On this episode of Policy Outsider, guest Heather Trela, director of operations and fellow at the Rockefeller Institute, discusses how COVID-19 is affecting the marijuana industry and efforts to legalize adult-use recreational marijuana at the state level.
Trela discusses how prohibition of marijuana at the federal level means marijuana businesses throughout the nation are ineligible to apply for federal economic small business relief. For businesses in most states that were able to comply with social distancing requirements this may not be an issue. For small businesses in Massachusetts, where recreational marijuana dispensaries were closed to prevent an influx of out-of-state customers, the lack of relief may mean closing.
Guest:
Heather Trela, Director of Operations and Fellow, Rockefeller Institute of Government
Transcript was generated using AI software and may contain errors.
Alexander Morse 00:05
Over the last few weeks, we’ve been looking at how the coronavirus is disrupting our daily lives and what changes we might expect to see moving forward. This is Policy Outsider. I’m your host, Alex Morse. As stay-at-home orders were implemented throughout the country, some industries were either forced to close or adapt to stay open. One industry that adapted, marijuana. On today’s episode, we talk with Heather Trela, director of operations and fellow at the Rockefeller Institute of Government, who researches marijuana and how it relates to federalism. Heather will explain some of the changes marijuana businesses undertook to stay open and some of the challenges marijuana business owners face. Next.
Alexander Morse 00:48
Before we get started, we are still working from home. So Heather and I used Zoom, a web-based video conferencing software, to talk. There may be the occasional glitch in the audio but that doesn’t distract from our conversation. Thanks. Heather, thanks for joining me today.
Heather Trela 01:22
Glad to be here, Alex.
Alexander Morse 01:24
I’m glad that you’re on today to talk about the state of the marijuana industry amid the coronavirus. So let’s just take it away. What is the state of the marijuana industry?
Heather Trela 01:34
Sure, well, the marijuana industry on the medical side as a whole is basically still open for business. States, despite shelter in-place and other businesses having to close, medical marijuana dispensaries have been allowed to remain open. Recreational, that has mostly been allowed to stay open. The primary exemption or exception right there is Massachusetts. Massachusetts is the only state with a recreational program that has decided to close their recreational sales but keep their medical sales open. Now, they did this for a couple of different reasons. One of the biggest ones was the fear of travel, out-of-state people coming in to buy marijuana in Massachusetts. That is technically illegal if they bring it home with them, but being the only northeastern state that has a recreational program with active dispensaries, they thought that was going to be too tempting for people in let’s say New York to cross state lines to come in. They were trying to prohibit out-of-state travel and just travel in general. That might be a good call on their part. Pennsylvania decided to not deem liquor stores essential businesses. That means that people have been traveling from Pennsylvania to other states to buy alcohol. So Massachusetts may have been right that they would be getting out-of-state sales. Now, when I say essential, that’s kind of a catch all. Not all states have declared marijuana essential businesses. But the marijuana industry has been able to comply with state orders to remain open.
Alexander Morse 03:13
Can you remind the audience why going out of state to buy marijuana is illegal?
Heather Trela 03:19
Sure, because marijuana is federally illegal. The federal government considers marijuana to be a Schedule 1 drug, having no medical or considered highly addictive. It is not permitted to cross state lines. States have been able to get away with legalizing it within their own boundaries or borders, but they’re not permitted to transfer marijuana from one state to another.
Alexander Morse 03:43
Right, so your example of New Yorkers going into Massachusetts that violates federal law.
Heather Trela 03:48
Yes.
Alexander Morse 03:48
Okay. You also were talking about the essential designation of marijuana. But there’s a little bit of a caveat there. Can you elaborate on that?
Heather Trela 04:01
Not all states have deemed anything essential. It depends on the order as in each individual state for medical that tends to fall more under essential, because it’s considered the same as a pharmacy because you’re buying marijuana for medical purposes prescribed by or recommended by a doctor with your card. But for recreational, not all states have said this is definitely an essential service. What they have said is it’s usually a category of businesses that can remain open if they can follow certain guidelines, which is social distancing, limiting the number of patrons. States where they are not deemed essential, they’ve been able to work around this by doing some innovation. States have been a little bit more lenient on curbside delivery at marijuana dispensaries, so people don’t have to go into the store. Delivery is now an option in many states where it wasn’t previously. So with these caveats, they can remain open without getting the official stamp of an essential service.
Alexander Morse 04:59
So the folks in Massachusetts who have a medical license, they’re able to go in and shop as if nothing’s changed.
Heather Trela 05:08
Yes, if you have a medical marijuana card in Massachusetts, you can still go to a dispensary or they will deliver. You still can get your marijuana. If you do not have a medical card, you are now unable to purchase marijuana in Massachusetts. In the state of Massachusetts, if you don’t have a medical card, you cannot get marijuana at this time. That is somewhat problematic, because a lot of people in Massachusetts have let their medical cards lapse because marijuana was available without having to have a medical card. You could do the same thing going to a dispensary that sold for adult-use purposes without having to go through the bureaucracy of getting or renewing your medical marijuana card. In Massachusetts, this isn’t an issue. But in other states, there are fees associated with getting your medical marijuana card that ranges from $25 to $200 a year. In states where recreational has become an option, people don’t want to go through the hassle of going to the doctor, getting this all taken care of, and getting a card, if they can just walk into a store and buy marijuana regardless. There’s also a lot of people, potentially, in Massachusetts who don’t have a qualifying medical condition to get a medical card, but do use marijuana for medicinal purposes. It could be PTSD, it could be a variety of things that may not qualify, or they haven’t found a doctor to say they qualified, but they are using it not just to have a good time on a Friday night. They’re using it to manage anxiety or other conditions. There are also people who get federal benefits that are wary of getting a state medical marijuana card because it could jeopardize their benefits. Because the federal government views marijuana as illegal, if you are a veteran, if you get public housing, if you get other federal services, you may want to shy away from getting a piece of paper that indicates you’re getting marijuana that could jeopardize you getting those benefits in the future. Other states have, I think that’s part of the reason, left their recreational program open as well. In addition to their medical marijuana program is to make sure these people are covered. Also states want to make some money. Their sales are generated from marijuana and states are going to be in a tough spot right now. So any additional income coming in from taxes is attractive to states.
Alexander Morse 07:31
Speaking of sales, what’s the data say about people buying marijuana during COVID?
Heather Trela 07:37
It’s a mixed bag of what marijuana has been like during a pandemic. You saw a huge spike in mid-March from like March 13th to the 20th, people were buying a lot of marijuana. There’s a lot of reasons for that. States were beginning to issue shelter in-place, stay at home, pause orders. So people weren’t sure when they’re going to be able to get their marijuana again. Just when people are stocking up on toilet paper and other things, they were stocking up on marijuana because they didn’t know would this be able to stay open during the pandemic? So you saw a huge spike there. After that, you see quite a bit of a dip in some states. It’s been a mixed bag. In April sales, there were some states had a brief spike around late April for two reasons. One, people were getting their stimulus checks, so they had a little more disposable income so they could buy marijuana. And two, April 20 is the marijuana holiday for 4/20. So people were potentially celebrating privately, instead of going into large gatherings, but were buying marijuana for that. Now, what we don’t know is do sales equal consumption. Are people buying marijuana and using it like alcohol? You tend to see a spike in alcohol sales and consumption. Or are people buying marijuana so they have it just in case, more like a staple like toilet paper. People aren’t necessarily using more toilet paper during the pandemic but they want it on hand in case they need it. Some states that have a lot of tourism, you’re seeing bigger dips in their sales in April. Colorado, you’re seeing dips in their sales for April. Nevada was down 26 percent in April of 2020 versus April sales of 2019. California was slightly up but did not have the same increase that was in place before the pandemic. Sales were up January/February going into March at a higher clip than they were for March and April, other than the big stock up in March. But then there’s states like Washington that have somehow seen a 20 percent increase in their sales in April. So I mean that leads you to believe that potentially Washington has more arable on alert, they have more homegrown consumers. Obverse to a state like Colorado or Nevada that is relying on tourism to bring people to the dispensary. That could be a lesson for the marijuana industry going forward. Illinois has been going like gangbusters, but Illinois’ program is brand new. They just became legal in January, so there’s still that novelty. That would track with other states, their first year of sales tends to be very strong and then it somewhat plateaus. COVID certainly didn’t slow that trend. But we can’t necessarily make a connection that was because of the pandemic that the sales increased either.
Alexander Morse 10:38
Considering marijuana is still federally illegal, I would presume that marijuana businesses, these individual establishments, small businesses can’t apply for federal relief. Can you help us on that?
Heather Trela 10:51
Sure. That is an issue, especially Massachusetts, for those particular recreational dispensaries that have been forced to close. Because of the federal prohibition, marijuana industry companies cannot currently get any federal relief in the COVID-19 packages that have been passed. What this could potentially mean is that a lot of smaller, non-backed-by-big-corporation dispensaries aren’t going to make it unless sales really pick up. Those who are part of a larger consortium have more funding behind them that they might be able to weather this storm. But depending on how long this lasts, it could be harmful to the mom-and-pop dispensaries.
Alexander Morse 11:37
So that’s a struggle for a lot of these small business owners because they look at this emerging market and wanted to jump in. You mentioned that there’s at least one attempt to make marijuana businesses eligible for federal relief. But what other types of changes, small-scale large-scale, will the marijuana industry see moving forward? Are states going to rush to pass recreational marijuana because they see it as a revenue stream?
Elizabeth Pérez-Chiqués 12:09
Potentially, in Massachusetts, the dispensary owners are actually suing the state to try to open up sooner. That could set some terms of activity going forward. Unfortunately, the current pandemic has derailed a couple of states’ efforts to pass marijuana. New York was potentially going to have legalized adult-use marijuana this year, if they could work out the details. That obviously had to be pulled to get a budget done quickly and focus on relief, considering how hard hit New York has been by coronavirus. I believe Missouri, as well, was potentially going to try to deal with this issue and that has been tabled Short-term, I think this is going to be disruptive to future legislation. States are going to be digging out, figuring out. Public health is a bigger concern right now, rightfully so. You see a state like Maine, who passed recreational marijuana four years ago and it was just about to finally launch their program, and those have been shuttered as well because it’s hard to do this in a pandemic. Long-term though, I think this is going to make marijuana more attractive to the states, especially the adult-use. Most states already have some form of medical marijuana program in place. But as states are facing tremendous budget shortfalls going forward, they’re going to be looking for ways to generate some income. As we’ve talked about in previous podcasts, public support is generally in favor of legalizing marijuana and the states are going to start worrying about they’re leaving money on the table. It’s not going to be enough to fix every budget shortfall but some money coming in is better than no money.
Alexander Morse 13:56
Thanks again to Heather Trela, director of operations and fellow at the Rockefeller Institute. Heather has been featured on several Policy Outsider episodes talking about the state of marijuana legislation across the country. You can search our catalogue of episodes on anchor.fm or wherever you get your podcasts. You can also check out Heather’s and other Rockefeller Institute research on marijuana policy by visiting rockinst.org/IntheWeeds. Everyone stay well and stay healthy. I’m Alex Morse. Until next time.
Alexander Morse 15:09
The Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm at the State University of New York. The Institute conducts cutting edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York State and the nation. Learn more at rockinst.org or by following RockefellerInst on social media. Have a question, comment, or idea? Email us at [email protected].
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