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mentor36 May 9, 2019

(This is a regular column that delves into the complicated issues surrounding California’s immense cannabis market from the vantage point of Marijuana Business Daily Senior Reporter John Schroyer. Based in Sacramento, he’s been writing about the cannabis industry since joining MJBizDaily in 2014.)

California lawmakers are almost halfway through the 2019 legislative session, and multiple bills that could have a big impact on the marijuana industry remain alive and kicking.

It’s far from certain that lawmakers will sign off on any measures cannabis businesses support. But several are worth watching because they indicate legislators are being responsive to MJ business concerns, industry watchers noted.

“I’m seeing, I think, a pretty considerable sea change this year as opposed to prior years,” said Amy Jenkins, chief lobbyist for the California Cannabis Industry Association (CCIA), noting lawmakers are talking seriously about issues ranging from reducing cannabis taxes to opening up more retail opportunities.

“What I’m seeing is legislators for the first time really demonstrating that they understand some of the concerns facing the industry.”

Hits and misses

One of the highlights that Jenkins and legislative advocate Max Mikalonis of K Street Consulting point to is the quick death of Assembly Bill 1530 at the hands of a legislative committee.

If it had become law, the bill would have overturned a relatively young policy of allowing MJ companies to deliver products anywhere in the state regardless of local marijuana business bans. The League of California Cities strongly supported the measure.

“It was sort of a watershed moment – of industry beating local government and law enforcement in the first policy committee – the first time it came up for a vote,” Mikalonis said.

But setbacks have occurred as well.

One of the most notable so far is Senate Bill 67, a measure designed to fix the state licensing backlog and reinstate thousands of expired temporary business licenses.

It passed the state Senate quickly but stalled in the Assembly in the first week of April.

However, on May 6, the bill was finally referred to two committees: Agriculture, and Business and Professions.

Sen. Mike McGuire, a northern California Democrat who’s sponsoring SB 67, has praised the California Department of Food and Agriculture (CDFA) for issuing over 1,000 provisional or annual licenses in recent months.

He said the agency has “stepped up big” in helping the state’s marijuana supply chain remain functional.

As of April 29, the CDFA had issued 116 annual cultivation permits and 890 provisional licenses, with another 411 pending fee payment by applicants.

The total number of expired cannabis cultivation licenses since January stands at roughly 5,600, a CDFA spokeswoman said.

Another measure that hit a roadblock is a tax reduction bill, AB 286. But it’s one that could still end up a victory that marijuana entrepreneurs might cheer.

In its original form, it would have temporarily lowered the state cannabis excise tax from 15% to 11% and suspended the cultivation tax for three years.

But the bill was amended to remove the excise tax drop. That means if it gets to Gov. Gavin Newsom’s desk, it will suspend the cultivation tax only until 2022.

However, Jenkins pointed out that there’s reason to celebrate since the bill remains alive. She said that means the industry as a whole is making political progress.

“The fact that that bill was dead on arrival prior to that committee, and we were able to resuscitate it and see it pass 17-0, I think again demonstrates that the Legislature understands some of the concerns,” she said.

AB 286 passed the Business and Professions Committee by a 16-1 vote and the Revenue and Taxation Committee by a 10-1 vote. It’s now in the Appropriations Committee.

As for why lawmakers removed the excise tax reduction, the political reality is it would have been too much of a tax revenue sacrifice to get enough support from lawmakers. So, a compromise was struck to get at least some state tax relief for the industry.

“There is always hesitation in passing bills that could reduce California’s tax revenue,” Assembly Member Rob Bonta, the primary sponsor of AB 286, wrote in an email to Marijuana Business Daily.

“However, we believe the proposed amendments will still hit our target of fighting the illicit market and helping licensed businesses thrive and survive.”

More action to come

The legislative session doesn’t adjourn until September, and a lot could change in coming months on a number of bills, including some that haven’t yet made an appearance.

For instance, the CCIA’s Jenkins noted rumblings about lawmakers possibly adding a comprehensive marijuana policy bill to the state budget – perhaps as soon as this month.

“There are rumors of a trailer bill that could come out that could include some substantial policy reforms,” Jenkins said.

She also said the five assembly members who got the state medical marijuana framework passed in 2015 – including Bonta – are going to try to get $30 million in state funding for enforcement against unlicensed MJ operators.

Plenty of cannabis bills remain up in the air, including several major industry priorities.

One of those is AB 1356, a union-supported measure that would require any city or county where Proposition 64 passed with a majority vote to allow cannabis retailers. (Prop 64 legalized adult-use cannabis in the state in 2016.)

As written, the bill would require jurisdictions where Prop 64 passed to permit at least one MJ retailer for every four liquor stores, or one cannabis retailer for every 10,000 residents, whichever is less.

According to an analysis by the office of sponsor Assembly Member Phil Ting, there are 255 municipalities and 21 counties where Prop 64 got a majority of votes, but nonetheless still have commercial cannabis bans in place.

So, AB 1356 could open up thousands of new marijuana retail opportunities.

But Jenkins acknowledged the bill is a “heavy political lift,” especially since it requires a two-thirds majority in both chambers to pass.

Mikalonis said he doesn’t believe it has as much support as AB 286, the tax reduction bill.

However, both remain hopeful.

(Click here to read the previous installment of this ongoing column.)

John Schroyer can be reached at [email protected]

© 2018 Highline Media Group