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Recreational Marijuana Bill Gains Traction in New York

May 29, 2019, 10:34 PM

New York State is moving closer to legalizing and taxing recreational marijuana, but is still wrangling over how to spend the new revenue as the end of its legislative session approaches.

State Senate and Assembly leaders said May 29 that there is enough support to pass a bill (A.1617-A/S.1527) for the growing, selling, and use of cannabis by those 21 or older, as well as the creation of an excise tax on certain cannabis sales.

Amendments to the bill introduced last week could tip the scale in favor of its passage before the end of session June 19, aligning with proposals from the governor, and those favored by Senate Majority Leader Andrea Stewart-Cousins (D). The measure is in committee in both houses.

Legalizing recreational marijuana is one of the top 10 issues Gov. Andrew M. Cuomo (D) set for this session.

The major holdup is in the distribution of revenue, Stewart-Cousins told reporters May 29, adding that her conference would like to see some of those tax dollars go to communities disparately impacted by marijuana prohibition.

Revenue estimates vary widely. Earlier this month, New York City Comptroller Scott M. Stringer released a report estimating a $3.1 billion adult-use marijuana market in the state—with $1.1 billion from just the city. The state is projected to receive an estimated $436 million in tax revenue, with New York City accruing an additional $336 million in tax revenue, according to the bill summary.

Ten states and the District of Columbia have legalized recreational marijuana in the last seven years. New York would be the 11th state to legalize recreational marijuana, and already allows medical marijuana for certain conditions.

The amended recreational marijuana bill includes the creation of an Office of Cannabis Management to regulate the hemp and medical and recreational marijuana industry—a measure included in Cuomo’s original proposal.

It includes a 20 percent state tax on marijuana sold by a wholesaler or retailer and a 2 percent tax that would go to the county where the dispensary is located. There would also be a tax on growers of $1 per dry-weight gram of cannabis flower and $0.25 per dry-weight gram of other parts of the plant known as trim. Local governments would be able to opt out of selling recreational marijuana in their municipality.

Push for Drug Treatment, Education Funds

The amended bill is a bit more specific than Cuomo’s when it comes to revenue, said Patrick Orecki, senior research associate for the Citizens Budget Commission, a nonprofit civic organization.

Like Cuomo’s, revenue would go toward the oversight and administration of the state program as well as carve-outs for law enforcement.

The amended measure, however, would divide up the remaining funds after oversight is covered by sending 25 percent into the state lottery fund to supplement educational aid, 25 percent to drug treatment and public education, and 50 percent to a community grants reinvestment fund.

The Citizens Budget Commission agreed with the use of revenue for addressing related issues such as public health, but cautioned the state from counting on the money. “It takes a long time for those revenues to be realized and the state shouldn’t be too over anxious or too over ambitious for when that revenue should be received,” Orecki said.

How to spend the money was one of the main issues that held up the bill during state budget negotiations in March.

“I don’t think anybody doubts that marijuana will be legalized,” Stewart-Cousins said. Senate Democrats have yet to conference on the amended bill, but she said she thinks it’s “moving in the right direction.”

State Assembly Speaker Carl Heastie (D) told reporters May 29 that he thinks there is significant support in his conference, but it will have to have another discussion on the matter.

The bill could be rolled into an omnibus bill at the end of session known as the “big ugly,” as there are many issues still on the table. “We have 13 more really, really busy days,” Stewart-Cousins said.

To contact the reporter on this story: Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com

To contact the editor responsible for this story: Jeff Harrington at jharrington@bloombergtax.com

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