislation in 2019

AB 1529 (Low) - universal symbol

This bill reduces the minimum size of the universal cannabis symbol visible on the cannabis cartridge or integrated cannabis vaporizer from a minimum of one-half-inch by one-half inch to minimum of at least one-quarter inch wide by one-quarter inch high and requires it to be engraved, affixed with a sticker, or printed in black or white.

AB 420 (Lackey) – research

This bill authorizes the California Cannabis Research Program (CCRP) to cultivate its own cannabis for the research project, and expand what studies may examine, including mold, bacteria, and mycotoxins. Under the provisions of the bill, the CCRP would be required to seek the approval of the Drug Enforcement Agency to do so within a federally legal framework and CMCR would not qualify for a license under the state's commercial cannabis framework.

SB 595 (Bradford) - social equity fee waivers

This bill requires a licensing authority to develop and implement a program to provide a deferral or waiver for an application fee or a licensing fee for a local equity applicant or local equity licensee by January 1, 2021. SB 595 further requires that at least 60% of the dollar amount of waivers or deferrals of fees must be allocated to equity applicants and licensees. In addition, the bill authorizes a licensing authority to adopt emergency regulations to implement this bill and states that the adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, as specified.

AB 404 (Stone) – testing labs

This bill authorizes a cannabis testing laboratory to amend a certificate of analysis (COA) to correct minor errors and retest samples. Specifically, AB 404 authorizes the testing laboratory to retest a sample whose test result falls outside the specifications authorized by law or regulation, if both of the following occur: a) The testing laboratory notifies the Bureau, in writing, that the test was compromised due to equipment malfunction, staff error, or other circumstances allowed by the Bureau, and b) The Bureau authorizes the testing laboratory to retest the sample.

AB 1291 (Jones-Sawyer) – labor peace agreements

This bill requires an applicant for a license classification within the cannabis industry who currently employs fewer than 20 employees to provide a statement that the applicant will enter into a labor peace agreement, as currently required by existing law, within 60 days of employing 20 employees, and requires applicants already employing 20 or more

employees to provide a notarized statement that they will or already have entered into a labor peace agreement.

Under current law, a cannabis license applicant must submit a statement as part of their application that the applicant will enter into a labor peace agreement, or has already done so, and will abide by its terms. However, the law does not set forth any specific timelines associated with that requirement; instead, the Bureau of Cannabis Control (BCC) regulations state simply that the agreement must be entered into "as soon as reasonably practicable" following licensure. This bill would require that the statement include a commitment that a labor peace agreement will be entered into within 60 days.

Additionally, applicants often may not yet have 20 employees at the time of their application, but will subsequently employ 20 employees after obtaining a license. This bill would add an additional required statement for such applicants stating that the applicant will enter into a labor peace agreement within 60 days of employing 20 employees. This statement must be notarized.

SB 153 (Wilk) – hemp

This bill would revise the provisions regulating the cultivation and testing of industrial hemp to conform to the new federal requirements for a state plan, requiring the secretary of the California Department of Food and Agriculture, in consultation with the governor and state attorney general, to develop and submit a state plan to the secretary of the United States Department of Agriculture on or before January 31, 2020.

Cannabis-Related Legislation that was Vetoed by the Governor

SB 305 (Hueso) access in hospitals

This bill would require a health care facility to allow terminally ill patients to use medical cannabis within the health care facility.

The Governor vetoed this bill begrudgingly, citing that this bill would create significant conflicts between federal and state law because the federal government classifies cannabis as an illegal substance and health facilities certified to receive payment from the federal Center for Medicare and Medicaid Services must comply with all federal laws in order to receive federal reimbursement for the services they provide.

2019 Regulatory Work

CalCannabis Appellation Working Group:

In February of 2019, the California Department of Food and Agriculture CalCannabis Cultivation Licensing Division invited HCGA to an informal working group for discussion and exploration of concepts related to appellations as applied to the cannabis industry.

Over the course of many months, HCGA participated in all 7 of the Appellations Working Group meetings. The meetings were conducted as a limited participation group using a primarily a web-based and conference-call approach to facilitate participation from members around the state. Meetings were not open to the public, although proceedings were recorded for reference. A physical meeting space was made available in Sacramento, and HCGA attended many of the meetings in person. The working group meetings had considerably long and detailed agendas making the meetings range from a half-day to a full day. Topics discussed at the working group included:

Goals for the appellations program. Major goals that were discussed included promoting environmental sustainability, promoting small independent business, incentivizing participation in the legal marketplace, promoting rural agriculture and economic development, and positioning California for the future national and international markets.What information should be included in cultivators’ appellation petitions. How CDFA will review appellation petitions. How CDFA will handle potential conflicts between appellations and trademarks. The role of processing and manufacturing in appellations.

The stakeholders in the working groups consisted of 30+ industry and non-industry trade associations and experts in the field of geographic indicators. 10-20 participated in each meeting. No private businesses were invited. An informal coalition led by Genine Coleman of Origins Council/MAP that included regional heritage associations tackled agenda items and united on various positions. Undeniably the voice of the heritage regions rang loud and strong throughout the process. We expect to see draft regulations pertaining to the Appellation program early this winter. Along with our coalition partners, we will be engaging thoroughly in the rule-making process.

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