New York Gov. Andrew Cuomo is taking another swing at cannabis legalization by budget, New Yorkers learned yesterday during Cuomo’s budget address.
We took a deep-dive into the hundreds of pages of legislation to highlight the most interesting and important aspects of Cuomo’s proposal. Think of this plan like clay to be molded: it still has to go through the negotiation process, a distinctly New York brand of politicking during which lawmakers haggle over major policies before the April 1 budget deadline.
It’s no secret that New York is expected to be a powerhouse cannabis market, if and when adult use sales are up and running. Cuomo’s office is estimating that legalization could generate $20 million in tax revenue for fiscal year 2021, and $63 million in 2022. During Cuomo’s State of the State, Cuomo estimated that legalization could generate roughly $300 million in tax revenue “when fully implemented.” (In Cannabis Wire’s coverage of Cuomo’s budget address, we noted three proposed taxes: on cultivation, $1 per dry gram of cannabis flower; $0.25 per dry gram of cannabis trim; and $0.14 per gram of “wet cannabis.” Cannabis sales to a retail shop would be taxed at “20 percent of the invoice price.”)
Meanwhile, Siena College released a poll on Tuesday showing that 58% of New York residents support legalization, “the largest support its ever had in a Siena College poll.”
The legislation specifies that the Office of Cannabis Management will exist within the Division of Alcoholic Beverage Control. The executive director of the new office, Norman Birenbaum, was recently appointed by Cuomo, and will have extensive authority. (Read Cannabis Wire’s Q&A with Birenbaum.) Birenbaum will also appoint a deputy director for health and safety, a role that includes overseeing the medical cannabis program, and a deputy director for social and economic equity to oversee equity plans.
There will also be a cannabis control board that has authority to craft rules and regulations. Cuomo’s budget gives him the power to appoint the board members for three-year terms, which will include “a chairperson with one vote, and four other voting board members, all of whom shall be citizens and residents of this state.”
Cuomo is doubling down on his “regional approach” to legalization. Cuomo led a cannabis summit last October, during which lawmakers, governors, and regulators from states like Connecticut, Pennsylvania, and Colorado, gathered to debate cannabis policy. (Read Cannabis Wire’s coverage of the summit.)
In Cuomo’s budget plan, New York will seek to “engage in activities with other states, territories, or jurisdictions in order to coordinate and establish, uniform policies and best practices in cannabis regulation. These activities shall prioritize coordination with neighboring and regional states, and may include, but not be limited to establish working groups related to laboratory testing, products safety, taxation, road safety, and any other issues identified by the executive director.”
Licensing will be determined by the Office of Cannabis Management executive director. So far, those adult use licenses include: cultivator, processor, cooperative, distributor, retail dispensary, and, perhaps most noteworthy, on-site consumption license.
Cannabis research licenses could be used for work like “genomic or agricultural research” and “clinical investigations.”
Some other considerations when it comes to adult use licensing: has the applicant made an effort to “contribute to communities,” including those disproportionately affected by enforcement of cannabis laws? What is the environmental impact of the facility seeking a license? And has the applicant entered into a labor peace agreement with an entity that is “actively engaged in representing or attempting to represent the applicant’s employees?”
There are already 10 licensed medical cannabis companies in the state, also known as registered organizations, which include major multistate operators like Curaleaf. And they have one potential advantage over future competition, in addition to their foot in the door: Registered organizations under the state’s medical cannabis program could have the option to vertically integrate their adult use adult use businesses, or, put simply, sell the cannabis they grow. (Medical cannabis businesses in the state are all vertically integrated.)
Otherwise, a cultivator, for example, can have a processor license and a distributor license, but not a retail license. There are also limits to how many of a license type one entity can hold: for example, those applying for retail licenses are limited to three. (Also, those retail shops cannot be closer than 500 feet from a school or 200 feet from a place of worship.)
One angle that’s likely to see particularly robust debate: the legislation, if passed as-is, won’t allow adult use consumers to grow their own cannabis. Medical patients, or their caregivers, on the other hand, will be allowed to grow four plants per household.
While Cuomo’s proposal would allow for limited social consumption via the on-site consumption licenses, but don’t expect cannabis at your local bar. Cannabis and alcohol cannot be sold at the same location. Also, as far as mixed products go, the “use or integration of wine, beer, liquor or nicotine or any other substance identified in regulation in cannabis products is prohibited.”
Cuomo’s budget proposal includes a number of noteworthy special use permits, including: trucking permits for transportation of cannabis and products; warehouse permits for storage; and delivery permits to “to authorize licensed adult-use cannabis dispensaries or third-parties to deliver adult-use cannabis and cannabis products directly to cannabis consumers.”
Where things get interesting in a market like New York City: a caterer’s permit to allow the “service of cannabis products at a function, occasion or event in a hotel, restaurant, club, ballroom or other premises, which shall authorize within the hours fixed by the office, during which cannabis may lawfully be sold or served on the premises in which such function, occasion or event is held.” Also, temporary retail cannabis permits, which would allow adult use cannabis sales “for a limited purpose or duration.” These could take the form of pop-up events, for example.
Local control (and its limits) will be a key area of debate as lawmakers try to come to a consensus by the April budget deadline, especially for those who lean conservative.
Under Cuomo’s budget plan, a county or city with 100,000 residents or more can prohibit cannabis businesses. Otherwise, localities can determine things like hours of operation and location of shops but not in such a way that makes their operation “unreasonably impracticable.”
It’s noteworthy that Cuomo’s budget proposal would ban local community agreements, which caused a great deal of friction in Massachusetts and were seen by many as creating a barrier to entry for smaller companies.
“Local rules, ordinances, regulations or prohibitions enacted by a county, city, town, or village shall not require an adult-use cannabis applicant or licensee to enter into a community host agreement or pay any consideration to the municipality other than reasonable zoning and permitting fees,” Cuomo’s legislation reads.
Sticking points: stoned driving and social equity
Another area that hamstrung progress on legalization last year: fears over increased instances of driving while impaired by cannabis. Cuomo’s plan includes the creation of a workgroup that would include other states to “outline goals and standard operating procedures for a statewide or regional oral fluid or other roadside detection pilot program. The work group may include, but not be limited to, representatives from district attorney offices, local and county police departments, and other relevant public safety experts.”
Social equity provisions were also front and center during the budget negotiations last year, and also during the legislative debate that followed. There appears to be broad consensus on the need for equitable legalization in New York, but there are also divisions over how best to do so.
Under Cuomo’s proposal, a number of possible social equity programs have been listed, including: priority and/or expedited application review; reduced fees; access to low, or zero-interest loans; incubator and other educational programs; incentives to hire staffers that meet equity requirements.
“I am pleased that the Governor has advanced a comprehensive measure to legalize and regulate cannabis, and look forward to continuing the conversation with my colleagues and the Governor on all the various aspects and proposals,” Assembly Majority Leader Crystal Peoples-Stokes told Cannabis Wire. “As has always been the case, the only legislation that I can support will include a statutory commitment of significant resources directed to communities harmed by mass incarceration resulting from the so called war on drugs, and a robust economic and social equity plan for access to the new industry. I am optimistic the Governor will also come to this conclusion as negotiations progress.”
Casinos, advertising, and other considerations
New York has a number of casinos, from Turning Stone upstate, to Empire City in Yonkers. When it comes to gambling and cannabis, anyone with a retail cannabis license will be banned from offering gambling on the licensed site. This doesn’t apply to lottery tickets, as long as those rules are followed.
Cuomo’s budget legislation has proposed a number of advertising restrictions, including bans on ads if they’re misleading, promote overconsumption, or appear to be appealing to children. This means that cannabis ads will be prohibited a number of places, including within 500 feet of a school, playground, child care facility, library, park, or on public transport. Along these lines, traditional cable, radio, print, broadcast, or internet ads can only appear where the audience is generally 21 years of age and older. Ads that include coupons or other discounts would also be banned.
Two years into the program, the Office of Cannabis Management, with other state agencies, will conduct a study into whether legalization goals have been achieved, including fiscal, public health, social justice, and elimination of the illegal market. At the end of the study, the office will, if needed, recommend changes.