By GARRY RAYNO, InDepthNH.org
CONCORD — A bill legalizing recreational use of marijuana passed the House on a two-to-one margin, but ran into a buzz saw over its finances before the House Way and Means Committee Thursday.
The bill would provide $14 million of state money for start-up costs, which would be paid back, said the bill’s prime sponsor Rep. Daryl Abbas, R-Salem, who suggested legalization would produce between $260 million to $360 million for the state’s coffers.
Under the bill, the first $25 million would go to substance abuse treatment and prevention, while 90 percent of the additional money would reduce the statewide education property tax, 5 percent would go for law enforcement training and 5 percent for children’s behavioral health.
The bill was developed from a number of bills proposed last year and this session produced a compromise, Abbas told the committee.
The bill would have marijuana sold through the Liquor Commission, and instead of sales or transfer taxes, would generate revenue as the commission does as profits from liquor sales.
Abbas said he did not want what has happened in other states with commercial sales where the tax and regulations are too high and the price is not competitive with the illicit market.
He said he wants the price low enough to draw people away from illicit sales.
The more than four-hour hearing produced more questions than answers and a subcommittee will work on the bill before the committee decides on its recommendation.
While many people supporting the bill when it initially passed the House last month, said it is not perfect, but a step forward, the opposition turned out Thursday including the existing alternative treatment centers which grow and distribute medical marijuana, large-scale cultivators from other states and as expected law enforcement.
And despite the overwhelming support from the House, most people testifying had suggestions for changing the bill, particularly how edible cannabis products are handled, as well as a backup plan to create a state bank to handle the money the industry would generate if private banks are not willing to service the industry which is still illegal under federal law.
State banking officials both public and private said a state bank would not be needed as private banks would be willing to provide the needed services under some careful procedures already developed.
And they said the plan to capitalize the state bank with $10 million is woefully underfunded and would take significantly more money with a continued infusion of state money as the industry grows.
“We don’t believe a state bank is needed,” said Kristy Merrill, president of the NH Bankers association.
The state’s police association opposed the bill saying it would significantly increase the costs for law enforcement across the state.
Bedford Police Chief John Bryfonski said the increase in costs are not the only problem as all facets of law enforcement are understaffed.
He used examples in Canada, Colorado and other states that have legalized recreational use and the resulting problems.
He noted New Hampshire does not have an intoxication limit for THC levels which made it impossible to prosecute two drivers in fatal accidents in his town.
What is being proposed “is akin to an episode in the shark tank,” Bryfonski said. “You can’t put dollars and cents above the cost of human life.”
But the concerns over banking and law enforcement could be moot as representatives of the cultivation industry operating in other states told the committee no cultivators would be interested in working with the state under the structure set up in the bill.
A person associated with East Coast Cannabis in Maine said the investment is way too costly to be the single supplier to the state as the bill requires saying the bill’s sponsors “just don’t get it.”
He told the committee cannabis is a perishable product and is not something that can be turned around as quickly as the bill would require.
Committee members sought additional information from Abbas on such things as how it was determined $25 million would go to substance abuse treatment, or how he developed his revenue projections and what they include.
Several members were concerned about edible products, which would be available at the cannabis stores, but only sold to residents with medical marijuana cards.
Committee vice chair, Rep. Patrick Abrami, R-Stratham, who chaired a cannabis legalization study committee several years ago, questioned how the edibles would be handled under the bill.
“I am confused why this is in here,” Abrami said. “We have seven stores that do all these things, produce, grow and create edibles and sell them retail.”
He said the edibles are very popular and if they are only sold to those with medical cards, that could impact revenue assumptions.
Abbas said his revenue assumption was just for the “flowers” to make them as “conservative as possible.” He estimated the edibles and vaping would be about 30 percent of the total sales.
Abrami said he is concerned about the existing seven stores, because people with medical cards could buy their cannabis at the state-run stores.
Rep. Timothy Egan, D-Sugar Hill, was also concerned about the existing treatment centers and the way edibles are handled in the bill.
While he supports the bill in general, he said, the bill leaves too much money on the table.
Egan said the industry is expected to continue growing and likely to be a $41 billion industry in four years according to a study.
And he noted the fastest growing section of the market is edibles and vaping.
He said edibles are 13 percent of the dollar volume of the market and are expected to grow to 18 percent by 2025 according to Headset.
The edibles have outgrown the flower market in states with commercial sales, Egan said, and additional sales would allow the cannabis industry to grow like local breweries and wineries have in recent years.
And he suggested the bill should be amended to allow the personal cultivation of plants, which it does not as passed.
Liquor commission officials said they foresee separate buildings for the sale of cannabis products if the agency has to oversee the sale of cannabis as the bill requires, saying the commission’s brand has been built over a long period of time and they do not want the public to confuse the two.
The agency also has a much lower estimate for revenues at $50 million annually and higher estimates for the cost of stores, personnel and administration.
The Liquor Commission would regulate the growing, processing, and sales of the graded products.
Initially 10 cannabis stores would be located throughout the state, but there is no limit in the bill, Abbas said, but communities could opt out from hosting a retail store.
Several committee members noted a cannabis store may not be perceived as positively as a liquor store and high traffic communities may not be interested.
A subcommittee will meet next week to begin working on the bill.
The bill had bipartisan support in the House, but faces an uphill battle in the Senate if it receives final approval.
Garry Rayno may be reached at firstname.lastname@example.org.