Legalized Marijuana – How Much Is In It For Pennsylvania?
December 22, 2020
“Is legal weed a panacea? Of course not. But I challenge anyone of either party to put forth a turnkey solution that delivers so much to so many by simply rewriting a law. Like it or not, we’re gonna be *awash* in legal weed. I think it should be Pennsylvania’s.” – John Fetterman, Lieutenant Governor of Pennsylvania, August 10, 2020
It’s no secret where Pennsylvania’s first and second in command stand on legalizing marijuana. Governor Tom Wolf and Lieutenant Governor John Fetterman, both Democrats, are outspoken in their support for the legalization of recreational, adult-use cannabis in the Commonwealth. While the Republicans who control both chambers of the General Assembly remain far from convinced on the issue, the reality of Pennsylvania’s multibillion-dollar budget deficit may soon leave members of both parties seriously considering this option as part of their search for available revenue sources in an attempt to stop the State’s fiscal bleeding and agree to a longer-term budget solution.
Even if the State were to raise taxes or expand casino gaming, the fact remains that Harrisburg continues to experience a structural deficit where annual expenditures exceed recurring revenue collections. Pennsylvania closed out its previous fiscal year on June 30, 2020 with a $3.2 billion shortfall. Come summer, the State’s elected officials staring down another inevitable shortfall may soon begin asking some pointed questions about how much tax revenue legalized marijuana could generate for the Keystone State.
On November 6, 2012, Colorado voters approved Amendment 64, while Washington voters passed Initiative 502, making the states the first two in the country to legalize the recreational use of marijuana. In 2019, Colorado generated $302,458,426 from marijuana taxes, licenses, and fees. Fiscal year 2019 saw the State of Washington produce $395,523,567. But what might that mean for Pennsylvania, a state with nearly double the population of the forgoing examples?
Making some big assumptions – if Pennsylvania’s appetite for cannabis products is on par with that of the country’s first two legal jurisdictions, and assuming a similar rate of taxation, with Pennsylvania’s population, it could mean annual tax revenues exceeding $600,000,000.
Is it safe to assume Pennsylvania would welcome legalized marijuana as enthusiastically as Colorado and Washington? A recent Philadelphia Inquirer article reported that the number of patient visits at medical cannabis dispensaries has increased by more than 70 percent during the COVID-19 pandemic, rising from 70,000 a week in February to 120,000 each week in August. Patients bought about $385 million in legal marijuana products from the state’s cannabis dispensaries during the period according to the Department of Health’s Office of Medical Marijuana. Furthermore, the State’s tax receipts from medical marijuana sales have risen month-after-month since the program’s inception several years ago.
While medical and recreational use represent entirely different sectors of the cannabis marketplace, it would appear that attitudes are progressive enough in Pennsylvania toward the use of marijuana that it is not difficult to imagine a scenario where Pennsylvania fares similarly to Colorado and Washington.
When the issue is marijuana, it is always difficult to predict State or Federal actions. And Pennsylvania, despite having cosmopolitan centers like Philadelphia and Pittsburgh, has many very conservative areas that traditionally have been opposed to marijuana legalization for any purpose. Those conflicting factors render assumptions about the likelihood of adult use marijuana legalization even more speculative than is usually the case. However, one thing is definite: Pennsylvania will be faced with another very large budget shortfall that must be addressed, and the tax revenue from legalized recreational marijuana sales would take a big bite out of that looming shortfall.
Regardless of what Pennsylvania does or does not do on this subject, on November 3, 2020, New Jerseyans, by a two to one margin, voted in favor of Public Question 1, a legislatively referred constitutional amendment that legalized the possession and use of marijuana for persons age 21 and older and legalized the cultivation, processing, and sale of retail marijuana. Ultimately, Lieutenant Governor Fetterman may be correct. Pennsylvania may indeed be awash in legal marijuana. However, it just may not be its own. Its immediate neighbor to the east may be satisfying Pennsylvania’s appetite for marijuana and reaping tremendous fiscal rewards in the process.
The Regulated Substances Blog is intended to keep readers current on developments regarding medical cannabis legalization and regulation and is not intended to be legal advice. If you have any further questions regarding the above, please contact Daniel Clearfield (dclearfield@eckertseamans.com).
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