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Jerry Kremer

The states, including New York, get into the pot business

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In 2011, I had the pleasure of meeting then Colorado Gov. John Hickenlooper. He was visiting New York City to raise money for his re-election campaign. His state was considering the passage of a law legalizing the sale of marijuana, and Hickenlooper expressed to me his concerns over whether it would produce any serious money for the state and the impact of the law on his constituents.

It’s now 10 years later, and 18 states have legalized the sale of cannabis to those over age 21. Hickenlooper is now a U.S. senator, and Colorado has earned almost $1.5 billion in tax revenue from marijuana sales since 2014. Reports from Colorado law enforcement appear to show that there hasn’t been a spike in driving arrests, and the state is spending millions of dollars on health care and fixing its roads and bridges. It is anticipated that Colorado and the 17 other states that have legalized pot will be joined by at least six more states this year.

Unlike the politics of wearing a mask during the coronavirus pandemic, there’s no such thing as red states vs. blue states when it comes to marijuana sales. Alaska, Arizona, Montana and South Dakota are among the Republican states that have made the leap, and others are getting in line. The main reason for this acceleration of state interest is just plain dollars. Many governors are afraid to impose income taxes or increase user fees, and taxes on cannabis are becoming the easy way to fill up the treasury.

I offer no judgment on whether cannabis is good or bad for the public. There are lots of experts who oppose its legalization because they consider it a “gateway” drug that leads people to try more serious drugs. Only time and science will tell whether that’s a fact, but the rush to legalization is real. In April of this year, New York state joined the crowd, with the backing of Gov. Andrew Cuomo.

But New York’s law stands out, and is very different from those in the other 17 states. Unlike many states that have deposited the sales tax revenue in their general funds, New York has mandated how that revenue will be spent. Forty percent will be reinvested in communities that have high addiction and crime rates. Twenty percent will go to the state’s public schools, and forty percent will be directed to drug treatment and health services. This is the only tax program New York has that lays out where the dollars actually go.

Cannabis legalization in New York is expected to become a major business development tool. Under the new law, there are nine types of licenses that will be available, ranging from growers to processors to retailers. Fifty percent of those licenses will be targeted to minority businesses and individuals, and the other half will be available to the public. Local governments will receive partial tax revenues from the sales, but they have the option to ban such sales before Dec. 31. It is projected that on Long Island alone, cannabis-related businesses will hire 7,000 new employees.

The new law will also have a major impact on many businesses. Employee rights and conduct will be a major issue going forward, and those seeking cannabis for medical reasons will present challenges for hospitals, nursing homes, assisted-living facilities and a variety of other adult-care operations. There is no doubt that law and accounting firms will benefit. (Full disclosure: My firm, Ruskin Moscou Faltischek, has a Cannabis Practice Group.)

There are philosophical questions about whether government should be in the business of allowing marijuana sales to generate tax revenue — a so-called sin tax. But our country has been living off taxes on alcohol and cigarettes for decades, and without lottery money, many states would be in deep economic trouble. Perhaps we can learn to live with — and benefit from — another sin tax.

Jerry Kremer was a state assemblyman for 23 years, and chaired the Assembly’s Ways and Means Committee for 12 years. He now heads Empire Government Strategies, a business development and legislative strategy firm. Comments about this column? JKremer@liherald.com.