By Megan Friscia
Numerous states with legalized recreational marijuana and medicinal marijuana programs have recognized dispensaries as essential businesses, alongside grocery stores, pharmacies, police stations, and more during the wake of the coronavirus. Essential businesses are those which are eligible to remain open during a lockdown; though the Federal Department of Homeland Security outlined what essential businesses are, the choice of which businesses qualify as “essential” is ultimately a state issue.
The coronavirus pandemic, in part, led to the passage of proposals in favor of the legalization of recreational and medical marijuana. Arizona, Montana, New Jersey, and South Dakota all passed proposals (Proposition 207, Initiative 190, Public Question 1, and Amendment A, respectively) which legalized recreational marijuana. Mississippi passed a proposal (Initiative 65) which legalized medical marijuana.
Marijuana legalization, in the eyes of many citizens and lawmakers, has transitioned from an ethical question to a financial one. The pandemic greatly decreased demand for services and retail goods, leading to mass unemployment. As a result, state tax revenues have also taken a hit. The Brookings Institute anticipates that state and local government revenues will decline by about 5% every year for the next three years. Statewide initiatives, including testing protocols to curb the virus, also call for funding; New Jersey is predicted to borrow $4.5 billion for coronavirus pandemic expenses within the next year alone. As a result, state economies entered a budget crisis and are in dire need of funding to mitigate their losses. Many of these states looked to marijuana legalization as a potential solution.
The argument for marijuana legalization on the basis of tax revenue generation is not a new one. The Democratic Party of Colorado promised to channel marijuana-associated tax revenues towards improvements in education during its 2013 proposition for recreational marijuana. Across the country, similar arguments were made in November and are likely to continue as states grapple with widening budget gaps.
In Pennsylvania, despite opposition from the state’s Republican dominated legislature, Governor Tom Wolf (D) is pushing for legalization as an “economic boost,” the revenues of which will be used for small business grants and restorative justice programs. Connecticut, too, plans to legalize recreational marijuana by 2021. “We have to think regionally [in regards] to the pandemic, and we have to think regionally when it comes to marijuana as well.” says Connecticut Governor Ned Lamont (D). “[Connecticut] is surrounded by states — New Jersey and Massachusetts — where marijuana is already legal. [We] don’t need people driving back and forth across the border,” Lamont added. Certainly, states are legalizing for a variety of reasons. However, state finances are at the center of every initiative. In Connecticut, 20% of poll participants who were “strongly opposed” or “somewhat opposed” to legalization would vote in favor of recreational use if it would “help with Connecticut’s fiscal situation and resolve the budget deficit.”
The pandemic undoubtedly provided impetus for legalization on a much larger scale than anticipated. The recognition of dispensaries by many states as essential businesses also signifies
a shift in governmental perspective regarding recreational marijuna. As support for recreational use continues to grow nationwide, experts anticipate a domino effect as neighboring states seek to capitalize on the associated tax revenues. “I think [legalization] in New Jersey will expedite
more states to have adult use,” says Joshua Horn, co-chair of Fox Rothchild’s Cannabis Law Group. “[Legalization] is coming to New York first… It’s going to take some time in Pennsylvania because the Republican-controlled House and Senate have been resistant to [legalization]…”
Indeed, Republicans in Pennsylvania’s legislature construe Wolf’s plan as disingenuous—a bail-out for the Governor’s mismanaged pandemic response. Regardless of Wolf’s personal intentions, Republicans in Pennsylvania are right to doubt the efficacy of legalization in solving budget problems. New Jersey’s budget shortfall is estimated to reach $5.7 billion, based on the Governor’s Budget Proposal from February, come 2021. The New Jersey Policy Perspective estimates legalization would generate $300 million in tax revenues annually. New Jersey’s legislative fiscal estimate puts that number at $126 million per year. In Connecticut, analysts estimate budget gaps of approximately $1-$1.5 billion every year for the next three years. Estimates of marijuana revenues in Connecticut over the next five years sit between $692 and $740 million, with as little as $35 to $48 million in year one. In Pennsylvania, conservative estimates of $200 million in tax revenues from legalization would also fall far short of the state’s $1.8 billion deficit.
Although legalization won’t solve state budget gaps in their entirety, they nonetheless provide numerous fiscal and ethical benefits. Legalization of recreational marijuana provides citizens a clear path towards promoting equity in their legal system. Tax revenues can be used to boost education and drug rehabilitation programs, as well as help to minimize state budget gaps. For these reasons the United States is likely to see a wave of state legalizations in the next few years. Considering the severity of state deficits, legalization is not the single-solution to weathering COVID-related budget gaps, but it is an important part of the puzzle.