New York’s path to legal weed

By Alex Halperin
Jan 29, 2021

Other than federal reform, the biggest cannabis regulatory question this year is whether New York will manage to legalize REC. In addition to creating a huge new market, thriving weed businesses in New York City would signal to the rest of the country, and much of the world, that legalization is inevitable.

For the last two years, Gov. Andrew Cuomo (D) has enthusiastically backed legalization. Even after Covid shut down much of the economy and state government last spring, he continued to push for it. 

“We were in good shape last year,” said David Mangone, director of policy at The Liaison Group, a lobbying firm focused on federal cannabis reform. The legislative process is inherently unpredictable, but this year there are more reasons for him to be optimistic:

  • Due to the pandemic, the state is facing a $15B budget deficit, and rightly or wrongly, pot taxes are seen as a way to at least partially dig out of the hole.
  • “They are looking at any way possible to raise revenue,” Mangone said.
  • In 2020 state elections, Democrats gained ground in both chambers of the state assembly, undermining opposition from Republicans and moderate Democrats.
  • New Jersey legalized on Election Day and New York may want to set the tone for the northeast’s legal market. 

Last year, Mangone said, there were two outstanding issues: Distribution of tax revenue and impaired driving. Revenue has received much more attention.

  • For several years running, State Senator Liz Krueger, (D-Manhattan) has proposed a REC bill which would earmark much of the tax revenue to benefit communities most harmed by prohibition.
  • Last year, Cuomo’s bill sent tax revenue to the state’s general fund without specifically allocating funds for social causes. This year his bill marks a compromise; Beginning in 2023, it would earmark $100M over four years and then $50M annually thereafter, though it hasn’t satisfied all progressives.
  • Cuomo anticipates the industry generating $300M in annual tax revenue, an estimate that’s perhaps more conservative, and, at least at first, more realistic, than officials in some other states have envisioned.
  • It would also create a structure for allocating equity licenses. 

A bill could pass through the state’s budgetary process or independent of it.

  • The budget process, slated to include Cuomo’s bill, ends on March 31, at the end of the state’s fiscal year.
  • Krueger’s bill could pass as late as June when the session adjourns.
  • Mangone sees the budgetary option as more likely since moderate Democrats sometimes prefer the cover of the budgetary process for more controversial bills.
  • This week, State Assembly Majority Leader Crystal Peoples-Stokes (D-Buffalo) called for the legislature to pass Krueger’s more progressive bill before the budget process in a bid to pull Cuomo’s bill to the left.   

Cuomo’s program would create a tightly-controlled program, which typically plays to the advantages of big multi-state operators with the resources to manage regulatory hurdles. “New York doesn’t strike me as the kind of state that will have a free market,” for licenses, Mangone said.

Here’s what else to expect:

  • It’s likely that to take at least months after legislation passes before the first legal REC dispensaries open. (New York has a limited MED program.)
  • Cuomo has proposed a complex tax regimen that would include a potency tax. If enacted, it would be only the second state, after Illinois, to have one. He anticipates legalization to create 60,000 jobs in New York. 
  • His new bill would create a state retail tax of 10.25%, far less than the 20% he proposed last year. That doesn’t include local taxes.
  • Both bills would allow counties with less than 100,000 residents to opt out of REC sales.

Next door, Connecticut could potentially legalize through the legislature this year as well.

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