"We need to maintain the edifice of what
continues to work in Colorado," declared Norton Arbelaez of the
Medical Marijuana Industry Group at a January 24 meeting of the
Amendment 64 Implementation Task Force's Regulatory Framework
Working Group. Crucial to that system, explained Meg Sanders of
Gaia Plant-Based Medicine, is "seed-to-sale production tracking,"
because "we need to make sure we are accountable for what we're
producing until it reaches the consumer." The alternative, Arbelaez
warned, is California-style chaos, which he presented as "a
cautionary tale" of "cannabis run amok." The problem in California,
he said, is that "the lack of a statewide seed-to-sale regulatory
framework has made controlling diversion and effective regulation a
near impossibility."
Arbelaez, Sanders, and their allies in the
medical marijuana industry, who stand to benefit from rules that
impede new competitors, argued that the state's strict regulations
explain why the Justice Department has been relatively light-handed
in Colorado, allowing hundreds of dispensaries to continue
operating. They said preserving that system, including a rule
requiring marijuana retailers to grow at least 70 percent of what
they sell, would discourage federal interference with the new
recreational market. And in the end, as I noted
last month, their views were reflected in the task force's
recommendations to the state legislature, based on the premise
that, as Erica Freeman of Choice Organics put it, "you have a
regulatory system in front of you that works very well."
But as a
state audit issued this week confirms, that system never really
existed. Sure, there was an impressive-looking, 220-page book of
Colorado Medical Marijuana Statutes and Regulations, and
there was a Medical Marijuana Enforcement Division (MMED) within
the state Department of Revenue. But Colorado's vaunted
"seed-to-sale" monitoring system, which was supposed to include
electronic plant tags, 24-hour video surveillance, and records of
every marijuana transfer, was never actually implemented. "The
envisioned seed-to-sale model does not currently exist in
Colorado," reports State Auditor Dianne Ray, and in any case "may
not make sense," especially now that the legal marijuana market is
expanding to include recreational users. As a result of inadequate
manpower, funding shortages, and poor financial management, Ray
says, the MMED not only has failed to create the high-tech tracking
system it envisioned; it does not even "review forms designed to
track medical marijuana activities and inventories and ensure
that medical marijuana is not being diverted from the system."
That's right: Although medical marijuana businesses are required to
file forms whenever they move any of their product, no one ever
looks at them.
Furthermore, state inspectors visit medical marijuana businesses
during the application process but generally do not check in again
after they are up and running, so it is hard to say how many of
1,440 or so operations officially overseen by the MMED (including
producers of cannabis edibles as well as dispensaries) are actually
complying with regulations such as the 70 percent rule or the limit
of six plants per patient. MMED Director Laura Harris tells me
enforcement is "complaint-driven," although "we have to prioritize
our complaints because we have a limited number of investigators
whose primary mission at this point has to be conducting
pre-licensing inspections." The auditor's report recommends
discontinuing those inspections in favor of "risk-based
on-site inspections of the licensed businesses as part of a
comprehensive monitoring program."
The report estimates that pre-approval inspections of all 2,400
applicants who sought state licenses prior to a two-year moratorium
that began in August 2010 "would take about 12,300 hours,
which equals the work of six full-time equivalent staff in a
year." It adds that "the number of Division staff available to
perform these on-site inspections has been as high as 19 but has
been reduced to 10 as of February 2013." You can start to see why
it takes so long to obtain a license. According to the audit, "The
shortest approval time was 436 days, while the longest approval
time was 807 days." The average was about two years. "Out of about
2,400 pre-moratorium applications," the report says, "the Division
has approved or denied only 622, or about 26 percent [as of last
October]. The rest of the applications were still pending (41
percent) or were voluntarily withdrawn by the applicant (33
percent)." Pre-moratorium cannabis businesses are allowed to
continue operating in the meantime.
The extra time spent processing applications does not
necessarily translate into extra care. In a a sample of 35
applicants, the audit found "potentially disqualifying information"
about 13 (37 percent), including four out of the 10 who had
received licenses. The audit likewise found that the occupational
licensing required for employees of cannabis businesses "is not an
efficient and effective method for determining eligibility to work
in the medical marijuana industry." It does not reliably screen out
people with disqualifying criminal records, for example, largely
because the MMED typically issues employee licenses before it sees
the results of background checks.
Other problems noted in the audit include "weaknesses in the
Division's fee-setting, strategic planning, and expense controls"
that have contributed to chronic revenue shortfalls, which led the
MMED to lay off most of its staff last year. The audit questions
the wisdom of "large capital purchases, such as furniture, computer
equipment, and software for a marijuana plant tracking system" (the
one that still does not exist). Meanwhile, the MMED "underreported
sales tax revenue generated by 56 dispensaries by about $760,000
for Fiscal Years 2011 and 2012 combined."
This is the same agency that the Amendment 64 task force wants
to entrust with regulation of the recreational market. Some state
legislators are skeptical. "If they couldn't handle the little
piece they have now,"
says Rep. Brian DelGrosso (R-Loveland) "there's no way we can
trust them to handle more." But The Denver
Post reports
that supporters of the current system are undeterred:
Michael Elliott, executive director of the Medical Marijuana
Industry Group, said the state's regulation works but needs
funding. Although the state might lack oversight, he said, "the
vast majority of business owners are staying in strict compliance
with state law."
I don't know if that's true or not, and it really doesn't matter
to me whether the current marijuana businesses are complying with
the state's arbitrary rules. But Elliott and other advocates of
strict control have sold those rules as the key to preventing
massive diversion of marijuana to other states, which they warn
would provoke a federal crackdown. It may well be the case that the
appearance of careful, comprehensive regulation has
helped keep the feds out, and it may also have reassured some of
the voters who supported Amendment 64. But we should not confuse
appearances with reality.
"There are folks in this industry [who] are interested in
maintaining that status quo," says Harris, who as head of the MMED
should know a thing or two about the reality of marijuana
regulation in Colorado. "What you will hear from many in industry
is that this works. Well, I'm not as optimistic about it working.
If it worked, we would be able to present evidence of how the model
works toward good enforcement....I'm not as optimistic that the
theoretical model works as well as I think they hoped it
would."
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