The chair of the Minnesota House committee with control of taxes had a message for education and social services advocates Thursday: Don’t expect recreational marijuana to raise money to enhance those programs.
Rep. Aisha Gomez, the Minneapolis DFLer who leads the House Taxes Committee, used the rollout of a massive recreational marijuana bill to say it won’t produce a bucket of cash for other programs.
“Cannabis taxes in our bill are not going to solve anyone’s social problems,” she said. “We’re not going to use taxes to fix the education changes that our communities need, to build all the affordable housing that we need, to fix all the infrastructure that we need.
“We designed this bill to address the wrongs of prohibition, to bring people out of the illicit market and into a regulated market, which means we try not to have a high tax on cannabis so it can compete.”
She dubbed her message a “scolding, tax-related, final note.”
At the same time, however, backers from both the House and Senate — DFLers all — predicted passage this year.
“I believe that 2023 is the year that we will legalize adult-use cannabis in Minnesota. That process starts today,” Rep. Zack Stephenson, DFL Coon Rapids, said Thursday. The bill, House File 100, will get its first hearing Jan. 11.
“Our current laws are doing more harm than good,” Stephenson said. “State and local governments are spending millions of dollars enforcing laws that aren’t helping anyone.”
Sen. Lindsey Port, the Burnsville DFLer who will be the lead sponsor in the Senate, said the bill that passed the House did not get a hearing in the GOP-controlled Senate. That will change this session, she said, but it also means the Senate has more work to do than the House to become familiar with the issues.
“We’ll take some time to educate our members and make sure we are able to build the same bipartisan support that has been built in the House,” she said. “The Senate is committed to making sure that we right this wrong.”
Gov. Tim Walz has endorsed legalization and says the affected state agencies have already begun preparing for it. Since Washington and Colorado legalized recreational marijuana by initiative in 2012, 19 other states, along with Washington, D.C. and Guam, have done so by ballot measure or by legislation.
The bill appropriates about $100 million in the first two years for various agencies involved in the new project — ranging from $15 million for a state agency called the Office of Cannabis Management and $1.7 million for a Cannabis Expungement Board to $17 million for programs to help low income and people of color to get into the business via programs called CanStartup, CanNavigate and CanTrain.
It also includes $5.5 million for the Department of Public Safety, $5 million for the State Patrol, $1 million to the courts and $8 million for substance abuse treatment.
That $100 million is about how much Gomez thinks the tax rate of 8 percent of gross receipts at the retail level will raise over the same time period. Regular sales taxes will also apply but local governments would be precluded from adding local sales taxes.
The bill is similar to the bill that passed the House in 2021 but has some changes, including fixes to the hemp-based edibles language that was included in a large omnibus bill last spring. That bill made intoxicating edibles, vapes and drinks legal and created a new and mostly unregulated and untaxed industry. The new bill brings that system into the recreational marijuana system under a new control board.
Backers of legal marijuana worry that if governments try to collect too much in taxes on marijuana products, they won’t be competitive with the entrenched black market that has existed for decades. The revenue from the bill might not even be enough to pay for the regulation, enforcement and economic development efforts contained in the measure. Among them are loan and training programs to help lower-income and people of color — historically the targets of laws prohibiting marijuana — become part of the new business.
In 2019, a legal marijuana market analyst told a Minneapolis conference on legalization that he estimated a $300 million tax take from recreational marijuana after five years. That was based on surveys of current marijuana usage and what the similarly sized state of Colorado raised. But even that level was less than half of what Minnesota raises in tobacco taxes.
At the same conference, then-House Majority Leader Ryan Winkler said the intent of legalization wasn’t to raise money. Winkler is credited with developing the substance of the bill that was introduced Thursday.
“We are not interested in this as a major source of revenue for the state of Minnesota to deal with education or road construction, things like that,” Winkler said then.
Gomez echoed that philosophy Thursday. The tax rate envisioned in the bill would collect between $100 million and $150 million over two years. But if that money isn’t enough to cover the programs in the bill, the House DFL is committed to using general fund revenue to make up for it.
“What our commitment is to the people of Minnesota is that we’re going to make sure that people are safe, that our law enforcement has the resources they need to respond to this, that regulators have the resources they need to respond to this, that we are being true to the values that we started our process with,”Gomez said. Those include making sure there are “pathways into this marketplace” for people who have been harmed by prohibition.
“Our commitment to the health and safety and equity that is encompassed here remains regardless of where that potentially volatile revenue stream lands,” she said.
A significant section of the bill responds to demands that those who had marijuana-related convictions before legalization have those records cleared. The bill provides automatic expungement for lower offenses and a new board to review requests for more-serious crimes.
“We heard loud and clear from Minnesotans that we cannot legalize cannabis without expungement,” said Sen. Clare Oumou Verbeten, DFL-St. Paul. “This is a racial justice issue.”
Opponents of legalization said earlier this week that passage was “less than a slam dunk” and that lawmakers have not addressed issues such as traffic safety, workplace safety and access by young people. The bill, though referred to as adult-use-cannabis, prohibits use by those who are 20 and younger.
“We’re going to unleash more impaired drivers on Minnesota roadways on an already understaffed law enforcement contingent without a reliable roadside test of impairment,” said John Hausladen, president and CEO of the Minnesota Trucking Association.
Kim Bemis, the c0-chair of Smart Approaches to Marijuana Minnesota, said legal marijuana bills in other states have not produced the revenue predicted and created more problems than proponents acknowledged. He said he was especially concerned about high-potency levels in commercial products and the impacts it has on users, particularly young people.
“One of the biggest myths about commercialization of cannabis is the idea that we will get rid of cartels and the black market,” Bemis said. That hasn’t happened in any of the other legalization states, he said.
Opponents said they were caught unaware when the hemp-based edibles law passed, as were many others. They thought they were going to spend 2023 trying to undo that law but instead will be fighting a larger battle against recreational marijuana. “The Legislature’s primary responsibility is that it passes laws that are safe and the benefits outweigh the costs,” Hausladen said, something that didn’t occur with the hemp bill last year.