How Will Cuomo Legalize?

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No one but New York Governor Andrew Cuomo and his aides knows exactly what the powerful governor will propose when it comes to his legalization plan in what is expected to be one of the world’s biggest cannabis markets.

But with some details expected as soon as Tuesday, the anticipation is building. Particularly among progressives.

A major Cuomo speech in mid-December in favor of legalization, followed days later by New York City Mayor Bill de Blasio, signaled an abrupt turn toward ideals for cannabis reform pushed for years by advocacy groups and factions of New York’s Democratic Party. Both Cuomo and de Blasio now say the new legal industry should open up opportunities in African American and Latino communities that bore the brunt of law enforcement’s selective cannabis war of the past few decades. The two leaders have set the stage for reforms beyond what many advocates thought was possible even months ago.

Cuomo reiterated that philosophy in a press conference last week. “I think it’s very important that the wealth that’s generated here, the economic opportunity, which should be significant, goes to assist those people who paid the price in the first place,” Cuomo said, according to State of Politics. “So how do you steer the economic empowerment to the communities that actually paid the price? That’s something we’re working on.”

Cuomo’s expansive legislation is also expected to reform the state’s hemp and medical cannabis laws, said Assemblywoman Donna Lupardo, the new chairwoman of the Assembly Agriculture Committee. The new federal Farm Bill legalized hemp and CBD-based products, and Lupardo said New York is primed to take advantage: “I’m going to be looking at small farmers across the state,” Lupardo told Cannabis Wire. “We have to make it easy for people to get into this work.”

New York will hardly be starting from scratch. Months of groundwork has been laid by a panel appointed in August by Cuomo’s administration, and the governor can draw on longtime advocacy and model legislation pushed last session in Albany. In addition, the state can learn from the successes and mistakes of the earlier West Coast adopters.

State Assemblywoman Crystal Peoples-Stokes, the Assembly’s new Majority leader and the sponsor of a  model bill, called the Marihuana Regulation and Taxation Act, told Cannabis Wire that she is hopeful the governor’s plan mirrors that legislation’s progressive goals, although she said she doesn’t know for sure how much of it the governor plans to embrace. She is expecting pushback— fears about youth use and other potential harms to public health—from law enforcement organizations and health groups. Still, she believes lawmakers have decided that the benefits of legalization outweigh both groups’ concerns in those areas. She predicted lawmakers will work to mitigate those challenges through regulation and public education.

On Friday, Thomas Madejski, president of the Medical Society of the State of New York (MSSNY), released a statement acknowledging that while “there are a number of financial considerations that continue to push for expansion of marijuana use,” including potential tax revenues, which can be “enticing,” he has concerns about impaired driving, potency, and a potential increase in smoking as a result of legalization. Madejski said MSSNY is “proud to stand with” the New York State Association of County Health Officials, and the New York State Association of Sheriffs, both of which oppose legalization.  

This opposition is unlikely to stop the passage of a legalization bill, and the industry will inevitably create new millionaires and significant tax revenue. Lawmakers and advocates want to ensure that the state’s system also benefits those in minority communities who bear the brunt of prohibition.

“The communities that have been devastated have to gain from this,” Peoples-Stokes said. “If not, I look forward to a rigorous negotiation.” Peoples-Stokes also said that the state must ensure licensing rules include low capital requirements for new businesses. She said she envisions both small and large businesses in a new cannabis sector, “but we hope that it is not controlled by large corporations.”

Melissa Moore, the deputy state director for New York with the Drug Policy Alliance, told Cannabis Wire that pinning down the details of the governor’s plan has been difficult. “It’s evolving minute by minute,” she said. Any plan that emerges will be judged against the Marihuana Regulation and Taxation Act she said, because that plan was crafted with buy-in from a “broad array of advocates,” including drug and criminal justice reformers. While businesses may be salivating at a market that could bring billions in sales, Moore argued that the interests of New York communities should trump business concerns.

“Given the scale of harm done and given the absolute horrors wrought by the marijuana war,” she said, “the governor and the legislature are beholden to New Yorkers, not these investors or these businesses.”

Moore said she offers an analogy she knows the governor will appreciate: the state’s craft beer and wine industry. “The craft beer and wine field has really blossomed in New York,” she said. “The governor is proud of that work.”

Among the provisions Moore and others said they expect from the state’s eventual plan:

• Expungement and/or sealing of past criminal records related to cannabis.

• A tax rate high enough to fund key priorities but low enough to discourage or wipe out a viable black market. Moore said she expects Cuomo to use the tax rates floated in a May New York State Comptroller report as a guideline, which used a state excise tax rate of 10 % and a New York City excise tax rate of 25 %. Those rates, together with the state’s existing 4 % sales tax, would create tax revenue of $436 statewide and $336 million in New York City, according to the report.

• Tiered licensing and low capitalization requirements. Also, to be avoided, Moore said, are requirements like those in Florida and elsewhere that mandate that companies who want to open a dispensary or cultivation facility control all aspects of their product from seed to sale, so-called “vertical integration.” These tend to  favor large corporations and freeze out small businesses, Moore said.

• Low or no interest loans or other incentives, such as a bonus in scoring license application, for minority business owners wanting to enter the new cannabis industry.

• Dollars allocated to low-income African American and Latino communities that would fund public infrastructure projects, money for job and education programs that can give low-income people skills for employment, and a leg-up for minority business owners.

Ari Hoffnung, a former New York City deputy comptroller who is now the CEO of Vireo Health, a New York medical cannabis operator, told Cannabis Wire the company supports the idea of smaller, minority-owned businesses being able to enter the market more easily.

“When you’re building a new industry, we need to do it right,” he said.

Among the answers Hoffnung said he’s looking for in Cuomo’s proposal: Will the governor embrace a statewide cap on licenses or leave it up to localities? Will local governments have to opt-in to legalization or proactively opt out? Will the state earmark revenues for a specific purpose or place tax dollars into the state’s general fund?

“There are a lot of compelling reasons associated with each model,” Hoffnung said. “It’s going to be a fascinating public conversation.”

Hoffnung also hopes lawmakers won’t limit out-of-state investment — and there is likely to be a considerable amount of interest in New York’s industry from deep-pockets around the globe. He said that when Colorado lawmakers sought to protect in-state businesses by limiting out-of-state money, “It actually ended up hurting businesses.” Hoffnung added, “It becomes more difficult to finance the business—especially when you can’t walk into a bank and take out a loan.”

Moore, of the Drug Policy Alliance, said the state’s quick turn on the issue reflects pressure from legalization in nearby Canada and Massachusetts — New Jersey is also working on a reform bill — as well as rising pressure on Democratic lawmakers to address the selective enforcement of cannabis laws against minorities.

Moore noted that New York City’s cannabis prosecution numbers continue to show high black and Latino arrest rates. “The number of arrests have dropped but the racial disparities are just as bad as they have been for the last thirty  years” she said. “We’re holding our breath for Tuesday.”

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