On Monday, a committee of six Vermont lawmakers met for the second time, by Zoom, in an effort to reconcile the differences between the House and Senate versions of cannabis sales legislation. Once they can come to a number of agreements, on everything from where tax revenue is headed to how law enforcement should screen for impairment, the bill will head toward Gov. Phil Scott’s desk.
Two years ago, Vermont, the state with the highest cannabis use rates in the nation, became the first to legalize by legislature, rather than by ballot box, but lawmakers did so without allowing for sales. So now, lawmakers are once again returning to the discussion after meeting for the first time on August 19.
The first meeting highlighted some significant differences between the House and Senate when it comes to how legal sales should unfold in Vermont. For example, there is disagreement on taxes , local control, advertising, and a seatbelt provision that some lawmakers fear could increase the number of traffic stops, particularly affecting people of color.
By the end of Monday’s meeting, ground had been made on a number of compromises. One area of friction remains around local control. The Senate version proposes an opt-out for jurisdictions that want to ban cannabis establishments, whether one type, such as retail, or all types. The House version proposes an opt-in policy, but only for jurisdictions that want to allow for retail.
Disagreement also remains on THC caps and concentration limits for cannabis products. The Senate version bans cannabis products that contain alcohol, nicotine, or are appealing to kids, and no packaged cannabis product to be consumed orally can contain more than 100 mg of THC. The House version would not allow cannabis flower with more than 30% THC; solid concentrate with more than 60% THC; and no products containing more than 50 mg THC, unless it was a topical. If the House version passed, it would be among the most restrictive approaches toward cannabis products for adult use in the nation.
The Senate also continues to disagree with the House proposal to use saliva tests to help detect cannabis impairment, and with a seatbelt enforcement provision that some lawmakers expressed is irrelevant to the cannabis bill.
“Maintaining that saliva would be a tough sell for us on the Senate floor, and the seatbelts is an impossible sell for us on the Senate floor, so we leave those two items open,” said Senator Dick Sears on Monday.
Previously, the Senate wanted to give Vermont residents priority in obtaining licenses, while the House proposed that the Agency of Commerce and Community Development work with the Agency of Agriculture, Food and Markets to provide Vermont residents services like technical assistance and training, which the Senate agreed to. The Senate also agreed to create an “integrated license,” which would only be available to existing medical cannabis license holders, which would allow “vertical integration under one license.”
On Tuesday, much of the time was devoted to discussion about potential tax revenue and where that revenue would go. Graham Campbell, a senior fiscal analyst in Vermont’s Legislative Joint Fiscal Office, broke down estimated revenue figures. If a cannabis sales bill is passed, the state won’t see any revenue until fiscal year 2023, “because the market’s not quite set up.”
In the House version of S. 54, by fiscal year 2025, sales of cannabis and cannabis products are estimated to be $63.4 million on the low end, and $118 million on the high end. The House version calls for a 14% excise tax, estimated to generate by fiscal year 2025 between $8.9 million and $16.5 million annually. This proposal also includes a 6% sales tax with funds of between $3.8 million and $7.1 million estimated to be headed for the Education Fund by fiscal year 2025.
“On these House estimates, I think they’re just extremely low projections of income, from everything I’ve seen over the years, I think that you’ve way underestimated the income. But I’ve felt that way since the beginning,” Sen. Sears said.
When discussing these revenue estimates, Campbell explained that, in order to compare various state experiences, they normalized data by population and tax rate.
“You’ll hear from other states that it’s collected significantly higher revenues. Colorado collected, I think, north of $80 million dollars a year in revenue. That’s because they have a much higher tax rate and they have a much bigger population,” Campbell said.
Campbell also highlighted “potential border issues,” pointing out that when Washington legalized before Oregon, Oregon residents headed across the border for legal access. About 10 to 15% of Vermont’s overall market is expected to come from out-of-state visitors, Campbell said. “It’s difficult to estimate the extent to which travelers will be purchasing marijuana in Vermont, when Massachusetts, which is by far our biggest tourism state, has legalized sales, and with a roughly similar tax rate,” he said, adding that “it’s very well likely that, you know, New York residents will flood across the border into southern Vermont and purchase a lot of cannabis.”
Though, Campbell said, if S. 54 is passed, Vermont would be the third state in New England with legal adult use sales, all of which have comparable tax structures.
Sen. Joe Benning mentioned that many lawmakers have been “accused,” at some point, of creating the system to tax and regulate cannabis sales because they’ve had “dollar signs” in their eyes.
“It is important to note that we don’t really have a handle on how much is actually going to be produced as a result of this effort. But money was never, at least in my eyes, and I believe in many other people’s eyes, the main reason for going through this,” Benning said. “We have the highest consumption rate per capita in this country. And all of that is coming from either underground sales or, now, cross-border sales. And the underground sales have been the main concern. We want a place for people to be able to purchase a safe product.”
The House proposal also allocates 30% of the excise revenue to be earmarked for the Prevention Fund, and 70% for the General Fund. This was a point of contention at the last meeting, as the Senate version does not allocate specific percentages, for example, to prevention.
“I do believe that money should go into prevention and education. I think determining a particular percentage doesn’t make any sense because we don’t have any idea of what that might be,” Sen. Jeannette White said at the first meeting. “Revenues should go into the general fund and then it should be distributed the way it is needed at that particular time. So I do have a real, real issue with this.”
The Senate has proposed, as an alternative to the House proposal, that “30% of cannabis excise tax revenue with a cap of $10m goes to [General Fund] and dedicated to funding substance misuse prevention programming,” according to a revised Senate proposal to the House.
The Senate version of the legislation estimates sales between $63.4 million and $118 million by fiscal year 2025, and, with a 16% excise tax plus a 2% local option tax plus state fees, between $12.1 million and $21.9 million in tax revenue by that year. While the excise tax rate and the local tax are still unsettled between the House and the Senate, the Senate agreed to the House proposal to apply a 6% general sales tax “to the retail sale of cannabis and cannabis products sold by retailers and integrated licensees.”
Lawmakers also discussed a potential timeline, which lays out the estimated rollout. If the legislation takes effect in October, for example, the Cannabis Control Board members could be nominated, selected, and begin work by January 1.
By June 2021, the Cannabis Control Board could start the formal rulemaking process for adult use cannabis businesses, with a goal of final adoption of rules for cannabis establishments estimated for March 1, 2022. Retailers could be licensed on or before October 1, 2022, and begin sales to the public.
This committee is scheduled to meet again on August 31.
