Senate committee considers oversight, economic growth with legalized adult-use cannabis

‘It is not necessary for us to go about this blindly when 18 other states have navigated the process already,’ Senate Law and Justice Committee Chairperson Mike Regan, R-York, said Monday

By: - February 28, 2022 4:01 pm

Sen. Mike Regan, R-York, speaks during a Senate Law and Justice Committee hearing on legalizing adult-use cannabis on Monday, Feb. 28, 2022. (Screenshot)

After wrestling with whether legalizing adult-use cannabis could curb demand on the black market earlier this month, a Republican-controlled Pennsylvania Senate committee on Monday heard from experts on how — if the state moves ahead with legalization — to regulate the product and ensure economic growth.

The two-hour Senate Law and Justice Committee hearing was one in a series of meetings to evaluate the possible benefits of legalizing adult-use recreational cannabis in Pennsylvania and draft oversight measures.

Pennsylvania’s neighbors — New York, Virginia, and New Jersey — have legalized recreational cannabis. Gov. Tom Wolf, a Democrat, changed his stance on adult-use cannabis in 2019, joining Lt. Gov. John Fetterman in calling for legalization.

There also is growing support for similar legislation among Pennsylvania residents. An October 2021 poll by Franklin & Marshall College showed 60 percent support among registered voters for cannabis legalization.

Sen. Mike Regan, R-York, who chairs the Senate panel, announced plans to introduce legislation legalizing adult-use cannabis to help fund law enforcement last fall alongside state Rep. Amen Brown, D-Philadelphia. Sen. Dan Laughlin, R-Erie, became the first Senate Republican to support adult cannabis use, introducing a legalization proposal with Sen. Sharif Street, D-Philadelphia, last year.

But it’s unlikely that Pennsylvania will join its neighbors and states across the country in passing adult-use cannabis legislation. House and Senate leadership have not expressed support for the measure, though some have signaled an openness to vet a proposal.

Asked Monday during a Pennsylvania Press Club luncheon if an adult-use cannabis proposal would have any legs in the chamber, House Majority Leader Kerry Benninghoff, R-Centre, responded: “Shorter than mine.”

If elected governor, Senate President Pro Tempore Jake Corman, R-Centre, told the Capital-Star in November that he would review legalization proposals. Any bill, he said, must meet “really significant standards.”

Regan, who supported the state’s medical marijuana program, reiterated a commitment to those standards on Monday, saying the hearings aim to develop “comprehensive” legislation that uses best practices for implementation and enforcement.

“It is not necessary for us to go about this blindly when 18 other states have navigated the process already,” Regan said.

Jordan Wellington, a partner at VS Strategies, a cannabis policy firm affiliated with the Vicente Sederberg law firm, told lawmakers that cannabis consumption and commercial activity is already happening in Pennsylvania.

“The question is really who will be engaging in that commercial activity, whether it is licensed, controlled, regulated businesses that do things like check ID and follow safety procedures or whether it is illicit operators? Wellington said.

He proposed that lawmakers consider testing procedures to ensure safe cannabis products.

“It’s one of the great competitive advantages the regulated market has over the illicit market,” Wellington said. “Consumers know they’re consuming a safe product, and studies show that consumers will pay a price premium for a regulated product.”

Brandon Nemec, government and regulatory affairs associate director for PharmaCann, Inc. — an Illinois-based cannabis company, told lawmakers that having a centralized plan for regulation from the beginning of any cannabis program would help with oversight and ensure stronger policies.

Jesse Alderman, a partner and co-chair at Foley Hoag LLP, a Boston-headquartered cannabis law firm, urged lawmakers to consider “clear statutory mechanisms and clear deadlines” to enable existing medical marijuana cardholders to obtain approval to operate at dual permittees.

This could allow Pennsylvania to impose conversation fees immediately while bringing on new applicants through a separate program, Alderman suggested.

Nemec promoted the potential for “new and sustained and meaningful” revenue if Pennsylvania legalizes adult-use cannabis.

“However, the commonwealth should be mindful of setting an adult-use tax rate that will allow it to compete with the illicit market and bring adult-use consumers into the regulated market as quickly and effectively as possible,” Nemec said.

Citing Michigan as an example, Nemec told lawmakers that the state’s combined effective tax rate is 16 percent, with a 10 percent cannabis excise tax and 6 percent regular sales tax. Last year, Michigan reported more than $1.3 billion in adult-use sales and generated approximately $250 million in tax revenue, Nemec said.

He said that the administration of taxes is most easily applied by the state and operators, meaning that the tax rate is applied at the point of retail. 

Nemec added that there are opportunities for workplace development, referencing a partnership in Illinois with local community colleges with formalized training programs through trade groups or schools.

“The commonwealth has the opportunity that if it does decide to transition to adult-use, tens of thousands of new, good-paying, living-wage jobs are going to have to be created in order to sustain a market the size of Pennsylvania’s,” Nemec said. “And at the outset of the program, it would be very beneficial if the commonwealth considered setting up private-public partnerships.”

Street also recognized opportunities for Pennsylvania farmers to get involved with cannabis growth. He added that there’s a chance for dealers currently working in the illicit market to shift toward a legal cannabis program.

“I want the kid who’s been asked 100 times how he can score some illegal weed — I’d like him to be able to have the opportunity to work in a dispensary or join one of your companies as well,” he added.

Though legalizing recreational cannabis is still up for debate in the General Assembly, some lawmakers have different ideas on spending any additional revenue generated from cannabis sales.

Sen. James Brewster, D-Allegheny, suggested using the money — even a portion of the funds — to address addiction in Pennsylvania.

“No matter what we’ve tried to do, we have not made a dent in that,” Brewster said.

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