Pot opponents mislead on costs, local aid threat

LT. GOV. KARYN POLITO suggested earlier this week that passage of the ballot question legalizing recreational marijuana could lead to a reduction in local aid to pay for regulating the new industry and public safety costs, but there is little evidence to support her claim.

At a meeting of the Local Government Advisory Commission on Tuesday, Polito and several municipal officials raised some familiar concerns about the ballot question. They worried about marijuana-infused candy making its way into the hands of young people. They fretted about the lack of local control over pot shops. And they said there’s no way to test drivers to see if they are impaired from smoking marijuana.

But Polito also raised a new concern, one that resonates with local officials, that passage of the ballot question could lead to cuts in state aid to cities and towns. “We’re very concerned about the regulatory costs that would take away funds from needed services, in particular schools and local aid,” Polito said.

Billy Pittman, a spokesman for the Baker administration, said Polito’s statements were based on what has happened in Colorado, which legalized recreational marijuana use in 2012. He said state revenue from pot taxes has not been enough to cover the state’s regulatory costs.

Pittman said Gov. Charlie Baker, Boston Mayor Marty Walsh, and Attorney General Maura Healey made a similar claim in an op-ed they wrote for the Boston Globe in March.

“The governor and lieutenant governor are proud to join a bipartisan group of statewide leaders opposing the proliferation of marijuana in part because evidence from Colorado shows that the costs to the state could very well outweigh the additional tax revenue from the sale of the drug,” Pittman said in an email. “And with current revenue projections below expectations in Massachusetts, these costs would come at the expense of other vital state services, such as education and local aid.”

But Colorado officials say the concerns about their revenues being raised in Massachusetts are news to them.

“That’s the first time I’ve ever heard that narrative,” said Chris Stiffler, an economist with the nonprofit, nonpartisan Colorado Fiscal Institute.

Colorado is bringing in a lot more marijuana tax revenue than it is spending on regulation and enforcement. Colorado is on pace to generate $130 million this year in revenue from taxes, licensing, and fees and spending about $18.4 million on regulation and enforcement of the laws, including $8 million for the Marijuana Enforcement Division, which oversees the state’s 2,800 retail and medical marijuana stores, cultivation centers, and manufacturers.

“It’s definitely covering the cost of regulation and is allowing the state and counties to do a lot of other things,” said Stiffler, citing homelessness programs, accelerated construction of local facilities, youth diversion programs, and other programs totaling about $105 million last year.

Massachusetts, under the ballot question proposal, would tax marijuana differently than Colorado. In Colorado, there is a 15 percent excise tax levied on wholesale unprocessed recreational marijuana. Then both medical and retail marijuana have the state’s 2.9 percent sales tax added on and there is a 10 percent “special sales tax” added to recreational sales. Local counties and communities can also levy a sales tax, up to 8 percent, that they collect and retain.

By law in Colorado, the first $40 million from the wholesale excise tax goes to a school building program to fund construction as well as new roofs and items such as heating, ventilation, and air conditioning. The remainder of that tax goes into a public education fund, totaling nearly $10 million last year. The state also sends 15 percent of the special sales tax back to cities and towns, apportioned by the amount of marijuana sales in the community.

In Massachusetts, Question 4, the referendum to legalize adult use of marijuana, would slap a 3.75 percent tax on marijuana above the state sales tax of 6.25 percent. Medical marijuana is exempt from the taxes. In addition, cities and towns can levy up to 2 percent on the sales. With both sides predicting the sale of marijuana in Massachusetts could quickly hit $1 billion, that means at least $100 million for the state through the sales and marijuana tax, far higher than what would likely be needed to regulate the industry. There are also licenses and fees, especially at the start of the effort, that would cover administration expenses

Jim Borghesani, communications director for the Yes on 4 campaign, said the Alcohol and Beverage Control Commission has an annual budget of about $2.2 million to oversee the thousands of bars, restaurants, and stores that sell booze in the state. (A correction has been added to the bottom of the story)

“They oversee far more licenses than the [proposed] Cannabis Control Commission ever will,” he said. “Maybe the budget will be a little more that, but we don’t anticipate there won’t be enough money. Anything left over will go to the general fund.”

Borghesani said opponents are using “scare tactics” to get local officials on board to defeat the measure, using false data about Colorado and threats of reduced local aid to whip them into line.

North Adams City Councilor Lisa Blackmer, who was in the meeting with Polito, said Colorado is “struggling to keep up with regulation” but admitted she did not have anything at hand to cite as evidence. But she said when looking at the Rocky Mountain State’s tax rate compared to the proposed level in Massachusetts at less than half, the Bay State will not be able to do what Colorado is doing.

“My concern is revenue,” said Blackmer, president of the Massachusetts Municipal Association which has voted to oppose Question 4. “Anything that increases a demand for services is going to increase the costs for cities and towns.”

MMA executive director Geoff Beckwith retreated slightly from the claim about Colorado when presented with the data but, nonetheless, insisted there will be “hidden costs” for communities. He cited the portion of the initiative that will allow private citizens to grow up to 12 marijuana plants at home for personal use. Beckwith said that far exceeds normal consumption and will place a burden on police to keep a lid on a potential black market.

“Public safety [officials] are very concerned about an under-the-counter black market especially bordering on states without legal marijuana,” said Beckwith. “We haven’t looked at the exact revenue forecast but our big concern is there are a lot of other questions that are really very costly, question around local public safety and local public health and we expect them to be costly. Local communities might not have the tools to address them.”

Opponents in Massachusetts such as Beckwith and Polito highlight the fact that marijuana revenues are less than 1 percent of the total revenue Colorado takes in each year, intimating the money isn’t a big enough gamechanger to make it worthwhile. But Stiffler, the Colorado economist, says that’s misleading.

“Yeah, it’s not nearly the big windfall the public thinks,” he said. “They say, ‘why don’t we have a new lane on the highway if there’s all this marijuana money’ or ‘how come we don’t have all these new schools from the marijuana money.’ They don’t realize how small 1 percent of the total is but it’s still more than $100 million and that’s real money. We’re doing a lot of good stuff with the money.”

 

(Correction: The original version of this story incorrectly stated the Alcohol and Beverage Control Commission has retained revenue for its budget. The money the commission collects is sent to the state’s general fund, not kept for the agency’s budget.)