The New Jersey Effect? Rhode Island Committee Hears Cannabis Legalization

Rhode Island’s Senate Finance Committee took up cannabis legalization on Wednesday, adding momentum to the push for cannabis law reform across the United States. But, in a departure from other states in the region, Rhode Island lawmakers are considering state-run sales. 

A state-run cannabis model has yet to be implemented in the United States, though such proposals are increasingly common. Rhode Island lawmakers debated the merits of such a model the same day that a task force in North Carolina suggested that this framework could also work in their state. (Some provinces in Canada have opted for government-run cannabis sales.)

Rhode Island Governor Gina Raimondo’s fiscal year 2021 budget includes a cannabis legalization proposal that “would create the strictest regulatory framework for any state in the country that has legalized marijuana,” Liz Tanner, Rhode Island’s director of the department of business regulation, said during a presentation on Article 13, or the “Adult Use Marijuana Act.” 

(Read Cannabis Wire’s coverage of the budget, unveiled in January.) 

Front and center during Wednesday’s discussion: New Jersey voters’ recent decision to pass a legalization measure, Massachusetts’ mature market, and states like New York and Connecticut that are teetering. 

“Adult use marijuana is readily available to Rhode Islanders in Massachusetts and that access is set to expand greatly and continuously. As such, a strict regulatory structure is required for Rhode Island to prepare for and address the externalities of regional legalization,” Tanner said. 

Tanner showed a map of Massachusetts, emphasizing the border jurisdictions that have licensed retail cannabis just north of Rhode Island’s border. 

“This regional landscape guarantees that Rhode Island will now be dealing with the consequences of marijuana legalization in law enforcement, public health, climate issues, and beyond in an effort to have the most control possible over how this issue is addressed,” Tanner said. “This will ensure that marijuana would be tightly-controlled with the greatest priority on health and safety.” 

Municipalities would have control through zoning and permitting authority, and can ban licenses by ordinance through 2021. After that, local bans would need to be enacted through referendums. Local jurisdictions could also collect local impact fees to offset costs related to local regulation, like initial licensure. 

Matt McCabe, a chief data analyst for Rhode Island’s Office of Management and Budget, discussed the financial side of the proposal, and said that the best analogy in the state for adult use cannabis might be gaming. Using Colorado and Washington as models, and using federal survey data to estimate cannabis consumers, McCabe estimated that a full first mature year of cannabis sales could be $160 million, bringing the state a revenue share of around $50 million. 

Senator Susan Sosnowski asked whether other states involve departments of agriculture in regulations. 

“This is a product that’s being grown, just like the medical marijuana that’s being grown,” Sosnowski said. 

Senator Louis DiPalma mentioned that the medical cannabis landscape in Rhode Island has “morphed,” and that the regulatory framework still hasn’t quite come together cohesively. He added that he’d have difficulty answering questions from constituents about the nitty gritty of regulations. 

“Why is this a better model than the Massachusetts model?” he asked. 

Pam Toro, associate director and general counsel overseeing cannabis, answered that this model was proposed after research, including a New Hampshire-style state-run liquor model.

“We came up with this model that is albeit different from Massachusetts. And we believe that having the state be responsible for the retail outlets, the state will be directly controlling the products, the pricing, the potency, and the market. So this was an effort to do something that, yes, is different, but really focuses on the public health and safety,” Toro said. 

Senator Ryan William Pearson followed up by requesting more information, perhaps in a written form, about how the medical and adult use markets would “mesh” and “meld” together. He also asked if an analysis had been done about how the demand for medical cannabis would change if adult use became legal. 

Toro answered that no such analysis had been done, and said it involves “balancing” to ensure that medical cannabis patients can access their products.

Pearson also asked how long it might take for Rhode Island’s market to mature. 

“Other states have seen upwards of six months or a year,” McCabe said, and estimated that he thought the Rhode Island adult use cannabis market would “stabilize” within a year. 

Senator Walter Felag, Jr. asked if the medical cannabis program would be regulated separately. Toro responded by confirming that would be the case, because, for example, caregivers can grow cannabis for patients, but in the adult use program, there would be no home growing. And there would be a potency cap for adult use cannabis, but that cap wouldn’t apply to medical products. 

Senator James Seveney asked about the “opportunity cost” of approaching adult use with a state-run liquor store model. 

“Have you guys looked at what it’s going to cost us to go down this path as opposed to license private sellers to go out and do it, and then just tax them? I mean, how much money are we leaving on the table by making this a state operation?” Seveney asked, adding that he’d want this analysis in writing. He also asked if it’s be more or less expensive for someone to buy an ounce of cannabis from a state-run store, or a private store. McCabe said that prices would vary based on potency, with the more expensive and higher potency products only available on the medical market.  

Senator Thomas Paolino said that whatever model Rhode Island goes with needs to be competitive with both the illicit market, and neighboring states. 

Toro said that regulators don’t really want to compete with the illicit market, they want to outperform unlicensed activity, and that because it wouldn’t be profit-driven, Rhode Island would be in a good position to do so. 

Paolino said that he isn’t sure that he would support legislation that banned growing, because if he wants to buy apples, he can, and if he wants to grow them, he can. 

“I do appreciate that, in terms of your concerns about the right to grow, but we’re trying to really just strike a balance. And hopefully, if we have a good adult use availability of products in terms of product choice, variety, and competitive pricing, our view is that this would develop very similar to the alcohol market post-prohibition,” Toro said. 

“Director, with all due respect, I think that says something,” DiPalma said, that Rhode Island would be the first state with state-run adult use cannabis sales. “I think we need to look real hard.” 

DiPalma also asked for an analysis of the unintended consequences, both positive and negative, of legalization.

Rhode Island was represented during New York Governor Andrew Cuomo’s Regional Cannabis Regulation and Vaping Summit last October, which brought together governors, lawmakers, and regulators from New York, Connecticut, New Jersey, Pennsylvania, Rhode Island, Massachusetts, and Colorado in midtown Manhattan to debate cannabis policies, from legalization to vaping. 

Cuomo and Connecticut Governor Ned Lamont urged states in the region to link arms on cannabis policies, acknowledging how small northeast states could mean residents in non-legal states crossing borders for legal cannabis next door.  

“This patchwork quilt of regulations makes no sense at all,” Lamont said at the summit. “My state of Connecticut, people cross the border. They drive up to Massachusetts where they buy some cannabis and bring it back, and that makes a real problem for our state police.” 

New Jersey voters overwhelmingly passed a legalization measure on Election Day, and now lawmakers in the Garden State are actively hammering out the implementation framework. 

At Cuomo’s cannabis summit, New Jersey Gov. Phil Murphy told Cannabis Wire and a small group of journalists, “The more coordinated and harmonious we can be, the better off we’ll all individually be. Obviously, we’d keep our own legislative reality. Your executive order authority is your own, but I’m optimistic we can do this in a way—this being both vaping and adult use of recreational marijuana—in a coordinated way.” 

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