PROVIDENCE – Gov. Daniel J. McKee says he sees the legalization of recreational marijuana as a “small-business opportunity,” and he is signaling that his administration is willing to work with state lawmakers who have unveiled their own legislation to make recreational cannabis legal.
McKee’s fiscal 2022 state budget proposal released on March 11 included a plan to legalize the sale of marijuana to adults through 25 licensed, privately owned retailers – a model the governor referred to as “entrepreneurial” because, unlike a previous proposal by former Gov. Gina M. Raimondo, the state would not operate the retail outlets.
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“It’s a new business model,” McKee told Providence Business News in an interview on Wednesday. “We will try to regulate it, and make sure it is safe. It will be privately run but tightly regulated.”
Under McKee’s proposal, licenses would be allocated through a lottery system, but he noted that 20% of them would be earmarked for minority-owned businesses.
“It’s a startup industry, so let’s be intentional about sharing the opportunity in all of our communities, including our minority communities,” McKee said. “I think that is sharing the wealth and an appropriate thing to do.”
The McKee administration projects that the plan would bring in $2 million in state revenue in fiscal year 2022, and then increasing in subsequent years, with $17 million projected for 2023.
McKee said his proposal’s “entrepreneurial model” is similar to what’s contained in state legislation introduced on March 9 by Senate Majority Leader Michael J. McCaffrey, D-Warwick, and Sen. Joshua Miller, D-Cranston. The bill was drafted at the behest of Senate President Dominick J. Ruggerio.
“The fact that we are aligned on many of the issues is good,” the governor said. “It’s going to be a General Assembly decision, and we will share what information we have.”
For his part, Miller said he is hopeful that discussions among lawmakers and with the McKee administration will lead to compromises where the plans differ.
“After 10 years of doing this, I am more optimistic than any other year I have been involved with it,” said Miller.
How do the two proposals compare?
Revenue generation:
– The McKee administration says its proposal would bring in $2 million in state revenue in fiscal year 2022, increasing to $17 million annually by 2023. The plan calls for a nonrefundable $5,000 application fee and a $20,000 licensing fee for a retailer’s license, according to a R.I. Department of Business Regulation spokesperson. Cannabis sales would be taxed at 17%, which includes the state’s 7% sales tax and a special 10% excise tax.
The revenue would be divided this way: 25% for administrative, prevention, education and law enforcement; 15% would go to local communities; and 60% would go to the state’s general fund.
– It’s not clear how much revenue is forecast to be generated under the lawmakers’ proposal, but licensing fees and tax structure differ from McKee’s plan.
A cultivator license would cost $100 to $20,000, depending on size and type of operation. A manufacturer’s license would cost $5,000; a retail license would cost $20,000; and a testing license would cost $5,000. Entities would be limited to possessing one license. The lawmakers’ proposal features a 20% tax that is made up of the state’s 7% sales tax, 10% special tax and a 3% tax for municipalities that allow cannabis sales.
Regulation:
– McKee’s proposal sets an initial limit of 25 licenses, in addition to the nine licenses for medical-marijuana dispensaries that would also be allowed to sell for recreational use.
Also, the licenses would be governed by a “Cannabis Reinvestment Task Force,” which would also advise on the long-term investment of revenues in the areas of job training, access to capital for small businesses, affordable housing, health equity and community development.
The proposal would invest $1.1 million in the state’s health equity zones to expand community-based health initiatives and infrastructure; $1 million in treatment, prevention and surveillance through multiple state agencies; and $900,000 in state and local law enforcement training and capacity building.
McKee’s proposal notes that legalization would be administered with input from the R.I. Department of Health, the Department of Revenue, and the Department of Public Safety.
– The lawmakers’ proposal sets a limit on licenses by limiting one license per 10,000 residents in a city or town. Each municipality will be allowed to have at least three licensed facilities, but local jurisdictions will have a final say on whether recreational-marijuana sales are allowed.
Also, adult state residents would be allowed six active plants and up to 12 plants total. The plan would enact a prohibition on cannabis in public places, and unsealed containers would be prohibited from passenger areas of a motor vehicle.
The Senate’s proposal would create a “Cannabis Control Commission,” similar to what is done in Massachusetts. The commission would be its own division for regulation, similar to the structure of the R.I. Lottery.
The proposal includes a process for expunging marijuana-related offenses free of charge, whereby individuals file a notice with the court for an automatic review of their record. Application and licensing fees will fund a Cannabis Equity Fund, which would be used to provide technical assistance and grants to applicants from disproportionately impacted areas.
Approval process:
Both proposals would use a lottery process to distribute the licenses to sell marijuana from a retail outlet.
Protections for businesses to enforce rules against drug use on the job:
Neither plan addresses this in the initial versions, but both McKee and Miller spoke to PBN about the concerns of the business community.
McKee said his plan would address business safety concerns through revenue directed to law enforcement, treatment prevention and education. “It’s just like liquor,” he said. “You have got to put some safety factors in, and make sure it is regulated.”
Miller said the concerns would be addressed during the legislative process. “All existing employer [prerogatives] to test and control the workplace will remain,” he said.
David Chenevert, executive director of the Rhode Island Manufacturers Association, an organization advocating for the state’s 1,600 manufacturers and 40,000 employees, said he has “concerns,” even though he has not reviewed the two proposals. RIMA has opposed the legalization of cannabis since Raimondo introduced her own marijuana plan last year.
“Realistically, I know they are looking for revenue,” said Chenevert. “From our perspective, it’s a safety concern. Many manufacturers do federal work, therefore they are not allowed to have a situation where there is drug impairment, and we have to figure out a way to prevent that.”
There is a federal prohibition on the recreational use of cannabis.
Chenevert said businesses are trying to survive and it is not the right time to introduce the legislation. “About 7,000 of the state’s companies have applied for PPP [Paycheck Protection Program] loans,” he said. “So, now we have to deal with this as well. There is no letup. There is always something coming down the pipeline that we have to deal with.
“The most important thing is the safety of our employees, and that’s where our concern lies,” he said. “It’s going to be a new world. It’s going to happen no matter what we say. Myself, I would have held off for another year.”
Chenevert has looked to other states for information about legalization. He said it has caused problems for businesses in Colorado. “It’s a bloody nightmare,” he said. “So, I am not sure how it’s going to work here from a manufacturer’s standpoint.”
Chenevert said manufacturers will need to implement a testing regimen for employees to ensure safety. “We will have to look at that,” he said, noting that there is going to be a “big learning curve” for businesses.
“We’re all still getting through the pandemic,” he said. “We worry about getting our vaccines, and our employees getting their vaccines. We are also just trying to survive. It’s our livelihoods.”
Adult-use of marijuana has been legalized in neighboring Massachusetts, Maine and Vermont. It is legalized in 15 states.
“It reflects the changing national and regional landscape,” said McKee, who in the 1990s served on the Cumberland Town Council with Chenevert. “We’re responding because other states have done it. Massachusetts has done it. We can learn from their learning curve.”
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.
