On January 21, 2020, the 30-day New Mexico legislative session begins. The 30-day session is referred to as the “short session” which are held in even number years while 60-day sessions occur in odd number years. Thirty-day sessions are limited to budgetary matters and issues approved for consideration and placed on what is referred to as the “Governor’s Call” or “Governor’s Message”.
On September 10, 2019, Governor Michelle Lujan Grisham’s “Cannabis Legalization Working Group” recommended a traditional licensing system for private companies that would grow and sell marijuana. The state would not operate retail stores. The licensing system is the same system as used for the State’s medical cannabis program. The Task Force proposal is a complete shift from the legislation that advanced through the state House in the 2019 legislative session where lawmakers embraced the idea of state-run cannabis stores as a part of a compromise with Republicans.
EDITOR’S NOTE: On January 16, 2020, house bill 160 was pre-filed for the upcoming legislative session. This blog article is a review of major highlights of the proposed legislation often asked about. It is not to intended to be a complete explanation of the legislation. You can read the 173 page bill at this link:
PROVISIONS LEGALIZING RECREATIONAL CANNABIS
There are two separate bills that have been pre-filed, House Bill 160 and Senate Bill 115 . House Bill 160 is sponsored by State Representative Javier Martinez who served on the Governor’s working group. Senate Bill 115 is sponsored by State Senator Jerry Ortiz y Pino. According to both State Representative Javier Martinez and State Senator Jerry Oriz y Pino, both bills essentially have the same provisions. A final consolidated bill should emerge if enacted by both chambers.
Last year, it was the House that started the process with legalization of recreational cannabis. The approach this year is to have the Senate start the process in that it is the more conservative Senate that rejected last years efforts by the house. Getting it passed the Senate is the more difficult task.
The legislation is based on a report by the Governor’s Cannabis Legalization Working Group appointed to study the issue last year. The group had public meetings throughout the state and took testimony from interested parties. The group received over 200 pages of public comment from residents across the state prior to issuing is recommendations to address public health, public safety, testing, regulation and taxation of recreational cannabis.
House bill 16O is partially entitled “The Cannabis Regulation And Tax Act”. The title of the bill provides a nutshell of what the legislation does as follows:
The legislation creates a “Cannabis Control Division” within the state’s Regulation and Licensing Department and outlines duties and responsibilities of the new division (HB 160, page 11)
The bill creates a “Cannabis Regulatory Advisory Committee” (HB 160, page 15)
The Department of Health duties and responsibilities are enumerated (HB 160, page 19)
A “Public Health and Safety Advisory” committee is created (HB 160, page 20)
The bill establishes the medical cannabis subsidy program
Law enforcement reporting requirements for Department of Public Safety are revised (HB 160, page 22)
A “cannabis regulation fund” is established (HB 160, page 70)
A “community grants reinvestment fund” are created ( HB 160, page 70)
A “low-income medical patient subsidy” fund is established (HB 160, page 73)
It creates a cannabis “workforce training fund” (HB 160, page 73)
A cannabis industry equitable opportunity investment fund is created (HB 160, page 76)
A Cannabis Tax Act is contained in the legislation to allow state, city and counties to impose excise taxes (HB 160, pages 80 to 83) and provides for distributions from cannabis excise tax revenue
The legislation creates a roadside drug testing pilot project
The legislation creates a public education campaign
OVERVIEW OF LEGISLATION
The legislation will regulate both commercial and medical marijuana programs. The Cannabis Control Division of the Regulation and Licensing Division will have very broad and extensive authority to regulate the industry. The division will have powers to promulgate rules and regulations, including many mandates and limitations on license issuance and quality control. The Cannabis Control Division must be up and running by January 1, 2021, which is a very ambitious deadline given the magnitude of creating the industry.
The proposed legislation for the 2020 session does not include a provision calling for state-run cannabis stores. State run cannabis stores were proposed in the 2019 legislation that passed the House.
The proposed legislation will legalize use and sale of recreational marijuana for anyone age 21 and older. The 2019 New Mexico Legislature decriminalized possession which is now a $50 civil fine with no jail time. The proposed legislation provides for taxes on recreational pot at roughly 17% to 19% but makes medical marijuana tax-free and entirely subsides medical marijuana for low income patients.
The plan calls for food-grade testing of marijuana products. The legislation if passed will require all cannabis products sold in New Mexico to be tested and free from contaminants. Packaging must be clearly labeled with the THC dosage. The legislation also includes restrictions on advertisements that target youth. The legislation requires investments in training that would assist law enforcement officers in identifying impaired driving and not just limited to only cannabis-induced impairment.
The legislation does give local governments some authority to determine where cannabis dispensaries can be located. However, the state’s counties will not be given any authority to be able to prohibit cannabis sales nor prohibit the licensing of stores. In other words, local zoning rules will be able to be used to control the number of stores in an area where they the stores can located. This is identical to zoning restrictions placed on retail stores that sell pornography.
The legalization bill calls for generally a 19% tax rate. Each county and city have varying gross receipts tax rates and the cannabis tax would be added to those sales taxes. The tax is much lower than in other states and it is hoped it will prevent buyers from turning to the black market. The legislation will exempt residents in the medical cannabis program from the tax and would require cannabis growers to serve the medical market before the recreational market.
According to supporters, the tax will allow revenue to be generated for law enforcement efforts. Revenue generated by legalizing marijuana and taxation on ales will go toward law enforcement training and equipment, substance abuse treatment programs and the creation of a fund to help pay for medical cannabis costs for low-income patients. A proposed fund to help marijuana entrepreneurs is also proposed to help get the industry started.
Eleven states and the District of Columbia have enacted recreational use of marijuana for adults. Vermont and Illinois have approved cannabis legalization laws through the legislative process while the other 9 states have done so through ballot measures.
Cannabis is still classified as a Schedule 1 narcotic. Production, sale and distribution of cannabis is a violation of federal law but the US Department of Justice and Federal law enforcement authorities decline to take action against states that have legalized it. The proposed legislation includes provisions that provides for dismissal of cases involving individuals who were incarcerated for cannabis-related crimes.
NO VESTED PROPERTY RIGHTS GIVEN
The legislation avoids a traditional licensing system as is created for full-service alcohol licenses. With present alcohol full-service licenses, the number of liquor licenses are capped and based on population numbers and liquor licenses are the property of the licensees and not the state. Purchasers of full-service liquor licenses have “vested property rights”. Liquor licenses are now being sold for upwards of $1.5 million where only the wealthy or major restaurant chains can only afford them. The result and unintended consequence of a population cap is that licenses are purchased for a few thousand dollars from the state and held onto for an investment profit or windfall profit.
In other states where recreational cannabis has been legalized, major corporations and wealthy investors have been able to purchase licenses, monopolize the industry and have squeezed out small business’s owners and local investors. Under the proposed legislation, the goal is to keep the license cost to around $500 a month, or $6,000 a year, so small businesses and local entrepreneurs can afford the licenses.
As written, the recreational cannabis legislation contains no limit on the number of recreational cannabis licenses. Under the proposed legislation, the holder of a recreational cannabis license issued will have no vested property right in the license and the license is deemed property of the state. A license issued pursuant to the Cannabis Regulation Act will not be transferable from person to person, corporation to corporation or corporation to person. The licenses shall not be leased and shall not be considered property subject to execution, attachment, a security transaction, liens, receivership or all other incidents of tangible personal property under the laws of this state. (Page 28 of HB 160)
PROTECTIONS FOR STATE MEDICAL MARIJUANA PROGRAM
There are upwards of 80,000 people enrolled statewide in New Mexico’s medical cannabis program which became law in 2007. It is projected that there will be over 100,000 patients by 2021. Governor Michelle Lujan Grisham has made it clear that New Mexico’s “Medical Cannabis Program” must be protected and not be place into jeopardy by legalization of recreational cannabis.
The proposed legislation contains a provision “requiring that each cannabis retailer maintain at all times a supply of medical cannabis products suitable and sufficient to meet the reasonably foreseeable needs of qualified patients as determined by the department of health.” In the event of a shortage of cannabis products, qualified patients shall be served before any other consumer and the proposed law further provides that unused plants or products reserved for medical cannabis use may be offered to other consumers upon receiving division approval that all reasonably foreseeable medical cannabis needs have been met. (Page 13 of HB 160).
MEDICAL CANNABIS RESIDENCY REQUIREMENTS
The 2019 New Mexico Legislature enacted amendments to the medical cannabis law and Governor Lujan Grisham signed them into law. The legislature changed the definition of “qualified patient” by removing a requirement that an enrolled member of the medical cannabis program must be a New Mexico resident. The changes took effect on July 1, 2019.
After the amendments to the law took effect, a Santa Fed State District Court ruled that New Mexico must allow non-residents to participate in its medical cannabis program. Ultra-Health LLC, an Arizona licensed medical marijuana producer whose President and CEO Duke Rodriguez, a former NM Department of Health Secretary, file suite to challenge the New Mexico residency requirement and succeeded. Initially the Governor said her administration would appeal the decision.
Placed on the Governor’s legislative agenda is a bill that is intended to address a State District Court ruling that New Mexico must allow non-residents to participate in its medical cannabis program and to have a New Mexico residency requirement for a medical cannabis card.
PERSONAL PRODUCTION OF CANNABIS PROHIBITED
Under the proposed legislation, it is unlawful for a person intentionally to produce cannabis except as provided in the Compassionate Use Act and the Cannabis Regulation Act and provides for limitations. (Page 61 of HB 160).
RESTRICTIONS ON MUNICIPAL AND COUNTY AUTHORITY
The proposed legislation places limitations given to local government entities, municipalities and counties. (Page 44 of House Bill 160)
Under the legislation, a local jurisdiction may in part adopt reasonable time, place and manner rules that do not conflict with the Cannabis Regulation Act or the states Clean Indoor Air Act including rules that reasonably limit density of licenses and operating times consistent with neighborhood uses.
Also, local jurisdictions may allow for the smoking, vaporizing and ingesting of cannabis products within an indoor or outdoor cannabis consumption area on the licensed premises of a cannabis retailer or integrated cannabis micro-business. Allowing time, place and manner rules are similar to alcohol licensing requirements.
Two very notable restriction place on local jurisdiction are that “local jurisdictions shall not:
(1) prevent transportation of cannabis products on public roads by a licensee that transports cannabis products in compliance with the Cannabis Regulation Act; or
(2) completely prohibit the operation of any category of license.”
ADVERTISING AND MARKETING RESTRICTIONS
The legislation provides that the Department of Environment and Occupational Health and Safety shall promulgate extensive rules and regulations relating to advertising and that prohibit the advertisement and marketing of cannabis products on a billboard, radio, television or other broadcast media, with exceptions. Advertising to those under the age of 21 are strictly prohibited. Using cartoon characters and minors in advertising are banned. The legislation establishes youth prevention and education programs. (Page 55, 56 of Bill 160).
CONFLICTING POLL NUMBERS
There have been two polls conducted on the legalization of recreational marijuana with two totally opposite results.
A poll was conducted from November 26 to December 2, 2019 by Change Research. The poll was commissioned by the Governor’s Legalization Working Group and sampled 1,005 likely voters statewide. The poll found that 73% of likely New Mexico voters support legalizing cannabis in the 2020 legislative session.
Another poll of 930 registered voters was released by Emerson College on January 7, 2020 that found that 63% of New Mexico voters are opposed to full legalization and 42% supported keeping just medical marijuana. You can review the tab results spread sheet here:
GOVERNOR LUJAN GRISHAM ANNOUNCES SUPPORT OF LEGALIZATION
On Friday, January 17, 2020 Governor Michelle Lujan Grisham announced her unequivocal support for legalization of recreational marijuana emphasizing 4 major points:
1. Legalization will spur economic development and
2. Create thousands of jobs
3. Open new career options for younger New Mexicans, and
4. Act as a catalyst for new research into cannabis’ medicinal properties.
In a press release announcing her support, Governor Michelle Lujan Grisham had this to say:
“The Legislature has the opportunity to pass the largest job-creation program in New Mexico in a decade … Skeptics have been right to preach study and patience. I agree with their caution and that’s why we haven’t’ been rushed into this issue. But if we are clear-eyed about the risks, we have to be clear-eyed about the opportunity. … It is an incredibly important opportunity. … We are serious about getting it passed. It’s time to stop pretending cannabis is not already a part of our economy and culture. … The thousands of New Mexicans who work in, supply and serve our medical cannabis program are employers, they are doctors, they are entrepreneurs and they are neighbors.”
For economic benefits of legalization see:
According to the Governor’s office legalization of cannabis would generate upwards of 11,000 new jobs in agriculture, manufacturing, regulation, and retail industries. According to an independent economic analysis upwards of $620 million in sales will be achieved in the 5th full year of legalization. The Governor’s Office noted that medical cannabis producers last year sold almost 3 times more medical cannabis than chile.
Nine other states have already legalized recreational cannabis.
A HARD SELL
In interviews, the Governor has acknowledged that winning approval of the marijuana legalization plan will be difficult. She believes the Senate will be the biggest hurdle and she had this to say:
“I think cannabis [recreational legalization] is going to be really hard [and] it should be. That is not something to run into without being really clear. … If I have it on the call, I’m serious about getting it passed”
The fact that the State has some of the highest DWI rates and opioid addiction rates in the country clearly complicates the legalization of recreational cannabis and the statistics will no doubt be used again by opponents of the legislation. The New Mexico Special Agent In Charge of the Federal Drug Enforcement Administration (DEA) has already come out in opposition to the legislation.
Kyle Williamson, a special agent in charge of the El Paso division of the Drug Enforcement Administration (DEA), which also covers all of New Mexico, said marijuana is an illegal drug for a reason, calling it addictive, prone to abuse and almost impossible to use responsibly and saying:
“From a federal law enforcement standpoint, it is a dangerous drug. … Some people say marijuana isn’t addictive, it doesn’t lead to the use of harder drugs and legalization will not lead to more use … juvenile, adolescent use, adult use in Colorado has all increased.”
JOHN STRONG COMMENTARY: CANNABIS BILL DOES NOT ADDRESS ONE VERY BIG PROBLEM
John B. Strong is a private business owner in New Mexico and an investor. John Strong has been investing in startups since 2004. He is a co-founder or board member at several different companies, mostly in technology, healthcare, and financial services. Mr. Strong describes himself as being “obsessed with entrepreneurship and small businesses.
Mr. Strong offered the following observation on recreational cannabis legalization:
“Cannabis legalization is certainly coming at some point to New Mexico. Voters are in favor of it, and the State wants the tax revenue it can generate. There is however, one glaring problem that other states are confronting that should be addressed in any bill.
The hard fact is that along with legalization, there is a greatly reduced fear of violating the law by purchasing illegally cultivated and sold cannabis. In California in particular, they estimate that even 3 years after legalization, 70% of all cannabis products are illegally cultivated and sold outside the Tax and dispensary system. This obviously undermines one of the prime reasons for a state to legalize cannabis for the general public.
Making matters worse, when laws governing possession are eliminated, there is little fear of purchasing illegally grown cannabis, which is generally much cheaper than what comes out of the dispensary system. It’s all about dollars to the consumer, who would rather pay 25%-35% less by purchasing untaxed or controlled products from back yard farmers. And make no mistake, it is readily available to almost anyone anywhere.
Not only does this undermine the dispensary system, as they are competing with untaxed and lower priced, unregulated products, but it severely restricts the tax collections for the state as well. There is however, an easily implemented deterrent that can help ensure compliance: It should be mandated that all cannabis products be kept in their original packaging whether on your person, in your vehicle, or in your home.
All of these products are already packaged in some form anyway, and it is easy to add the tax stamp in the package (similar to those on the bottom of any pack of cigarettes).
If a consumer is found to possess cannabis in a plastic bag, or Tupperware container, chances are high that it was illegally cultivated and sold already. If those products were subject to seizure and a fine for possessing them, it would put a real deterrent to illegal sales. It’s really a matter of making it just not worth it to the consumer to possess or purchase them outside of the tax and dispensary system.
This won’t ensure full compliance, but any serious dent in the problem would be meaningful to both the state and the dispensary operators, and it is not a difficult fix. The bottom line here: If we are serious about legalization, we might as well benefit as much as possible.”
COMMENTARY AND ANALYSIS
The problem that must be confronted is that it is likely thousands more will seek “medical cannabis” cards as a means of side stepping the prohibition of recreational cannabis use. Getting a doctor’s prescription for marijuana will probably be as easy it is to get opiods. Alcohol Prohibition was a failure, as is outlawing recreational cannabis use. The widespread use of marijuana and the “underground” black market economy must be recognized for what it is and it will never go away as long as people want and desire a product.
The arguments made by Special Agent In Charge of DEA that marijuana is a dangerous drug leading to increase drug use are arguments that have been made repeatedly over the last 60 years by those in law enforcement who have been involved with the “war on drugs” first declared by President Richard Nixon and later carried on by First Lady Nancy Regan with her “Just Say No” to drugs campaign, which was laughable at best.
This country’s and New Mexico’s “war on drugs” when it comes to marijuana use has been a miserable failure with billions spent and wasted, money that would have been better spent on education, roads and even drug treatment and counseling. Many of the arguments that marijuana is a “gateway drug” to far more addictive drugs such as heroin and cocaine have been repeatedly debunked, but that is an argument better left for a later date.
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Even though Democrats hold comfortable majorities in both the New Mexico State Senate and the House of Representative the legalization of the recreational use of marijuana in the 2020 session is far from certain, even with the Governors unequivocal support. There are still many members of the Senate and House, both Democrat and Republican, that have staunchly opposed all previous efforts to legalize recreational cannabis.
Although Governor Lujan Grisham supports the general concept of legalization of recreational marijuana, she has stressed repeatedly that any new law allowing recreational marijuana must not interfere with the state’s medical cannabis program, it must address driving while under the influence and it must protect workplace safety. It appears that the proposed legislation addresses those issues.
When it comes to the legalization of the recreational use of marijuana, both the house and the senate bills avoid a traditional licensing system like it created for full-service alcohol licenses. As written, the recreational cannabis legislation contains no limit on the number of recreational licenses, gives no vested property rights to license holders and makes it clear that the licenses are property of the state.
The two conflicting polls in essence cancel each other out. In politics, polls are often inaccurate as learned in the 2016 national election. A poll commissioned by a party that has a stake in an outcome are always subject to skepticism. The only polls that really matter are the ones where people actually vote and not just asked their opinions. One option that should be considered is placing the legalization issue 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. Without a strong consensus, the enactment of the bill without a public vote will no doubt be and ongoing controversy.
Legalize, regulate, tax recreational marijuana like alcohol and cigarettes.
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