Schulte’s return to marijuana board restores industry influence
When the Marijuana Control Board meets this week in Nome, there will be a familiar face behind the dais again: Bruce Schulte, the board’s first chairman.
Gov. Michael J. Dunleavy appointed Schulte to the Marijuana Control Board in August. The Legislature will consider his appointment for confirmation during its next session, but until then, he’ll serve in one of the board’s seats designated for a member of the public or active in the industry.
That’s a change from the last time he served on the board, when he served in the seat designated for a member of the industry after helping lead the campaign to legalize recreational use.
Schulte doesn’t actually have a financial stake in a cannabis business. When it was first legalized, he intended to pursue a license, but reconsidered based on the economics, he said.
“I applaud the folks that have put so much time and energy and capital into this,” he said. “I want the industry to succeed, but the free market being what it is, some will succeed and some won’t. My sense is that the market is a little saturated. Already we see some people pulling out, merging forces… which is kind of what we expected to happen.”
He was dismissed from the board in 2016 under former Gov. Bill Walker’s administration amid accusations of poor behavior to staff. At the time, the Alcohol and Marijuana Control Office was run by former director Cynthia Franklin, who had a somewhat combative relationship with the board and the nascent industry.
Schulte said he expects to be asked about the accusations during the confirmation process but described Franklin’s behavior to the board as bullying in those days.
“That led to some frustration on my part,” he said. “And rightfully so.”
In a statement provided to the Journal after publication, Franklin wrote that she was “saddened” that Schulte was engaged in “sniping about perceived slights that happened years ago.”
“Although Mr. Schulte had personal power and control issues that interfered with his ability to serve in a professional manner on the board back in 2015-2016, I hold out hope that he has grown in the interim,” Franklin wrote. “Given this second chance, surely Mr. Schulte will focus on having mature interactions with the AMCO staff, industry members and his fellow board members.
“In my role as director of AMCO when Alaska legalized marijuana, I did my best to balance the need to protect the nascent industry from federal overreach while giving newly licensed businesses room to grow. There were some folks determined to drive a wedge between AMCO and those new businesses, but for the most part, we managed to come together and create regulations that work for Alaska.”
Franklin added that she voted for legalization and was “proud” of her work establishing the legal cannabis industry in Alaska.
The Marijuana Control Board was established in 2015 after Alaskans voted in favor of Proposition 2, which legalized the recreational use of cannabis, in 2014. At first, two seats were dedicated for industry representation along with one law enforcement, one public health and one public seat. However, statutes establishing the board allowed for one of the industry seats to be a member of the public with no stake in the industry.
Dunleavy initially nominated Fairbanks resident Vivian Stiver to fill a vacant seat after he decided not to reappoint industry member Brandom Emmett of Fairbanks. Industry stakeholders heavily objected to Stiver because of her earlier involvement in a citizen initiative to ban commercial cannabis operations from the City of Fairbanks.
Stiver said in testimony during confirmation hearings that she intended to regulate the industry fairly at the state level, but the Legislature ultimately voted against confirming her to the seat. Dunleavy later appointed her to the board of the Alaska Housing Finance Corp. and Schulte to the seat on the MCB.
The governor’s decision to appoint Schulte came after conversations with people both inside and outside the industry, said Matt Shuckerow, Dunleavy’s press secretary. Schulte’s name was included on a list of five people suggested by the Alaska Marijuana Industry Association shortly after the Legislature voted not to confirm Stiver, and while the governor ultimately chose one of the individuals on that list, he was not obligated to, Shuckerow said.
“I think that the governor, in his review of all boards and commissions, has expressed a desire to have people who think innovatively, who take into consideration the different views of their communities and the whole,” Shuckerow said. “He wants someone who can think outside the box, who can bring a different perspective … My understanding on this appointment was that under Mr. Schulte’s credentials, he does qualify as a public member.”
In his initial fiscal year 2020 budget, Dunleavy proposed dissolving the Marijuana Control Board and Alcoholic Beverage Control Board and consolidating the powers into the office of the Alcohol and Marijuana Control Office director.
The Legislature did not accept that change, and it was ultimately removed from the budget. Shuckerow said he did not have any news about the governor’s intentions related to the boards, but that there is clearly public interest in the actions of the board, as shown by the recent public interest in proposed regulations before the Alcoholic Beverage Control Board about breweries.
“More broadly, there is an examination and will continue to be an examination of boards, looking at alignment and intent and whether or not they can be changed or reformed in some manner,” Shuckerow said. “That is something that is important.”
Schulte said though he’s not serving in an industry seat, he does have a clearer history of advocating for the industry than the average person. The industry has matured since the first legal sale in 2016, reaching about $130.5 million in retail sales and $15.7 million in total taxes in 2018. In some ways, that’s what early advocates envisioned, Schulte said: that cannabis would be just another industry in Alaska’s economy.
There are outstanding issues facing regulators and the industry, though. At the forefront of those issues is the tax structure implemented on cultivators, which is assessed entirely on weight at a rate of $50 per pound.
While advocates originally proposed that tax structure for simplicity’s sake in the initiative approved by voters, stakeholders have since raised the alarm that it will strangle cultivators as supply increases and the retail price for cannabis drops. As the price drops, the assessed tax will remain the same, as it is based on weight, cutting more and more into cultivators’ profits.
Schulte said he originally supported the tax structure but now agrees that it’s a problem. However, it’s not up to the Marijuana Control Board to change it; that’s the purview of the Legislature.
“As prices come down, the taxes have not changed,” he said. “In some cases, people have found that it’s impossible to be profitable. I think that that’s something that needs to be looked at. But again, the best the Marijuana Control Board can do is inform the Legislature what some of the options are and then it is up to the legislators.”
On-site consumption endorsements are still an issue for the Marijuana Control Board as well, with the backdrop of a statewide indoor smoking ban complicating the landscape. The board approved endorsements in general for edible on-site consumption indoors for businesses that hold endorsements, but smoking is relegated to outdoor areas with adequate ventilation, but even that is complicated by the smoke-free workplace law.
Going forward, he said he wants to see the board partner with the industry stakeholders to help them be successful in addition to being regulators.
“The question I would raise in any situation is: are these folks conducting themselves appropriately in regards to regulation and statute, and what are we doing to help them be successful?” he said. “Some of these regulatory boards get too wrapped up in telling folks what they can’t do, not what we can do to make it better. I think if I were to bring any preconceived notion to the board, it would be that: what can we do to help you succeed?”
Elizabeth Earl can be reached at [email protected].
Editor's note: This story was updated to include a statement from former Alcohol and Marijuana Control Office Executive Director Cynthia Franklin.