On June 28, 2019, Governor Michelle Lujan Grisham announced the creation of a “Cannabis Legalization Working Group.” The task force consisted of 19 members including the Democratic and Republican legislators who sponsored unsuccessful legislation this year to authorize and tax recreational marijuana sales at state run stores. The group also included representative of a labor union, sheriff’s department, health care business, Native American tribes, medical cannabis businesses, a county government association, and commercial bank and hospital company. The Working Group held public hearings, listened to the public and compiled recommendations for the governor that will be incorporated into proposed legislation to be introduced in the 2020 legislative session.
After the 2019 Legislative session, Governor Michelle Lujan Grisham voiced support for legalizing recreational marijuana but only with safeguards. The Governor made it very clear that any recommended legislation would have to include rigorous protections for the medical program, public safety and workplace concerns and clear labeling before she would consider supporting the legislation.
On October 16, the “Cannabis Legalization Working Group” released its long-awaited recommendation report. The report recommends that New Mexico become the nation’s 12th state to legalize recreational marijuana. The report recommends legalization, regulate and tax the sales of recreational marijuana. The final report provides state lawmakers a road map to follow during the 2020 thirty day 30-day legislative session that begins in mid-January.
You can read the working group’s final report here:
WORKING GROUP RECOMMENDATIONS SUMMARIZED
Following are the 15 major recommendations gleaned from the 16-page report:
1.The report recommends establishing a state licensing and regulation system maintaining the current license distinctions in medical cannabis program. Licensees would serve both medical and adult-use markets. There would be no “recreational only” type of license. It was recommended that the legislature should limit vertical licensing to just 2 types: Producer/Retailer or Producer/Manufacturer, to prevent monopolization of the industry.
2.The Working Group endorsed a recommendation that the cannabis program should not be dependent on the general fund. The recommendation is that the program generate 100% of the cost of regulation, including management of the medical cannabis program, from licensing and per-plant fees. All new tax revenue would go to programs determined by the governor, legislature and local governing bodies.
3.Mandate and require that cannabis products be clearly labeled to reflect accurate dosing and maintain strong testing standards. For any number of reasons, making THC-containing products easily identifiable is important for public safety, especially involving children. The working group recommended the adoption of consistent highly-visible markers, for example a bright red line on the edge of every package, to make the identification of THC-containing products easy for parents, law enforcement and education professionals.
4.Marijuana advertisements that feature children, cartoons or anything that would entice youth would be prohibited . Advertising on public TV or Radio or to mobile devices or in publications owned or targeting minors would be prohibited. A robust public education program aimed at children and teens would be funded. State agencies would be directed agencies to create youth-oriented education and prevention programs, in addition to responsible use programs for the general public.
5.Allow counties and municipalities to impose local time, manner and place restrictions. No local government would be allowed to prohibit a business based on participation in the legal cannabis industry, but they could reasonably limit density and operating time consistent with neighborhood uses. Counties and municipalities would be allowed to maintain buffer zones between cannabis sales and churches, schools and childcare centers similar to that with liquor licensing.
6.Use tax revenues generated to fund law enforcement training to identify drug-impaired driving.
7.Set aside funds to help provide access to capital for communities and small businesses to launch cannabis companies.
8.Use revenue from recreational marijuana taxation to “support housing, job training and education programs statewide.”
9.Establish low fees for “micro business” licenses so that small family farms and entrepreneurs can enter the market.
10.Study the demographics of the industry to ensure equity.
11. Set aside funds for local jurisdictions to use revenue in the manner they see fit.
12.Impose a tax rate that’s no more than 20%, with the goal being a total 17% tax rate.
13.Impose strict criminal penalties for selling cannabis to minors, consuming in a vehicle and any other unlicensed sales.
14.Enact legislation for the automatic expungements of marijuana possession convictions.
15. Prohibiting home cultivation or requiring licensing for those who wish to grow their own. Medical cannabis patients would still be allowed to cultivate their plants as under current law. The activity by other people would be decriminalized for up to six plants “to remove felony criminal implications for low-level personal production.”
RECOMMENDATIONS TO PROTECT STATE MEDICAL MARIJUANA PROGRAM
According to the Department of Health, enrollment in New Mexico’s medical cannabis program, launched in 2007, has steadily increased in recent years and exceeds 78,000 statewide. It is projected that there will be over 100,000 patients by 2021. In 2019, it’s estimated that New Mexico has a population of 2.10 million.
Governor Michelle Lujan Grisham made it clear that New Mexico’s medical marijuana program must be protected. Following are the recommendations:
1. In the event of a supply shortage, licensed cannabis dispensaries would have to supply medical marijuana patients before recreational users. This provision will be difficult to enforce because of the difficulty in determining when there is in fact a shortage and how the shortage will be made up.
2. Exempting medical cannabis sales from taxation.
3. Set product requirements and funding a low-income patient subsidy program to lower the cost of marijuana to patients.
4. Taking revenue generated by recreational legalization to subsidize the state’s medical cannabis program.
The working group’s report and recommendations will be presented to at least two legislative interim committees.
RECOMMENDATIONS ON HOW TO USE TAX REVENUES GENERATED
An independent economist cited in the report estimates that the state would gain 11,000 jobs and sales would reach $620 million by the fifth year of legalization’s implementation. The combined estimated tax revenue from medical and recreational cannabis sales would be $100 million annually. Opposition experts argued that revenue collected from cannabis sales is very difficult to predict, due to market forces, the possibility of federal action and the potential for even more states legalizing recreational use of marijuana.
The report makes a number of recommendations on the uses for the tax revenues generated by legalizing recreational cannabis in New Mexico and include:
1.Law enforcement training and equipment
2.State testing and oversight duties
3.Low-income medical cannabis patient subsidies
4.Drunken driving prevention and other health programs
5.Financial aid for small businesses to enter the cannabis industry
6.Creating new community college cannabis industry training programs
GOVERNOR AND KEY LEGISLATOR REACT
Nora Meyers Sackett, spokeswoman for Governor Lujan Grisham said the recommendations appeared to address many of the Governor’s concerns and said:
“The Governor is pleased that the working group incorporated her priorities for any potential legalization bill into their study … . The governor will be reviewing the recommendations, and the next steps will be to incorporate the recommendations of this working group into balanced legislation and working to win the support of legislators and stakeholders ahead of the session. ”
Key Democrat Senator George Muñoz in reaction to the recommendations said that a legalization bill will face numerous hurdles during the 30-day session. According to Muñoz, Native American leaders have expressed concern about the impact of marijuana legalization on tribal lands that have high alcohol abuse rates and he said the state’s current $2.3 billion estimated budget surplus means more revenue is not urgently needed. However, Munoz also said technological improvements in detecting cannabis impairment when it comes to driving under the influence could make him more likely to support a marijuana legalization bill.
MEDICAL MARIJUANA PATIENTS REACTION
Now that the Cannabis Legalization Working Group has released its final recommendations, some medical marijuana patients are raising concerns that the proposed framework for legalizing recreational marijuana will have a negative impact on the medical cannabis program. The concern is that intertwining recreational and medical businesses will compromise the medical supply.
Jason Barker, a medical cannabis advocate with Safe Access New Mexico had this to say about the recommendations:
“Fifty-five percent of our producers are having trouble meeting the demand for those products already and if over half of the people in the program can’t produce that quickly enough, if we roll into a recreational law then it would be a great concern for me and a lot of the other patients. … It’s something that will devastate the medical program in doing so. … The state is seeming so desperate to get access to that green rush tax dollars that come with legalization that whatever they can get through and pass, they will and they’ll fix it later.”
The Cannabis Legalization Working Group wrote in a letter to legislators who will have to approve any recreational cannabis proposals that they are recommending a new model to protect patient access and affordability with a “patient first’ supply model. ”
NEW MEXICO CAPS LICENSED MEDICAL MARIJUANA CULTIVATORS TO 1,750 PLANTS
There are 78,000 patients enrolled in New Mexico’s Medical Marijuana program. On June 11, the state Department of Health announced New Mexico’s plant limit for licensed medical marijuana providers would be set at 1,750 plants, a 30% drop from the 2,500 plants allowed under an expiring emergency state rule. Some cultivators such as Ultra Health, the largest medical marijuana operator in the state, said the plant limit would exacerbate a medical marijuana shortage and constrain market growth.
The changes also included an increase to the annual licensing fee for producers and the elimination of a $50 fee for replacing lost patient identification cards. The Department of Health said the proposal was an attempt to strike a balance between ensuring adequate supply for those enrolled in the state’s medical cannabis program, while avoiding an excessive surge in pot production.
Three New Mexico medical cannabis cultivation companies, G&G Genetics, Sacred Garden and Ultra Health joined together in filing a lawsuit against the New Mexico Department of Health in response to the new rule limiting the number of plants one company can grow to 1,750 saying the cap puts constraints on the supply of medical marijuana to patients. The growers argue that the more than 78,000 patients registered for the medical marijuana program in New Mexico require more product, which means more plants per company.
The producers say the Department of Health has not done the research required to determine how much legally grown cannabis is needed to provide an adequate supply for over 77,000 patients enrolled in the program. The complaint calls the new limit just as “arbitrary and capricious” as the previous one. The civil complaint filed alleges:
“The materials [the Department of Health (DOH)] claims support the 1,750-plant rule are riddled with logical holes, unrepresentative data, inferential leaps, contradictions and poor math”.
According to the complaint filed, the department relied heavily on a report and patient survey based on the amount of cannabis patients had purchased in the past — during times of limited supply, rather than the amount patients would buy if enough were available.
The lawsuit is still pending.
FAILED HOUSE BILL 356
On March 7, 2019 the state House passed House Bill 356 (HB 356) with a two-vote majority of 36 to 34. HB 356 was the first recreational marijuana proposal ever passed by one of New Mexico’s legislative chambers. HB 356 was legislation that was the result of bipartisan efforts and talks involving House Democrats and Senate Republicans. Every Republican Representative in the House voted against HB 356 joining 10 Democrats in opposition to it. All previous efforts of marijuana legalization have failed in the Senate because of skepticism from conservative Democrats in the Senate.
HB 356 bill included a provision for state run and regulated stores. The compromise bill required people to keep receipts showing they purchased their marijuana legally, and they could carry only 1 ounce of cannabis and couldn’t grow it on their own. House Bill 356 was a broad marijuana legalization proposal and dedicated some of the tax revenue from cannabis sales to research into cannabis impairment, purchasing roadside testing equipment for law enforcement and to train police officers as drug recognition experts when drivers are stopped. The bill made it clear that employers could still maintain drug-free workplace policies. The bipartisan HB 356 stalled in the Senate and never made it to the full Senate for passage. The legislation failed when the session was adjourned on March 21, 2019.
COMMENTARY AND ANALYSIS
When you review the recommendation of the “Cannabis Legalization Working Group” they are a very significant departure from House Bill 356 with the exception of a state licensing system. Absent is any mention of state run and regulated stores. The recommendations do include the rigorous protections for the medical program, public safety and workplace concerns, and clear labeling Governor Lujan Grisham demanded when she announce the working group.
Absent from the report is any mention or any clear discussion if the group is recommending the legislature to enact a traditional licensing system like it created for full-service alcohol licenses. With present alcohol full-service licenses, the number of licenses are capped and based on population numbers. Liquor licenses are now being sold for upwards of $1 million where only the wealthy or major restaurant chains can only afford them.
The exact same thing will happen with recreational marijuana licenses unless the licenses are not tied to population. There should be no limit on the number of recreational pot licenses that will create a market of licenses that increase value and are considered an investment by the private sector as opposed to regulation by the state to protect the public health safety and welfare.
One major obstacle that will need to be address by the legislature is the existing cap of 1,750 plants imposed on medical marijuana suppliers and if a similar cap on recreational marijuana producers should be imposed. The response should be is to allow the market to decide what the caps should be and there should be no caps on the number of plants as long as the producers are regulated.
One option that should be considered is placing the issue of recreational marijuana on the ballot for voters to decide, which has been done in other states like Arizona and Colorado. However, if a strong consensus can be achieved and if a recreational legalization program can be supported by large majorities in both the House and Senate, they should proceed and vote to legalize the recreational use of marijuana.
Legalize,regulate, tax recreational marijuana like alcohol and cigarettes.
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