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“Governor Youngkin’s failure to act allows an already thriving illegal cannabis market to persist, fueling criminal activity and endangering our communities.”
By Michael Chun, Capital News Service
Three years, four sessions and one veto since the first legislative attempt, Virginia still does not have a recreational cannabis market. Potential investors say that makes it hard to plan for the future. Advocates and some politicians say the reasons the governor gave for his recent veto are only exacerbated by preventing recreational cannabis sales.
Gov. Glenn Youngkin (R) recently vetoed House Bill 698 and Senate Bill 448, which would have created a framework for an adult-use, recreational cannabis market.
This session was not the first time the General Assembly acted to create a retail market. Lawmakers passed a bill in 2021, but the part of the bill that would create a recreational market had to also be passed the next year before it became law—which never happened. The part that did not need reenactment legalized simple possession of marijuana.
Republicans gained a House majority in 2022, along with a new governor who was uninterested in creating a cannabis market. Lawmakers skipped over the issue in 2023 and brought it back this year with a legislative Democratic majority.
Del. Paul Krizek (D-Fairfax) and Sen. Aaron Rouse (D-Virginia Beach) worked on a compromise between their two bills, and expressed disappointment over the governor’s vetoes.
“Public servants are obligated to tackle pressing issues, regardless of their origin or culpability. They cannot cherry-pick which problems to address,” Rouse stated.
Youngkin is concerned the illegal market will thrive if a recreational market is established, but other lawmakers believe the lack of a legal market is driving up those numbers.
“States following this path have seen adverse effects on children’s and adolescent’s health and safety, increased gang activity and violent crime, significant deterioration in mental health, decreased road safety, and significant costs associated with retail marijuana that far exceed tax revenue,” Youngkin stated in his veto.
The better approach would be to revisit any discrepancies in enforcement, according to the governor.
“Governor Youngkin’s failure to act allows an already thriving illegal cannabis market to persist, fueling criminal activity and endangering our communities,” Krizek stated in an email. “This veto squandered a vital opportunity to safeguard Virginians and will only exacerbate the proliferation of illicit products.”
Rouse called the governor’s “dismissive stance” toward cannabis sales unacceptable.
Video by Mark Jones, VCU Insight
The unregulated and untaxed illegal cultivation and distribution of cannabis generates at least over a billion dollars annually in Virginia, according to a 2020 Joint Legislative Audit and Review Commission, or JLARC, report.
As the law currently stands in Virginia, adults over 21 can legally use and possess cannabis for an amount up to 1 ounce. Green-thumb adults are allowed to cultivate four plants at home. Adults can also pay to get medical approval and purchase cannabis through state-approved dispensaries.
Advocates Disappointed, Say Bill Was Good
Chelsea Higgs Wise is the executive director of Marijuana Justice. She has tread the Capitol steps since 2019 to lobby and inform lawmakers. She testifies in committees about cannabis-related legislation, including equity measures and the modification of cannabis-related offenses.
The Black-led organization’s advocacy work includes a path forward for people who have been incarcerated on marijuana charges, through repeal, repair and rehabilitation. The organization also pushed for social equity programs that help formerly incarcerated people get into the legal cannabis business.
The legislation vetoed by the governor would have legalized it right, Higgs Wise said.
“It includes the equity portions and includes repair for communities and includes certain funds,” she said. “This is what we’ve been promising Virginia.”
The excitement did not last long. A few weeks after the bill passed, it met the governor’s veto pen.
“It’s a grave disappointment that Virginia is going to have to wait for a safe and regulated cannabis market,” Higgs Wise said. “Gov. Youngkin’s obsession with the legacy market is misplaced, but we recognize the need for a regulated market for reinvesting our community.”
Marijuana Justice does not use the term black market, and instead uses “legacy market.”
“The legacy market is thriving, we’ve always had a marijuana market here in Virginia and across the U.S.,” Higgs Wise said. “We don’t need the government to tell us what that is. They’re just coming in now to make a lot of money off of it.”
The Virginia Cannabis Equity Loan Fund would have provided grants, low-interest and zero-interest loans to qualified microbusiness applicants. The fund was called the social equity license in previous legislation, and Republicans attempted in 2022 to channel the money to other places and eliminate the qualifying provisions.
The microbusiness provisions were a way for people to get involved with what is anticipated to be a multimillion dollar business, including veterans of the U.S. armed forces as long as they met certain qualifications.
Illegal markets often still thrive in the first few years after a state legalizes cannabis sales. That has to do with equity provisions, or lack thereof, according to Higgs Wise.
“Their people that they know are not selling it, that means it is not in their neighborhood; it’s too expensive,” she said.
The familiar aspect of connecting with the local supplier, often a friend or someone from the community, also does not come with extra fees.
“These are the equity portions that we have to think about for the consumers as well as for the business owners,” Higgs Wise said.
The first year of the recreational market could see sales between $123 million to $206 million, according to JLARC estimates from the bill’s impact statement. By year five, sales were forecast to be between $609 million to just over $1 billion.
Lawmakers settled on a 8 percent marijuana tax, with sales and use tax at 1.1 percent. Localities had the option to tax up to 2.5 percent and include a food and beverage tax.
Recreational marijuana sales could bring in $6.41 million in the first year from the 8 percent tax alone. By the fifth year, the tax revenue was forecast at $66.41 million.
The legal marijuana market would overtake the illegal market by year four, and have nearly two-thirds of the sales by year five, even with much higher tax rates, JLARC reported in 2020.
JLARC looked at the reported cannabis use rates compared to the use rates of other states to determine this figure.
Higgs Wise said to “rest assured” her organization will be back next year to push for a recreational market.
“For those who want to participate in Virginia’s cannabis industry, we welcome you to join us to fight for a fair and just market,” Higgs Wise said.
Impact on Virginia Cannabis Companies
Griffin Moon and Dave Bredard launched Chester Cannabis Co. two years ago to sell hemp products that were legal at the time, and they had hopes of getting into the cannabis market.
“So that’s definitely the biggest challenge for companies in this industry is all the changing legislation.” Moon said. “You just never know what’s coming.”
Currently, hemp products cannot contain more than 0.3 percent THC. Moon and Bredard disposed of a number of products after lawmakers cracked down on THC levels in hemp in 2022. Lawmakers sought more regulation of delta-8 sales, according to a report from the Virginia Mercury.
They had to go back to the lab and create a new product line, Moon said.
“It’s hard to kinda set up a business if you can only think of a year or a couple years in advance and set up, you know, five, 10 years down the line,” Moon said. “It’s just hard to think of the future.”
Policy Standpoint
Gregory Habeeb, president of Gentry Locke Consulting, represents Virginia’s Cannabis Association. He served as a Republican delegate representing southwestern constituents from 2011 to 2018.
A roughly $3 billion illegal cannabis market already exists, Habeeb said.
“So the real issue is how we should regulate that market,” Habeeb said. “By passing a bill to regulate it, we can address the public health and safety concerns.”
The illegal market continues to grow, going untaxed, unregulated, with untested products sold, according to Habeeb.
“We’re hearing from law enforcement all over the state that they want something done, it’s time to get it done,” Habeeb said.
Polls continue to show that recreational cannabis is a bipartisan issue. A majority of Virginians support retail sales. Democrats have the most support (70 percent), followed by Independents (54 percent) and then Republicans (46 percent).
“Nobody wants a system where unlicensed drug dealers sell untested, untaxed products,” Habeeb said. “I think there’s going to be some political consequences, as more and more people come around to the idea that we need to regulate this market.”
VCU InSight reporter Mark Jones contributed to this report.
Capital News Service is a program of Virginia Commonwealth University’s Robertson School of Media and Culture. Students in the program provide state government coverage for a variety of media outlets in Virginia. VCU InSight is the school’s broadcast capstone.
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