Washington’s state-licensed cannabis retailers opened their doors in mid-2014, and the industry has seen steady growth since, tallying more than $4.7 billion in sales, $1.7 billion in excise taxes collected and $322 million in retail sales tax.
And the upward trend continued through 2020.
“Even with COVID-19, when we look over the last five years, we continue to see growth. In fact, year-over-year versus 2019, we see substantial growth,” says Rick Garza, director of the Washington State Liquor and Cannabis Board. “We always look at the excise tax being collected: It was $390 million in FY19 and we’re looking at $446 million this year.”
There are currently more than 1,800 licensed cannabis businesses in the state, though unlike other states, Washington prohibits vertical integration and limits the total number of licenses any one person may own.
But there’s room for even further growth, as large parts of the state still have bans and moratoria in place, though Garza says there has not been much movement in that regard.
As part of its focus on Washington, Marijuana Venture interviewed Garza on the state of Washington’s legal marijuana industry and the agency’s plans for the next year.
Marijuana Venture: This industry has created thousands of jobs, generated in billions in revenue and brought in billions in taxes. Where does the cannabis industry fits into the overall economy of Washington?
Rick Garza: The revenues that are being generated in this short period of time that we’ve been regulating the industry are equal to and surpassing the alcohol industry, as far as the business itself, and it continues to grow. It just tells you that even before legalization, cannabis has been something that citizens of our state and consumers have used for many, many years and wish to use.
Legalization provides an opportunity to come out from under the shadow of prohibition and provide an industry that’s vital and meets the needs of consumers. To see where we are today with six years of retail sales, it just proves that prohibition failed for a lot of reasons, whether it was alcohol or whether it was cannabis.
MV: Social equity has been a major topic in the industry over the past year, because the industry is overwhelmingly white. What is Washington doing on the social equity front?
RG: It’s interesting that Colorado, Oregon, Washington and Alaska, the first four states for adult use, did not (initially) have a social equity lens in their laws. It’s not something we heard back when we legalized cannabis in 2012, but certainly as other states that have large communities of color began to legalize, there was an effort to create a social equity lens to make sure that we provide access to this marketplace for those who were disproportionally impacted by the War on Drugs.
When we merged the medical and recreational markets , there were thousands of medical dispensaries in the state, and we only allowed 222 retail locations [in addition to the initial 334 stores licensed in the first stage of recreational licensing]. That meant that many of the 2,300 folks that applied did not get a license. And many of them, as we’re learning, were from communities of color.
That has brought on a real concern from those communities that they were left out and, in some instances, individuals believe it was intentional. Of course, the LCB would say it was never intentional, but of course we understand systemic racism, we understand institutional racism, and we had some outreach meetings the last three weeks with communities of color that were difficult. They were upset at how difficult the process was for licensure. A lot of people got left out of that system. And if you’re a person from a community of color, this is a story they’ve heard before, and they’re pretty outraged by what happened. We’re trying to do everything we can today and in the future to bring them into our system.
The work of the social equity task force is an effort to determine how we’re going to take the existing retail licenses that we have that have been returned and provide those to folks who meet these social equity requirements. But I can tell you the sense from those who were left out of the merger is that it’s not enough. And it’s true. We’ve got 34 licenses, I think 15 of them are not in bans or moratoria, so you’ve got a pretty small number of licenses. But those are the ones we have available today.
MV: As one of the first states in the country to legalize marijuana, what are some of the lessons learned you would want other states to know?
RG: Well, it’s very difficult to put a system in place when you’re defying federal law. Look at the obstacle of getting into the business when you can’t bank. It becomes quite clear that the people who are going to get into this business to begin with are either going to have the capital up front, or they know an investor. So people with money are going to have the first access to this market. That’s a lesson learned that we never would have seen before because we have this issue of banking in this cannabis industry.
When I look at the alcohol industry that we also regulate, you don’t see that problem. One of the reasons is that anyone can get a liquor license.
Also, we had to try and create a marketplace that would only grow enough cannabis to meet the demand of the people in the state of Washington over 21. Can you imagine anything more difficult for an industry, for Chateau Ste. Michelle, for example, than saying, “You’re only going to sell wine in the state of Washington.”
So we put together a pretty strict system that made it difficult for everyone to enter this marketplace. California is struggling with this right now, with bringing their illegal market in, because that industry has been so huge in that state for years that people are not choosing to move over to the legal market because of the cost and regulations.
MV: What are the Liquor and Cannabis Board’s top priorities for the next 12 months?
RG: I think one is this social equity law that passed; doing everything we can to bring folks in to the industry that reflect, not only the state as far as its diversity, but reflect those that were in the industry before we had legalization.
No. 2, we had some difficult times with respect to our enforcement. We reorganized our enforcement division. We want to work closer with the industry, we want to do more outreach and communication with the industry. It’s very difficult to maneuver around our rules and laws, with respect to cannabis. We know we need to do a better job with businesses on outreach and communication.
This interview has been edited for length and clarity.