Senate passes a marijuana equity bill
Measure creates public loan fund, regulates host community agreements
THE MASSACHUSETTS SENATE on Thursday passed a bill that takes significant steps toward helping minority entrepreneurs and those affected by prior enforcement of drug laws break into the legal marijuana industry, which has so far been dominated largely by big companies and White business owners.
“Massachusetts became the first state in the country in 2017 to include explicitly an equity mandate in its adult use cannabis law,” said Senate Cannabis Policy Committee chair Sonia Chang Diaz, a Boston Democrat running for governor, in an interview. But, she said, “There’s just a huge gap between the express intent of the law and what we’re seeing in real life.”
Senate Ways and Means Chair Michael Rodrigues, in introducing the bill on the Senate floor, said, “This legislation builds upon the goals we’ve always had for marijuana industry in the Commonwealth, not to be measured only in revenue dollars but through how we protect consumers, support small businesses, facilitate a competitive industry, and promote social equity.”
The bill passed unanimously, 39-0.
But entrepreneurs have been stymied primarily by two factors: a lack of start-up capital in an industry that cannot obtain traditional bank loans due to federal prohibition; and a lack of prioritization locally, since municipalities must issue host community agreements to any marijuana business seeking to open within their borders.
According to statistics presented at a Cannabis Control Commission meeting on Thursday, only 29 social equity or economic empowerment businesses – the designations the commission uses to describe those disproportionately affected by prior enforcement of drug laws – have gotten the green light to begin operating, or around 7 percent of the 380 open businesses.
A total of 37 “disadvantaged business enterprises” have gotten permission to open, a category that includes minority, women, and veteran-owned businesses, among others.
Chang-Diaz called the Senate legislation a way to address the “racial wealth gap” in Massachusetts.
The bill that passed the Senate would address the financial struggles by creating a new Cannabis Social Equity Trust Fund, capitalized with 10 percent of the state’s revenue from the cannabis excise tax. This would be an estimated $18 million in fiscal 2023, though the amount will grow as the industry grows. Marijuana companies could also donate to the fund to fulfill commission requirements that every company contribute to the industry’s diversity. The state-administered fund, which would be governed by its own board, would offer grants and loans, including no-interest and forgivable loans, to social equity and economic empowerment applicants.
It generally costs at least $1 million to open a marijuana retail shop, and members of the Cannabis Control Commission, particular chairman Steven Hoffman, have been pushing for the creation of a publicly backed loan fund for years. Hoffman said Thursday he thinks the fund “would have very quick impact if it’s approved,” since many social equity entrepreneurs have license applications pending, but need money to move forward.
The bill would also take steps to address the difficulties businesses face getting approval from municipalities. It would redirect tax revenue equivalent to 1 percent of a social equity business’s sales from the state to the city or town where the business is located. This would not raise taxes on those businesses, but reallocate money from the state to the community, providing a financial incentive for communities to host social equity businesses.
The bill also aims to address long-standing problems with host community agreements. While state law caps community impact fees, which are fees negotiated between a host community and a marijuana business, at 3 percent of sales, many communities have gotten around the cap. Some simply negotiated agreements that exceeded the cap. Many communities required additional donations to local charities, nonprofits, or municipal services in excess of 3 percent. The CCC has said they do not have legislative authorization to disapprove of host community agreements, so, practically, no one is ensuring the agreements meet the legal standard. That means less well-funded businesses are at a disadvantage in negotiating agreements, since communities have an incentive to sign agreements with wealthier companies that can offer larger payments.
The Senate bill clarifies that community impact fees must be directly related to actual expenses incurred by the community because of the marijuana business, and the host community agreements cannot include any fees, charitable donations, or financial contributions above the 3 percent. It also gives the CCC authority to reject agreements that do not conform with the law.
The bill also lays out a method by which cities and towns can vote to allow social consumption sites, like marijuana cafes. The legalization law authorized social consumption, if communities agreed to host them, but Secretary of the Commonwealth Bill Galvin said there was no clear method by which communities could opt in to host one. The CCC has been awaiting legislative action before starting to issue social consumption licenses.
Senators said social consumption is important for people who live in public or rental housing, where there may be barred from consuming cannabis. Sen. Julian Cyr, a Truro Democrat, added that it could also help places like Cape Cod where day trippers can purchase cannabis legally but do not have a legal place to consume it, since outdoor consumption is prohibited.
Several significant amendments were added on the Senate floor. One requires a judge to grant a petition to expunge a criminal record for possession and cultivation of small amounts of marijuana and also authorizes expungement for small-scale distribution. Sen. Jamie Eldridge, an Acton Democrat, described the amendment as allowing expungement for an offense that is “essentially the sharing of small amounts of cannabis among friends.” Another amendment would clarify that a criminal record does not necessarily bar someone from working in a marijuana establishment.
Gov. Charlie Baker has been pushing for legislation that would update the state’s impaired driving laws to better account for marijuana use. But lawmakers have hesitated to act out of concern that there is no accurate test to judge when a driver is impaired from marijuana. The Senate unanimously passed an amendment introduced by Senate Minority Leader Bruce Tarr to form a commission that will monitor developments related to testing technology and make recommendations for how to better regulate and enforce impaired driving laws.The Senate bill will go to the House for consideration. House leaders have expressed interest in considering the topic. The House already passed a bill in February 2020 that would have clarified the law on host community agreements, but the pandemic broke out and the Senate never took it up. House Speaker Ron Mariano said in January that addressing problems in the marijuana industry is one of his priorities this session.
Cannabis Control Commissioner Nurys Camargo, speaking to reporters after a CCC meeting Thursday, said she is optimistic that the bill will become law. “I think our legislators know it’s time,” Camargo said. Camargo said it will take time for the social equity fund to get set up, even after the bill is signed. She estimated it could be at least a year before funds actually start flowing. But without the bill, Camargo said, social equity entrepreneurs would be left behind as the industry matures. “If this doesn’t pass this legislative session, it will be too late,” she said.