Mo Money, Less Problems: Economic Incentives for 2020 Legalization Measures

Marijuana buds on top of United States cash money
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As this dumpster fire of an election season lurches towards its close, don’t forget that four states – Arizona, Montana, New Jersey and South Dakota – will be voting to legalize adult-use cannabis this November! South Dakota and Mississippi will have medical marijuana on the ballot as well.

There are a myriad of arguments to make in favor of legalizations: it gets people out of jail (and keeps them out), being able to consume cannabis is a civil liberty, legal cannabis offers consumers access to safe and lab-tested products instead of cannabis mystery meat. But this year, as the coronavirus pandemic has decimated state coffers and countless jobs, the economic incentives to legalize have taken on new significance and momentum.

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Read on to learn more about how much tax revenue each of these states is projected to bring home with access to a legal market, and what they plan to do with that money.

Arizona

For Stacy Pearson, the spokesperson for Smart and Safe Arizona, the “silver lining” of the coronavirus pandemic is that Arizonans are looking for cash to boost their economy. And that may translate into the passage of adult-use cannabis legalization.

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“Voters continue to see revenue as the single biggest benefit of legalization,” she told Wikileaf, “both in direct revenue from taxes generated and the revenue that can be saved when you stop the persecution of marijuana users and free up time for both law enforcement and the legal system.”

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Pearson estimates that by the third year of the program, the state would generate an estimated $340 million in annual tax revenue, by taxing adult-use cannabis at 16%.

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How About Jobs?

The Arizona initiative would effectively grandfather all pre-existing medical dispensaries into the rec program and add 26 new licenses for social equity applicants, as well as licenses for rural counties that aren’t currently home to any dispensaries. While Pearson can’t say precisely how many jobs will be created, she estimates that the demand for cannabis will roughly double. “With that comes larger cultivation sites, busier retail operations and all the other tertiary employment [packaging, transporting, etc],” she said. “All of those jobs then increase.”

Where Would the Money Go?

Pearson explained that the money will be allocated into four “big buckets:”

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  1. Community colleges – “Community colleges were defunded in 2008,” Pearson said. “This would restore funding to [them] and bring tuition down.”
  2. Public safety – This money would be allocated to local governments to distribute among fire, police and other departments as they see fit.
  3. Infrastructure – This would address “roads throughout Arizona that are woefully underfunded,” Pearson said. “There’s a huge jobs component to that.”
  4. Public health – Municipalities would be able to put this money towards the most pressing issues in their community: mental health, homelessness, substance use disorder, suicide, etc.

Mississippi

In Mississippi, advocates with Medical Marijuana 2020 (MM2020) are working to pass Initiative 65, which would legalize medical marijuana in the state. Legislators have thrown a monkey wrench into the campaign, however, by drafting a competing bill (65A) with the seemingly explicit purpose of confusing voters and diluting the vote for I-65. Additionally, on October 8, Governor Tate Reeves (R) signed a bill to legalize FDA-approved marijuana products like Epidiolex in the state.

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In lieu of taxes, I-65 calls for a “user fee” that would be used solely to run the program itself. Thus, the program would not raise revenue for state coffers.

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How about Jobs?

Jamie Grantham, the spokesperson for MM2020, regularly stresses that this would be a “conservative” program with a free-market approach to licensing that could lead to a large influx of businesses and new jobs.

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Montana

Activists with New Approach Montana are campaigning for two initiatives this November: Initiative 190 would legalize adult-use cannabis and Constitutional Initiative 118 would modify the state constitution to set the age for legal consumption at 21 (Montana otherwise defines an adult as someone 18 or older).

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According to a University of Montana study commissioned by New Approach Montana, adult-use cannabis – which would be taxed at 20% – would generate an estimated $236 million in total revenue by 2026. The study anticipates that a large portion of sales will come from tourists; Yellowstone National Park alone receives about four million visitors annually. The study estimates that Montana will see 850,000 out-of-state cannabis customers by 2026.

Furthermore, the program establishes a 50% horizontally-integrated market (its medical program is fully vertically integrated) that will ideally enable businesses to focus on what they do best. “It’s a critical improvement [and a way to] aid small businesses in Montana and help them compete in a rapidly evolving marketplace,” Pepper Petersen, spokesperson for New Approach Montana, told Wikileaf.

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How about Jobs?

Initiative 190 calls for a one-year moratorium on new licenses in order to give current medical providers a leg up on out-of-state competition. If the initiatives pass, all medical providers will be able to apply to double their grow canopy. Petersen explained that the program will generate an estimated 4,000 new jobs. “Once rec comes online, it’ll be as big as coal was in its heyday,” he said.

Where Would the Money Go?

Montana’s legalization initiative proposes earmarking half of all revenue to various public lands, parks and restoration projects. It splits the rest of the revenue equally between the state’s general fund, separate funding specifically for municipalities that permit cannabis sales, veterans services, substance abuse treatment and care services for disabled and elderly Montanans.

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If the initiative passes, however, the state legislature will have the final say when it comes to allocating the revenue.

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New Jersey

This November, New Jersey residents will vote on Public Question 1 to legalize adult-use cannabis. The program has the support of Governor Phil Murphy (D) and State Senate President Stephen Sweeney (D), as well as other lawmakers and a coalition of New Jersey non-profit organizations operating as NJ CAN 2020.

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According to NJ CAN 2020 campaign manager Axel Owen, adult-use cannabis could generate an estimated $300 million annually once the program is fully implemented; he cited a 2016 study conducted by New Jersey Policy Perspective. “That’s a very conservative estimate,” Owen added, explaining that the figure doesn’t include ancillary businesses.

Cannabis would be taxed statewide at a rate of 6.625%; local governments could tack on an additional tax of up to 2%.

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How About Jobs?

Owen estimates that the program would create “tens of thousands of jobs,” not including ancillary businesses.

Where Would the Money Go?

If legalization passes at the ballot, first the legislature and then the state’s Cannabis Regulatory Committee – which already oversees the state’s medical program – will determine how to allocate the revenue. “It’s a multi-step process,” Owen said.

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South Dakota

South Dakota is the first state in history to attempt to pass both recreational and medical marijuana in one fell swoop. According to Drey Samuelson, political director for South Dakotans for Better Marijuana Laws, there’s a big risk if only Measure 26 (the medical initiative) passes: because it’s not a constitutional amendment, the state’s conservative legislature could dismantle it if it not safeguarded by protections put in place by Constitutional Amendment A (the rec bill). “If Measure 26 passes and Amendment A doesn’t, there’s every reason to believe the legislature will rip Measure 26 apart,” Samuelson told Wikileaf.

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Samuelson added that legalization would give South Dakota “first mover advantage” in the region (unless Montana beats them to the punch). In other words, if federal legalization passes, a pre-existing program in South Dakota would give the state additional momentum.

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Amendment A is the real moneymaker. According to a report conducted by the South Dakota Legislative Research Council, the adult-use program would generate an estimated $29 million by fiscal year 2024 through a 15% tax and licensing fees.

How about Jobs?

Melissa Mentele, Campaign Director for the medical initiative, points out that legalization wouldn’t merely create “weed jobs,” but could “really stimulate the economy with [a demand for] skilled trades like construction, electrical, custom HVAC and custom build outs.”

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Mentele additionally stressed that the program will be accessible to residents. “I didn’t want it to be a circus show to create something here for South Dakotans,” she said. Although the program is vertically integrated, all license fees (each step of production requires a separate license) are capped at $5,000. “People should be spending money to create the safest, most efficient facilities,” she said, not on exorbitant license fees.

Where Would the Money Go?

The revenue generated by Amendment A would be split evenly between the state’s general fund and public schools. “Schools are underfunded, teachers are way underfunded,” Samuelson pointed out. (According to Business Insider, the state ranks 47th for teacher salaries).

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