By Dan Murphy
Governor Andrew Cuomo has agreed to the legalization of marijuana in New York State. Cuomo has proposed amendments to a legal pot agreement which will likely come as part of the state’s budget negotiations next month.
Part of the legalization process will include how a $100 Million Social Equity fund will be allocated, enable the use of delivery services, and refine which criminal charges will be enforced as it relates to the improper sale of cannabis to further reduce the impact on communities hit hardest by the war on drugs.
“As we work to reimagine, rebuild and reopen New York, we’re taking every opportunity to address and correct decades of institutional wrongs to build back better than ever before,” Governor Cuomo said. “We know that you cannot overcome a problem without first admitting there is one. Our comprehensive approach to legalizing and regulating the adult-use cannabis market provides the opportunity to generate much-needed revenue, but it also enables us to directly support the communities most impacted by the war on drugs by creating equity and jobs at every level, in every community in our great state.”
Allocation of $100 Million Cannabis Social Equity Fund:
This fund is to help revitalize communities that have been most harmed by the war on drugs.Through this fund, qualified community-based nonprofit organizations and local governments would apply for funding to support a number of different community revitalization efforts, including job placement, mental health treatment, substance use disorder treatment, housing, services to address adverse childhood experiences, afterschool and child care services, linkages to medical care, women’s health services and other community-based supportive services.
Enabling the Use of Delivery Services
The legalization of cannabis is expected to play an important role in helping rebuild New York’s economy following the damaging effects of the COVID-19 pandemic. In fact, legalization is projected to create more than 60,000 new jobs, and spur $3.5 billion in economic activity while generating an estimated $350 million in tax revenue once fully implemented.
Cannabis legalization also has the potential to have a significant economic benefit on distressed areas in New York, providing employment opportunities for all levels of the workforce. As social and economic equity are the bedrock of Governor Cuomo’s proposal, delivery services offer a low-cost entry point into the industry, particularly in communities which have been especially impacted by the war on drugs.
Recognizing this, the Governor is amending his proposal to allow for the permitting of delivery services as a way to open up access to this new industry even further so more New Yorkers can participate as it grows. As part of this, local governments would have the opportunity to opt out from delivery services occurring within their jurisdiction.
Criminality of Improper Sales
Under the Governor’s amended proposal, specific penalties will be reduced as follows:Criminal sale in the third degree (sale to under 21 year old) will be made a class A misdemeanor. Criminal sale in the second degree (sale of over 16 ounces or 80 grams of concentrate) will be made a class E felony. Criminal sale in the first degree (sale of over 64 ounces or 320 grams of concentrate) will be made a class D felony. In 2019, Governor Cuomo signed legislation to decriminalize the penalties for unlawful possession of marijuana.
A new report says legalization of marijuana for adult use in New York State will create tens of thousands of jobs and add hundreds of millions in revenue over the next 5 years. The report, Economic and Revenue Impact of Marijuana Legalization in New York State—A Fresh Look, was written by James Parrott of the Center for New York City Affairs at The New School and economist Michele Mattingly.
The report found New York will see sizable economic benefits in the form of excise and sales tax revenue, jobs and overall economic output from the new industry to contribute to the state’s revenue goals in the wake of the COVID-19 pandemic and resulting economic crisis and budget shortfall. The pandemic has taken a greater jobs toll in New York State than in any state except Hawaii.
If New York becomes the 16th state to legalize marijuana during the 2021 legislative session, annual retail sales of adult use marijuana are projected to rise from $566 million in fiscal year 2023—when legal sales are expected to be first authorized—to $2.6 billion in 2027, and could reach $3.9 billion by 2032. The experience of other states shows that legal sales grow rapidly in the first several years as current users are drawn away from the illicit market and new users are attracted by the safety, quality assurance, and product variety that legalization provides.
That market size would generate up to $159 million in state excise and sales tax revenue in fiscal year 2023 and $765 million in annual tax revenue by 2027 based on Governor Cuomo’s proposed tax structure—which includes a 10.25 percent excise tax, a potency tax and would subject retail sales to the sales tax. On a cumulative basis more than $2.5 billion in total state taxes would be generated over the first five years.
In the Governor’s proposal, additional tax revenue would be generated for localities by the local portion of the sales tax, and under a proposal co-sponsored in the legislature by Senator Liz Krueger and Assemblywoman Peoples-Stokes, four percent in excise taxes would benefit municipalities and counties. The legislature’s proposal would generate slightly lower state taxes than the governor’s proposed tax structure, and about the same amount of local taxes.
The authors estimated that every $1 billion in sales in New York would create 19,400 jobs in the cultivation, manufacturing, distribution and retail segments and an estimated $848 million in employee compensation and several hundred million dollars in business income. These jobs include those directly employed in the marijuana supply chain as well as by suppliers to the industry and the jobs supported by the consumer spending of those workers. Projections show that in the first year, more than 11,000 jobs would be supported. In fiscal year 2027, over 50,000 jobs would be supported, equating to $2.2 billion in employee compensation and over $2 billion in business income.
The report found that adult use marijuana sales will add $6 billion in economic output in New York by fiscal year 2027.
“A legalized adult-use cannabis industry can inject billions into our state economy and address longstanding inequities with smart policies in place. As New York works to develop new revenue streams to address critical budget needs and repair the economy in the wake of the COVID-19 crisis, legalization provides a substantial opportunity to create new and diverse small businesses, quality jobs and strengthen rural and urban economies and communities,” said lead author economist James A. Parrott.
