Time:07:36 AM to 08:41 AM
Place:SCR 356
This Meeting was called to order by
Representative Pabon
This Report was prepared by
Erin Vanderberg
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
Presentation from the Department of RevenueCommittee Discussion Only

07:37 AM -- Presentation from the Department of Revenue

Representative Pabon, chair, called the meeting to order. A quorum was present. Barbara Brohl, Executive Director for the Department of Revenue (DOR), and Ron Kammerzell, Director of Enforcement for the DOR, came to the table to present information to the committee about how the department is preparing to manage marijuana enforcement. This presentation was requested by the committee in light of the Legislative Audit Committee's performance audit of the medical marijuana regulatory system, dated March 26, 2013.

07:40 AM

Director Brohl stated that she came to her position in July 2011, and discussed her accomplishments in the department since then. She highlighted the two individuals that she installed to oversee the Medical Marijuana Enforcement Division (MMED) at the DOR, Laura Harris and Ron Kammerzell, and discussed their credentials. She discussed her work on the issues of the cash fund shortfall, division overspending, and application backlog. She said that in FY 2012-13 the marijuana enforcement department operated within a budget of $2.4 million with 15 FTE, though they are allotted $5.7 million and 55 FTE. She discussed changes that the department has implemented in the way the application process works, including the assessment of an upfront application fee. She discussed how the corrective measures the division has taken since she has come on board were in line with the audit. She stated that the division has been working with local licensing authorities to improve collaboration. She highlighted the need for state and local licensure to be decoupled, and cited House Bill 13-1238 as the second attempt to seek a legislative change on this issue. She said this bill has the support of the Colorado Municipal League and Colorado Counties, Inc. She discussed plans to eliminate the application backlog by the end of this fiscal year. Currently, there are 138 problem applications, which the division now has the support of the Attorney General's office to remedy, 119 other applications that have not been processed, and 328 applications awaiting approval at the local level.

07:51 AM

Director Brohl distributed a handout to the committee addressing specific questions she was asked during the March 28 meeting of the committee (Attachment A) and opened up her testimony to new questions from the committee. Representative DelGrosso asked how the MMED staffing and budget levels compare to those in the Liquor and Tobacco Enforcement Division. He then asked if current funding levels were enough for current applications. Senator Baumgardner asked where additional employees will come from. He then asked about the savings from vehicle leases that were relinquished. Senator Schwartz asked about background checks. Questions from the committee continued on compliance checks and whether the division currently knows how much it will cost to license one facility. Mr. Kammerzell stated that the division is currently putting together the fee analysis and cost structure.

130404 AttachA (2).pdf130404 AttachA (2).pdf

08:05 AM

Mr. Kamerzall continued to field questions from the committee on how many current medical marijuana licensees there are in the state. He stated that there are currently 696 licensed businesses, about 4,000 employees licensed, and about 650 pending applications. Mr. Kammerzell stated that HB 13-1238 would help clear the division's application backlog. He discussed pre-moratorium and post-moratorium applications. Representative Pabon asked a question on whether a sales tax would be necessary to operate the division. Director Brohl stated that DOR would like to see a taxation system in place similar to the state's limited gaming fund. She stated that the liquor industry was supported with General Fund money up until 10 years ago. She said that there needs to be predictability in funding, and that a special sales tax would help the division achieve that predictability for at least the short term. She stated that another reason the limited gaming fund model was desirable is that it allows the amount of tax to be adjusted. She discussed her department's participation in the Amendment 64 Task Force's Tax, Civil Law, Funding and Resource Issues working group. She stated that additional funding considerations need to be made for the not only the enforcement, but also the social, health, and education impacts of the new policy.

08:19 AM

Committee discussion continued on Amendment 64's three taxes: excise tax, special sales tax, and 2.9 percent sales tax. Representative Pabon stated that there is recognition that the excise tax will go to funding the Building Excellent Schools Today (BEST) program to meet voter intent, and asked if it was possible to predict what the growth of the industry will be and what amount of sales tax will be needed. Director Brohl stated that Recommendation 1.1, as written, would allow the division time to evaluate and predict growth trends and cash fund needs. Representative DelGrosso asked additional questions about the taxation scheme. Director Brohl stated that the division's current $2.5 million budget is not sufficient for the outlets it currently oversees; the budget affords only background checks, not post-application compliance checks. She stated that $5.7 million, the division's appropriated amount, would be ideal. Representative Singer wondered if there would be potential savings in other departments, like Law, where there would be fewer marijuana-related prosecutions. Representative Singer discussed concerns about the underground market. Director Brohl discussed her conversations with representatives from Washington state, who came out to discuss marijuana regulation issues with Colorado's DOR. She stated that both states had difficulty in estimating underground market values of marijuana and struggled with the issue of the underground market's impact on their respective state's regulatory schemes. Senator Schwartz discussed the state and local licensing piece, and asked about the harm in placing the regulatory responsibility on localities. Representative Pabon concluded the DOR's presentation by thanking Director Brohl and Mr. Kammerzell for their frank, upfront, and thoughtful responses.

08:38 AM

Representative Pabon discussed the upcoming meeting schedule and the Monday deadline.

08:41 AM

The committee adjourned.