California’s Growing Pains

Dec. 5, 2014, is not so long ago, yet it feels so far away. That was the day I first sat down in Assembly Member Rob Bonta's office to discuss AB 34, a bill regulating medical cannabis. Bonta, as Chair of the Health Committee, is committed to protecting patients in all aspects of health care. It was clear from day one that his office was committed to putting in the time and energy required to get this done. And, for the first time, I felt like my community had a listening ear in the process.

At the end of session legislation, Senate Bill 643 and Assembly Bills 266 and 243 had widespread, bipartisan support. Compromise language was finalized and approved through discussions supported by the governor's office. On Oct. 9, California Governor Jerry Brown signed the legislation, sending a clear message to the federal government that California would be taking the lead from here on.

Now one simple sentence sums up the challenge facing tens of thousands of unregulated cannabis businesses in California: "No person shall engage in commercial cannabis activity without possessing both a state license and a local permit, license or other authorization."

These laws mark the start of a new era for cannabis policy in California. New benchmarks have been set for protecting independent business and cottage industry. A solid foundation has been laid for sustained policy progress. The following looks at the process, a few of the policy highlights and next steps for this ongoing policy conversation.

Unprecedented in scope and collaboration, the legislative success required monumental work by many groups and individuals. As representatives of California’s independent farmers and businesses, we [the California Growers Association] were honored, humbled and inspired to have been included in the process from beginning to end. We deeply appreciated the relentless efforts and determination demonstrated by so many diverse groups and individuals.

This is exactly the type of effort that was required in California. Unlike many other states that are bringing regulatory frameworks online for cannabis, California had a massive pre-existing industry that is more than 50 years old. The public policy challenges associated with regulating a massive unregulated industry are much more complex than in other states where cannabis businesses were less prevalent.

Policy breakthroughs will provide immediate relief as our industry begins to mitigate the economic and environmental crisis that for decades has been damaging California communities, independent business owners, waterways and wildlife.

Significantly, the laws will help provide direction and guidance—not to mention a measure of sanity—as California prepares for the anticipated 2016 ballot initiative on recreational cannabis use by adults.

Still, despite strong support through the process, not everyone is satisfied. Last-minute opposition from Harborside Health Center—often described as the world's largest cannabis dispensary—is just the tip of the iceberg. California’s big cannabis businesses are unhappy with restrictions on cross-licensure that protect against consolidation. On the other end of the spectrum, many of California’s micro-businesses feel they will be regulated out of existence.

This legislation strikes a great balance by providing opportunity for an independently owned cannabis industry in the future. Consider the cultivation licensing. Licenses were created for specialty, small and medium cultivation. Large cultivation is not part of the regulated marketplace for now. These types of limitations, coupled with reasonable restrictions on vertical integration, have left many of the bigger business interests feeling shorted.

Still, the rationale behind this approach is clear. California is home to tens of thousands of unregulated businesses. One of the most immediate and tangible threats to these businesses is the advent of new business interests who seem blind to the fact that California has been a global leader in this industry for decades.

That leadership was built on the hard work and sacrifice of tens of thousands of business owners and hundreds of thousands of workers. Entering this marketplace without sufficient understanding of that history and heritage is foolish at best. A simple way of putting it: Every 10-acre farm licensed under this regulation would displace 40 existing family owned farms. Regulation would force those independent business owners to remain in the black market. The legislature has successfully leveled the playing field.

In that achievement, the legislation is a tremendous step forward for California. It is critical to the state—economically, environmentally, and socially—that adequate opportunity and timelines be created for this existing community of businesses to transition to a well-regulated future. And—for all of the challenges associated with creating a fair marketplace—the state government achieved a difficult balance that left big businesses and anti-regulatory activists equally frustrated.

Implementation and adaptation of the legislation will be a complicated, multi-year endeavor. Interest groups and business owners that feel their interests were not represented should avoid starting new groups to further fragment the industry. Rather, businesses should work together with existing organizations to find common ground and move forward together.

Looking forward, there are four major areas where we will focus our policy work:

Legislation

The California State Legislature is made up of the State Assembly (80 members) and State Senate (40 members). The legislature operates on a two-year schedule that coincides with two-year elected terms in the Assembly. The legislative sessions run from December and January to September. Bills are introduced and must progress through policy and fiscal committees in both houses. The process has lots of opportunity for stakeholder participation.

Legislative affairs in California are played for high stakes across a fast-paced field. Hundreds of votes are cast during the nine-month sessions. Dozens of stakeholders weigh in with public comments. Special-interest groups spend millions of dollars in efforts to influence public-policy decisions. Negotiations can be tense.

Laws tend to be created from high-level perspectives. Bills often provide framework language and abdicate significant details to regulators. A well-integrated regulatory affairs program is an important component of legislative success.

From fixing a word here, adding a phrase there, to fundamentally rewriting entire sections of code, clean-up can take many different forms. Sometimes clean up bills sail easily through the process, other times they are more challenging to pass than the original legislation. Only time will tell how active and effective the legislature is at amending this code.

Regulation

California is just beginning one of the most comprehensive regulatory processes in recent memory. Regulations are detailed guidelines necessary to implement legislation. In California, there will be more than a dozen boards, bureaus, committees and commissions involved in promulgating rules for the cannabis industry. While the 2015 legislation provides a solid foundation for progress, many details will necessarily defer to regulators.

Under the new legislation, the most successful cannabis companies in California will be those with the most effective regulatory affairs programs. A good regulatory affairs program will ensure that the company is able to comply with each regulation relevant to its business.

Moreover, well-organized business communities will be able to work directly with regulatory agencies, and ensure regulation is workable for the entire industry.

Local Government

Legislation approved in Sacramento provides new pathways for thousands of existing cannabis activities to enter the legitimate marketplace in California. The 2015 legislation provides important public policy tools to help solve the public safety and environmental impacts created by the black market. However, local governments are the gatekeepers.

Local governments are essential to the successful implementation of the new legislation. Local elected and appointed officials will be important partners as we work together to transition away from the black market and into compliance.

Today, there is a patchwork of local regulations in California. The strategies to impact change at the local level will be as unique as the diverse communities that make up this great state. By being clear about policy goals, working together and staying focused, the cannabis industry can be a partner for change at the local level.

Electoral Politics

Direct democracy has a long-established history in California. When the legislature or elected body lacks the political will to take on tough subjects, proponents can go directly to the people.

Many cannabis activists—and those business interests that feel they lost in the legislature—are viewing the initiative process as an opportunity to upend key provisions in the legislation.

A more constructive and effective approach would be to view the initiative as an opportunity to address some of the more challenging issues. For example: expunging records of past convictions; establishing guidelines for on-site consumption; and making it legal for everyone—not just patients—to legally consume cannabis.

It is difficult to imagine the state legislature taking these topics up, and there is ample opportunity for the voters to strengthen the policy framework in California with a targeted initiative that makes progress on these particular issues.

Many of the specific details of this regulation are still to be determined. Policymakers in Sacramento, and in cities and counties across the state will make important decisions. It is time to work together to advance a cannabis industry that honors our heritage, creates opportunity today and sets us up for future success.

Here’s a look at the policy highlights:

• Rigorous standards for testing labs and mandatory batch-testing of all products
• Establishment of a system of appellation controls
• Flexible licensing structure that allows reasonable levels of vertical integration
• Reasonable restrictions protecting against rapid consolidation of ownership
• Oversight of cultivation from the Department of Food and Agriculture
• Specific licenses for specialty, small and medium producers
• Modern square-footage limits replace archaic plant-count limits
• Realistic timeline for transition, ensuring no disruption to businesses operating in compliance with existing regulations before Jan. 1, 2018.

It is a new era for cannabis in California. The transition to regulation will be difficult. Cannabis businesses will be busy learning about and implementing new programs, getting new permits and paying new fees. Informed decision-making will be a key component of success.

About the Author: Hezekiah D. Allen is executive director of the California Growers Association, a leading voice for California’s cannabis farms and businesses. He was raised off the grid in Humboldt County. He studied politics and government, including studying abroad in Jordan, India and China. He has more than a decade of experience as a successful commercial cannabis grower, has worked in watershed restoration, and with local government and natural resource agencies. In 2014 he focused on cannabis policy full time.