Questions are piling up for the committee--chaired by Sen. Joseph Cervantes--and the full Legislature to tackle in the aftermath of legalization which MLG signed into law in 2021 with very high hopes for the future:
The legalization of adult-use cannabis paves the way for the creation of a new economic driver in our state with the promise of creating thousands of good paying jobs for years to come. We are going to increase consumer safety by creating a bona fide industry. We’re going to start righting past wrongs of this country’s failed war on drugs. And we’re going to break new ground in an industry that may well transform New Mexico’s economic future for the better.
Well, that didn't quite happen, at least not yet. Conversations with cannabis experts reveal where things went off the rails and how to get them back on. Let's take a look.
--An extreme over abundance of mairjuana dispensary licenses. There are some 2,000 of them in a state of 2.1 million people, says NM Cannabis Chamber of Commerce executive director Ben Lewinger. (Not all of them are in use).
The initial legislation got through without any license limits in part because social justice advocates did not want to shun the little guy and people of color. But that has backfired and the industry is now calling for a moratorium on licenses as multiple dispensaries shutter their doors and are unable to resell their licenses to recoup their investment. Says Lewinger:
The moratorium would be for a temporary time period set by state regulators. The flaw in the legislation was not caught, despite going through multiple legislative committees, and it must be changed if the industry is to deliver on its promise.
That promise, as MLG stated, is to be an economic driver but, Lewinger says, over 30 percent of marijuana sales are conducted by a handful of big guys. That wasn't what the state was sold at the legalization debate.
Major cannabis businesses sent a letter to MLG last month seeking her support to limit licenses. One licensee said he counts more marijuana dispensaries in the state than McDonald's and Starbucks combined.
Marijuana baron Duke Rodriguez said last year:
There’s going to be a settling out and there’s probably going to be about 200 dispensaries that could close in the next 12 to 18 months. If you do the math and you look at Arizona and you look at Colorado, our market can comfortably support about 200-plus dispensaries And we’re way over 400.”
THE BLACK MARKET
That cheap cartel marijuana is able to avoid state regulations and finds its way into legal dispensaries (with illicit connections) where marijuana is retailed to consumers at the $1,200 a pound market price plus a 12 percent excise tax. It is a huge loophole. But it's also a law enforcement problem that has bedeviled other states that have legalized pot such as California and Oregon.
The upside to the black market-- if there is any--is that the illegal weed passes state quality checks before being sent to dispensaries. That's better than a street dealer selling marijuana that customers could be ill-suited for and even laced with more dangerous drugs. (Not that street dealing has been eliminated, according to one expert, but he says the main problem is the cheap cartel pot getting legitimized.)
Tax collections lag. The state is on course to do about $350 million a year in adult pot sales (not including $200 million in medical marijuana). But, as Rodriguez points out, the state is not collecting the excise tax on all of that. The problem? Many of the small retailers don't know, are ignoring or haven't taken the time to comply with gross receipts tax filings. That has to be top of the mind for Chairman Cervantes and his committee. At a 12 percent excise tax rate the state should be taking in about $40 million a year. The Committee needs to check the numbers.
NM marijuana legalization turned out to be the ultimate free market experiment with wide open licensing and plant growing limits that have reached sky high heights for manufacturers. But like so many hopeful experiments it is the major producers who are most protected from the oversaturated market. And even they have been burned. Out of state firms gobbled up NM pot businesses at absurd prices early in legalization and are now having difficulty getting their money back.
Marijuana was never goiNG to be a major "economic driver." Much the same was said when the state 25 years ago legalized gambling at Native American casinos. The rush in the front years is where the big money is made then it settles down. For marijuana it will be same. There is a set limit to how many folks want to gamble or smoke pot.
Senator Cervantes was an ardent foe of legalized pot but he has to put that in the rearview mirror and join with fellow lawmakers and the Governor in getting our state out of the marijuana mess and giving us an industry that operates within well-enforced regulations and not like the Wild West it has become.
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(c)NM POLITICS WITH JOE MONAHAN 2023
(c)NM POLITICS WITH JOE MONAHAN 2023