Legal cannabis likely won’t be in this year’s budget, but supporters say there’s a silver lining

This story originally appeared on Spotlight PA.

Gov. Josh Shapiro made legalizing recreational marijuana a centerpiece of his budget pitch this year, but cannabis advocates and Pennsylvania lawmakers say such a proposal is unlikely to be part of a final deal.

Democrats who control the state House have yet to find consensus on how to regulate a multibillion-dollar industry and include the people most harmed by drug criminalization in the new market. Meanwhile, the lawmaker who controls what legislation the GOP-majority state Senate considers still opposes legalization.

Passing a legalization bill with the budget due June 30 is “probably not a realistic timeframe,” said state Rep. Dan Frankel (D., Allegheny), chair of the House Health Committee.

Still, legalization advocates say they’re closer than ever to success, citing allies in both parties, legalization in all but one of the commonwealth’s neighbors, and a blueprint in the passage of medical marijuana.

“We’re on a path to get this done,” Frankel told Spotlight PA.

Polling shows the issue is popular with voters in the lead-up to a contentious election in November. Three proposals had been introduced in the legislature as of mid-June — two with bipartisan backing — and more are on the horizon.

The cannabis industry itself, which sees big profits in Pennsylvania, is pushing hard for legalization, employing dozens of lobbyists at at least nine different firms to make their case to legislators. They largely support a bill that would create a new regulatory board dedicated to marijuana and allow existing medical marijuana companies to transition into the recreational market.

Legislative Democrats who have spearheaded legalization talks this year want to allow the people most affected by marijuana criminalization to participate in the new industry and to ensure legalization doesn’t adversely affect public health.

Chief among the roadblocks is deciding how the new industry would be structured.

In his February budget pitch, Shapiro asked lawmakers to pass a 20% tax on recreational marijuana sales. He estimated that doing so would bring in more than $250 million in annual tax revenue once the industry is off the ground.

Shapiro also asked that a bill include expungement for people convicted of nonviolent possession of small amounts of marijuana, and echoed legislative calls for the industry to include previously criminalized groups. And he wants the state Department of Agriculture to regulate the industry.

He left the rest of the details up to the legislature.

Frankel’s committee has since held many hearings on the issue. He said he heard from a “parade of interests” that, while often well-meaning, “want to create a great business opportunity.”

That experience led him to support the sale of marijuana in state-owned stores, similar to existing ones that sell liquor and wine. Twenty-one other Democrats have signed on to a bill that would create such stores.

“It’s clear that if our main priority is protecting public health from unintended consequences of for-profit commercialization, then a state-owned system for adult-use cannabis may be a way to it,” Frankel said.

Frankel argued such a system would let the state take on the risk of managing the volatile new industry and protect Pennsylvania farmers.

“There is a lot to like about this mode, but there are certainly other ideas and approaches out there to be considered,” he added, saying that his own proposal will depend on what his colleagues back.

Frankel also expressed interest in adopting some measures from Canadian law. One would be to require edible flavors to be “unappealing to children” and come in varieties such as broccoli or beets instead of the candy-like options popular in states with adult-use cannabis.

Such ideas, particularly state sales of marijuana, are opposed by the industry and some advocates. But Frankel said he wouldn’t be fazed by their concerns.

“I would be somewhat skeptical of a bill that was universally and enthusiastically endorsed by the industry, and I think that [in] my experiences, sometimes the best policy doesn’t make every stakeholder happy,” he told Spotlight PA.

Reaching a consensus in the closely divided state House is only the first hurdle for legalization. The next — and much bigger one — would be winning over the Republican-controlled state Senate.

Legislative Republicans have long blocked action on cannabis by citing its federal status as a Schedule I drug, which the Drug Enforcement Administration says has “no currently accepted medical use and a high potential for abuse.”

President Joe Biden’s administration this year began the process of reclassifying marijuana as a less dangerous drug. But state Senate Majority Leader Joe Pittman (R., Indiana) told Spotlight PA in a statement that he still has concerns.

“I continue to hear from drug and alcohol providers in my district that have reservations about the use of marijuana and its impacts on addiction,” Pittman said. “I have long believed this issue is something the federal government needs to figure out.”

Those concerns have been echoed by influential interest groups, such as the state’s manufacturers association, law enforcement organizations, and some children’s advocates.

But Meredith Buettner, executive director of the Pennsylvania Cannabis Coalition, a trade organization that represents medical marijuana permit holders, believes the right circumstances could force the legislature to act. The state is currently flush with surplus cash but faces long-term revenue issues it will one day be forced to reckon with.

“Stranger things have happened during the month of June in Harrisburg,” she told Spotlight PA.

What’s on the table

In addition to the legislation that would create a state system to sell marijuana, there are two other bills currently before the legislature.

One, from state Sens. Dan Laughlin (R., Erie) and Sharif Street (D., Philadelphia), would create a new board to regulate the industry and allow medical marijuana companies to sell to recreational customers — a priority for existing sellers.

To address calls for social justice, the bill would reduce permitting fees for, and approve grants and interest-free loans to, “social and economic equity” applicants.

Such applicants would need to make less than $75,000 a year. They would also need to have been arrested for a nonviolent drug offense or lived for at least five of the past 10 years in a location with higher-than-average poverty or incarceration rates.

The bill would also allow established medical sellers, such as publicly traded, multistate companies, to receive additional permits if they partner with an equity applicant. The existing company, or other established marijuana executives, could also own up to 10% of their social equity client’s business.

A bipartisan state House bill proposed Monday mirrors much of Laughlin and Street’s proposal. However, it would allow an existing company to receive additional permits only once its equity client opened its doors.

The bill would also put the state Department of Agriculture in charge of regulating both the existing medical marijuana program and new recreational sales, as proposed by Shapiro, rather than creating a new board.

“We’re trying to take everybody’s best practices and best ideas and put it into a bill,” state Rep. Emily Kinkead (D., Allegheny) told Spotlight PA.

Industry advocates have supported these proposals. But the language concerns Cherron Perry-Thomas, a grassroots advocate for adult-use cannabis who previously worked as a marijuana marketer.

Contracts between established companies and budding entrepreneurs, she told Spotlight PA, are “predatory.” She also argued that established businesses shouldn’t be able to hold any stake in new companies coming from the Black and brown communities harmed by the over-policing and criminalization of marijuana consumption.

Instead, she wants to see the law incentivize business partnerships between small rural farmers and urban entrepreneurs.

“We’re asking for first right of refusal for communities who were impacted by the war on drugs,” Perry-Thomas told Spotlight PA.

She also agrees with the marijuana industry on a few proposals. She concurs Pennsylvania needs a new regulatory agency dedicated to marijuana and that selling cannabis products through state-run stores, as suggested by Frankel, would stifle small-time producers.

Street has heard the concerns about social equity, and said that haggling over the exact language is at the top of his agenda for the coming weeks.

“There’s agreement that the language as written is insufficient, and that we got to do more,” Street told Spotlight PA.

He has pitched allowing licensed small growers to hawk their wares at special sites that are specifically for cannabis, similar to farmers’ markets.

Getting equity provisions right has troubled other states. Connecticut state officials are auditing their marijuana program’s equity council, which is charged with verifying applicants’ credentials and handing out grant money to impacted communities. Industry-backed bills in Pennsylvania include similar mechanisms. New York, meanwhile, struggled to find a funding source for equity grants and ended up cutting a deal with a private equity firm.

State Rep. Napoleon Nelson (D., Montgomery), chair of the Legislative Black Caucus, told Spotlight PA that an equitable bill for communities that have been “overpoliced and overcriminalized” was a priority for any legalization bill.

He didn’t go into details about specific policies that would earn the bloc’s backing in the closely divided legislature.

“We ought to say what we’re for,” Nelson said, “and not what we’re against.”