Vermont Legislature SmartTranscripts:

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: We are live.

[Committee Chair (unidentified senator)]: This is Senate Appropriations Committee, January 30. We're going to, at slide 27, budget requests. And just as an update for the committee on BAA. So this today, we're having testimony on next year in budget, but we're hoping to get the BAA out maybe like a straw vote by next Friday, and then get it out of the committee by the next Tuesday. So I think it's only center lines that has possibly work in your committee to do on Right. The

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Well, we won't be looking at it until next Friday, but I'm looking at things right now, so let's see what we have.

[Committee Chair (unidentified senator)]: Okay, so hopefully we'll can if you have changes, we'll talk about

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Well, I'll do what I can quickly. Yeah, So

[Committee Chair (unidentified senator)]: that's just so the committee knows what our background is on that. And we'll have so next week, we'll have Robin Chittenden, and administration, And today, back to the budget for next year. So we have a cannabis control board in today. I'll introduce you to Salisbury.

[James Pepper, Chair, Vermont Cannabis Control Board]: I'm James Bedford, chair of the board.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: And my name is Olsen Fitch, and I'm the executive director for the board. Alright. So I have a slide up, and I'm going to my plan is to walk you through those. Feel free to stop me, and that's Western. So we'll start this first slide. I just wanted to include in here to put out the seven core principles that guide the work of the board. Some of you may be familiar with those, some of you may not, but that's just a brief summary. It's what we prioritize and what we are guided for and making all of the decisions that impact our community in the work that we do. So that's folks.

[Committee Chair (unidentified senator)]: So if you could do make it full screen, it might be the one.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Oh. It is. Yeah. Let's wear that button. Probably that button.

[Committee Chair (unidentified senator)]: Or if you just go up to the red upper right corner and do it seems like you're not doing.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: That's how?

[Committee Chair (unidentified senator)]: It helps a little. You can zoom in, but I think that's fine. Think you're on the side

[James Pepper, Chair, Vermont Cannabis Control Board]: that don't have as much text.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Okay. As you can see here, social equity, one of our top priorities, we always try to make sure that we do where we can to support those who were disproportionately harmed by the cannabis prohibition in their licensure and direct them to the HCCD that administers their business development on where they could get the rewards that they need. Bringing in small cultivators and legacy operators, also finalists, making sure that we are focused on being environmentally friendly as much as we can and support the work of our licensees in that direction, youth prevention and education, consumer protection, which again, with our lab coming online shortly, will be really wonderful to support that principle to make sure that all of the products that Vermonters consume are free of harmful contaminants. Medical program service, oh, sorry, medical program services. Again, as adult use market continues to grow, we do not lose sight of the medical program and want to make sure that our patients have the services that they need. And of course, about fixing so those are the seven core principles that we always keep in mind in all of this. And I will now sort of jump into a couple slides. This one is a quick overview of the cannabis sales and tax trends. You've seen a variation of that slide on my prior presentation when I was here, James, on the Adjustment Act. This is just sort of graphically for you our trends in sales beginning fiscal year 'twenty three through fiscal year 'twenty nine, and the corresponding sales tax and excise tax revenue. Obviously, numbers at Y-twenty '6 and below adjust the current forecast.

[Committee Chair (unidentified senator)]: Can you explain why you do think it's gonna keep growing?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Well, this is the GFO and administration consensus data, so that's the analysis that went into that. I think so far we've only seen the market grow, because trends are still in a place where it gives us an understanding that we could see at least the next few years some increase.

[Committee Chair (unidentified senator)]: Are there other states that legalized before us, are they still seeing growth? Like is Colorado continuing to see growth?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Well,

[James Pepper, Chair, Vermont Cannabis Control Board]: They stabilized and then, you know, certain outside events, the pandemic, when people were staying home, they saw a spike in sales, it's fallen off since, you know, since 2023. So we're just still kind of on the ramp up phase where demand is exceeding supply. We're starting to level off. As prices come down, we capture more of the illicit market. They come to the regulated market, but even JFO by their most recent revenue forecast has things really

[Senator Richard Westman]: Yeah. So

[James Pepper, Chair, Vermont Cannabis Control Board]: still some growth. As far as far as far And

[Committee Chair (unidentified senator)]: and you have I assume you have data on the number of sales now, like, the dollar amount, but, like, how many individual buyers there are, right?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yes, we have per individual business, we have that data and

[James Pepper, Chair, Vermont Cannabis Control Board]: we can

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: track internally to see which businesses do it, selling, how much of what.

[Committee Chair (unidentified senator)]: I got to know, like, is sales going up because it's just inflation, or the people, say people are buying more, or more people buying, those kind of, maybe that went into the JF public trustee.

[James Pepper, Chair, Vermont Cannabis Control Board]: I'm just, I hope I'm reading the chart right. It's a little, a little hard to read, but am I right that the excise tax is 25.1 in that last instance? Mhmm. Okay.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: That's what it is projected at. Yep.

[Senator Richard Westman]: Okay, great. Thank you. Yeah.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: But for the this coming fiscal year '27, it's $23,600,000 and 10.1 sales rate. Those numbers. And the forecast was just updated in January. So, again, whatever data we need so far so far, we've actually the revenue could have been higher than they've estimated in the last three years.

[Committee Chair (unidentified senator)]: Another thing. Yeah.

[James Pepper, Chair, Vermont Cannabis Control Board]: The economic development committee on the senate side is also looking at a pretty expansive market expansion bill, that all of those strategies will inevitably void increased revenue, it's always balancing act as to how much you want to spend with the control board in order to receive those revenues and what the kind of public health and safety consequences are of those.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yep. So the other note I wanted to include here is that the sales tax revenue supports the universal after school and summer programs, right? So all of those funds administered by the Department of Education, and then excise tax revenue goes to general fund, except for the 30% that goes in the substance misuse and special fund. So just wanted to set the stage here because on my next slide, I will be talking about available general type of fund revenue forecast.

[Committee Chair (unidentified senator)]: Okay, so the Norris has got you. Yeah, I'm sorry, just out of curiosity, does the state dictate the prices set in each individual establishment, or do they set their own? And and how was the price at the end of these thing? I don't know if they call it inside like a dying buyer. I don't know they call it. No. That was the old days. That was the old days.

[James Pepper, Chair, Vermont Cannabis Control Board]: Yeah. We have some data on, like, price per gram and and market and basket the average basket sizes and things like that, but really, it's a free market on this. I mean, we control we have it's a managed market on the supply side. You know, we control the number of licensees there are that are allowed to cultivate. But, know, we, it's the amount of cannabis we cultivate is a little bit higher than what we see as current supply, we've seen the demand, which helps drive quality, know, helps the price be somewhat in line with the illicit market. But, as far as what retailers sell it for, they get to set

[Committee Chair (unidentified senator)]: the price. So just give me an

[James Pepper, Chair, Vermont Cannabis Control Board]: example of that might be. It's like $48 for an eighth of an ounce. It varies depending on whether you're talking about indoor or athletic quality, the potency, the kind of the profile, the cannabinoid profile. There's a pretty big fluctuation, but I would say on average, it's about $48 per eighth of an ounce, which is Does that include the the excess tax and and

[Committee Chair (unidentified senator)]: the sales tax on that? Yeah. Okay.

[James Pepper, Chair, Vermont Cannabis Control Board]: This is probably on the same line, but a little different. I'm just wondering, you know, the strategic decision was made to have lots of licenses available regardless of whether they bump up against each other geographically. So for instance, Burlington is, you know, on Church Street, there were five to six outsets. Do you show yet people who are exiting the business? I think we've had six retailers. It's I'm just talking about retail. I think six exit. None of them I don't think any of them cited to economic reasons. It was most some of them one of them was of compliance issue. Mhmm. Well, I guess one of them wasn't economic reason, but there's other issues going on there. But we're not seeing a huge drop off. I think that if the if the if the retailers were permitted to expand and not be adjusting the towns that have opted in, they would. And then you would be inevitably capturing more customers. Sure. Because, you know, price, convenience, different things that drive consumer choices. You have to drive 30 miles round trips and purchase regulated cannabis or just walk down the street to your neighbor and just home for all day. But in other words, you're not seeing that, you know, a relative profusion of licenses that's leading to hunger games among Right. Survivors. It depends on who you ask, but no. I mean, we're not seeing I think one indicator that that would be true is that people would be, the reason it would be drastically lowering their prices in order to outcompete other regions. Well, I have seen that over the last three years. I'm thinking here just about pre rolled cannabis has gone from, you know, dollars $19.18 down to $7 in some cases. That's healthy. Mean, you want the consumer to have a low price. I just thought it must become some people falling below the viability. I don't think we're there yet. We have put a pause on issuing new retail licenses. We're very mindful of the rates have a density problem. Yeah. And you gave us a little bit more rule making authority to make sure that when an existing REIT center wants to change locations, they're changing locations to a place that doesn't exacerbate that. That's problem. Better geographic distributions. I

[Senator Richard Westman]: would argue with you that that's a mixed bag in a community like Morseville. I think in the village of Morseville when you've had, I know five, but I think there were six. There were six. And and the drop have they dropped one? That was the one

[James Pepper, Chair, Vermont Cannabis Control Board]: with the compliance issue. It's not

[Senator Richard Westman]: only compliance issue, but I think when you have six in the village of Morseville with the size of the village, that's a lot.

[James Pepper, Chair, Vermont Cannabis Control Board]: I I we would absolutely agree. The original cannabis bill had zero authority for us to regulate where they were going. We would have loved that authority, honestly, to limit the cap, the numbers that were allowed in certain areas of the state. You know, I think that bill, the legislation that passed that assumed that locals would pass ordinances to stop the vaccination happening. But I think everything rolled out too quickly so that

[Committee Chair (unidentified senator)]: we get ahead of that. Okay.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: So I'll continue. So what I this slide I wanted to include here because this indicates the difference between what's projected as that total excise tax revenue and what will actually be available in the general fund to you, because this accounts for the 30% suffrage misuse prevention special account allocation. So again, if you're looking at, say, 23,500,000.0 as an excise tax strategy for fiscal year twenty seventh, we're really only looking at $16,500,000 available in that fund because the rest is going to that special fund. So I wanted to flag that, but sometimes that jump lost a little bit in numbers. And then now, I know they just included to sort of remind this group that CTV will rely on its collection of fees, fines through our special funds to cover a third of our operating budget, and then two thirds, we will be reaching out to the general fund for appropriations. So somewhat indirectly, we'll be dipping into that excise tax strategy to cover two thirds of our operating costs. That's how sort of the structure was slightly different than prior years, but generally, like that.

[Committee Chair (unidentified senator)]: So you're pulling make sure I understand what you said, that you are pulling your Is it always just a third or that's just the way it looks from the answer?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: It's just the way it works out, that we usually collect up to $2,600,000 in fees and fees and fines through the licensing and compliance activities. And our budget, as you'll see, is around $7,000,000 So it means about a third of it is something that we can cover through fees, and the two thirds is something that we have historically covered through the excise tax revenue before it would drop the remainder would drop in the general fund. But now that the entire excise tax revenue goes to the general fund first, We'll be working with the administration to ask for appropriations from the general fund. And then the fees and penalties,

[Committee Chair (unidentified senator)]: the money you get those directly from the regulated market.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Exactly, annual fees, real life insurance application fees, product registration fees, and any administrative penalties we collect. You will continue to draw on that satisfaction? So indirectly, we will continue to, and I think I put it in there. It was about $4,500,000 So you can see it's in fact, some of them.

[Committee Chair (unidentified senator)]: But why are you saying it's from access?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Well, them, it's sort of, it will be out of the general fund, but sort of indirectly,

[Committee Chair (unidentified senator)]: Just you making sure I understand.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yeah, no, we can't really separate

[Committee Chair (unidentified senator)]: Kinda lowers what's going through this.

[Senator Richard Westman]: Exactly, exactly. That's what I think is the better way to put it.

[James Pepper, Chair, Vermont Cannabis Control Board]: Our fees have never been fully reexamined since they were set. There was a conscious decision in 2022 to set them not equal to our operating expenses, but to kind of discount them so that they're gonna be create a more accessible market. And there's been talk about reexamining fees over the years, and we did a few analysis before that was submitted to the finance committee and the employees on this meeting last fall. So there may be conversation about increasing some fees, decreasing others, you know, bringing it more revenue for

[Committee Chair (unidentified senator)]: the When we sit top, you mean within the control board or within this Within this.

[Senator Richard Westman]: Watson? I'm interested in why fees would be intentionally set to

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: not cover your costs. Mhmm.

[James Pepper, Chair, Vermont Cannabis Control Board]: It was it was the decision was made that it was actually the JFO before that examined various fee proposals that we put forward to the Ways and Means and Finance Committee, because the directive to us was create a market structure and fee schedule and try your best to set the fees that they would cover the operating expenses. If that's impossible, pretty good. You know, have a alternative fee structure. So we we put forward two two proposals. JFO evaluated them. JFO at the time found even if you set them astronomically high, the depressed entrepreneurial interest in getting into the market would probably still not cover the CCB's budget. So you might as well just try and focus on creating more vibrant market that is accessible and generate sufficient revenue.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Try to bring in the legacy operators and encourage their participation. And of course, when we have social equity applicants, we want to help those out. So the therapy structure is different. So, they have to sort of make decisions now.

[James Pepper, Chair, Vermont Cannabis Control Board]: But fees generally do get reevaluated time to time. I think you, you know, we're supposed to. The appropriate committees have a report from us about what they're bringing in, who's paying what, you know, relative profitability of various license types.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Okay. All right. So next right here is sort of that summary of our budget asks. So as I mentioned, about two thirds of our budget asks will be covered through the general fund appropriations, and about $2,500,000 is what we expect to cover through the cannabis regulations fund. And then I also include a little overview of our staffing as we are locked in currently. So we have five exempt positions that includes the board, executive director and general counsel. We have 16 folks who are dedicated to their compliance licensing and medical program agents who work with their licensing and applicants and patients. Four business office data and outreach folks that support the operations, and we have three positions, three folks working from the lab. So that is 20 staff total.

[Committee Chair (unidentified senator)]: Good? Questions? Just one. Does the board member of their salary go by tenure or is it flat?

[James Pepper, Chair, Vermont Cannabis Control Board]: It's standing statute. The the chair is two thirds of a superior court judge than two other board members are half.

[Committee Chair (unidentified senator)]: Scared. That's done. Okay.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Allow the line to go to the next slide. Okay. So this one. So I tried to focus this slide on the increase that you are seeing in our budget. So, to kind of summarize it and make it a little bit easier. So we are looking at 9.4% year over year increase, which, in four hours, it's just over $600,000 And I included a short breakdown here, sort of what, where are those increases specifically coming from? About a third is like your personal services, So salary, wages, all of the benefits that come up to about $2.00 2. And then about 400,000 is in operating cost, with the largest chunk of that devoted to the lab. So, I think we've just got it a little bit before. We finally have our lab. We got our last summer. The lab is set and fit up. We have our equipment. We just hired our third lab team member, and we are in the process of getting things up and running by this summer. So now what we need, we need the actual supplies that any lab would need and that's what we are looking for. That yellow box over here is a quick summary of what those things are, sort of quick representation of what are the lab costs. And I broke them down into two sections. One of the top sections is on subscriptions and maintenance costs. So, for example, the information management system will have an annual fee, how does it's all maintenance contract, so we'll need to account for that. Same goes for that proficiency subscription, when we'll have a vendor come out twice a year to run their tests. And then, of course, something like a waste removal, We'll need to have a contract with a vendor because we have plentiful solvents and other things that need to be removed off-site, etcetera.

[Committee Chair (unidentified senator)]: What is the DLL MOU?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: DLL MOU use our memorandum of understanding with DLL to help support the pharmacological laboratory. Yep. To help support our operations in the field. We lean on them and have at the top situations, say, agents don't feel safe going out in the field to do a cessation of operation with the licensee, so we will have a member of the DLL team present.

[Committee Chair (unidentified senator)]: And the DLL also does your page checks? Like

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: We, yes, they don't, you know, we don't rely on that service to, but yes, if we needed to, that's where we will go to. We've done the lead times. We usually use them for enforcement activities, not as much for us for compliance.

[Committee Chair (unidentified senator)]: Is this increase, is the math cost why your sales have gone up like 4%, but your total budget increase is 9%? Do you attribute that difference to the lab, or why the 9% increase?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Why? I would say, know, lab increased, if without the lab, it would have been at about 5% increase. So lab is taking out the largest count. And so then personnel expenses and then a little bit of ADS. Again, we are working with ADS on a few projects and another 100,000 I think that we need to budget for to keep things going.

[Committee Chair (unidentified senator)]: So just so the rest of the board members won't know, per our conversation, we can't anticipate that this lab cost is not a onetime fee. It's it's an ongoing it's pretty debasive.

[James Pepper, Chair, Vermont Cannabis Control Board]: These operating expenses are ongoing. The equipment is BAA expenditure. The one time expenses to labs are done.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Okay. Yeah.

[Committee Chair (unidentified senator)]: You dropped a lot of beakers, or what were your labs?

[James Pepper, Chair, Vermont Cannabis Control Board]: We'll try and keep the drop beakers till bed, Miles.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Any other questions about this page that I think yeah. And what I the rest I have for you is the actual report that finance management folks provided to me. And, again, I can walk you through this, but I tried to capture that in the client's life so that you could look at the so if you look at the first table and the total amount, like, difference between FY '27 and '26 is $2.00 2, which is what I've tried to present to you in the price line, and that's our salary, wages, contracted third party services. That's where that's captured. Then the second table is where we are capturing the increases related to ADS. And I highlighted in orange the places where you are seeing those increases, specifically, and again, those are tied to our IT costs. And then other purchase services category, 83.3 percent is where we are capturing lab expenses related to subscription and maintenance of the lab equipment. And then the supply category, which represents almost 500, some 500% increase, is where the lab consumables are captured. So again, we are tracking those separately to make sure that we have a good handle of that understanding of, okay, what is the cost of the consumables versus various subscriptions that we need to clean the lab.

[Committee Chair (unidentified senator)]: On the next page, what are your grants?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Grants is that, oops, sorry. Grants is that contract with DLL. So we are looking at, you know

[Committee Chair (unidentified senator)]: The applied as a grant, but it's an MMO.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: That's how finance management tracks it and wanted us to file for it, so not sure. That's crazy. He bought financing. That's yeah. But that's about it in terms of so you could see in the totals, and that's the 9.4%. Again, our budget was not very large, so the 600,000 increase with lab being about two fifty of that is really what's sort of pushed it towards that 9.4%, because we did not have an easy budget for the lab in the prior fiscal year. So we're going from 0 to quarter of $1,000,000 in operating costs.

[Committee Chair (unidentified senator)]: On your enforcement, you have 16 staff, I think you said?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Licensing, enforcement, and medical. So it's 16, but we have 10 dedicated to compliance and enforcement.

[Committee Chair (unidentified senator)]: Do you track it, like what the compliance costs are for vendor, for licenses?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: We don't. We could

[Committee Chair (unidentified senator)]: just do the simple math of finding out the total number by the number. But I wonder if you track that and how that compares to other states or anything like that.

[James Pepper, Chair, Vermont Cannabis Control Board]: I have done that analysis to just the FTEs per licensee, and we run pretty lean in terms of almost every other state. I haven't tracked it to, like, DLL or, you know, agencies. I assume you have more 13. No. More more compliant. More Reserving.

[Committee Chair (unidentified senator)]: Compliant. But maybe I mean, when you when you equate them to be equal, what they do to their licensing than what you do,

[James Pepper, Chair, Vermont Cannabis Control Board]: You don't know? I I don't know enough about the Yeah. Day to day work with the compliance officer. It is a somewhat unique field Right. That we are dealing with because we need to be experts in agricultural practices and pesticides and then food manufacturing and sanitation, food Right. Seems like there's more going down retail. Yeah. It's been I mean, I've, you know, I've said it many times. In an ideal world, these three kind of areas of the supply chain would be split between three existing state departments. None of them are willing to actually benefit. The step from the campus establishment because the federal. And

[Committee Chair (unidentified senator)]: do you do you inspect each licensee every year or is it just Multiple.

[James Pepper, Chair, Vermont Cannabis Control Board]: Everyone is required to do at least annually, but they oftentimes need snap inspections. These are just unannounced, filter shrug Both.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yeah. Sometimes announced, sometimes unannounced. And then investigative work. Obviously, if we got complaints, we send agents to investigate those. You know?

[Committee Chair (unidentified senator)]: And do you have any performance metrics?

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: It's a good question. We have been working with our consultants. So we hired a consultant to help us do the supply and demand analysis. And as a part of their work, also sort of evaluated structure of our agency and have suggested some KPIs for us. So the report is fresh off the press in the last months or so, so we are going to be officially, you know, turning to utilizing some of those suggestions. Today, we, you know, we definitely do what's required for the budget cycle, but some of those are ratio, some of those are what's the compliance rate, for example, inspections, how many result investigations, how many pass with flying colors. So we have those metrics

[Committee Chair (unidentified senator)]: for sure. And you have three ways for people to play in the address.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: They have a platform.

[Committee Chair (unidentified senator)]: Assume you try to go to the county.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yes. So complaints a year. Yes. And I think that presented yes. So we definitely have total complaints on any of those. It's also investigations and violations. So those things are definitely available. I

[Committee Chair (unidentified senator)]: would assume that would be a performance measure you could

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: We Yeah.

[Committee Chair (unidentified senator)]: Something similar. Or just general customer satisfaction. Yeah.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yes. That's probably a.

[Committee Chair (unidentified senator)]: Any other questions? Do have anything else you wanna say?

[James Pepper, Chair, Vermont Cannabis Control Board]: Just out of curiosity, are your investigators just civilian personnel? Yes. We we pulled them from agency of agriculture, department of health. You know, we we try to cover the expertise that the compliance needs and cross train all of our compliance You pull them in your coach. Yeah.

[Committee Chair (unidentified senator)]: Well Alright. And last question I just happen

[James Pepper, Chair, Vermont Cannabis Control Board]: to think. Do you like DLL? Do you do people who go in with a fake ID and try to get through the system. And, like, cigarettes? A little bit. I mean, we we certainly investigate the complaints then and try and try and do it, but we haven't done systematic. You know, they're not supposed to be called stains anymore. Right. We don't we don't systematically do it. Not that I'm advocating for. It's just

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: No. We've relied on DLL. So we've had complaints, and when we've gotten a complaint and it seems serious, we would work with DLL so they send somebody from their We just don't necessarily have the staff and our agents constantly in the field, so they wouldn't even be able to pass it. In the year, we're

[Senator Richard Westman]: saying that

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: it just wouldn't work. There's so few, and really the same seven people who've been with us from the beginning. Many turnover on that team? They're talking good. They're amazing. But they just been well to know them. But DLL is also on purpose.

[Committee Chair (unidentified senator)]: DLL doesn't sink. Senator Norris is crushing. They're all they don't have force inherited civilians, inspectors. Like, don't have sworn officer. Do they have sworn

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: I'm something.

[Committee Chair (unidentified senator)]: They give us some You're compliant.

[James Pepper, Chair, Vermont Cannabis Control Board]: Sworn officers. People that do these things are they they Yes. Are not staying. That's right. They they contract with the service. Use his kids. Yeah. So I'm there.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Okay. Okay.

[Committee Chair (unidentified senator)]: Any other questions? Thank you. We should have asked you that we didn't ask you.

[James Pepper, Chair, Vermont Cannabis Control Board]: I mean, the only thing I think that's good news, I know that revenue is never enough, but we we didn't exceed you know, if you go back to JFO's 2023 forecast on market, it was just two months old, they projected three years out. We've exceeded those projections every single year by at least four years standing for the year, 70% in. So the market is strong. Know, the revenue is never enough. It's not, you know, fixing any major issues. It's more about loving homes. But, know, you I think there's gonna be continued growth. And, again, there's we are leaving quite a bit of money on the table in in certain areas, but, you know, there are areas that would require debate and policy choices.

[Committee Chair (unidentified senator)]: Okay. Thank you. Thank you. Janet, if you could saw that the auditor had done this weekend, do we have the deputy auditor? I don't know. No. I here the other day, but

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yes, sir.

[James Pepper, Chair, Vermont Cannabis Control Board]: Did you in person?

[Committee Chair (unidentified senator)]: He was here yesterday in person. I mean,

[Senator Richard Westman]: some This one's look like a chicken.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: You

[Committee Chair (unidentified senator)]: can ask the auditor. Does he know where his deputy is?

[James Pepper, Chair, Vermont Cannabis Control Board]: It's a good question. It's too cold

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: to be skiing.

[Doug Hoffer, Vermont State Auditor]: I'm sorry, that's on a need to know basis.

[Committee Chair (unidentified senator)]: Okay, so yeah, now we're going to hear the budget request from the auditor's office. We have the auditor with us, so we'll let Doctor. Harper just give us his presentation.

[Doug Hoffer, Vermont State Auditor]: Thank you very much. And first, let me say I I appreciate you allowing me to testify remotely. I have some vision issues, and I'm trying to limit my time on the road. So thank you. Our budget, as is always the case, is pretty straightforward. There's nothing fancy. There's no federal money. We have no programs, no divisions. We have three sources, actually two and a teeny add on. The largest by far is our internal service fund, which reaches almost everybody in state government, not the lottery folks and a few others, but generally speaking, everybody. And the methodology for that, it's called the SARF, the single audit revolving fund. The methodology for that is approved, whenever we make changes by both the fifth floor and OMD in Washington because it covers single audit stuff as well. And the advantage, by the way, of the SARF, in addition to spreading the the cost around, is that those entities that receive federal funds in most cases can apply some of it towards the payment of the SARF to us. So it's not general fund. And our general fund this year has declined quite a bit for a reason I'll explain, but it's it's now under $300,000. We had a position when I took office in '13 that was exempt, and my predecessor used it for PR. And that didn't seem like a good use of a body to me, so I repurposed it into an investigatory guy or gal. And it worked a couple of times exceptionally well. The first was Andrew Stein, who later became my second deputy and now is kind of the CFO at the tax department. Really bright guy, great writer, good researcher, and I really enjoyed having him in the job. We got a lot of good product from him. A couple of others in between weren't as good. And then we had a woman named Fran who's over at AHS Central, also just as good as Andrew. So it was a mixed bag. And, the last fellow we had didn't really work out and, was more work and trouble than it was worth. So I I realized unless the auditor and or the deputy are ready to devote a lot of time to this position, I thought it would add value and add product. That sounds bad product, but, in the end, I think the best choice is is what we did. We I did something that very few appointing authorities ever do. I gave up an exempt position, and I had it turned into a classified senior auditor, and we are recruiting for that position now. So that cost goes into the SARF, the internal service fund, and is is taken from the general fund. So the general fund cost is down. Other than that, there's almost no changes. It's all pretty much status quo.

[Committee Chair (unidentified senator)]: Well, with your total budget changes percentage, I don't see that on your one page here.

[Doug Hoffer, Vermont State Auditor]: I'm sorry. It's under 3%. We we met the governor's request. I love to follow the rules. You know?

[Committee Chair (unidentified senator)]: Good there's characteristic for an auditor. Yesterday we were talking about your audit of BGS energy program, which I appreciate. I found that in lending. We talked to BGS about it. But is there anything else that you would want to highlight of your your work or your side did?

[Doug Hoffer, Vermont State Auditor]: Well, you you might get a kick out of this. As you may know, we did three jobs that were about different entities in state government that have programs to serve consumers who have complaints. One was the Department of Health, Food and Lodging. One was Public Service Department. They have a complaint program, as you know, and the other was the insurance division of DFR. And two of those, DFR and PSD, balance, did a pretty good job. And the Department of Health wasn't that far off, but there's room for some improvement. I'm sure they will. But the audits were not covered by Vermont Digger. And over the years, VICI Digger has been a pretty reliable partner as it were in presenting or sharing our work with the general public. Now you guys know we get it to you, and we get it to the administration. And I also have a newsletter that goes to about 13,000 people, but I was very disappointed that Digger didn't cover those two. So I I waited a few days and sent him a note, and I said, you know, I don't know what's going on. Maybe it's because the legislature's back and you're overworked and you always have to make choices. Maybe it's because the findings were generally positive,

[Senator Richard Westman]: and I

[Doug Hoffer, Vermont State Auditor]: know the media prefers conflict. And I just threw that out, but he wrote back and said, you're right. A positive finding we take is status quo, and we're not gonna cover it. I I was deeply offended because, you know, here's an an anecdote. About a year after I started the job, I was at the golf course, and some guy I hadn't seen in ages was over at a nearby green. And we had just released an audit report and had been covered in the news, and there were some unfortunate findings. And the guy yelled at me and said, Hoffer, why don't you just tell us what works? And I laughed, you know, but that represents a vision or an idea of state government that continues, which is state government is corrupt and incompetent. And I don't wanna be the guy that that helps, you know, create or maintain that view because I don't believe it. It's wrong, and I hate it. So with that in mind, I was deeply offended that VT Digger would think it doesn't matter if we tell people when state government does a good job. That really pissed me off. So I'm sorry to take your time, but those were, you know, modest audit reports. We have another one in that same vein coming out about the attorney general's CAP program, the consumer assistance program, which is a partnership with UVM, and that's kind of a mixed bag. You'll see that probably in a couple of weeks. We also have a a job that's almost done about Veggie, something I've dealt with many times over the years. In fact, wrote the first, or was the primary author of the first report on Veggie's predecessor, the EATI, back in 1998, when I did some contract work for then auditor Ed Flanagan. So it's kind of in my DNA. In any case, there is an element of the methodology that's used to determine not eligibility for the grant, but the size of the grant. And we now have some really interesting and up to date and, know, data that that hasn't been available in years past to answer the question, well, Phil, your company is applying for money, and there's a principle embedded in the statute very clearly that we're not supposed to pay you if you would have done this anyway. That's the but for for eligibility. The other is that the amount that we award should not include what is considered measurable background growth. Well, in the old days, they didn't have a way to measure that because the tax department's record keeping and and the IT systems were not up to the task. Now they are. So what they did is use for all of the applicants an industry average. So if all the widget makers in Vermont averaged an an an annual growth rate of 3%, that would be applied to the applicant, and their award would be reduced by that amount. And that's all they had to work with. And I complained about it over the years, but they said, oh, we have nothing to do. Well, I asked the question again about a year and a half ago. And as it turns out, taxes new system can answer the question and tell us, you know, what what is the immediate history prior to application for an applicant. And it's not necessarily directed, the report, to the council about the but for. It's directed to the Joint Fiscal Committee, which has statutory authority for the methodology. And I think it's pretty clear that it's time for a change, but you can read it when it's done. And it is almost done, and, of course, we always give it to the auditee for review. So it'll probably be three, four weeks. We are I'm sorry. Go ahead.

[Committee Chair (unidentified senator)]: No. I was just saying I'm I'll be interested to read that when it comes out.

[Doug Hoffer, Vermont State Auditor]: We also have a number of other projects under consideration because we have a lot of jobs that are have been completed at at more or less the same time. So we'll see how that sugars out in terms of the risk assessments that are underway, which reflect an analysis before we make a decision. So it'll be a little while before we answer all those questions. But the good news is, you know, we've had some retirements in the last four, five years and have been extremely fortunate to replace all those lost folks with some really excellent stuff from all over the country. And, you know, it's not surprising to me, but it's kind of interesting to think back on your your former colleague and my personal friend, you know, Michael, who was a big promoter of this let's pay them to come. Well, I'm not supposed to get personal with applicants when we're interviewing them, but I typically say, you don't have to answer this, but I'm curious why know, you are from Louisiana or Ohio or Washington or Tennessee, and you wanna move your and that's your life. That's where you grew up. That's where your family is. Why do you wanna move to Vermont where you know no one? And almost every single one of them says, I don't wanna raise my daughter in blank, fill in the blank. They wanna be in Vermont for a lot of reasons. I mean, it's a beautiful place, great quality of life, but the tipping point in some cases is that we offer some social and cultural things that other states don't. And you you can't make that part of your economic development strategy except do the rest of it as best we can. So I feel good about the office. I'm gonna be gone in a year, as you know, and I I think we've done some good work. And the the crew is good. I'm glad we could, you know, expand by another body because there's no shortage of work to be done, of course.

[Committee Chair (unidentified senator)]: Is your office involved at all about the general effort to maybe restart the the committee on, what do we call it, the GAC, I can't remember when it says, the kind of accountability and the performance reporting and all, like, how can we be better?

[Doug Hoffer, Vermont State Auditor]: Yes, indeed we are. And it's been an interest of mine. In fact, the first job I did for Flanagan back in the nineties was on performance measurement in state government. And we now include performance measurement in our objectives for almost every audit we do. And I'm happy to say that, after following this over the years, I think the state, the administration, which has this the office that is responsible for this statewide, has made some progress after a lot of false starts. And I know one of the false starts, unfortunately, was the ledge effort. There are people who are still talking about that, and Tim and I encourage them every chance we get. You know, it it it represents a responsibility, I think, of the legislature, but it it does involve commitments of resources, which is always challenging. But, I did something the other day in, house commerce, and I'll do more of it. I wanted to go a little bit further with performance measurement than Justin, the fellow at the office in on the 5th Floor does. But the interesting initial predicate question is, are the measures honestly reflective of the goals of the program that you guys create and is being measured by the department or the agency? That's always the most important question. Sometimes it's not. But even if it is, do they measure actual outcomes or not, or just output? It's easy to measure how much you do. It's much harder to measure how well you do. So I said, I can help. So I looked at six programs from the Department of Economic Development and was shocked to learn that two of them actually report what is characterized as performance data, but it's not. It's from the applications of businesses seeking money. They make no effort to follow-up. There's no due diligence after the company works through the program, whatever. And I won't tell you what they are now. I'm not done with the memo, but that really shocked me. So we may do yet another job on performance measurement because I just think, you know, it's such an incredibly valuable tool for the program managers, for policymakers, and for the general public. So I I care about that a lot. Know Tim does too. So

[Committee Chair (unidentified senator)]: we'll see. That would be helpful. I think we need help on that. I think the auditor's office is

[James Pepper, Chair, Vermont Cannabis Control Board]: the right place to to help the legislature figure out the best way to forward us.

[Doug Hoffer, Vermont State Auditor]: Well, thank you.

[Committee Chair (unidentified senator)]: Okay. Any other questions about the auditor or the deputy auditor?

[Doug Hoffer, Vermont State Auditor]: Can I can I just say this is a whole new world? The last time, or I think two years ago, I was here you guys were still talking about who had the better cookies from your constituents. It's a it's a different crowd now.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: Yeah. Yeah.

[Committee Chair (unidentified senator)]: Well, we're we're we're getting on our measures. Discussions of cookies was done.

[Doug Hoffer, Vermont State Auditor]: That was about morale, I think, basically.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: We've asked about performance measures on the golf course.

[Doug Hoffer, Vermont State Auditor]: That's about my handicap, and it's not what it used to be at all.

[Olsen Fitch, Executive Director, Vermont Cannabis Control Board]: No. Fine either.

[Doug Hoffer, Vermont State Auditor]: Well, I appreciate you taking the time. If you have any more questions, you know how to find me.

[Committee Chair (unidentified senator)]: Yeah. Well, thanks for all your your service in the office, and hope you have a good retirement.

[Doug Hoffer, Vermont State Auditor]: I hope so too. Thank you very much. Take care.

[Committee Chair (unidentified senator)]: Okay, well we can go offline for our attendance.