It’s Crunch Time For California’s Cannabis Bills

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California’s cannabis industry could be reshaped by a pile of bills still making their way through the current legislative cycle. But to get a shot at being signed into law by Governor Gavin Newsom, all remaining bills in California must pass the State Assembly or Senate by this Friday. 

Already, three major bills have been pushed back to 2020, including a bill that would have established charter banks and credit unions for licensed cannabis businesses, as well as one measure that would have authorized veterinarians to recommend cannabis for pets and another that would have created a new license type for cannabis consumption cafés and lounges. Another bill, which sought to bar passengers from smoking or vaping cannabis products in buses, limousines, and taxicabs—with an exception for limousines and buses whose passenger and driver compartments are completely sealed off and separately ventilated—was placed on inactive status. 

Nevertheless, there are still lots of big decisions coming in the next couple of days. And as the landscape for licensed cannabis sales continues to mature in the nation’s largest market, lawmakers are weighing a flurry of cannabis-related bills that, if signed into law, could have a significant impact on the state’s cannabis industry, as well as ripple effects across the country. 

Here are some of the most significant bills still up in the air: 

SENATE BILLS

SB 305 Last April, State Senator Ben Hueso (D) introduced the “Compassionate Access to Medical Cannabis Act,” also known as “Ryan’s Law,” in collaboration with former Santee Mayor Jim Bartell, who lost his 42-year-old son to pancreatic cancer. The measure seeks to facilitate terminally ill patients’ access to cannabis in healthcare facilities. If implemented, it would require healthcare centers to allow patients in palliative care to use their medical cannabis, as long as they show documentation of a doctor’s recommendation. The patients’ cannabis use would be included in their medical records. Smoking or vaping cannabis in medical facilities would remain prohibited. 

Even if this bill is signed into law, hurdles could remain. In the most recent analysis of the measure, the State Assembly signaled that it would authorize health care facilities “to suspend compliance with this bill if a federal regulatory agency, including the Center for Medicare and Medicaid initiates enforcement action . . .  or issues a rule or otherwise provides notification to the health care facility that expressly prohibits the use of medical marijuana.” 

On Monday, SB 305 was approved unanimously by the full Assembly. According to Senator Hueso’s communications director, Erin Hickey, the bill is now eligible to be taken up by the Senate, before heading off to the Governor.

SB 581 This bill, which is sponsored by the United Food and Commercial Workers Western States Council (UFCW) and is opposed by the California Cannabis Industry Association (CCIA), would require cannabis licensing agencies to post on their websites specific information about applicants and licensees—including labor law violations, enforcement actions, and convictions—by January 1, 2022. 

In its analysis of the bill, the State Assembly noted that, currently, information on licensing authorities’ websites “is limited to information such as license number and type, the licensed activities engaged in, the business owner’s name, basic information about the business, the license’s dates of issue and expiration, and whether the license status is active.” As a result, those who seek more information about licensees have to make a formal request under the Public Records Act. 

The UFCW and others who support the measure, the Assembly added, argue that “members of the public should not be required to file repetitive California Public Records Act requests simply to obtain information”; that “comparable licensing agencies have long disclosed basic applicant and licensee information through the internet”; and that “consumers should easily be able to check on the licensing and disciplinary records of those who are selling them cannabis to ingest and workers should be able easily to check on the licensing and disciplinary records of those who will employ them.” 

Meanwhile, opponents argue that a Public Records Act request is “more appropriate considering the sensitive nature of this information” and that “Requiring such information to be available publicly jeopardizes the safety and financial security of cannabis business owners.”

SB 581, which was authored by Senator Anna Caballero (D) is expected to be taken up by Friday, according to communications director Delphert Smith.

SB 595 This bill, introduced by State Senator Steven Bradford (D), who represents a large part of southern Los Angeles County, would require the state’s cannabis licensing authorities to provide application and licensing fee deferrals or waivers to local social equity applicants and licensees. 

In a recent analysis of the bill, the California State Assembly noted that proponents of Proposition 64, which legalized adult use, called for officials to address “the impact of prohibition on low-income and minority populations by affording communities who were aggressively penalized by the product’s previous illegality the opportunity to participate in the marketplace,” yet the industry’s “high start-up costs and regulatory fees are barriers to entry.” In response, local jurisdictions have created social equity programs designed to help historically targeted communities enter the market. Bradford’s bill builds on those efforts. According to the senator, “The cost for applicants to secure a state cannabis license, including applicants identified as equity-qualifying by a local equity program, can reach tens or even hundreds of thousands of dollars . . . This creates a tremendous barrier for people with prior convictions, people from communities most harmed by cannabis prohibition, and particularly people of color, from contributing to this newly regulated industry.” 

In terms of the potential fiscal impact, the Senate Appropriations Committee projected a one-time expense to licensing agencies (including the Bureau of Cannabis Control, the California Department of Public Health, and the California Department of Food and Agriculture) to adopt regulations. It also signaled that, because “Many license fees are in the thousands of dollars and, depending on volume, fees can exceed $100,000 per license,” the state will need “a meaningful dollar amount to provide a significant number of fee waivers.” 

The Drug Policy Alliance, which is sponsoring the bill, also noted that even though licensing and renewal fees in California are tiered, “they are based on a business’s projected revenue. As a result, licensing and renewal fees cost tens of thousands of dollars. This creates a tremendous barrier for people of color, people with prior convictions, and people from communities most harmed by cannabis prohibition . . . Coupled with a lack of access to traditional sources of capital, these fees are yet another impediment to realizing a truly diverse cannabis industry.”  

Ryan Morimune, Senator Bradford’s chief of staff, told Cannabis Wire that the bill is expected to make the Friday deadline, underscoring that “we have a lot of support and zero organizations opposing.”

ASSEMBLY BILLS 

AB 37 As Cannabis Wire reported this week, this bill, authored by Assemblymember Reginald Byron Jones-Sawyer Sr. of Los Angeles, would exempt commercial cannabis activity from a section of state law that prohibits the industry from deducting ordinary expenses such as rent, utilities, employee salaries, and employee health insurance premiums. 

No formal opposition to the most recent version of the bill has been submitted. However, in a recent analysis, the State Assembly noted that its Appropriations Committee determined that “the revenue loss resulting from this bill is interminable, because it lacks the historical data required to develop a reliable estimate.” Moreover, “the annual revenue loss resulting from the bill would likely be in the tens of millions of dollars annually.” 

On Monday, AB 37 passed the Assembly with bipartisan support and now heads to the Governor’s desk.

AB-858 If implemented, this bill would add a limit of 2,500 square feet of canopy for an outdoor grow to the California Department of Food and Agriculture (CDFA) Type1C cannabis cultivation license. According to Assemblymembers Bob Bonta (D), Ken Cooley (D), Reggie Jones-Sawyer (D), and Tom Lackey (R), who authored the bill, by placing a limit of 2,500 square feet of canopy for an outdoor grow, the Type 1C license will conform with all the outdoor cannabis license types. They and others who support the bill also argue that providing an updated definition of a Type 1C license will “help entry-level applicants, particularly social equity candidates, obtain a very basic license which has the flexibility to help them grow.” There is no official opposition to the bill on file. 

This bill also moves ahead to the Governor’s desk, following a 74-0 State Assembly vote on Monday.

AB-1085 This bill encourages the state’s “After School Education and Safety” programs, the “21st Century Community Learning Centers programs”, and the “21st Century High School After School Safety and Enrichment for Teens” programs to educate about and prevent substance abuse. To do so, the bill would require the Department of Health Care Services to enter into agreements with the California Department of Education to administer those programs, with funding from licensed cannabis sales. 

In explaining the need for the bill to the state’s Senate Rules Committee, the bill’s author, Assemblymember Kevin McCarty (D), first signaled that when voters approved Proposition 64, proponents said it “pays for itself and raises billions for afterschool programs that help kids stay in school.” As such, said McCarty, “The Prop 64 campaign clearly articulated its intent for after-school programs to be a prime beneficiary of these new revenues and it is critical that laws and regulations honor this intent.” In its analysis, the Rules Committee then pointed to the “Unmet need for expanded learning opportunities in California,” underscoring that, “as noted by the author, ‘Over 2,900 low income schools, including over 1,000 elementary and middle schools, do not benefit from a state [After School Education and Safety] or federally funded 21st [Century Community Learning Centers] after school program.’” 

In terms of fiscal impact, the Senate Appropriations Committee signaled that by specifying the after school programs for which the Department of Health Care Services may consider funding, “this bill could create [an] unknown but significant cost pressure to provide funding for those programs.” The bill is supported by dozens of public education entities and associations, including the Los Angeles Unified School District and the California Association of Black School Educators. No official opposition has been submitted. 

Like the aforementioned assembly bills, this measure was also approved on Monday and now awaits the Governor’s approval. 

AB-1291 This bill requires applicants who seek a license to participate in California’s cannabis industry, and who currently employ less than twenty employees, to provide a statement that they will enter into labor peace agreements within sixty days of employing twenty employees. The measure also requires applicants already employing twenty or more employees to provide a notarized statement that they will or already have entered into a labor peace agreement. In the most recent analysis of the bill, the State Assembly notes that, under current law, a cannabis license applicant must submit a statement that the applicant will enter into a labor peace agreement, or has already done so. However, the law does not set forth any specific timelines associated with that requirement. The Bureau of Cannabis Control regulations simply state that the agreement must be entered into “as soon as reasonably practicable.” The bill also takes into account that applicants may not have twenty employees at the time of their application, but could come to employ twenty employees after obtaining a license. To protect those employees, this bill would require a commitment that a labor peace agreement will be entered into within sixty days, in either scenario.

According to the state’s Medicinal and Adult-Use Cannabis Regulation and Safety Act, a labor peace agreement is one that is made between a licensee and any labor organization that protects the state’s proprietary interests by prohibiting labor organizations and members from engaging in picketing, work stoppages, and boycotts. In return, license applicants pledge not to disrupt labor organizations’ efforts to communicate with, organize, and represent employees. Applicants must also provide labor organizations access to areas where employees work, for the purpose of meeting with them to discuss their right to representation and labor rights under state law. 

According to Assemblymember Reggie Jones-Sawyer, who authored the bill, this bill will “provide employees with clarity on when an employer is failing to comply with the laws and a complaint needs to be filed.” It is also sponsored by United Food and Commercial Workers Western States Council, which represents “over 170,000 members, many thousands of which work in licensed cannabis businesses.” Following the approval of the full State Assembly on Monday, AB 1291 also awaits the Governor’s signature.

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