This story was first published by Pennsylvania Capital-Star.

Photo courtesy of Mike Latimer.

“Pennsylvanians are buying cannabis, but now what’s happening is they’re paying taxes in other states. We need to change that. We need to be more competitive.”

By Ian Karbal, Pennsylvania Capital-Star

Gov. Josh Shapiro (D) said Tuesday that he recently met with cannabis dispensary owners from Maryland, Ohio, New York and New Jersey. He wanted to ask them how many of their customers at stores near the Pennsylvania border were crossing state lines to buy their products.

Their response, he said: over 60 percent.

“Pennsylvanians are buying cannabis, but now what’s happening is they’re paying taxes in other states,” Shapiro said. “We need to change that. We need to be more competitive.”

It wasn’t the first time Shapiro has come out in favor of legalizing recreational adult-use cannabis. He advocated for it in his budget address last year. Still, despite some legislative efforts, no legalization bill made substantive progress in the legislature, though public polling (albeit paid for by a pro-cannabis advocacy group) shows broad support for legalization.

But Shapiro and other advocates believe the new legislative session that started this month could be different. For starters, state spending increases supported by Shapiro and other Democrats in the last budget are projected to shrink the state’s surplus funds. And no one wants to raise taxes to fill that gap.

Advocates are hoping that will be incentive enough for Republicans in the state Senate, where they have a majority, to more seriously consider passing a recreational cannabis bill. Kate Flessner, a spokesperson for Sen. Majority Leader Joe Pittman (R-Indiana) said “this issue is multifaceted, and proposals would need to first be vetted by standing committees, before advancing further and receiving input by each of our members.”

It’s not a no. And at least one Senate Republican has signaled strong support for recreational cannabis.

House Democrats have generally been more friendly to recreational cannabis legalization, though their bills gained little traction in the chamber last year. (Democrats had a one seat majority in the House until the death of an Allegheny county representative this month, but a special election in the heavily Democratic district will be in March.)

But getting the support for legalization in principle may not be the biggest roadblock to passing recreational cannabis legislation. To craft a bill that could pass in a divided legislature, state leaders must address concerns about how it would impact public health, social equity, criminal justice, industry and the state coffers. And many lawmakers and constituencies have different ideas about how to prioritize those.

‘The devil really is in the details’

Pittman’s spokesperson, for example, said “strengthening communities and ensuring public safety continue to be of paramount importance to our caucus.”

Shapiro said his aims were two-fold: keeping would-be tax revenue from going to neighboring states and “liberty, rights and freedom.”

Leaders in the Legislative Black Caucus say they’re looking for a bill that would provide funds for reinvestment in communities impacted hardest by the war on drugs and create state-supported opportunities for minority entrepreneurs to enter the fledgling industry.

And other lawmakers have raised questions about how legalization could impact public health, or what such a bill could do to limit the rise in cannabis consumption seen in other states that have legalized it.

“When thinking about legalizing cannabis, it’s not a simple, binary, yes or no decision,” said Beau Kilmer, the co-director of drug policy research at the think tank RAND. “The devil really is in the details.”

Kilmer has spent more than a decade helping other U.S. states, and even foreign countries, create cannabis laws that meet their unique needs. The most important first step for lawmakers, he says, is to “be very explicit about what their goals are—their policy goals.”

Choices legislators make when deciding things like how to tax cannabis or how to license cannabis-related businesses can have major impacts on the price of the product and who gets to sell it. This, in turn, can have impacts on user behavior and state revenue.

As an example, Kilmer noted that if a lawmaker’s primary goal was to shut down the illegal market as quickly as possible, a good approach may be to create few restrictions for private cannabis companies and create as many business licenses as possible.

“However, there are other folks more on the public health side who actually would like to see more regulation and not have the price bottom out,” Kilmer said. “Even if that means it’s going to take longer to reduce the size of the illegal market.”

Public health-focused measures could include restricting how potent legal products are allowed to be, or raising prices by limiting how much cannabis can be produced, or banning the sale of edibles and vapes.

“In the United States, most of the focus has been jumping from prohibition to this other extreme,” Kilmer said. “Outside of the U.S., there’s much more interest in these kinds of middle-ground approaches.”

Last year, Pennsylvania lawmakers on a subcommittee focused on cannabis heard from Canadian health experts about legalization in the province of Quebec. There, cannabis is sold in state stores, like liquor is here. They also have some of the strictest regulations on cannabis products of any government in North America that has legalized recreational weed.

The outcome, lawmakers heard, has been fewer cannabis-related DUIs, calls to poison control and emergency room visits than in other states and provinces that have legalized cannabis.

Notably, Reps. Rick Krajewski (D-Philadelphia) and Dan Frankel (D-Allegheny), the chair of the cannabis-focused subcommittee, have said they’re planning to introduce a bill restricting most cannabis sales to state liquor stores.

‘We want to make sure that they’re ahead of the line instead of at the end’

But public health and state revenue are only part of what lawmakers are considering and advocates are pushing for.

Cherron Perry-Thomas is the co-founder and director of social impact with the advocacy group Diasporic Alliance for Cannabis Opportunities (DACO). Their focus is on ensuring that any recreational cannabis legislation would create opportunities for Black entrepreneurs and others who have been particularly impacted by the war on drugs and prohibition.

Across the country, Black people are more likely to be arrested for cannabis-related crimes than whites, and more likely to see harsher sentencing for those same offenses. In Perry-Thomas’s mind, and others’, cannabis legislation presents an opportunity to right some of those wrongs.

Perry-Thomas has been involved in conversations with lawmakers in Pennsylvania. One thing she’s pushing for in a bill: state funds and resources to help Black entrepreneurs and others impacted by prohibition to get small businesses off the ground as soon as the market opens up.

“These socially impacted communities, we want to make sure that they’re ahead of the line instead of at the end of the line,” Perry-Thomas said.

Many states that have already legalized cannabis have attempted what are called “social equity programs,” with varying degrees of success. Often, this means requiring a certain number of business licenses to go to entrepreneurs from impacted communities. That could mean people living in areas with high rates of cannabis arrests, people formerly incarcerated on cannabis charges and their families, as well as minority groups that have been charged with drug crimes at disproportionate rates.

In Illinois, one of the first states to provide equity licenses, many qualifying entrepreneurs say the state failed to support them. State agencies responsible for licensing and regulating their businesses were stretched thin. And as new business owners waited for the program to catch up with them, in some cases, funds were being drained. In others, rising interest rates made it harder to fund next steps. Meanwhile, multi-state cannabis businesses and chains had transformed the market by the time they could open their doors.

Perry-Thomas believes Pennsylvania can learn from these mistakes. One of her proposals would create a state-backed “incubator program,” providing training and technical assistance for small business owners from targeted communities, before the market even opens.

She also suggests that no new businesses be allowed to open doors before equity businesses have a chance to get up and running. And, she says, the state could back low-interest loans for qualifying candidates with solid business plans.

Many Pennsylvania lawmakers are in agreement with at least some of what Perry-Thomas is proposing. Last year, lawmakers heard from entrepreneurs in nearby states about their experience with equity licensing in committee meetings, both for better and for worse.

However, Perry-Thomas worries that the national conversations around so-called DEI efforts (diversity equity and inclusion) may impact Pennsylvania statehouse decisions.

Rep. Napoleon Nelson (D-Montgomery), chair of the Pennsylvania Legislative Black Caucus, said he would not support any legalization bill without some kind of policy to help those impacted by the war on drugs enter the fledgling cannabis industry.

Nelson is also clear that any cannabis legislation he would support must also include criminal justice reforms, including potential expungements for those with cannabis-related charges.

“There has to be real criminal justice reforms that come with endorsing and building an industry based on a product that folks have been locked up for and taken away from their families,” Nelson said. “There has to similarly then be opportunities to rebuild both the entrepreneurs in that space and the communities that were impacted by that loss of economic activity, that loss of family ties.”

Though Nelson says he’s open to discussions on details. Who would qualify for automatic expungement? What would happen to people imprisoned on multiple charges, only one of which was cannabis related? Would there be help, or even compensation, for repeat offenders whose first interaction with the criminal justice system was over a low-level weed charge?

“It’s a really intricate, complicated and important aspect of the bill,” Nelson said.

While he isn’t sure what the shape of the criminal justice portion of a cannabis bill should look like, not having it, he said, would be a “red line for Black lawmakers.”

Other Democrats have said they wouldn’t support a cannabis bill that doesn’t have the backing of the Legislative Black Caucus, given prohibition’s impact on Black Pennsylvanians.

Private vs. public

Lawmakers must also contend with the already-powerful cannabis lobby in Pennsylvania. And they have not been shy about making their voices heard.

At last year’s committee meeting where a state-store model was discussed, lobbyists and industry advocates audibly groaned when Frankel appeared to support the idea.

Britt Crampsie, a spokesperson for Responsible PA, which represents both local businesses involved in the medical market and some of the largest cannabis chains in the country, has said they are against a state store model.

“We need to move to a private retail market, and do it sooner rather than later,” Crampsie said.

In part, she said, that’s because a private sector model makes social equity programs more possible, by creating more business opportunities for minority entrepreneurs.

Here, she and Perry-Thomas agree. Though Perry-Thomas has said that she could support a state-store model if there are requirements for certain products to be from equity-licensed companies elsewhere in the supply chain.

Kilmer, the RAND researcher, has said that a state-store model and social equity programs are not at odds. Because states would have more control over cannabis revenue, they could direct money towards other programs intended to help would-be entrepreneurs impacted by the war on drugs.

Any bill proposing a state store model, however, may face an uphill battle. Polling shows Pennsylvanians generally don’t support state liquor stores already. And key lawmakers, like Nelson, have expressed skepticism as to whether it’s the right path forward, citing similar reasons as Perry-Thomas. Though he, too, did not rule out supporting it if there were strong social equity and criminal justice provisions.

Crampsie says, as it stands, the industry is broadly supportive of another proposed cannabis bill, co-sponsored last year by Rep. Emily Kinkead (D-Allegheny) and Republican Aaron Kaufer, who decided not to seek reelection in 2024.

Kinkead has said that she plans to introduce a similar bill again this session.

The 220-page bill contained many measures championed by the Black Legislative Caucus, such as equity licensing and criminal justice reforms. According to Kinkead, some of those will be amended this year based on feedback from affected constituents. It would include state funds for equity-qualifying entrepreneurs.

The bill also contained requirements for product labeling, packaging and advertising. Kinkead even said that she’d consulted with people in the “billboard industry” who wanted to ensure there was clear language about what they could put on their signs, and where.

One thing Kinkead’s bill does not include, however, is a moratorium on social equity-qualifying business holders from selling their licenses to other, non-qualifying businesses.

“We don’t put that kind of regulation on any other kind of business, to say ‘You’re not allowed to sell your business.’” Kinkead said.

Perry-Thomas has said that she would prefer to see a program where those licenses would stay in the hands of qualifying business holders. That’s because other states with equity programs have failed to meet their goals, and often seen large cannabis companies dominate the dispensary business.

Kinkead’s bill also has the support of existing medical marijuana businesses, who would be allowed to transition to selling recreational cannabis.

With no language yet available for Frankel and Krajewski’s state-store bill, it’s unclear what would happen to existing medical dispensaries.

Peter Marcus is the vice president of communications at Terrapin Care Station, a private cannabis business owned by a Pennsylvania native. While they had stores in Colorado, it has since sold those to focus on Pennsylvania.

“The marketplaces for cannabis in a lot of places got complicated,” Marcus said. “Pennsylvania really emerged as just this really great marketplace with a lot of patients…. Plus, adult-use is knocking on the door.”

Marcus noted that Colorado and other states are facing what’s been called a “marijuana recession.” In short, an over-saturation of the market has led to massive price drops, which has had a particularly hard impact on small businesses.

According to Kilmer, however, the “marijuana recessions” states across the country are experiencing are emblematic of what a state store model could help.

A state-store model would allow the state to exert stronger control over prices, which would allow for stability. And that stability would be necessary to fund government programs reliant on cannabis funds.

Though Marcus disagrees that a state store model is necessary for regulating the market, he said that Pennsylvania has the luxury of “foresight” and he’s supportive of efforts to limit new licenses and grow the industry slowly.

“The reason Pennsylvania is the darling of the cannabis industry right now is…it actually has all of this background from lessons learned along the way to create a stable, balanced marketplace moving forward.”

But according to Kilmer, there’s another advantage of a state store model: mitigating the strength of the cannabis lobby.

“Once you get the for-profit companies involved, and they start making money, and then they hire their lobbyists, it can make it a lot harder to put that genie back in the bottle,” Kilmer said. “Pennsylvania and other jurisdictions that are legalizing could be incremental about it. You could start with a state store model and see how it goes. And maybe you decide five-10 years later, ‘OK, maybe we need to open this up.’”

This story was first published by Pennsylvania Capital-Star.

Photo courtesy of Mike Latimer.

Marijuana Moment via (https://www.marijuanamoment.net/pennsylvania-governor-wants-to-legalize-marijuana-so-residents-stop-sending-tax-money-to-other-states/)

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