What happened to legalized adult-use marijuana in New York and New Jersey? We sit down with Rockefeller Institute Chief of Staff and Fellow Heather Trela to understand why legalization efforts seem to have stalled in both states and where we can expect things to go from here.
Guest:
Heather Trela, Chief of Staff and Fellow, Rockefeller Institute of Government
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Kyle Adams 00:00
Earlier this year, adult-use marijuana legalization seemed like almost a sure thing in New York and New Jersey. In New York, Governor Andrew Cuomo was vocally supportive of legalization and featured it prominently in his executive budget proposal. In New Jersey, Governor Phil Murphy, backed a bill in the Democrat-controlled state legislature and public support seemed in favor. And then…
Allison Dunne 00:24
New York’s move to legalize recreational marijuana has stepped away from the budget and into the remainder of the legislative session. Opinions about whether to legalize the substance vary within regions and across party lines.
Kyle Adams 00:37
That was Allison Dunne, reporting on WAMC Northeast Radio that marijuana would not be included in New York’s final budget. Legalization efforts similarly stalled in the New Jersey State Legislature. So what happened? Where does it go from here? Today, I’m speaking with Heather Trela, chief of staff and fellow at the Rockefeller Institute of Government, about the state of adult-use marijuana legalization, the challenges, the complex conflicts between state and federal laws, and what we can expect in the near future. A quick note, we refer both to adult-use marijuana and recreational marijuana. They’re the same thing. This is Policy Outsider from the Rockefeller Institute of Government. I’m Kyle Adams. Stick around.
Kyle Adams 01:41
Hello, Heather, welcome back to Policy Outsider to bring us up to speed on the state of marijuana legalization. To start us off, what happened recently in New York and New Jersey? Why have these efforts stalled?
Heather Trela 01:53
Well, it’s interesting, they both stalled at exactly the same time. I think part of the problem is it is hard to get marijuana legislation passed through the legislature inherently because that means, a) the legislators have to take responsibility for what they’ve passed, and b) it’s very easy for interest groups to target individual legislators. When you pass marijuana through other methods, it’s more diffuse, it’s usually direct voter, and it’s harder to target individual people to sway their vote.
Kyle Adams 02:27
To backtrack a little, 10 states so far have legalized adult-use marijuana?
Heather Trela 02:31
Yes.
Kyle Adams 02:34
They’ve done so mostly through direct-voter action.
Heather Trela 02:34
Nine of the 10.
Kyle Adams 02:34
Can you explain the difference between those two paths?
Heather Trela 02:40
Sure. Legislative is probably the process most people are familiar with, as a bill is introduced in one of the chambers of the legislature, both chambers have to sign off for the majority, then it goes to the governor to be implemented into law. That is not the path that marijuana has taken in the beginning. It has been done by the initiative process. This is more prevalent in western states rather than in New England, although Massachusetts has this power as well. It is where a law can be introduced directly to the people at the ballot box. If it hits a certain percentage of voters, if they get enough signatures to get a ballot, then if they pass it then it has to be implemented.
Kyle Adams 03:21
Vermont was the outlier on that one and also the outlier on the way they do the market.
Heather Trela 03:25
Vermont’s just an outlier in general. They did pass legislatively recreational marijuana. But they are different than every other state in that they have not created any sort of market for marijuana. There’s no commercial marijuana sales. It’s basically home grow in Vermont. They’re a little different in both how they did process and the implementation.
Kyle Adams 03:47
Returning to New Jersey and New York, they were attempting to go through the legislative process. Do we know what happened?
Heather Trela 03:53
Neither are dead in the water yet. I would say New Jersey probably has a better chance than New York, because the rumors are in New Jersey, it came down to they were one vote short in the Senate for passage, which potentially they could sway that one vote. They have set a deadline for themselves for May, the governor has said if they do not pass by May, he will expand the medical marijuana program, which he’s able to do. New York, it’s not as clear what exactly happened because it never even got close to a vote. It was removed from the budget process. They have until June, so it could still happen. I think it’s going to be a little bit harder to do that. Most legislation in New York is introduced as part of the budget process and would allow legislators even more cover politically on their vote because we’re part of a larger package. Doing it independently is not impossible, but I think momentum has stalled a little bit. I think it will eventually happen in New York. I just don’t know if it’ll be this year.
Kyle Adams 04:48
Do we know general approval ratings for adult-use marijuana in New York, in terms of voters?
Heather Trela 04:53
In New York, support for marijuana is between 57 and 59 percent depending on the survey. Compared to nationally where it ranges from 62 to 66 percent.
Kyle Adams 05:07
Before we get much deeper here, you’ve described marijuana policy as a gateway drug for federalism.
Heather Trela 05:14
Well, I think federalism is interesting, but most people, their eyes roll back into their heads when you explain that federalism is the balance of power between the state and federal government. I used to teach Introduction to Political Science. And you’ve never seen kids more interested in federalism is when I framed it as a marijuana policy issue. Because inherently, right now marijuana illustrates all the problems and benefits of having a federal system. Marijuana is federally illegal and states are trying to implement it. All the tensions and the restrictions of that dance between the two levels of government.
Kyle Adams 05:51
Even though most states have gone through voter action to legalize, you wrote recently that you think the next wave of legalization is likely to come more through legislative action. But why do you think so?
Heather Trela 06:01
Well, there’s two reasons for that. One, I think it’s just a numbers game, 10 states have already legalized and so not all of the states remaining have initiative and referendum, especially some of the larger states that I think are more politically primed to introduce. New York, for example, can’t do it any other way than legislatively. I think the other part of that is that even the states where they have passed through initiative and referendum, it sometimes becomes problematic down the road, because it’s usually a constitutional amendment, which is much harder to alter or adapt to changing conditions. I would say legislatively, it’s harder to initially pass but then easier to amend. It’s the exact opposite for an initiative. I think it’s an attractive thing, especially because we’re still figuring this out, marijuana policy. All the states are experimenting and everyone’s learning from other states. It’s easier to adjust on the fly.
Kyle Adams 06:55
Let’s talk about taxation.
Heather Trela 06:57
Everyone’s favorite.
Kyle Adams 06:58
Yeah, of course, federalism and taxation. A lot of states are interested in legalizing for the revenue that they would get from taxing marijuana. It’s early, I know. But is that proving true in states that have legalized and how are states determining the right level of taxation?
Heather Trela 07:15
States that have legalized are bringing in money. It varies. I think, in 2018, the estimated tax revenue was the highest in Washington State with $319 million predicted. And the lowest end of the states that had a market up in 2018, was Massachusetts with $5.2 million. States are seeing growth as part of a total budget, it doesn’t fix everything. No one’s going to sneeze at the extra money, especially during these times when states are still recovering from the recession and have a lot of needs to take care of. The taxation rate is a moving target, all the states are doing it a little differently in what they their taxation rate is. The goal is to find that sweet spot where you’re taxing marijuana at a high enough rate to bring in the most income, but at a low enough rate that you are not encouraging the black market to continue. Legalizing marijuana does not do away with the black market. That is the goal, but it’s never going to completely eradicate it. States have to try to figure out how to get the most money without pricing out their product compared to the black market. Most states have done their taxation structure focused on an excise tax. And some states allow local governments to also tax on top of the state tax.
Kyle Adams 08:32
So they want that sweet spot where a person doing the calculus in their head, they’ll pay a little bit more but they’ll know they’re doing it legally.
Heather Trela 08:39
Right.
Kyle Adams 08:41
Very quickly, marijuana still illegal at the federal level, even though states are beginning to legalize, which puts them in this weird, uncertain situation, especially when it comes to banking and finance. They can’t bank like normal industries. How are states approaching that? What kind of solutions are they starting to find?
Heather Trela 09:00
This is really a big issue and has actually been brought up this session at the federal level. The House has been having hearings on banking and how to address it because it is federally illegal. A lot of larger banks are scared away from doing any sort of business with marijuana. The short answer is they haven’t quite figured this out. States have tried a few things but they haven’t quite figured it out. Credit unions are an option for some states for marijuana like payroll, but not further larger businesses. Colorado has passed a couple of different types of legislation to try to create marijuana-specific credit unions or allowing for other kinds of creation of banks and none of them have gone forward because of fear of federal interference or that they would not be approved to have insurance or other things that are necessary. There is one state, North Dakota, that has the only state-owned and state-run bank in the United States that could potentially be a clearinghouse for other states to run their marijuana profits through or serve as a model for how states could set up their own state-run bank. This hasn’t happened yet. Some states have explored this, but it is complicated to set up a state bank. It’s also problematic for states because without a banking system, it’s difficult to keep track of how much revenue that the marijuana industry is bringing in and makes it harder to tax. It’s on the honor system. States are losing money because it’s difficult to track the money that’s coming into this industry.
Kyle Adams 10:26
Does that factor into the research you do at all, trying to find numbers on these things? Is it a little harder?
Heather Trela 10:30
It’s a little bit of a moving target. A lot of these are just estimates. Its good faith by the marijuana industry to stay in compliance, it’s just a lot harder when you don’t have a bank receipt to refer back to with how much money you brought in. It’s also a public safety issue for a lot of states. I think in Colorado, there’s been 200 burglaries of marijuana dispensaries, because everyone knows there’s a lot of cash on hand. It makes them very vulnerable and it means increased public safety funds have to be spent to protect these industries.
Kyle Adams 10:59
In addition to the taxation, legalizing marijuana, it’s a whole new industry, so it’s seen as an economic development tool there that you would create new jobs throughout the supply chain and then maybe rippling out from there. Again, it’s early in all of these states, but how’s that playing out?
Heather Trela 11:18
We run into the federalism problem here as well, because marijuana is not legal at the federal level, the Bureau of Labor Statistics can’t collect any data on this. The numbers are always a little bit fuzzy. Unfortunately, that means we have to rely on research done by groups that are typically more pro-marijuana, so may overstate the numbers. But there has definitely been job creation. Right now, the predictions are that there’s going to be 110 percent increase in marijuana-related jobs from 2017 to 2020. A lot of states are finding a boom because you have to create the whole industry in-house. That’s another federalism issue is that because marijuana is illegal on the federal level, states need to create their distribution and sales to be confined within the state limits. This is a problem for Oregon. Oregon has over-produced marijuana and has no place that they can dump it. So you’re seeing prices falling there. But there has been job increase. But that doesn’t address the other issue of job loss because of drug testing and marijuana not being federally legal. Anyone who’s licensed federally, including like truck drivers, if they test positive, they can lose their jobs, even though it’s legal in the state that they consume it in. There’s no real data on that yet. That would be something interesting to look forward to see what the net job creation and net loss is.
Kyle Adams 12:49
Outside of the federal workforce, do you know if other industries, they’re not the only ones who drug test right? Do other industries take marijuana off of their list of fire-able results from a drug test?
Heather Trela 13:01
You’re starting to see that in some industries, especially in companies that have a large presence in these states that have legalized marijuana. It’s not across the board yet. It’s a case-by-case issue, but you’re starting to see people start to if not remove it completely but make it not a fire-able offense.
Kyle Adams 13:20
In your most recent analysis, you make an interesting point that it seems like it’s going to be a big issue moving forward. You mentioned public opinion is really trended in favor of legalization. In actual implementation, you’re seeing a lot of nimbyism. A voter may be in favor of it to check yes on a referendum, but they don’t necessarily want a dispensary in their neighborhood.
Heather Trela 13:45
Right.
Kyle Adams 13:45
Or whole counties are opting out of legalization. How exactly does that work? What’s the threat to the whole system?
Heather Trela 13:53
For anyone who doesn’t know, NIMBY is “not in my backyard.” It’s the idea that people are in favor of something but they don’t want it in their neighborhood. This has definitely been a problem for states that are rolling out marijuana, especially recreational marijuana. Almost every state, if not every state, has a contingency where a county or locality can either completely ban any production, distribution, sales in their jurisdiction. Now, none of the states allow this to ban personal use. That’s not allowed. Even if it was for example, we’re in Albany County, if Albany County banned marijuana sales, you could still consume it in your private home and you wouldn’t be in trouble for possession. But it’s caused a few different kinds of issues that this plays out. One is that it often impacts estimations of how much revenue can be created and generated, especially if a state is not sure how many counties or localities are going to opt out. It also creates something of marijuana deserts where there could be entire swaths of counties where there’s no marijuana available for distribution, sale, cultivation, which means it forces it, potentially to neighborhoods that are more amenable. But there’s also some social justice issues associated with that. It tends to be poor neighborhoods where some dispensaries are put in. There’s also the issue of the counties that opt out often also are opting out of the revenue. That’s the carrot here that states offer is that if you allow a dispensary or grow facility in your county locality, you will get a percentage of the tax on that sales. Some localities, counties, if they opt out, they’re opting out of the revenue, but that doesn’t mean they’re necessarily opting out of some of the problems that may come along with marijuana consumption. They won’t have those additional funds to pay for that.
Kyle Adams 15:55
You already touched lightly on the social justice aspect, which is starting to be more of a central issue in legalization in that the populations that have been historically most harmed by criminalization, generally more minority and poorer than America as a whole, want to be sure that they are adequately benefiting from the new industry. How are they going about doing that? How does state policy address it?
Heather Trela 16:24
This is a new trend and a real focus on the new legislation being passed in states. Right now, I think the last statistic I saw was, the marijuana industry is about 80 percent white. There are pushes in states to try to reserve some licenses, some business loans, specifically for people of color and those of lower socioeconomic status or who have a prior low-level conviction for marijuana, to try to make sure that they’re now benefiting from an industry that they were harmed by because it was illegal. There’s also a push toward decriminalization or expunging of records in a lot of states where they’ve passed recreational marijuana, so that those who have previously had this on their record, they’re trying to streamline the process to make it easier to get that off your record for your criminal history.
Kyle Adams 17:17
Are there also policies in place anything along the lines of like minority and women-owned business initiatives in New York that really encourage those people to get into the industry?
Heather Trela 17:28
Massachusetts, there was a big push for this, to make sure that diversity was included in maybe not the ownership but at least the operation and the jobs that are being created.
Kyle Adams 17:37
With legalization taking off, the other type of issue to think about is sustainability. Here’s a new industry starting, even though it’s essentially agriculture, it’s still a new industry taking off, so a lot of people are trying to look at how to make it sustainable right from the start. What are some of the environmental threats of cultivation and production? How are we looking at minimizing them?
Heather Trela 18:03
You know, there’s the joke that marijuana grows like a weed but it does require a lot of energy. It takes a lot of light to grow marijuana that means a lot of lights are on using up electricity. For those warmer climates where they’re growing outside, there’s soil erosion, there is impacting the streams. Because it’s federally not permitted, there’s no general consensus on pesticides and what can be used. States have to create that wholesale. California, I believe, before you can get a license, you have to do an environmental impact study for your facility, which is important. But it’s also not cheap, which also then prices out some people from moving into the industry. States are starting to be more concerned about this limiting the type of energy you use. I was lucky enough to tour a grow facility here in New York for medical marijuana, and they’ve tried to go solar to minimize the electricity being used for all of the lamps for marijuana. States are still just trying to figure this out. I think we’ll see a bigger push maybe in the next wave as after the businesses has been established and we can see the actual impact addressing some concerns.
Kyle Adams 19:16
Finally, last time we spoke about this, and listeners can go back to Episode One to catch up on that.
Heather Trela 19:21
Please do.
Kyle Adams 19:22
I believe we still had Attorney General Jeff Sessions.
Heather Trela 19:26
Yes.
Kyle Adams 19:27
Who pretty famously had some anti-marijuana views. Have things changed now and is federal legalization at all in the picture in the near future?
Heather Trela 19:39
I guess it depends on how you define the near future. Attorney General Barr has not been quite as forceful in his anti-marijuana language. He personally isn’t a big fan of it, but he actually just testified before Congress and was asked about marijuana and he thinks the current situation is untenable. While he would prefer, personally, a federal prohibition that worked, we’re kind of past that at the moment. He is open to more leaving it to the states and does not seem so anxious to use federal resources to prosecute states that have legalized marijuana. There is also moving through Congress right now, the STATES Act, which specifically would protect states that have legalized marijuana from federal interference. Now, this is an important step forward for two reasons. One is that there is protection for states currently, it’s the Rohrabacher–Blumenauer Amendment, which I think has to be renamed because one of those guys is no longer in Congress, that would protect medical marijuana from federal interference. It offers no protections to recreational marijuana. That has to be renewed with every spending bill. It has not been a problem with getting the votes, but when we had the federal shutdown, there was a lapse in those protections. The STATES Act would make that official so it wouldn’t have to be renewed and would expand that protection to recreational marijuana, not just medical marijuana. There’s some bills that have been introduced that look to de-schedule marijuana from being a Schedule 1 drug. I don’t think the votes are there yet. But we’re definitely seeing at least now with the new Democratic elected to the House movement. Previously, another Sessions, Pete Sessions from Texas, wouldn’t allow any marijuana-related legislation at a committee in the House. We didn’t really know where people stood. We’re seeing some movement. I don’t think we’re to the federal level yet in the next few years, but I think we’ll potentially get there eventually.
Kyle Adams 21:54
Heather studies federalism with a particular focus on marijuana policy for the Rockefeller Institute. Heather, thank you so much for joining us.
Heather Trela 22:02
Thanks, Kyle.
Kyle Adams 22:03
The latest piece in our series on marijuana legalization is out now. It examines the potential economic impact of a legal adult-use marijuana industry in New York State. As always, you can find this research and more at rockinst.org. You can also find us on Facebook, Twitter, and Instagram at RockefellerInst. Thanks for listening.
Kyle Adams 22:50
Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm of 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 in the nation. Learn more at rockinst.org or by following at RockefellerInst on social media. Have a question, comment, or idea? Email us at [email protected].
“Policy Outsider” from the Rockefeller Institute of Government takes you outside the halls of power to understand how decisions of law and policy shape our everyday lives.
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