Marijuana Legalization Map 2020

Fiscal and Structural Subgroup—Meeting Two DRAFT Minutes September 11, 2020 1:00 PM Virtual Meeting A meeting video link will also be available here soon Meeting Attendees: Secretary Brian Moran Deputy Secretary Brad Copenhaver, on behalf of Secretary Bettina Ring Assistant Secretary Catie Finley, on behalf of Secretary Daniel Carey Jenn Michelle Pedini (Virginia NORML) Commissioner Jewel Bronaugh (VDACS) Ngiste Abebe (Columbia Care) Dr. David Brown (Department of Health Professions, on behalf of Caroline Juran) Kristen Collins (Tax Department), on behalf of Commissioner Craig Burns Michael Carter (VSU Small Farm Outreach Program and farmer) Travis Hill (ABC) Deputy Commissioner Charles Green Joe Mayer (Tax Department) David Barron (Department of Forensic Science) Commissioner Bronaugh began the meeting at 1:00 PM. Approval of August 17, 2020 Minutes Commissioner Bronaugh called for a vote to approve the minutes of the subgroup’s last meeting on August 17, 2020. Roll Call Vote: 9 yes, 0 no Unanimous in favor of approval of minutes Guest Speaker: Steve Hoffman, Chair, Massachusetts Cannabis Control Commission When Massachusetts first started in 2017, they reached out to states who had preceded them, and they were all very helpful—so happy to help serve in this role. Massachusetts approved medical cannabis in 2012, and was overseen by the Department of Public Health. That department did a good job with regulations but it took a long time—first dispensary did not open until 2015. In 2016 voters approved 53-47% an initiative to legalize adult use, and it remains controversial. The MA legislature put a hold on the law, but finally passed it in mid-2017. That created an independent 5-person commission jointly appointed by the Governor, the AG, and the Treasurer. At first they just covered recreational, but in 2018 switched to regulating medical as well. As far as they know, MA has the only fully independent body that oversees marijuana. At the beginning, the commission had no office, staff, or funding. They had to go to the legislature to get funding. It works well as an independent body—they were able to move more quickly than the original medical regulations. They finalized regulations and started accepting applications for licenses in spring 2018 and had stores open in November. The regulations they developed closely mirrored the medical regulations, and now they have streamlined everything into one set of regulations. This is an effective structure. One downside of being an independent agency is that because of the controversial nature of the topic, they are often on their own. Another downside was the difficulty to start up—no money, no staff, no office. Now 3 years into this, they have a staff of 75 people and an office. Mr. Hoffman would advocate for a standalone agency that has both medical and recreational under its structure. MA originally just had a 13% retail tax. The legislature increased that to 20%, including 3% for localities that host the retailer, 6.25% state sales tax, and a 10.75% excise tax. That has become a source of controversy. There are specific uses designated for the excise tax, but there has not been a lot of transparency in how that is used. They are looking at alternative tax structures, such as weight-based and potency-based. KPMG was hired to help them do the analysis, and even though he could not share specific, they found that the revenue generated from different structures was about the same. The Revenue Department thinks that collecting as a sales tax is likely easiest. Currently have 65 retail stores open and think they can get to 200 or 225. KPMG concluded now that the price of marijuana is inelastic, but when the market matures, the price will become more elastic. Legislature is considering raising the tax rate because of this. Question from Sec. Moran: Our ABC has an enforcement arm. How does the MA independent commission handle enforcement? Answer: They have 75 people on staff, and the biggest single group is enforcement: licensing, inspection, and enforcement. It is not a law enforcement operation—they can do fines, rescindments and suspension, and they can refer to other state law enforcement. Q from Sec. Moran: Where do your revenues come from? Answer: Every year, they need to get an appropriation from the legislature, and so far they have gotten what they’ve asked for. This year, they do not have a budget in place yet, and may not get one until October. Mr. Hoffman would not be surprised if they have to take some cuts. Budget is roughly $16 million. Q from Dr. Bronaugh: You mentioned social equity mandate—can you talk more about how you implemented that? Answer: This has been difficult. The legislation has a diversity requirement and a more explicit mandate that states that those communities negatively impacted by criminalization are full participants in the new industry. There are some challenges with that because there are no definitions in the law. They brought in a sociologist to help them define this and even looked at the neighborhood level—ended up with a list of 29 communities disproportionately harmed. Also, full participation does not just mean employment, but it includes ownership as well. Implementing this has been an uphill battle though. People from those communities were allowed to apply for economic empowerment status, which makes it easier to apply. Also created a social equity program, which trains people in how to run a business and gave these folks priority as well. Two biggest challenges: 1. Strong MA tradition of local rule—before the state can issue a license, the city or town must issue an agreement first. And no localities have the equity mandate. 2. Funding is also a large challenge. Banks are not lending for this industry, so many equity applicants cannot get the necessary capital. They have been pushing to use some of the excise tax to get a fund to provide low or no-interest loans to these folks. Illinois has mirrored a lot of the MA mandates, but they have actually designated some funding to go to that. Q from Michael Carter: Is grower supply all coming from in state? Answer: Everything is in state because there is no interstate commerce allowed. They have a seed to sale tracking system. When a plant becomes 8 inches tall, it gets an RFID tracking tag, and that identifier stays with that all the way through retail. This ensures that everything sold in state was grown in state, and also ensures that nothing grown in state is sold out of state. The DOJ Cole Memorandum said that they are not going to interfere with states who choose to do it, given that no one under 21 can legally purchase, no criminal enterprises make money, and there is no diversion of product across state lines. Jeff Sessions rescinded this memo and is letting the state US Attorneys decide how to handle. MA is not a great agricultural climate, so the prices there are much higher. Most production is done indoors, which is resource intensive and expensive. MA has aggressive environmental rules for that reason. Group members can email additional questions to staff and they will share with Mr. Hoffman. Guest Speaker: Chief Justin Nordhorn, Chief of Enforcement, Washington State Liquor and Cannabis Board Powerpoint from WA is attached. WA was one of the first states in the nation to legalize, and this was done through a voter initiative. But there were some gaps because of this. WA system was modeled after alcohol control with different levels. Manufacturers or processors cannot have an interest in a retail store. Not vertically integrated like many states are. Implemented a 37% tax on final cannabis sales, and it is much easier to do the tax collection at the retail level. They have a licensing division and had a 30 day window at the beginning, but that presented a lot of challenges. They are now up to 550 licenses but had over 2,000 applications. Some communities got left out because of this, and they are exploring ways to fix that. They also have enforcement, and the WA agency covers cannabis, alcohol, and tobacco, but they found that it takes much longer to inspect cannabis. So they have a specific team doing enforcement of cannabis, and this has been really important. They have a traceability system, and there is no one right way to do traceability. Even if the federal government fully legalizes, it would still be good to have the traceability system, just like for some other agricultural products. They have a residency requirement for licensees, but have branched out to allow out of state investment to some degree. Have 3 state-chartered banks and many credit unions who do business with the industry, and this has been good. Because it is more cash-based, they have seen more robberies of these businesses in general. WA does not allow for online sales now, but is considering changes that. Number of licenses: around 2,000 total in wholesale, retail, and other. Washington does not allow for home-grows or home delivery. Have seen growth in the marketplace and revenue collections since they started—slide 14. There is still an illicit market in WA, but unless it’s a very big operation, not a lot of focus on prosecution that. During COVID-19 pandemic, they have seen increased sales, perhaps because people are shifting away more from illicit market due to safety. Revenue projections continue to increase—slide 15. Slide 18 has a snapshot of price per gram in Washington State. There has been a lot changes to licenses—ownership of businesses, floorplans, and other things to get competitive advantage.

Load more