Inside the HIA’s ‘Cash Flow Crisis’ and How Its Dissolved Chapter Program Is Responding
isavira | Adobe Stock

Inside the HIA’s ‘Cash Flow Crisis’ and How Its Dissolved Chapter Program Is Responding

After withholding dues from its state chapters for the first six months of 2020, the HIA recently voted to disband its affiliate program, citing financial hardships from a lack of membership and COVID-19.

August 7, 2020

Editor's note: This story was updated Aug. 11 to add HIA membership numbers and correct an error. A previous version of the story stated HIA membership numbers had decreased by 50%. The number of members has not decreased by 50%, but a significant portion of members have downgraded their memberships, resulting in a revenue drop of nearly 50% for the organization since 2019.

While the Hemp Industries Association (HIA) has been a resounding voice throughout the industry for the past quarter century, the organization has recently come under fire for withholding payments from its state chapters and, shortly after receiving a complaint about it, dissolving them suddenly in July.

Jody McGinness, who became executive director for the organization in early July, tells Hemp Grower that earlier this year, the organization went through a “cash flow crisis” and needed to take immediate action to resolve it.

But some from the state chapters say troubles extend beyond this year and aren’t solely a result of the state affiliate program. Missing funds, a confusing membership portal and a lack of communication from the HIA have resulted in some chapters, like Kentucky, to recommend those considering membership hold off until the chapters receive clarity.

“Without a clear path forward, or visibility into our State Chapter’s viability or budget, we cannot properly plan outreach and advocacy campaigns. We are making a strong suggestion that members do not renew their dues until we can make light of what is going on,” the Kentucky Hemp Industries Association (KYHIA) said in a statement. “With absolutely no input from the local or regional levels, we do not want to see your money go toward a wasteful initiative.”

(The statement has since been removed by the HIA and replaced with a different statement by the national organization. See HIA’s full statement here.)

Dissolving The Chapters

The HIA had 14 chapters before it voted to dissolve them July 15. As part of its affiliate program, the HIA had an agreement with its chapters to split membership fees 50/50.

The move to dissolve the chapter program abolished that split in fees, effective immediately, and set up a task force to establish a new affiliate program that matches the shifting needs of the organization, McGinness says. The HIA is also working out plans for the chapters’ use of its name and logo, as many of the chapters are their own nonprofit organizations and can operate independently without support from the national organization.

“All organizations that were formerly chapters of the HIA are being provided with an agreement to license the continued use of HIA's logos and intellectual property during the transition period between the end of the previous chapter program and the implementation of a new affiliate structure so that they can continue to conduct business,” the HIA said in a statement.

By July, the state chapters had been aware of the HIA’s looming decline in revenue, which McGinness says is down 70% from this same time in 2019. It’s one of a few reasons why he says the HIA decided to abolish the existing affiliate program. 

McGinness says earlier this year, the HIA examined its “remarkable” 50/50 split fee with the chapters and realized “how atypical it was as far as how dues are typically handled with chapters.” 

Another reason for abolishing the existing chapters, McGinness says, is that they no longer meet the HIA’s needs. While the HIA was once an activist organization created to help legalize hemp, now that it is legal on a federal level, McGinness says the organization wants to take a broader approach through a more regional model. (One of the 14 previous chapters, Pacific Northwest Hemp Industries Association, represented a region, while the rest represented individual states.)

“We’re really interested in a program that serves the HIA’s needs as it is now,” McGinness says. 

The decision was unexpected, says Tate Hall, the president of the KYHIA, which has about 300 members. But problems had been brewing far before the chapters were disbanded.

Two Sides

As the COVID-19 pandemic hit the U.S., the HIA halted due payments to state chapters starting in March. By then, the chapters had been owed dues from Q4 of 2019. Those have since been paid, but the fees for the first half of 2020 are still outstanding, McGinness says.

All 14 HIA chapters jointly filed a financial records request in May. Hall says they received incomplete information from the HIA.

“They promised us, they swore up and down to pay it back eventually,” Hall says. “It started with six months, then nine, 12, 18, and now it’s up to 24 months [for repayment.] We can’t get a good answer there.”

McGinness says the HIA is working with each individual state chapter heads to come up with a repayment plan and that it owes less than $50,000 total among the chapters. Some chapters agreed to waive their owed dues, he says.

A number of factors contributed to HIA’s falling revenue, mainly driven by a sharp decline in funding from membership dues, McGinness says. 

HIA's membership model is tiered with several levels from members to choose from. Membership dues rose in 2018, resulting in fewer signups in 2019, McGinness says. He adds that since that time, a large number of members have downgraded their membership levels to the lowest tiers, resulting in a 50% decline in revenue from 2019.

The actual number of members has slightly dipped since 2018, from 1,225 members that year to 1,112 as of July 2020, McGinness says. (He adds that the HIA will soon be rolling out a new membership program with adjusted fees in an attempt to create “a membership program that has more value.”)

Hall, on the other hand, disputes McGinness and says the HIA owes the chapters much more. He adds that it’s “absolutely incorrect” that the HIA disbanded the chapters because they weren’t bringing in enough funding.

“We wouldn’t get the check until three to six months after members joined. Nobody really knows how that process has worked from the get-go,” Hall says. “We were totally willing to work 110% of the way with them on working to pay it back up until a couple weeks ago. The talks just broke down.”

Hall also asserts that membership has been rising since 2018—the year hemp became federally legal. He did not provide specific membership figures either, but Hall says it’s because the HIA hasn’t provided them.

“We haven’t gotten membership numbers since the beginning of the year, but last year was the biggest growth in the hemp industry that anybody’s ever seen,” Hall says.

Membership Tracking and Other Problems

Spotty record keeping and website issues are among other problems Hall and other chapter heads say they’ve had with the HIA.

For example, when organizations wanted to sign up for membership on a state chapter website, they were directed to the national website. From there, selecting to be affiliated with a state was an extra step that some didn’t realize they needed to take, Hall says, leading all the feeds to be funneled directly to the national organization.

In addition, information about members as well as dues were delayed for months at a time from the HIA, Hall says.

He adds that the state chapters have attempted to create their own task force to address the issues among the national organization and state chapters, but the HIA “didn’t want any part of that.”

“We’ve been trying to fix the situation at HIA for several months, and it’s very, very frustrating when your suggestions and advice fall on deaf ears,” Hall says.

Response From Chapters

For now, several chapters Hemp Grower spoke with say they are exploring all their options in terms of action, from forming a new organization to taking legal action.

Hall says he, along with some other chapters, will be able to continue operating as independent entities and in a relatively normal fashion. Other organizations, on the other hand, were just starting up and had been more dependent on the funds from the HIA.

The former Illinois Hemp Industries Association has already fully transitioned from the HIA and recently rebranded itself as the Midwest Hemp Coalition. Kalee Hooghkirk, the coalition president and owner of United Hemp Co. of West Dundee, Ill., called the decision to abolish the chapters “sudden, unexpected and deeply disappointing.”

“Our mission is to increase accessibility and opportunity in the hemp industry through advocacy and diverse community connections. The industry and coalition’s activities are particularly important in the current pandemic and recession,” Hooghkirk said in a news release. “Partnering with other supporters is extremely important to us. The Midwest Hemp Coalition welcomes people from all aspects of our industry with a focus on creating a space for minorities and women who historically have been disproportionately represented within the hemp and cannabis industry.” 

The Midwest Hemp Coalition is extending an honorary membership to all 2020 members of the Illinois HIA chapter, along with other benefits for previous members as well as veterans, students and qualifying social equity applicants.

While the unpaid dues have been a burden on the chapters, Hall says the largest burden has simply been dealing with the combination of issues from the HIA.

“Really good people across the industry are running these organizations and trying to keep a straight face,” Hall says. “This is an unneeded added piece of drama with a lot of people’s lives and businesses and with their time.”