The pace of legalization debates are picking up, with lawmakers in Rhode Island taking up two competing proposals on Thursday.
Lawmakers are considering legalization plans through the budget and standalone bill. Former Gov. Gina Raimondo tried, and failed, to get legalization passed by budget, as Cannabis Wire previously reported.
A joint hearing that included the Senate finance and judiciary committees focused on a legalization proposal put forth by Gov. Daniel McKee, Article 11 of his FY 2022 budget, and on Senate Bill 568, also known as the Cannabis Authorization, Regulation and Taxation Act, or CART Act. In early March, Senate Majority Leader Michael J. McCaffrey and Senator Joshua Miller announced the Act, to legalize cannabis use and sales for adults 21 and older.
Thursday’s meeting came just one day after Governor Andrew Cuomo of neighboring New York signed a comprehensive legalization bill and New Mexico lawmakers sent adult use legislation to Gov. Michelle Lujan Grisham’s desk, which she has said she will sign.
The hearing began with an hour of discussion about each proposal. Rhode Island Department of Business Regulation Director Elizabeth Tanner went straight to the details of the governor’s plan. Ahead of giving an overview of their bill, Miller and McCaffrey spoke more broadly about the shifting cannabis landscape, and the wider aims of legalization.
Miller said the Senate bill “aims to redress wrongs perpetuated by a policy of prohibition and the war on drugs,” and spoke about the states “nearby that have, like Massachusetts, or soon will have legalized recreational sale of cannabis,” also calling out New Jersey and New York, which both recently legalized, and Connecticut, which has legislation under consideration.
“The question we are faced with, why now?” said McCaffrey, when he spoke next. “Now is the time to do this. The reality of the situation is, for the last number of years, we’ve had cannabis available through the illicit market in the state of Rhode Island and through the markets of other states that have legalized the marijuana. So we should capitalize on it now.”
He concluded his opening remarks by adding, “Hopefully we’re able to work with the administration and all the parties involved to come up with a piece of legislation that will pass this year.”
The questions from lawmakers suggest that in Rhode Island, as was the case in New York, impaired driving and equity will be early sticking points. Though, these are early days, considering the budget still has a couple of months to go.
Two major differences between the two proposals are around home cultivation and local opt out. Under the governor’s plan, localities can opt out of all cannabis license types by referendum. Under the Senate plan, they can only opt out of sales. The governor’s proposal does not allow for home cultivation, while the Senate plan does.
The governor’s plan, as detailed in a slide deck presentation Thursday, would allocate 25 new adult use retail licenses, by lottery, each year between 2022 and 2025, and then regulators would reassess based on a “market demand study.” Existing medical cannabis businesses, of which there are nine, will be allowed “hybrid retail” licenses. Of the 25, five will go toward “qualifying minority- or women-owned businesses.”
During that time, only craft cultivation licenses will be awarded, which allow for less than 1,000 square feet. Half of these will be awarded to “minority business enterprises,” and the same will go for transportation licenses and manufacturing/processing licenses.
The tax rate with the governor’s plan would come in around 20%, like the Senate plan, though it is structured differently. Specifically, instead of a 3% local tax, there is a cultivator excise tax that is “roughly equivalent to a 3% effective tax rate.” Localities would instead get 15% of the program’s gross revenue, which includes taxes and fees, which “equates to 3-4% of retail sales.” Most of the program revenue, 60%, will go into the general fund, while the remaining 25% is dedicated to specific purposes.
The two buckets laid out by the governor’s plan are “public health and health equity” and “public safety.” In the first bucket, for example, $1.1 million each year would go toward “health equity zones” and $1 million would go toward treatment and prevention. In the second bucket, $900,000 would go toward law enforcement, just under half of it for “drug-recognition training,” which was a big topic in the final days of New York’s legalization negotiations, as impaired driving emerged as a significant sticking point.
The Senate bill would establish a Cannabis Control Commission, with five commissioners. There would also be an advisory board with 25 members.
The license types are standard: cultivation, manufacture, retail, and testing, but the CCC could create new license types. An entity could only have one license, total, with the exception of existing medical cannabis licensees, which will be allowed to be vertically integrated. There would be a limit on the number of shops based on population, and the current estimate is that around 150 shops will be licensed.
Cannabis would be taxed under the Senate plan at a total of 20%, including a 10% excise tax on sales, the state’s existing 7% sales tax, and a 3% local tax, the revenue of which would go toward the locality. The fiscal note estimates that this local tax will bring in just over $3 million each year starting in 2024.
Revenue from cannabis fees and penalties would go toward a new Social Equity Assistance Fund. The fiscal note estimates that around $2 million in fee revenue will be collected by the state each year, starting in FY 2023.
The cannabis proposals garnered a number of written and verbal testimonies. Several came in from state and law enforcement officials. Nicole Alexander-Scott, director of the Rhode Island Department of Health, for example, wrote in support of McKee’s plan, which she says is “anchored in principles of equity and public health and safety.”
James Manni, the superintendent of the Rhode Island State Police, wrote in support of the governor’s proposal, saying that it “provides the regulation and much needed resources from the public safety perspective,” adding, “The position of the Rhode Island State Police is that it must prepare for the inevitable future where marijuana is fully legal in nearly every state.”
And Neena S. Savage, the tax administrator of the Rhode Island Department of Revenue, Division of Taxation, called for amendments to the Senate bill. Specifically, instead of a 3% local tax, which Savage suggested be called “a municipal excise tax to make clear it is not a state sales tax,” Savage suggested simply bumping up the excise tax from 10% to 13% and allocating 3% to cities and towns, which would streamline the collection process.
Testimony also came from organizations across the state, ranging from those focused on business to those focused on youth. The Rhode Island Alliance of Boys & Girls Clubs, for example, called for “cannabis tax revenues to fund Rhode Island afterschool and prevention programs.”
The Rhode Island League of Cities and Towns broadly called for greater local control. For example, the League opposes the referendum opt-out, and called for opt-out “by Council action.” And, AAA Northeast called for “the inclusion of language that maintains pre-employment drug testing policies for those employed in certain safety-sensitive positions,” as well as DRE training and public education campaigns.
The Rhode Island Business Coalition, on the other hand, had concerns with legalization overall, citing a lack of clarity around what would happen with workers’ compensation, drug testing, and safety sensitive employees, among other workplace-related issues.