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How much would recreational marijuana be worth to Minnesota?

And does that justify legalization? A new political committee is trying to make the case.

Eleven states and the District of Columbia have legalized marijuana for recreational use so far, all but two via citizen initiative.
REUTERS/Jason Redmond

A recently formed political committee will try to make the economic case for legalizing recreational marijuana in Minnesota.

Cannabis for Economic Growth was registered with the state Campaign Finance Board in April. Corey Day, who until January was the executive director of the state Democratic-Farmer-Labor (DFL) party, registered the PAC after forming a consulting business called Blue Ox Strategies. Day is listed as the chair of the committee while Minneapolis attorney Lawrence Wright is the treasurer.

“Our goal is to talk about the economy of it all,” Day said. “Taxation, revenue, entrepreneurship, how this new economy is going to help the state.” 

The focus of their efforts will be not be on lobbying legislators at the Capitol, however; it will be on persuading voters. Day said he envisions commissioning polling to see how voters in different parts of the state view the issue and then use digital ads, television and mail to promote the issue. 

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As of now, he doesn’t expect the political committee to be making direct contributions to candidates. Even though Day’s recent background has been in DFL politics, he said he expects the new political committee to be bipartisan, judging candidates on the issue of marijuana legalization rather than party.

Days said the group’s funding is likely to come from the cannabis industry: businesses and others who are investing in the production, marketing and distribution of legal marijuana in other states and in Canada.

“It is folks who are looking at coming into this market from out of state or states that have already gone down this road,” Day said. “I think Minnesota is close to being on the same path as a Colorado or a Washington or an Oregon. We want CEG to be that landing pad for folks who want to have this conversation economically.”

Yes we cannabis

Eleven states and the District of Columbia have legalized marijuana for recreational use so far, all but two via citizen initiative. The most recent state to approve is Illinois, where the state Legislature voted to legalize sales beginning January 1. Canada, which shares a border with Minnesota, began retail sales of marijuana in April.

Corey Day
Corey Day
Minnesota legislators approved a medical marijuana option for residents in 2014. The Legislature, however, has not been eager to join the ranks of the states that have legalized marijuana for recreational use. Bills to do just that were introduced during the 2019 session but they didn’t progress very far. A bill creating a task force to study the pros and cons of legalization was pushed by the DFL-controlled House, but even that didn’t make it into the public safety omnibus bill. The GOP-controlled Senate held a lengthy committee hearing on a legalization bill, but the panel ultimately voted the measure down, mostly along party lines. An idea to put it on the ballot as a state constitutional amendment was also dismissed.

For supporters, the reasons to legalize recreational use of marijuana are many: Prohibition has only fueled a black market, and legalization would allow it to be regulated like alcohol; it would halt the consequences of criminalization that have fallen much heavier on low-income people and communities of color — especially young black men; finally, it could boost economies and raise revenue for state and local governments.

Cannabis for Economic Growth will focus its efforts around that last point, says Day. In 2018, Washington state collected $361 million in tax revenue from $1.35 billion in sales. The same year, liquor taxes raised $370 million and tobacco taxes raised $415 million. 

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Job counts are spotty because federal economic data doesn’t measure what the U.S. government still considers to be an illegal activity. But Leafly, a Seattle-based marijuana information website, estimates that there are 211,000 marijuana related jobs in the U.S. — a number that is growing. It refers to the industry’s growth as“America’s Hidden Job Boom.” 

Opponents of legalization have argued that the science about the potential harm of marijuana usage isn’t conclusive, partly because research has been limited, though potential adverse effects include health problems, addiction and an increase in unsafe drivers. Until the research is more conclusive, states should be cautious about approving marijuana for recreational use, say national opponents such as Smart Approaches to Marijuana, which is active in Minnesota.

Economics debated

Day said he thinks legalization of recreational marijuana is inevitable and that Minnesota needs to start thinking about what it would look like. “Let’s be realistic. In five-to-10-years this won’t even be a conversation anymore,” he said. “The way that states are moving in terms of legalization, this is going to be a moot conversation.

“The great thing we have here in Minnesota is, as this comes back up next session, to create a bill that’s the best of the best,” he said. “We can look at what works and doesn’t work — in Colorado, at what they’re doing in Michigan or California — and carve something out that’s gonna make the most sense for Minnesota.” 

Day said he would like to see special efforts made in Minnesota to make sure that low-income people and communities of color share in the economic advantages of legalization.

While economics is one of the reasons cited by respondents to a recent Gallup poll on legalization, it was not the top issue among the 64 percent who said they support the idea. The primary reason to support was to make the drug available for medical uses followed by a desire to free up policy resources for other crimes and a belief that marijuana use should be a personal decision, not a governmental one. Economics was ranked fourth, with 56 percent saying it was very important and 30 percent saying it was somewhat important.

But pollsters have also found different results based on how people were asked about the issue. Another poll, this one by Mason-Dixon, found that 37 percent favored legalization for recreational use; 15 percent favored decriminalization; and 28 percent favored legalization for medical use only. Only 15 percent supported current national policy of outlawing all possession and sale.

The economic benefits of legal marijuana are debated as much as the other arguments. One oft-cited study out of Colorado claims that there was $2.40 in economic activity generated for each dollar spent on recreational marijuana. But that study is two and a half years old and cannot account for recent price declines in states that have approved full legalization. It also did not assess any potential declines in alcohol and tobacco sales.

Other assessments of the increased costs to governments in terms of public health and public safety suggest they are equal to or outweigh any financial benefits from full legalization. 

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Jonathan Caulkins, a professor at Carnegie Mellon University who has studied the economic and public policy issues raised by legal marijuana, has predicted that the price will continue to drop as more production is added. He has also wondered whether U.S. farmers can compete with farmers in other countries as the legalization movement spreads globally.

It may be a decade out, but I don’t think there’s any reason why after national legalization and full economies of scale, you won’t be able to produce it at prices of things businesses can give you for free for now, like chocolates on your pillow in a hotel room or mixed nuts at a bar,” Caulkins told the Pittsburgh Post-Gazette. “It’s possible a hotel or restaurant could buy 1,000 pre-rolled joints at a time that could literally be given away to customers. The production costs are that low.” 

As a result, Caulkins predicts that the money will be made in the marketing of marijuana products, something more likely done by large, multinational companies. In Canada, the big global brewers are investing in marijuana companies as is Altria, the parent company of Philip Morris. “It will be a world of marketing guys and MBAs with a few people growing cannabis for them,” he said. “It will be commoditized, because it’s not that hard to grow.” 

Concerns about impact on young people

Judson “Kim” Bemis, a self-described former “pothead” who represents Smart Approaches to Marijuana in Minnesota, also runs a non-profit called Gobi Support, which provides resources to parents concerned about their teenager’s use of drugs and alcohol.

Judson “Kim” Bemis
MinnPost photo by Peter Callaghan
Judson “Kim” Bemis
Bemis argues that once costs are weighed against benefits, there is little economic boost to legalization. The declining price of marijuana has also hurt states that tax it by a percentage of retail price rather than by volume. And though Bemis acknowledges that prosecutions weigh more heavily on minority communities, he said prosecutions in Hennepin and Ramsey counties are declining.

In states where marijuana is legal, retail stores are more common in communities of color and that increases use, he said. And he is especially worried about use by young people since research on the impacts on young brains is lacking.

But he said he also not surprised that organizations like Cannabis for Economic Growth are forming in Minnesota. “There’s a lot of big money chasing this market,” he said of legalizing recreational marijuana. “But as one of the guys in Colorado said: we’re using our kids as guinea pigs. We have no idea what the long-term effects will be.”