Senate panels hear competing proposals on how to legalize recreational cannabis in RI

Politics

PROVIDENCE, R.I. (WPRI) — One plan would allow people to grow marijuana at home, the other would ban it. One plan calls for a cap on the number of pot shops, along with a lottery system, while the other sets up a new cannabis commission to run the show. One plan allows more people to get into the business of growing cannabis, while the other has a moratorium.

These details — how Rhode Island should go about legalizing recreational marijuana, not just whether to do it — have been the subject of discussion at the State House this year, as support grows for taxing and regulating cannabis. The first hearing on two new proposals was slated for Thursday afternoon in the Senate.

Both bills would legalize the possession of certain amounts of marijuana for adults 21 years and older, and set up a system of private retailers who will legally be able to sell the product as soon as spring of next year.

The first proposal, crafted at the direction of Senate leadership and introduced earlier this month by Sen. Josh Miller and Majority Leader Michael McCaffrey, would create a new Cannabis Control Commission to approve licenses and oversee the market, taking that job out of the hands of the R.I. Department of Business Regulation.

The Senate bill would also allow home-growing of marijuana — up to six active plants and 12 total — and would allow more cultivators to apply to be able to grow and supply cannabis to retailers and dispensaries.

The second bill, proposed by Gov. Dan McKee and heard Thursday in a joint meeting of the Senate Finance and Judiciary committees, was included in the governor’s budget proposal for fiscal year 2021-22.

“There’s a fair amount of common ground between the two proposals,” DBR Director Liz Tanner said in an interview Wednesday. “Although we differ on the best ways to get there, we are glad there’s agreement between both of us on a tightly regulated adult-use program.”

The McKee plan more tightly restricts who can grow marijuana if it becomes legal for recreational use. The bill would bar people from growing cannabis at home (registered home grows for medical would still be allowed), and calls for a continued moratorium on additional cultivation in general, since Rhode Island already has about 70 licensed cultivators growing cannabis.

“What we’ve seen in some of the more mature adult-use markets, is that home grow is a real source of diversion into the illicit market,” said Matt Santacroce, the new chief of DBR’s Office of Cannabis Regulation. “What a person can reasonably consume by themselves is not always in line with allowable plant limits.”

But Miller says his proposal to allow some home-growing gives the state the ability to regulate and oversee something that’s already happening.

“Putting it in the structure and recognizing it’s going to go on … I think is consistent with the legislation and creating the whole licensing structure,” Miller said earlier this month.

The senators’ bill doesn’t set a statewide cap on the number of stores that can open, aiming to allow the market to naturally determine that number. But it does set a minimum threshold of three stores per town or city, plus one additional store per 10,000 residents in each municipality that has more than 30,000 people.

That comes out to about 150 stores, according to an analysis of the Senate bill by the state budget office.

The McKee plan, in contrast, would cap the number of retail stores at 25 per year for the first three years, utilizing a two-tiered lottery system that would first select women- and minority-owned businesses for the first five licenses, and then a general lottery to randomly select from those who submit applications.

“Using a lottery really ensures the most transparent and fair selection process when it comes to the new licenses,” Santacroce said. (DBR is separately planning to use a lottery this spring to select six new medical marijuana dispensaries from a list of applicants.)

But there’s a big exception to the lottery proposal: existing medical dispensaries — known as compassion centers — wouldn’t have to enter the lottery at all, and instead would be eligible for a new hybrid license to sell cannabis for both medical and recreational use.

The idea doesn’t sit well with Kinverly Dicupe of Reclaim RI, a progressive group that is advocating for racial and economic justice in any legalized marijuana program.

“If we allow those corporations to immediately move in and get first dibs, they’re going to control the industry,” Dicupe said.

The three current compassion centers made $68 million combined last fiscal year, according to state data.

Asked why those centers should be able to bypass the lottery, Santacroce said it’s a matter of experience and expediency.

“These are licensees that have a track record of success in bringing safe and accessible product to the market in Rhode Island,” Santacroce said. “In order to get sales up and running on the timeline that we’ve proposed and that the budget has built into its assumptions … it just makes practical sense.”

In the 2022-23 fiscal year — the first full year of the McKee plan — budget analysts estimate $17 million in revenue will be raised for the general fund, which represents 60% of the tax collections from an estimated $95.5 million in marijuana sales. The rest of the tax revenue will be restricted to specific uses such as regulation and public health and safety, and a chunk of it will go to municipalities.

The McKee plan includes a 10% excise tax and 7% sales tax on cannabis sales, plus a weight-based excise tax that brings it to an effective tax rate of about 20%.

The Senate bill also has a 20% tax rate, but with a 3% local tax that will go directly to the city or town where the store is located, in addition to the 7% sales tax and a new 10% excise tax.

The Senate’s legislation also creates a social equity fund for licensing fees that would “provide technical assistance and grants to applicants from disproportionately impacted areas,” according to a summary of the bill.

The fund could help address a longstanding criticism of the state’s existing medical cannabis program, which is that there is a high barrier to entry for would-be small business owners. The application fee alone is $10,000, which is not refunded if the business isn’t picked from the lottery to be licensed. And if selected, the annual licensing fee is a whopping $500,000.

Those fees would be much lower in the proposed Senate bill for recreational cannabis, with a $500 application fee and $20,000 license fee for retailers.

Those fee amounts are not laid out in the McKee bill — they would be decided by regulation under DBR — but Santacroce said the fees will decrease.

“We’re anticipating a different fee structure that will be, on the whole, a lower barrier to these license,” Santacroce said.

Decupe says allowing people who are disadvantaged and have been negatively affected by cannabis prohibition to access the lucrative new market is key, including allowing worker co-operatives that aren’t controlled by corporations.

That also includes automatic expungement of marijuana crimes, she argues.

“I remember when states were first legalizing marijuana, there was a promise that came with that which was we were going to right the wrongs of this war on drugs,” Decupe said. “That hasn’t happened. It was the same people who were incredibly rich already .. those are now the same people making all the money.”

The Senate bill includes an application process for expungement of marijuana crimes, but it is not automatic. The McKee bill is silent on expungement, but the McKee administration has indicated support for expungement measures.

One of the biggest winners in any legalized marijuana program could be the roughly 70 licensed cultivators that have been growing cannabis for years in Rhode Island. During that time, they have been barred from selling their product to consumers or over state lines, leaving them with three medical dispensaries as wholesale customers. The addition of dozens more retail stores would likely be a boon for business.

The McKee bill continues the moratorium on future cultivation, but the Senate bill opens the state up to more cannabis growing, allowing the newly-formed Cannabis Control Commission to license cultivators.

“If this bill were to pass as is, it would be devastating to the RI cultivator population,” said Katie Sokol Ratkiewicz, owner of Treetop Farms in North Kingstown and the president of the Rhode Island Cannabis Association. “It could easily put us out of business, and invite multi-state operators to come in and run the industry versus local Rhode Islanders.”

The cultivators are asking the state not to allow further cultivation, unless a market demand study shows it is needed.

While debate continues about the Senate and governor’s proposals, support for legalizing cannabis this year in the House remains a question mark. A spokesperson for Speaker Joe Shekarchi has said he is neither for or against legalization a this point, and will listen to all the testimony when the bills are heard in committee.

The discussion also comes as a growing number of states, including in the Northeast, are legalizing cannabis. New York passed legislation to do so just this week, and New Jersey legalized earlier this month. Recreational marijuana is already legal in Massachusetts, and is under consideration in Connecticut.

Steph Machado (smachado@wpri.com) covers Providence, politics and more for WPRI 12. Connect with her on Twitter and on Facebook

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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