The nascent recreational marijuana industry in Massachusetts will, one day, bring in revenue to cover the state’s costs of regulating and licensing pot shops. But first, the state will have to set up a brand new regulatory framework.
Where the money will come from to set up that framework – before any marijuana is sold – remains to be seen.
Massachusetts Treasurer Deborah Goldberg told the Legislature’s Committee on Ways and Means on Monday that she anticipates asking lawmakers for money "in order for us to carry out all of the responsibilities involved with this new endeavor."
While there are some licensing fees that will be raised to fund the licensing process, most of the revenue from marijuana will not come until marijuana is actually being sold. In the meantime, the state will have to set up a new Cannabis Control Commission to oversee the industry, craft rules and set up the licensing process.
For example, Goldberg’s office just put out a request for proposals from companies to find out how much it will cost the state to buy an electronic tracking and licensing software system to process applications.
"We’ve begun putting pen to paper in terms of what we see as startup costs," Goldberg said.
Goldberg said she is unable to give a figure on how much the state will need to cover startup costs. The state of Washington spent approximately $5 million, but it incorporated marijuana into an existing agency that oversees alcohol and already had 100 investigators. Massachusetts’ Alcoholic Beverages Control Commission has 15 investigators.
Colorado received $1.9 million from the marijuana industry in licensing fees, and its marijuana enforcement division spent $5.1 million on regulation and enforcement in the first year, Goldberg said.
"You have to actually build an agency, put it in an office, hire three commissioners by March 1, have an executive director, legal staff, investigators, a licensing operation. The software itself will cost money," Goldberg said.
One possible source of funding could be borrowing from the state’s rainy day fund, which is supposed to be reserved for emergencies, like an economic downturn. But Goldberg said she would oppose that because of the potential impact on the state’s bond rating. House Speaker Robert DeLeo, D-Winthrop, also said taking money from the stabilization fund "may not be the way to go" because of the impact on the bond rating.
Goldberg said she has been talking with legislative leaders about potential sources of funding, but they have not reached any conclusions about where the money might come from.
Goldberg has been a strong proponent of increasing the tax rate that the state will impose on recreational marijuana. Under the language that passed in the ballot question, the state would impose a marijuana excise tax of 3.75 percent, in addition to the state sales tax of 6.25 percent. Cities and towns could impose a local sales tax of up to 2 percent.
This is far lower than the tax rates in other states where marijuana is legal. For example, Colorado’s tax rate is 29 percent and Washington’s is 37 percent. Both states are raising revenue from marijuana sales.
"I really don’t feel the state should be underwriting private business," Goldberg said. "There should be some benefit to everyone in our communities, because there will be a lot of costs we aren’t aware of on the local level."
Goldberg noted that Massachusetts will also lose some money relative to a state like Washington because it allows homegrown marijuana, and people who grow marijuana at home will be less likely to buy it from retail stores.
Separately, DeLeo and Senate President Stan Rosenberg, D-Amherst, said Monday that lawmakers are considering delaying some of the effective dates of the marijuana legislation. Currently, regulations must be developed by Jan. 1, 2018 or else medical marijuana shops will be allowed to sell marijuana recreationally without any regulations in place. There are other dates by which certain steps must be taken before then.
DeLeo and Rosenberg said they are unlikely to delay a Dec. 15, 2016 date for marijuana possession to become legal. This provision would allow someone to grow small quantities of marijuana at home, and it means a person could not be prosecuted for possessing marijuana, although there will still be no legal way to buy it.
"We’ve had discussions about delaying some of the dates to give us more time to fine tune the bill, and in the next few weeks, we have to make final decisions on that," Rosenberg said. Rosenberg said any delay will be "time limited," and dates that are farther out will be easier to move than dates that are coming up.
Jim Borghesani, a spokesman for the Yes on 4 effort that advocated for legalizing marijuana, said, "It’s encouraging that these leaders seem to be indicating that there will be no attempt to delay the December 15 possession and homegrow provisions. But given how the state’s precarious fiscal condition featured so prominently in their remarks, it seems counterintuitive that they would consider pushing back the post-December 15 timelines and in doing so push back a significant new revenue stream."
News Moderator: Katelyn Baker
Full Article: Where Will The Start-Up Money Come From To Regulate Massachusett’s Marijuana Industry?
Author: Shira Schoenberg
Contact: MassLive
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