Relief Finally on the Way for Embattled Cali Cannabis Operators
With the California cannabis industry on the verge of substantial collapse just over two years after the state’s voters approved Proposition 64 to regulate the adult recreational use of the plant, the Governor’s office is scrambling to salvage the maligned market with an 11th Hour legislative Hail Mary.
Last Friday, California Gov. Gavin Newsom released the language of his 2019 Budget Trailer Bill which included several provisions specifically addressing the crippled cannabis scene in what is supposed to be the epicenter of the culture.
This whole thing starts with a seed and a grower willing to give it enough love to bring it to harvest, yet in writing the regs that would govern the state’s fledgling rec market, lawmakers forgot the farmer, and the result has been catastrophic up and down the legal supply chain.
At first, the state began issuing Temporary licenses to qualified applicants seeking a spot in cultivation, processing and manufacturing, lab testing, distribution, or retail sales. These Temp licenses were meant to be a short-term bridge to allow companies to get up and running while the state processed their applications into final Annual licenses.
For a variety of reasons, that plan slowed to a snail’s pace and it quickly became clear that thousands of Temporary licenses were going to expire long before the state could issue more permanent Annual licenses.
Nowhere was this more clearly illustrated than with prospective cannabis growers.
The shit hit the fan in July of 2018 when all product sent to legal retail dispensaries had to be sourced from legal, licensed entities, but the state was still severely lagging on… ya know… licensing entities.
With all Temp licenses artificially set to expire on January 1st of this year, the state had a chance to take real, impactful action but they still could not see just how detrimental this licensing bottleneck had become, particularly for cultivators.
Instead, they passed Senate Bill 1459 which basically just renamed Temporary licenses into Provisional licenses, but did nothing to loosen the chokehold on the industry held by decision makers all the way from local weed-hating city councils up to the highest levels of our state government.
With ALL Temp licenses set to expire by the end of this summer, the idea was that issuance of Provisional licenses (good for 12 months) would give the state regulatory agencies enough breathing room to process all the pending applications into actual Annual licenses.
Instead, dozens, or even hundreds, of Temp licenses expire every single day in California while a literal handful actually get approved and processed into Annuals.
Cannabis farmers who have dumped everything they have – financially and emotionally – to get into the legal industry are now watching their Temp licenses expire weeks after putting legal plants in the ground. The gap between the expiration of their Temp and the issuance of their Provisional or Annual may be days, or weeks, or months, but you can’t just put a plant on pause. So what do you do?
This moral dilemma and the complete lack of understanding from lawmakers about how dire the situation was becoming has led to a homogeneity of mid-grade product on most legal dispensary shelves as Cali’s best pot growers are either being forced to, or are choosing to, sit out of the legal market.
Don’t get it twisted, the suits in Sacramento don’t give two shits about the quality of your weed, they just want you buying it and paying astronomical taxes on it.
But nobody is.
Cannabis revenues from the first year of legal weed in the 5th largest economy on the planet fell far short of expectations. When the Supply sucks, the Demand follows suit.
When their fat cannabis tax dollars came back skinny, suddenly the state realized that their Frankenstein legislation was breaking its chains. The kneejerk reaction was more legislation – Assembly Bill 67 – that would extend all currently issued Temporary licenses until January 1st, 2020. This would hopefully give the regulatory agencies enough time to tackle the stacks of pending applications and would allow these quasi-legal entities to continue to operate.
But like we said, we are losing double or triple digit levels of Temp licenses every single day, and as you know, nothing moves fast enough in politics.
So, here we are.
How many will we lose today?
In a last ditch attempt to slap a Band-Aid on their self-inflicted bullet wound, the Governor’s office has employed a controversial yet commonly used ploy to pump some life into the dying cannabis market – the Budget Trailer Bill.
In theory, a Trailer Bill is an amendment to the state’s annual Budget Bill used to add last-minute changes for the good of the average voter.
In reality, it is a shady way of redirecting funding intended for one democratically-chosen project into the whim of the author of the amendments.
Misuse of past Trailer Bills currently has Governor Newsom in a losing court battle to repay over $330 MILLION that was sneakily funneled away from its appropriated destination of homeowner relief and into the state’s upside down debt relief attempts.
Here, though, it seems that intentions are pure and they realize that the situation they have created is grim unless they can intervene as soon as possible.
Since this Trailer bill does not require the opinion of Cali voters, its timeline is on a much faster track then something like AB 67.
The 2019 Trailer Bill will effectively wipe out the arbitrary drop-dead date of January 1, 2020 at which point all Provisional licenses would expire as well.
As cannabis attorney Omar Figueroa clearly summarized in his breakdown of the Trailer Bill, “The bill would also delete the existing requirement that an applicant currently hold or previously held a temporary license in order to qualify for a provisional license; provisional licenses would be opened up to those who have never held a temporary license, or those who have held a temporary license but not for the type of desired commercial cannabis activity, or who have held a temporary license at a different premises.”
Golly, it sure seems like they are trying to completely erase the entire bad memory of the failed Temporary license fiasco. Can you blame them? Selling weed in Cali should be like selling hot soup to Eskimos.
Under this new language, Provisional licenses would be allowed to be renewed annually, so long as the state is still working “actively and diligently” on an Annual approval and that the applicant is continuing to take steps toward Annual approval.
So far, so good.
But these goddamn politicians just cannot quit tripping over their $200 neckties.
The exact language of the provision in the Trailer Bill says that any of the state’s regulatory agencies can “revoke or suspend a provisional license if the licensing authority determines the licensee failed to actively and diligently pursue the requirements for the annual license, or for any other reason.”
It’s that “…or for any other reason” part that doesn’t sit well with us.
That language is way too vague and the stakes are way too high, especially considering that the denial of your application – now for “any other reason”, whatever that means – does not entitle the applicant to any sort of hearing or repeal process. No means no.
Are race, gender, religion, or sexual orientation valid “other” reasons to deny an applicant their due entry into the industry? We’d like to think it won’t be that petty but, again, the law is only as clear as it is written (and eventually enforced).
Since Trailer Bills are technically part of the budget, they can be enacted with simple majority legislative votes and can be put into effect immediately after being signed by the governor.
In full disclosure, we didn’t read the entirety of the Trailer Bill – just the cannabis-related provisions. So there is a chance that the entire Bill could be challenged or even struck down by lawmakers before reaching Newsom’s desk, but historically they have gained easy approval as everyone tries to toss in a backdoor request for their own pet projects.
California State Senator Richard Roth once channeled his inner Forrest Gump in reference to this non-democratic process, saying, “Trailer Bills are like a box of chocolates, you never know what you’re gonna get.”
Hopefully, this action will put more pot plants in the ground and the early days of the industry will one day seem bittersweet.