Eight problems with Illinois’ dispensary application award process

Illinois State Senator Iris Martinez in a virtual press conference Wednesday said, “It is obvious we need to stop the lottery.” (Zoom)

Despite Gov. J.B. Pritzker’s efforts last week to paper over the problems, there is barely a person in Illinois who doesn’t view the state’s recent cannabis dispensary award process as a total mess. Yesterday, a collection of Black and Latino Chicago alderman, Illinois state legislators and other local politicos held what was perhaps the largest press conference yet, demanding a halt to the cannabis dispensary lottery lottery and a rescoring of applications.

“We should not allow the public to believe that only the rich and powerful have access to justice,” said State Senator Iris Martinez. “It’s obvious the process was very flawed. It is obvious we need to stop the lottery.”

Following the announcement that out of 937 applicants only 21 will be entered in a lottery for 75 highly lucrative cannabis dispensary licenses, at least four court cases have been filed in federal and state courts to halt the lottery and rescore applications. One federal case is due for a hearing to halt the lottery today, while a case in Cook County Circuit Court is scheduled for a hearing on September 22. The state has promised to not run a lottery until September 23, at the earliest.

Legalization of recreational cannabis was one of Gov. Pritzker’s signature early accomplishments. Written, passed in the legislature, and signed by him all in the first legislative session of his term last year. Pritzker and legislators lauded it as a major social equity accomplishment, providing communities of color an opportunity to cash in on a legal cannabis market many Black and Latino people had been operating illegally, and persecuted for during the decades-long War on Drugs.

Now, the dispensary license awards are fast turning into one of Illinois’ biggest policy and political albatrosses. Let’s take a look at why.

1. The Four Month Delay

Claiming that Covid delayed the state’s ability to manage the licensure process, Illinois regulators pushed the license award deadline back from April 30 to September 3. This was on top of anxiety among some Black political leaders that existing cannabis licensees would get a big head start on new dispensary owners – who were expected to be mostly minorities. With every month the announcement was delayed, Black and Latino political leaders’ patience was tested. But those leaders ultimately stayed mum, partly because Illinois Cannabis Czar Toi Hutchinson promised that social equity was her top priority. It turns out that much of the delay was because KPMG, the company hired to score the applications, had a Covid no-travel ban, and the Illinois contract required KPMG to pick up the applications in-person.

2. The Veterans Bonus Points Skewed Scoring

As reported by Illinois Statehouse reporting dean, Rich Miller, a last minute component added to dispensary applications by a veteran-friendly legislator, gave higher scores to applicant groups led by veterans. Because most teams with the resources to complete the highly technical application were able to get close to perfect scores anyway, it ended up that veteran status effectively became more important than social equity.

3. The Kinda Sorta Social Equity

Twenty percent of the application scores went to social equity status, and because scoring was binary, either you got all the points or you got none. Making matters more complicated was that social equity status could be awarded in one of three ways: First, you had lived for five of the last ten years in a designated Disproportionately Impacted Area by the War on Drugs. Second, you or an immediate family member was arrested for, but not necessarily convicted for a cannabis offense in Illinois. Third, you hired six people who qualified under the first two conditions, had them on payroll making at least local minimum wage when you applied and kept them, or other qualifying individuals on payroll in perpetuity. 

It turns out these qualifications created giant loopholes, so that well-monied applicants could hire people for dead-end jobs to get the qualification, or applicants whose kids got arrested for hotboxing in college now qualified as social equity applicants. This is how we ended up with so many tie breaking applicants with North Shore addresses and connections to private equity firms.

4. Cannabis social equity had big political undertones in Black and Latino communities

As of today, none of the cannabis license holders in Illinois are people of color. The irony that Black and Latino people were thrown in jail for selling weed for decades, while white people are now making millions selling it legally – as people of color are shut out – is not lost on Illinois’ minority communities. The anticipation that many of the next set of dispensary licenses would go to minority owners creating generational wealth, resulted in a collective holding of breath for Illinois’ people of color – far beyond just those in the cannabis community. 

Then, the shock of finding out that only 21 of 937 applicants made it to the tiebreaking lottery, and that many of those groups were led by white owners, created a political shockwave that may last for years. 

“It’s what people had already thought, that it was going to be some bullshit,” said Anton Seals, a community organizer in Chicago’s Englewood neighborhood who advocated in Springfield for the passage of the recreational cannabis law, and then was part of a rejected application group. “But we were saying this will be cool. But no, it was bullshit.”

5. Who Exactly Got Deficiency Notices, And When?

One of the key elements of the application process was that if there was a problem, or missing information with your application, you were supposed to get a deficiency notice from the state. Yet, three of the lawsuits filed claim an inconsistent standard for who got a notice, and under what circumstances. For instance, one applicant, Joline Rivera told Grown In that her team submitted three identical applications, and received discrepancy notices for two of the applications, but no notice for the third. 

Complicating matters, one lawsuit argues that the state’s application rules so broadly define “deficiency”, that essentially as soon as your application is found to have a problem of any kind, you should receive a notice. Therefore, the September 3 announcement of tie breaker finalists should be treated as a giant deficiency notice and every applicant should be given ten days to fix their application. This outcome would be a logistical nightmare for the state.

6. Accusations of Shoddy Scoring

One application group Grown In spoke to, 2068 Investments, found their group had been awarded five points for having a veteran in their applicant group, despite the fact they had not submitted paperwork for that section. Other applicant groups we spoke to also found their social equity status had been rejected, despite being lifelong residents of Disproportionately Impacted Areas. If these applicants and others can prove in court that the company hired to manage scoring, KPMG, denied some applicants of their right to be in the license lottery, the entire scoring process could be thrown out.

7. KPMG’s Credibility Problems

The biggest, most obvious problem KPMG has is that one of their Chicago employees is part of one the 21 tie breaking applicant teams. How this managed to slip past KPMG’s managers, and why the company didn’t outright ban employees from applying for licenses is a total mystery since now the company and the scoring process is shrouded in ethical problems. The company was hurriedly assigned a $4.2 million no-bid contract last spring to manage the scoring process. The contact was given to KPMG, the Sun-Times reported last July, “to  prevent insiders from getting a leg up in the process.” 

8. KPMG Will Be Back In Illinois’ Cannabis SpotlightAlthough the Illinois Department of Agriculture isn’t saying when, the next set of licenses, for craft grow, infuser and transport, is expected to be announced soon. KPMG was hired with a $2.4 million no-bid contract to manage that application scoring process too.