CEPC September Legislative Update
California Opens the Door for Conversations on Equity with SB 166
CEPC hit the ground running in Sacramento this August, wasting no time advocating for movement in cannabis equity policy this year. An opportunity for progress presented itself in the development of SB 166, a final cannabis trailer bill for 2021 that requires the Department of Cannabis Control (DCC) to implement a program for fee waivers and deferrals for state licenses and applications for licensure. The idea is not new – Senator Bradford authored the Cannabis Equity Act of 2018, which was enacted and mandated the state to create the program by January 1, 2021 – however the state has not yet fulfilled this responsibility. With renewed pressure from the Legislature and equity advocates, SB 166 gained momentum and moved quickly through the legislative process to meet the end-of-session deadline of September 10. It now sits on Governor Newsom’s desk, waiting for his review. Let’s dive into the details.
Eligibility Requirements
The main highlight of SB 166 defines “equity applicants and licensees” for the purposes of fee waivers and deferrals. That last part is important; the definition only pertains to these specific situations and is not an eligibility requirement for all state equity-related policies. That work must be done separately.
Under SB 166, individuals must satisfy three general requirements to qualify as a state equity applicant or licensee. First, they must own at least 50% of the business that is being licensed or is in the process of being licensed. Multiple qualifying individuals may combine their ownership to satisfy the requirement.
Next, one of the following must be true about the applicant/licensee:
They have a cannabis conviction under past criminal justice policies implementing cannabis prohibition.
They have an arrest for a cannabis-related offense under past criminal justice policies implementing cannabis prohibition.
They have a household income of less than 60% of the area median income for the applicable local jurisdiction.
They reside in an area with a population disproportionately impacted by past criminal justice policies implementing cannabis prohibition.
The final requirement is based on what jurisdiction a business is in. For those with established equity programs, then the local regulator must consider that individual or entity an equity applicant or licensee. For those in an area without an equity program, applicants and licensees must be local applicants and licensees.
The criteria allow for a broader scope of applicants to qualify for the fee waivers and deferrals thereby providing a mechanism for the state to quickly help a larger population of individuals who have been negatively impacted by cannabis-related criminal justice policies and the War on Drugs. To err on the side of inclusivity while still providing basic protections for equity applicants was a good political decision and provides regulators will some flexibility for the programs’ design. Furthermore, this bill was introduced at the end of session and moved at a breakneck pace; there was limited time for stakeholders to weigh in and provide their expertise and knowledge to legislators. Assuming the bill is signed, stakeholders like CEPC can advocate for more specifics through DCC.
Regulations Will Be Key
Another critical piece of SB 166 authorizes DCC to establish regulations to create the fee waiver and deferral programs. These regulations will arguably make or break the program and also be established quickly; the bills require the fee waiver and deferral programs to be established by January 1, 2022 and January 1, 2023, respectively. The DCC staff likely already has some plans, therefore CEPC and other equity advocates should weigh in soon. And there is a lot to potentially weigh in on.
SB 166 leaves a lot open for the regulators. How does one define and measure a “disproportionate impact” on a population? How long does an applicant or licensee need to live in the jurisdiction to qualify through the residency criteria? What qualifies as owning a 50% share of a company and what additional requirements should be mandated to protect equity applicants and licensees? The answers to these questions are not simple but are important. This legislation and it's implementing regulations set the stage for future cannabis equity policy in California. We want to build a solid foundation for this work.
Next Steps for SB 166
CEPC is now working to encourage Governor Newsom to sign SB 166 into law. In the meantime, the board is developing its recommendations for potential SB 166 regulations and other cannabis equity policy priorities to present to DCC. Now that the Legislature and Administration are paying more attention to cannabis equity issues, thanks in huge part to Senator Bradford and equity advocates, we need to keep the momentum and work to expand equity policies throughout existing California law.
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An-Chi Tsou
CEPC Senior Policy Advisor
Tsou Consulting