What California's Impending Marijuana Economy Can Learn From Washington and Oregon

What California's Impending Marijuana Economy Can Learn From Washington and Oregon
Timothy Norris/L.A. Weekly

As California prepares to enter the world of recreational weed, officials and business owners are closely watching how the state will govern the largest marijuana economy in the country.

California has until January 2018 until formal regulations go into effect, giving the Bureau of Medical Cannabis Regulation, currently being created by the Department of Consumer Affairs, more than a year to figure out how the industry will transition from medical marijuana to recreational pot. For insights into the recreational marijuana landscape, California's industry insiders can look to other Western states that have already legalized weed, such as Washington and Oregon.

“I’m sure California folks will look at what exists out there and what is working,” says Brian Smith, communications director for the Washington Bureau of Liquor and Cannabis. “They will really benefit from having states like Washington and Colorado pioneering it.”

Smith says the learning curve was steep when Washington first legalized recreational pot in 2014. Prior to legalization, the state’s medical marijuana program was largely unregulated and functioned more like a marketplace. It was extremely easy to get a doctor's recommendation, and many dispensaries acted like tax-free storefronts. Two years later, and the bureau was finally able to get ahead of the problem.

“Just this last year, we finally aligned the [liquor and cannabis] systems,” he says.

In addition to a problematic regulatory market, Washington had no guidance from the federal government or even regional players. In fact, no one wanted anything to do with their new system, Smith says.

“State agencies, places of higher education, places that we would go to try to get help as we tried to put together the rules, they didn’t want to touch it,” he says. “Same thing with trying to get banks to cover licensees. They didn’t want to touch it.”

Smith, who has been with the bureau for nine years, says initially growers and sellers had to pay their taxes in cash. People would show up with bags of money, sometimes smelling like pot and causing a serious public safety issue.

“Storing thousands of dollars in cash is not safe,” Smith says. Eventually independent banks became part of the overall system.

Moving forward, Smith recommends that California establish a multi-agency system from the get-go. He suggests getting financial institutions on board right away so there is no question of how to pay or collect taxes. A big win for Washington’s recreational cannabis industry was convincing the Department of Financial Institutions, which oversees banking, to get on their side.

“We made it work,” Smith says. “We teamed up with places where we could get support and tried to leverage that.”

Putting interagency teams together is something both Washington and Oregon officials say will help California get its sizable cannabis program off the ground. Bureaucrats will want to see facts and figures, Smith says, so keeping tabs on everything from tax and harvest data to weed maps will likely pay off in the long run.

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“They will be clamoring for this stuff,” he adds.

Also, launching a portal where interested parties can find information online is an effective way to ease tensions and reduce an influx of unnecessary calls and emails to state agencies. Oregon did just that when it launched the website marijuana.oregon.gov after the state implemented its recreational pot program in 2015. The idea was to create a robust access point where people could get regulatory information on licensing, state agencies and other existing data.

“We took a business-minded approach,” explains Mark Pettinger, spokesman for the Oregon Liquor Control Commission, which doubles as the leading recreational pot agency. “My advice would be to take the language of the law and make that into working rules that define and regulate the everyday of harvesting and distributing.”

Pettinger also recommends beefing up personnel to help with the intake of regulatory questions. Oregon learned that lesson too late, he says, and instead relied of liquor inspectors to handle cannabis. The workloads intensified almost immediately and created a backlog.

“It’s been voluminous,” Pettinger says. “We finally realized we had to integrate agencies,” including the Department of Agriculture, Oregon Health Authority and Department of Revenue. “We got everyone involved, even people that didn’t like cannabis.”

He adds that the agencies “aren’t always on the same page” but they are “in the same notebook.”

When setting up regulations, Pettinger says Oregon looked to Washington and Colorado for best practices but kept its focus “uniquely Oregon.” In keeping with that spirit, the state broke up licensing into multiple tiers to enable small businesses and big business to operate simultaneously. This created a “craft brew effect.”

“We kept our regulation fluid,” Pettinger says. “We’d hear things like ‘Hey, that law is crowding out mom- and-pops who want to get started in the industry and just want to grow an heirloom crop of some kind.' Well, then we created the micro tier where the licensing is less expensive.”

The biggest thing to remember, Pettinger says, is that cannabis regulation moves “in dog years.” It’s important for states to be flexible and listen to both citizens and business interests. Keep what is working and toss what it isn’t. “This is a business,” he says. “And some of you aren’t going to be successful, but that’s the way it is with any business.”


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