Governors in Brief - December 3 2018

BAKER URGES NEW STEPS FOR REPORTING MA HATE CRIMES

Taking a cue from the recommendations of a state task force, MASSACHUSETTS Gov. Charlie Baker (R) said the Bay State will create a new website to track hate crimes and urged police chiefs to designate at least one officer to coordinate responses to hate crimes in their communities. (BOSTON HERALD, SENTINAL & ENTERPRISE [FITCHBURG])

 

ABBOTT PITCHES TX PROPERTY TAX CAP

TEXAS Gov. Greg Abbott (R) appears set to propose capping annual city and county property tax growth at 2.5 percent. Under the proposal, which his staff emphasized is still a work in progress, a locale where property taxes go up by 6 percent would have to adjust the tax rate to ensure tax revenues collected rise no more than 2.5 percent. (DALLAS MORNING NEWS, SAN ANTONIO NEWS-EXPRESS)

 

REYNOLDS OPEN TO RESTORING IA FELON VOTING RIGHTS

IOWA Gov. Kim Reynolds (R) said she is open to restoring felons’ voting rights as part of broader criminal justice reform in the Hawkeye State. Iowa and KENTUCKY are the only states that currently ban convicted felons from voting unless the governor acts to restore their individual voting rights. Reynolds said she and lawmakers will likely take up the issue next spring. (DES MOINES REGISTER, RADIO IOWA)

 

MN GOV-ELECT SUPPORTS LEGALIZING WEED

Saying “I just think the time is here,” MINNESOTA Gov.-elect Tim Walz (D) said he believes the Gopher State should follow the lead of a growing number of other states and legalize recreational marijuana use. It is not clear if Walz plans to make a formal proposal to lawmakers in the coming year. (ST. PAUL PIONEER-PRESS, KVRR [FARGO])

 

LEPAGE AGAIN SEEKS TO BLOCK ME MEDICAID EXPANSION

Just weeks from the end of his time in office, MAINE Gov. Paul LePage (R) filed an appeal seeking to block a court order to implement voter-approved expansion of the state Medicaid program. Superior Court Justice Michaela Murphy ruled on Nov. 21 that the state must move forward with the expansion. Last week’s request for a stay filed by the Department of Health and Human Services claimed the expansion would have “far-reaching negative consequences” on state coffers. The move is likely a delay at best, as Gov.-elect Janet Mills (D) is expected to begin implementation shortly after taking office in January. (PORTLAND PRESS HERALD, BANGOR DAILY NEWS)

 

HOLCOMB JUST SAYS NO TO IN TOLL ROADS

In a letter to lawmakers last week INDIANA Gov. Eric Holcomb (R) said he will not move forward with an earlier plan to toll interstate highways in the Hoosier State. Holcomb said the fuel tax and vehicle registration fee increases approved last year by the Republican-controlled General Assembly are enough to sustain the state’s current road construction efforts. (NORTHWEST INDIANA TIMES [MUNSTER])

 

-- Compiled by RICH EHISEN

Governors in Brief - January 21 2019

DESANTIS WANTS MAJOR CHANGE TO FL MEDICAL WEED LAW

Saying he wants to see people “be able to have their suffering relieved,” FLORIDA Gov. Ron DeSantis (R) urged Sunshine State lawmakers to allow medical marijuana patients to smoke their weed if they so choose. If lawmakers do not go along by March, he said he would drop a state appeal filed by the administration of former Gov. Rick Scott (R) of a court decision that says banning it violates a constitutional amendment. (TAMPA BAY TIMES, ORLANDO WEEKLY)

 

CUOMO PITCHES NY PLASTIC BAG BAN

After legislation he proposed last year died without a vote, NEW YORK Gov. Andrew Cuomo (D) inserted a ban on single-use plastic bags into his 2019 budget. Cuomo said he is also proposing an expansion of the Empire State’s so-called “Bottle Bill” – which encourages people to recycle used plastic bottles - by making most non-alcoholic drink containers eligible for the 5-cent redemption. (NEW YORK TIMES, ALBANY TIMES-UNION)

 

KS, OH GOVS EXPAND LGBTQ PROTECTIONS

KANSAS Gov. Laura Kelley (D) and OHIO Gov. Mike DeWine (R) each issued executive orders last week barring discrimination against LGBTQ people in state hiring and other areas. Kelley’s order also applies to companies that do business with the state. (LAWRENCE JOURNAL-WORLD, DAYTON DAILY NEWS)

 

BAKER REFILES MA PUBLIC SAFETY BILL

Calling public safety “a fundamental responsibility of government,” MASSACHUSETTS Gov. Charlie Baker (R) re-filed legislation that would make it easier for Bay State judges to keep someone in jail on the grounds that they are dangerous. Baker filed a similar bill last year but did so after the formal session had ended for the year, and the measure died with lawmakers taking it up. (MASSLIVE.COM)

 

-- Compiled by RICH EHISEN

Suicides Up Significantly In Many States

Between 2007 and 2012, the number of annual suicide deaths rose by more than 30 percent in eight states, according to analysis of data from the Centers for Disease Control and Prevention by Governing. The largest increase, 69.3 percent, was in Wyoming, which was also the state with the highest suicide rate in 2012, at 29.6 suicides per 100,000 residents. Suicide deaths also increased by less than 10 percent in eight states, including Vermont and Wisconsin, where the suicide rate dropped by 2.2 percent and 0.8 percent, respectively.

 

Source: Governing, Centers for Disease Control and Prevention

 

Legend:

 

States with largest increase in suicide rate between 2007 and 2012: Wyoming, Utah, South Dakota, Kansas, Idaho, Hawaii, Delaware, Connecticut

 

States with smallest increase: Vermont, California, Louisiana, Maine, Mississippi, Rhode Island, West Virginia, Wisconsin

Will Regulation of the “Internet of Things” Fall to the States?

There’s a busy world all around us that goes relatively unnoticed much of the time but that could soon be a major focus of government regulation. It’s called the Internet of Things, or IoT, and although it has dominated the attention of the tech industry for the last several years, many in the general public still don’t know what it is or have even heard of it.

 

“Nobody knows what this is, but yet it’s incredibly important,” said U.S. Sen. Brian Schatz (D-Hawaii) at an IoT policymaking event in Washington, D.C. in December hosted by the Center for Data Innovation, as reported in Government Technology. “The reality is that while few people know what IoT is, they are already exposed to it when they cross the street or wash their hands.”

 

As a concept, the “Internet of Things” has been around since the early 80s, when a group of students in the Computer Science department at Carnegie Mellon University wired up a Coke machine to the Internet to keep tabs on its inventory. But there still isn’t a widely accepted definition of what the IoT actually is, according to a report released last month by the Federal Trade Commission. A working definition may be that it is the rapidly-growing network of physical devices -- from cable TV boxes and refrigerators to wearable medical devices and traffic lights -- that can connect to the Internet. It enables home thermostats to automatically adjust to weather forecasts, doctors to remotely monitor patients’ heart rates and stoplights to adapt to local traffic patterns.

 

The FTC report said experts estimate there will be 25 billion such devices in operation this year and twice that number by 2020. A story by Katy Bachman last January in Adweek, placed the latter figure even higher, between 50 billion and 75 billion, which she said would “create 13 quadrillion connections to the Internet and generate 200 exabytes of data a year.” To put that into perspective she noted the Library of Congress houses 5 exabytes of data.

 

That enormous volume of data has sounded alarm bells in Washington.

 

“We’re now in a world where data is being collected all the time,” FTC Commissioner Edith Ramirez said at the 11^th annual State of the Net conference last month, according to The Verge. “We’re bringing these devices into our homes, into what used to be private spheres, and the data that is being generated is increasingly much more sensitive.”

 

The FTC’s report, titled The Internet of Things: Privacy and Security in a Connected World, which was based on a workshop the agency conducted in Nov. 2013, stated that while participants generally agreed the IoT offered “potentially revolutionary” benefits to consumers, they also noted it “presents a variety of potential security risks that could be exploited to harm consumers by: (1) enabling unauthorized access and misuse of personal information; (2) facilitating attacks on other systems; and (3) creating risks to personal safety.”

 

“Participants also noted that privacy risks may flow from the collection of personal information, habits, locations, and physical conditions over time,” the report said. “In particular, some panelists noted that companies might use this data to make credit, insurance, and employment decisions.”

 

The security and privacy threat posed by IoT devices has already been demonstrated. Last summer researchers at the University of Michigan found that networked traffic signals were susceptible to cyberattacks. And in 2012 hundreds of home security cameras and baby monitors were hacked and their video streams posted on the Internet. That cyberattack led to the FTC’s first action against the purveyor of an IoT device, the marketer of the baby monitors, TRENDnet, which ultimately reached a settlement with the agency under which it agreed to beef up its security practices.

 

Despite the evidence of such threats, the FTC’s position, according to its report, is that “legislation at this stage would be premature,” aside from “strong, flexible, and technology-neutral federal legislation to strengthen [Congress’] existing data security enforcement tools and to provide notification to consumers when there is a security breach,” for which the agency has been advocating since at least 2012.

 

The bulk of the FTC’s recommendations lean toward self-regulation. The report states, for example, that IoT companies “should build security into their devices at the outset, rather than as an afterthought” and “limit the data they collect and retain.” It also advises that those companies give consumers choice in what data they share and notify them when there is a security breach.

 

The FTC’s light-handed approach is guided by a desire to avoid stifling innovation and economic growth.

 

“We should adopt a regulatory regime that allows technology, even disruptive technology, to thrive,” FTC Commissioner Maureen Ohlhausen said at last year’s International Consumer Electronics Show (CES), according to Adweek. “Success of the Internet has been driven by the freedom to experiment even in the face of unease. It’s vital that government approach the Internet of things with regulatory humility.”

 

President Barack Obama has called for federal legislation to protect against cyberattacks, including a bill requiring companies to notify consumers within 30 days of discovering a data breach that their personal information may have been compromised, like what the FTC has been seeking for years. With the recent high-profile cyberattack at Sony, some form of that measure could finally happen.

 

But states haven’t been willing to just sit around and wait for Congress to act on the issue. Every state but three -- Alabama, New Mexico and South Dakota -- has already enacted its own data breach notification law, according to the National Conference of State Legislatures. And even if Congress passes such a law, there are plenty of other facets of the issue for states to focus their attention on, such as consumer privacy. By NCSL’s count, for instance, 15 states have enacted laws, which, among other things, prohibit the downloading of information from motor vehicle event data recorders, or “black boxes,” without the consent of the vehicle owners or policyholders (see Bird’s eye view).

 

At the Center for Data Innovation’s Dec. 4 event entitled “How Can Policymakers Help Build the Internet of Things?” U.S. Sen. Deb Fischer (R-Nebraska) advised, “policymakers can’t bury their heads in the sand and pretend this technological revolution isn’t happening, only to wake up years down the road and try to micromanage a fast-changing, dynamic industry.” Many state lawmakers likely share that view.

 

-- By KOREY CLARK

 

More States Looking to ‘Go Green’ In Spite of Banking Woes

This Tuesday, Ohio voters will go to the polls to decide whether to legalize recreational and medicinal marijuana use. But even if the Buckeye State becomes the 24^th (along with the District of Columbia) to legalize some form of marijuana, it will not solve one of the most significant problems facing the burgeoning legal weed industry: the lack of access to banking services that virtually all other legal businesses take for granted. 

 

It is hardly a new problem (See “Legal Weed Outlets Flush in Cash Struggling to Find Banks” in the July 2, 2015 issue of SNCJ). But with Ohio possibly boarding the legal marijuana bandwagon and several states likely to have legalization ballot measures in 2016, it is one that cries for a solution.

 

Since 2012, four states and DC – all of which already allowed medicinal marijuana use - have passed laws legalizing the use by adults of small amounts of marijuana for recreation. Legalization advocacy groups like the Washington D.C.-based National Organization for the Reform of Marijuana Laws (NORML) expect similar bills in between six to eight states next year. This includes California, the first state to legalize medicinal marijuana use (via Proposition 215 in 1996) and home to more than 12 percent of the U.S. population.

 

The prime motivation behind such a relatively rapid push for legalization is simple: money. According to a report released earlier this year by The ArcView Group, a research and investment firm in San Francisco, the marijuana industry took in more than $2.7 billion in 2014, a 74 percent jump from the year before. ArcView predicts that as many as 18 states could pass recreational use laws by 2020, something that could drive cumulative annual revenues as high as $10.2 billion.

 

Much of that is predicated on what happens at the ballot box in California, where voters rejected a marijuana legalization ballot measure in 2010. But with polls showing a majority of Californians now support legalization, proponents feel confident the Golden State may soon be going green.

 

“Should an Adult Use legalization initiative pass in California in 2016 the entire industry could rapidly double in size,” the ArcView report concludes. Another study by New York-based Green Wave Advisors is even more bullish on the so-called “green rush” economy, saying in an October 2014 report that nationwide legalization could push combined medical and recreational retail marijuana sales to over $35 billion a year.

 

If the results in Colorado and Washington - the first two states to make recreational pot legal - are any indicator, it’s not hard to imagine such bold predictions coming true. According to the Colorado Department of Revenue, combined medical and recreational pot sales in August topped $100 million, the first time monthly revenues have reached that plateau. The Centennial State has already taken in over $86 million in marijuana tax revenues this year, more than it collected in all of 2014. Washington, meanwhile, has collected more than $67 million in pot tax revenues in its first year of legalization. Steve Lerch, executive director and chief economist for the state’s Economic and Revenue Forecast Council, told BloombergBusiness in October that Washington expects to take in more than $1 billion in pot-related revenues over the next four years.

 

But while states have no problem processing and banking such large amounts of cash, weed sellers are not so fortunate. With marijuana still barred by federal law, most banks want no part of their money. That leaves the vast majority of dispensaries as strictly cash-only operations – and high-value targets for theft and robbery. It also makes accurately collecting and tracking taxes on those sales much more problematic for state and local officials than for other industries.

 

Colorado has tried to address the situation. In 2014 Gov. John Hickenlooper (D) signed legislation to create a state-chartered credit union that would cater specifically to the state’s nascent legal weed industry. But the legislation had to clear a tall hurdle - federal law requires banks and credit unions to have a master account with the U.S. Federal Reserve in order to process checks and credit cards. The first financial institution created under the new Colorado law, Fourth Corner Credit Union, applied for such an account in December 2014. After months of silence, the Fed rejected Fourth Corner’s application in July, citing marijuana’s illegality under federal law. Fourth Corner has since filed suit seeking to force the Fed to grant them the account. A federal court is scheduled to hear oral arguments on December 28. 

 

Another possible avenue opened up in May with the formation of CannaNative, the brainchild of a trio of Native American businessmen in Southern California who want to unite over 550 Western tribes in the cannabis business. In a statement, CannaNative co-founder Anthony Rivera says the tribes would use their expertise in running casinos on sovereign land to set up financial services for weed dispensaries. In doing so, he says, tribes would use the fast-growing weed industry “to gain true sovereignty” in a way that is both economically and environmentally sustainable.

 

“CannaNative will usher a new age for sovereign nations, as Native American tribes have unique rights that allow for cannabis (marijuana and industrial hemp) cultivation, manufacturing, marketing, sales, use, distribution, medical research and even banking institutions for the rapidly growing cash-and-carry industry,” he said in a statement.

 

But while that might sound good to weed sellers desperate to find a bank, it seems highly unlikely that such a scheme will ever come to fruition.

 

“I don’t see how they would have the leeway to do something like that,” says Khurshid Khoja, the founder of Greenbridge Corporate Counsel in San Francisco, which represents numerous clients in the cannabis industry. “Even with tribal sovereignty there are things they can’t do. I just question how much leeway they would have to exempt themselves from federal anti-money laundering laws.”

 

The answer is very little, according to Brian Pierson, an attorney who specializes in working with Native American tribes for the law firm Godfrey and Kahn in Milwaukee. 

 

“Certainly there is tremendous need in Indian country, and it’s fair for tribes to explore every potential means for economic development,” he says. “But with respect to commercial activity focused on non-Indians living off reservation, there is no judicial authority for immunity or exemption from federal law.”

 

Technology is now also offering potentially much simpler possibilities for weed entrepreneurs. Companies like Denver-based FlowHub and Integrated Compliance Solutions, based in Las Vegas, offer “seed to sale” accounting and point-of-sale solutions that allow cannabis dealers to meet the strict guidelines laid out by the U.S. Department of Justice and the U.S. Financial Crimes Enforcement Network (FinCEN) for ensuring dispensaries are not laundering money or running afoul of racketeering laws. Others, like California-based Hypur, are promoting software they claim can almost fully automate the compliance process for banks, thus drastically reducing the amount of time they take to service a marijuana client.

 

But while technology offers wondrous new tools, it does not by itself solve the basic problem facing financial institutions that work with cannabis companies.

 

“At the end of the day, it is still the bank’s responsibility to make sure there’s no mistakes made with one of these accounts, regardless of what software they are using,” says Beth Mills, Vice President for Communications and Marketing for the California Bankers Association. 

 

That reality is why most observers still look to Congressional action for a resolution. But the wait has so far been frustrating. Multiple bills have been introduced in Congress, including HR 2076 by Colorado Rep. Ed Perlmutter (D). The “Business Access to Banking Act” would grant civil protections for managing accounts with legal weed dispensaries, but it has so far languished in a House subcommittee with no sign it will ever get a vote. With an often dysfunctional and hyper-partisan Congress heading into an election year, its prospects appear dim.

 

But there remains one small ray of hope for those who support a Congressional solution. An amendment to the tentative budget agreement reached last month between the White House and Congress included an amendment authored by Oregon Sen. Jeff Merkley and Washington Sen. Patty Murray, both Democrats, that would bar the Dept. of Justice from using federal funds to go after banks that provide services to marijuana businesses that are operating legally within their own states. It is yet to be seen if the amendment survives the complicated budget negotiation process. Even if it does not this time, NORML Deputy Director Paul Armentano says the expansion of the legal marijuana industry in the states is likely to force Congress’s hand sooner rather than later.

 

“Ultimately, this is an issue for Congress,” he says. “It is federal law that is preventing these state-compliant businesses from gaining access to financial services, and ultimately it is Congress that has to deal with this issue head on.”

 

 

 

 

Follow Rich on Twitter at @WordsmithRich