MONTPELIER — The Senate Judiciary Committee is expected to submit a bill this week calling for the legal sale of cannabis in Vermont with a 10-percent tax.
The Senate bill could be introduced as early as Tuesday, according to committee members.
But the bill will not recommend funding for a roadside test for driver impairment, or education for youth and adults — something the committee said should be determined by Appropriations committees. That could prove to be a major stumbling block for Republican Gov. Phil Scott and House representatives who have rejected previous bills without a roadside test or support for education initiatives.
In a brief statement, Scott’s communications director, Rebecca Kelley, confirmed the governor’s stance: “The governor has been consistent in his position on this issue — while he’s not opposed to legalization, he believes it’s important to get it right. That means having measures in place to be able to test impairment on our roadways and ensuring adequate prevention and education programming is in place.”
The 10-percent tax proposed in a draft bill is less than the 26-percent tax (20-percent excise tax and 6-percent sales tax) plus a 1-percent options tax proposed last year by the Governor’s Marijuana Advisory Committee. Support for the Senate bill is expected to be strong, but its path in the House is less certain because of House Speaker Mitzi Johnson’s support for a roadside test and education programs for youth and adults.
Lt. Gov. David Zuckerman, who said he supports the Senate bill, recently noted that the Joint Fiscal Office said there could be close to $370 million of economic activity with cannabis production in Vermont. It could attract an estimated 65 million people within a three- to seven-hour drive who would also spend money on hotels, restaurants and other Vermont services, he said.
“This edge we have with craft beer we could also have with cannabis,” Zuckerman said.
If there were revenues generated, Zuckerman said he would prefer to see the money invested in prevention and treatment, education and law enforcement, and higher education and economic development. He added that he opposed using revenues to fund education instead of raising the property tax rate, in case revenues dipped and created a budget crisis.
How did we get here?
Last year, the Legislature legalized possession, for adults over 21, of up to one ounce of cannabis for personal use in private and the ability to grow up to two mature and four immature cannabis plants. But the failure to allow the legal sale and purchase of cannabis raised concerns about the health and safety of people buying it on the illegal market, and the risk of penalties for doing so. There is also concern that Massachusetts and Canada already have legal sales and other states — Maine, New Hampshire and New York — could follow suit, with Vermonters buying cannabis elsewhere at the expense of the Vermont economy.
An initial Rand Corporation report several years ago projected earnings of up to $75 million a year in sales taxes on cannabis in Vermont, a number that has been revised down to between $10 million and $20,000 by a finance subcommittee of the Marijuana Advisory Commission as Vermont lagged behind other states that legalized sales.
Advocates said a failure to regulate pot in Vermont would also mean a missed opportunity to capitalize on sales to tourists visiting the state or offer struggling Vermont farmers the chance to diversify and capitalize on a lucrative cash crop. The recent federal declassification of hemp as a controlled substance is expected to be a boon for Vermont farmers producing medicinal cannabinoid (CBD) products, clothing and other products.
At the heart of the Senate bill is an effort to address many of those issues and reach a compromise. But the overarching concern for many — in the era of opioid and fatal fentanyl overdoses — is to protect consumers, particularly youth, from exposure to the illicit market.
Sen. Alice Nitka, D-Windsor County, was the only member of the Senate Judiciary Committee who voted against a Senate tax-and-regulate bill last year because it didn’t have provisions for a roadside test. But she is reportedly reconsidering her position because of health and safety concerns for consumers using the illicit market.
Support for the Senate bill is likely to come from Rep. Sam Young, D-Orleans-Caledonia district, who was the lead sponsor of a tax-and-regulate cannabis bill last year that failed in the House. He plans to submit a similar bill this year.
“I think it’s the right thing to do,” Young said. “You’ve got 20 percent of Vermont that uses cannabis on a regular basis.
Though there wasn’t support for a taxed and regulated market lat year, Young noted that there are many new legislators this year.
“I haven’t checked with all of them but it definitely feels like that (tax-and-regulate) is a much better system than we have now,” Young said.
Young said he believes legislators who opposed legalization of possession and use would prefer a tax-and-regulate system to ensure public health and safety and generate funds to support regulation and enforcement.
Young noted there would also need to be funding for education initiatives and prevention and treatment programs for substance abuse.
“I plan on putting in a bill, so there will be a bill in the House. The Senate can send something over to us. I think we have the votes, we have the vast majority of the Democratic caucus,” Young added, but hesitated to say they could override a governor veto. “If it’s going to be legal, we at least want some revenue. We missed our window to be the first, but it’s OK to take it slow and get it right and learn from other states (that have tax-and-regulate).”
Young said the House had never taken testimony on a tax-and-regulate model — testimony he thought would help to persuade legislators of the benefits of regulated sales if cannabis.
Support for the Senate bill came from fellow Rep. Robin Chesnut-Tangerman, P-Rutland-Bennington district.
“I do support the lower tax because I do think that the higher the tax, the more likely people are to seek the black market,” Chesnut-Tangerman said. “To me, one of the major benefits of a tax-and-regulate market is not revenue generated but quality control (for public health and safety).”
“We don’t intend to put the roadside testing into the bill, even though the commission, on a divided vote, recommended putting it in,” said Sen. Dick Sears, chairman of the Senate Judiciary Committee. “When and if it gets to the Senate floor, we’ll see what happens.
“We’re also not putting in the prevention stuff that the commission recommended,” Sears said, referring to the education component of cannabis legislation. “We feel that both traffic safety and the prevention stuff can come through the Appropriations process.”
Following the legalization of cannabis, Sears noted that the state had responded to the issue of driver impairment with an increase in Drug Recognition Experts (DRE).
“The issue of DREs is how many do we need?” Sears said.
“We have 55 DREs across the state. That may be an adequate number but may need to be better-located,” he added, noting that coverage was sometimes spotty around the state.
Both Ashe and Sears acknowledged that enforcement concerns were shared by Johnson and other representatives in the House.
Chesnut-Tangerman noted that Republican legislators had said if the state had legal possession and use, they were more likely to support tax-and-regulate, although the lack of a roadside test might make a bill’s successful passage through the House more difficult.
“But I don’t support the saliva roadside test, because it determines presence rather than impairment, and I think that would be problematic,” he said.
Sears stressed that it is likely that any tax-and-regulate law would take 12 to 18 months to implement, allowing plenty of time to build in safeguards on driver impairment and education initiatives.
Sen. Tim Ashe, the president pro-tempore, noted that it would also allow for other regulatory measures to be developed.
“As soon as a law would take effect is basically July 1,” Ashe said. “That would initiate the rule-making and all the regulatory construction to figure out who is going to open a store, have the growing licenses, establishing the licenses, establishing all the administrative pieces. So, 12 months is the safe amount of time to do that but it might take less time.”
Ashe and Sears also said the implementation period would allow time to determine the structure around licensing the cultivation and testing of cannabis products overseen by the Agency of Agriculture, and licensing of retail establishments that would be managed by a Cannabis Control Board, funded by fees from licenses issued.
“The cultivation needs to take place before you can have sales to get that product,” Sears said.
“People have to buy the facilities and have the security and all the other stuff, so that when the product has been grown, there are things that happen in sequence,” Ashe added.
Ashe said it was hoped that Vermont farmers and retailers would be given every opportunity to benefit from a new retail market.
“Our emphasis is to make sure that it is a Vermont-scale program, making sure that most Vermont small farmers are the primary suppliers to a retail market in Vermont and that small retailers will frequently be Vermonters going through the local process,” Ashe said.
Sears added that he hoped to keep big tobacco companies like Philip Morris and RJ Reynolds out of the Vermont cannabis market, at least for a while, to give Vermont producers and retailers a chance to flourish.
Both Ashe and Sears stressed that they were primarily motivated by the need to ensure consumers buy safe products versus hopes of generating substantial revenues to prop up state programs, such as the education fund, which continues to experience shortfalls.
“The key piece is creating a safe, legal market so consumers know what they’re getting,” Ashe said.
Wait and see
“We’re just going to wait to see what actually passes the Senate and let our committee take a look at it,” Johnson has said.
Johnson also noted the difficulty in trying to estimate the right tax rate for cannabis sales, and balancing the need for health and safety oversight and the cost of regulation.
“You tax high to raise a lot of money but drive sales underground, or you tax low to undermine the black market but then risk not covering the costs to regulating that market,” she said.
Johnson said road safety, youth usage, and prevention education initiatives were her main concerns about a tax-and-regulated cannabis market in Vermont.
“We have education campaigns about other legal drugs, about prescription drugs and alcohol. So, we want to make sure we get those pieces right,” she said.
Johnson said she also supported the use of DREs and ensuring that Vermont farmers and retailers benefited from a legal cannabis market.
Johnson added that she didn’t expect the Senate bill to be considered until crossover in the session, after Town Meeting Day.Other support