New York State will legalize adult-use recreational marijuana. On the latest episode of Policy Outsider, Rockefeller Institute Director of Operations and Fellow Heather Trela breaks down what is in the 77,529 word marijuana legalization bill and, importantly, what is not in the bill. Trela, a federalism expert turned marijuana policy maven, brings valuable context to the discussion, comparing revenue structure, social justice provisions, and other logistical considerations in New York’s legislation to the 14 states that have already legalized recreational marijuana.
Guest:
Heather Trela, Director of Operations and Fellow, Rockefeller Institute of Government
Transcript was generated using AI software and may contain errors.
Alexander Morse 0:06
This is Policy Outsider. I’m Alex Morse. New York State has a deal. A deal for legalizing adult-use marijuana. And so we’ve invited Heather Trela, director of operations and fellow at the Rockefeller Institute to discuss the new legislation. What’s in it? Also, what’s not in it? And what New York hopes to accomplish by legalizing marijuana? Coming up next.
Alexander Morse 1:00
I’m joined today by Heather Trela, director of operations and fellow at the Rockefeller Institute. Heather, thanks for stopping by.
Heather Trela 1:07
Glad to be here, Alex.
Alexander Morse 1:09
So we’re here to talk about the new marijuana legislation in New York State sponsored by Senator Liz Krueger and Assembly Majority Leader Crystal People-Stokes, which the legislation was introduced over the weekend in March. And as of this recording, there has not yet been a vote but we do expect it to pass. And so New York State has a deal. Heather, how was your weekend reading new legislation?
Heather Trela 1:35
I had a very busy Sunday reading 77,000 words of the legislation but glad that this finally got over the finish line after two previous attempts.
Alexander Morse 1:46
Let’s start with that. What has been the landscape of marijuana in New York State? I know that they’ve tried to have a deal for the last couple of years. But there have been some holdups, sometimes at the two-yard line.
Heather Trela 1:57
Yes, so they first started trying to introduce marijuana two years ago. And they did so outside of the budget process. It was originally part of the budget and they broke it out separately. And it fell apart. No one officially has said why but there were some disagreements, not about legalization, but about the details. A lot of back and forth about where the money raised by legalizing adult-use marijuana would go. Some people wanted more money to go to communities that had historically been impacted by marijuana enforcement. Others wanted more money to go to schools. All worthy things but they just could not get together on the same page. So it did not come through. Last year, there was a bigger push and COVID-19 happened. So pretty much everything outside of the bare necessities of the budget and emergency preparation because of how hard New York was hit in March, adult-use marijuana was a casualty of that. This year was our third bite at the apple, also New Jersey had gotten across the finish line after some struggles this year as well. So there was some additional pressure on New York to maybe if we’re going to do this, this is the time to do it.
Alexander Morse 3:13
You’re right with the surrounding states. Massachusetts has a recreational program. Vermont has a homegrown program.
Heather Trela 3:21
Vermont actually changed their law where they are putting a commercial market in place.
Alexander Morse 3:25
So New York was facing the pressure because we wanted to make sure that we were collecting sales tax revenue on this kind of product. And like you said, with COVID-19 disrupting the economy, it was imperative that New York really find new additional revenue.
Heather Trela 3:41
Yes, new revenue streams were a huge motivator for all states during this time. So looking to recreational marijuana when we’ve gotten so close in the past, I think that helped push this over the edge.
Alexander Morse 3:54
Okay, so now, in New York State, there is a deal and we do expect that this bill will pass, we figured that we would invite you, our resident marijuana expert, to talk about what’s in the bill and, as importantly, what’s not in this bill?
Heather Trela 4:11
Sure. So let me give you some broad-strokes framework of what this bill does. Adult-use marijuana would be allowed for those 21 years of age and older. It excludes minors, similar to alcohol. It would create a system of dispensaries in New York, as well as lounges where people could go and consume marijuana on premises. It creates a tax structure to generate revenue for the state and for local governments as well as for these other funds that we’ll talk about probably in a minute. It also expands medical marijuana. There’s more qualifying conditions for medical marijuana. We had one of the more restrictive programs in the United States. We’ve slowly been adding more and more qualifying conditions and this bill does that as well as expands that. This also, as a goal, this bill will try to repair past wrongs for communities that have been disproportionately impacted by the prohibition of marijuana. Now, what this bill doesn’t do and what no bill for any state does, is make marijuana legal to the federal government. We’re still working under the same prohibition that all the other states are working under. So that means that our market has to be completely contained within the state. All the marijuana needs to be grown, processed, and sold within the boundaries of New York State. That is the same for any state because of the federal prohibition. So this bill has a lot of ambitious goals, especially with the social justice aspect of it. What this bill doesn’t do is there’s a lot of details that need to still be worked out. Those details will fall to the newly created Marijuana Control Board that will be making the decisions about how licensing is done. What is the eligibility? What is the paperwork? What are the forms? What are the fees to apply for licenses? They will also deal with packaging and determining how marijuana has to be packaged. What needs to be on the labels? THC level will have to be displayed but how are they going to do that? So there’s a lot of little details that will take a while to figure out that still needs to be figured out from this bill.
Alexander Morse 6:35
Okay, so focusing on what’s in the bill, let’s just start off with who can do what? Who can grow marijuana? Who can sell? Who can, you already mentioned that, consume? You have to be 21.
Heather Trela 6:49
Some of those details haven’t been figured out yet. We don’t know what the qualifications are for who can grow, who can sell. This bill does introduce a homegrown component, which was somewhat of a surprise to me because that has not really been part of previous bills, not right away. And once the regulations have been set by the Marijuana Control Board, individuals can grow three mature and three immature plants and up to 12 total plants per household. So there is that component, but for the other details as to who can actually run a dispensary and who can own that still needs to be worked out. There are some restrictions on that. A previous marijuana conviction is not a disqualifier in this instance, even if it’s a felony. However, if you’ve been convicted of money laundering or other business-related crimes that would prohibit you. This bill also prohibits for the most part vertical integration. What I mean by that is they’re trying to bring in as many different people to the marijuana industry as possible and prohibit big corporations taking over the industry. If you own a grow facility, you can’t also own a dispensary. Now, there’s one exception to that, which is if you’re a microbusiness, which is if you own all parts of methods of production, that is allowed but you could only sell your own product. So it doesn’t limit what you can do. But for the most part, they’re trying to bring in as many new people and create as many new jobs as they can. They’re trying to diversify who can be involved in marijuana.
Alexander Morse 8:31
You mentioned earlier that there’s a really big social justice component. So I’m guessing that this attempt at trying to diversify the field of who is participating is aimed at that social justice.
Heather Trela 8:43
Yes, New York State has set itself an ambitious goal to have 50 percent of all licenses go to either minority-owned businesses, women-owned businesses, or both. Distressed farmers, members of communities who have been negatively impacted, or service-disabled veterans. They’re trying to bring people into the fold who might not normally be in the marijuana business. Despite all attempts by states to diversify, it is still a predominantly white male business. But New York has set some pretty ambitious goals. They’ve also implemented loans to social and economic equity applicants, so those would be low to 0-percent loans, to help people get into the business. You have to meet certain prerequisites, obviously, but there will be a special fund set up from the proceeds of marijuana to try to help those who may not financially be able to easily jump into this business to do so. So they’re really trying to rise as many boats as they can with this.
Alexander Morse 9:49
It seems that New York State is invested in really getting this to be a successful program from the jump.
Heather Trela 9:55
Yes, the newer states have really been focused on this that have legalized. We aren’t the first to do this but this has been certainly learned from other states. One aspect is that they are starting to get data from the beginning of who’s getting these licenses so they can better track the metrics for reaching these goals. Other states have been a little lackadaisical in keeping demographic information about their licensing. So we have to guess as to what percent of licenses are going to these groups that people are trying to target. That’s an important step forward as well.
Alexander Morse 10:33
Sticking with the social justice aspect, I think that this bill will expunge previous records of marijuana arrests. Could you elaborate?
Heather Trela 10:44
What this bill does is if you were convicted of a crime that is now legal under this bill, so not all marijuana-related offenses would be expunged, but if you did something in 2019 that is now legal in 2021, your record will automatically be expunged.
Alexander Morse 11:06
Oh, it’s an automatic process.
Heather Trela 11:07
It’s an automatic process. Now they’re giving themselves two years to do this because they have to actually go through the records but it should be an automatic expungement. Which is great, because while expungement is important, a lot of states and cities that have done this have not made it automatic, which then puts the burden on a person who may not have the resources or the knowledge of the legal system. They have the responsibility then to get their own record expunged. So this will hopefully streamline the process and will probably change a lot of people’s career opportunities.
Alexander Morse 11:41
For sure, this looks like it’s going to be extraordinarily helpful in correcting a lot of wrongs. And that was onset by the war on drugs. I’m also aware the way that it’s taxed, the revenue is going to be allocated or distributed in a way that’s going to try to promote social justice.
Heather Trela 12:00
Yes, let me talk a little bit about the tax structure that they set up. There’s a two phase tax here. I’ll talk about the easier one first, which is when the tax that is put on the product when you buy it at a dispensary. So the bill sets a total of 13 percent tax on that: 9 percent of that will go to the state, 4 percent of that will go to local governments. It’s like a nesting doll of that 4 percent: 25 percent goes to the county, and 75 percent goes to the cities, towns, and villages within that county based on dispensary sales. So if you don’t have any dispensaries, you don’t get any cut of the proceeds. There’s also an earlier taxation phase, which is actually unique to New York, which is an excise tax charged when being wholesale and that is based on the level of THC in the product. Now most other states have an excise tax similar to this, they do it based on weight. New York is one of two states, I believe, that does it based on THC level, Illinois is the other. But Illinois is not as granular as New York, New York is actually based on per milligram of THC. So there’s an incremental increase in the tax, we’re talking like percentages of a cent based on per milligram. Whereas in Illinois, if you’re under this threshold, you pay this much; if you’re in this threshold, so it’s a little more broad. New York is the only state that does this with such precision tied to THC level.
Alexander Morse 13:39
Now is there a benefit to taxing on THC level as opposed to weight or drawback for that matter?
Heather Trela 13:46
It’s similar to alcohol or part of alcohol. The higher the proof, the more you tend to pay in tax, but that’s the similar thing. They’re just trying to discourage high THC products. Or not discourage but you should pay. These are a sin tax, you’re paying more for the premium. So what all this money does is the money that goes into the states, to answer your original question, is split up in another interesting formula. Of the money that the state takes in, they have a 40/40/20 model. So 40 percent of that money is going to go to education programs in school, so it’ll go to the Lottery to use be used in schools. Forty percent will go to programs in communities that have been negatively impacted by previous marijuana prohibition. This can go to all sorts of things. It will go to nonprofits or some qualifying local government programs. It can help with job placement, mental health, housing, a lot of social services. So that’s 40 percent. Then the final 20 percent goes to drug treatment and public education, making sure people can get treatment if they have a drug-use problem or making the public aware of the dangers of underage consumption of marijuana, other health concerns to be taken into consideration, as well as the benefits. So that’s another way that they can try to help those who previously had been negatively impacted by marijuana convictions.
Alexander Morse 15:24
How much money does New York State expects adult-use or recreational marijuana to bring in?
Heather Trela 15:30
Now, this will not be immediate. It’s going to take a few years to get the program up and running and off the ground. Once the program is fully implemented, New York State thinks they’re going to bring in about $350 million a year from recreational marijuana.
Alexander Morse 15:44
Okay, that’s a lot of money that’s on the table that a lot of local governments can try to take a bite out of. But there’s a local opt-out provision, right?
Heather Trela 15:53
Yes. So every state, I believe, that has legalized marijuana has given this option to local governments. It varies in what provisions there are. In New York State, we’ve gotten again very granular. Previous versions of this bill limited those who can opt out to counties or cities that were over a certain threshold, then population. This bill does not do that. This bill allows any city, town, or village to decide that they would like to prohibit a dispensary or an onsite consumption site from being located within their jurisdiction. No locality can prohibit adult-use marijuana consumption in your home. That is not allowed. But what they can do is they can set limits on the presence of the two businesses—the dispensaries or onsite consumption sites. There is a time limit on when they can make this decision. Localities have up until nine months after this law is passed to decide they want to opt out. After that point, they will not be able to opt out. So I’m expecting you’re going to see a rush of local governments and local referendum this coming election cycle because they want to have it on the books. You can rescind your decision to opt out at any time. So if you think you may want to opt out, you’re going to have to do so within the next nine months.
Alexander Morse 17:22
Do we have a sense of what counties or municipalities would like to opt out already?
Heather Trela 17:29
Opening this up to such a small local government level makes things more interesting, I think. But traditionally, we’ve seen previous years that a lot of the counties on Long Island have not been in favor of marijuana legalization and have indicated they were going to likely opt out. The same goes for a lot of the counties just north of New York City. So we don’t know. This could be more granular as I said before. It could be certain towns and villages within a county that prohibit this. They are not allowed to prohibit per the law or the Act, grow facilities and testing facilities and manufacturing and labeling facilities. This is limited to just the consumption sites and dispensaries.
Alexander Morse 17:38
Is there going to be a limit on the number of dispensaries?
Heather Trela 18:26
That will be determined by the Marijuana Control Board. They have not decided yet if there’s going to be a limit on the number of licenses.
Alexander Morse 18:35
Okay, so let’s jump into that then. What’s not in the bill? We talked about social justice. We talked about tax structure and revenue. But you mentioned that the Marijuana Control Board still has a lot to iron out.
Heather Trela 18:48
Yes, a lot of the operational aspects of recreational marijuana still need to be determined by the Marijuana Control Board and then implemented by the Office of Cannabis Management. These are all new things that have been created, as well as the Cannabis Advisory Board. So, like I said, the licensing process will have to be determined. They’ll have to determine other regulations like testing. What the testing requirements are for marijuana? How things are packaged? How things can be advertised? There are some limits on advertising in there, but they can add additional. There is not a definition yet of communities disproportionately impacted by previous marijuana convictions. There’s some guidelines as to what they’ll look at but they’re going to have to crunch the numbers and identify the actual communities that qualify under New York State’s judgment. There’s a lot to still be worked out, which is why marijuana legalization while it’s going to likely be passed this week, will not actually be implemented for a while.
Alexander Morse 19:26
Now that New York State becomes the 15th state that legalizes adult-use marijuana, is there anything unique about this bill or the way that it’s being done in New York?
Heather Trela 20:14
New York is one of a few states who have done this process through the legislature. Most states that have legalized both medical and adult-use marijuana have done so through the referendum process, where there’s a ballot measure and the people vote on it directly yes or no. Only two other states have done this process through their legislature, Illinois was the first to create a commercial market through this method, and Vermont was the second. Vermont’s weird, they did a two-step process. They did home grow only and then they created a commercial market a couple years later. It is hard to pass this legislatively, as we’ve seen historically. So that is one major difference in how New York has done this. Again, the taxation structure based on THC is somewhat unique, similar to Illinois, but not the same. It’s more granular. So that’s a difference. And other states have definitely been invested in social justice, social equity. New York, I think, has set pretty ambitious goals for itself. So we’ll have to see if they can actually reach those. There’s no timeline on those. There’s a lot of reporting requirements in this bill. I haven’t read all of the other states bills as closely. But New York State also has several provisions in there that encourages New York State to consult with other states, especially those in the same region to discuss best practices and share information. This is really going to, hopefully, open the door for continuing to learn from each other. The two laboratories of democracy of federalism, seeing what other states are doing and taking the best of what other states are doing and implementing them here in New York and vice versa.
Alexander Morse 22:15
Thanks again to Heather Trela, director of operations and fellow at the Rockefeller Institute for hopping on today to discuss New York’s hot off the press and landmark legislation. As New York State continues to hash out the remaining details for adult-use marijuana rules and regulations, be sure to follow along with updates from Heather and the Rockefeller Institute at rockinst.org. You can also check out more of the Institute’s marijuana research by visiting rockinst.org/IntheWeeds. Thanks for listening. I’m Alex Morris. Until next time.
Alexander Morse 23:34
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