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Virginia Gets Close to Legalizing Recreational Weed as Other States Eye Cannabis Tax Windfalls

Mike Blake | Reuters
  • Virginia is close to becoming the first Southern state to get a tax revenue high as it moves to legalize recreational weed.
  • Governors in cash-strapped states across the country are calling to legalize medical and recreational cannabis.
  • States like Wisconsin that have divided government can find it harder to pass comprehensive cannabis reform.

Virginia is close to becoming the first Southern state to get a tax revenue high as it moves to legalize recreational weed.

A bill passed Sunday in both the state's House of Delegates and Senate is awaiting the signature of Gov. Ralph Northam, a Democrat.

Once signed, the Old Dominion would officially join 15 other states and the District of Columbia that havelegalized marijuana for adult recreational use. Though under the Virginia bill, legal sales and possession would not take effect until 2024.

States from Wisconsin to Kansas — many cash-strapped amid the Covid pandemic — are calling for similar measures as they struggle to balance their budgets. Governors also cite racial justice as a reason to legalize marijuana, with Black and Latino men imprisoned at higher rates nationwide than their white counterparts for the same offenses.

Support for marijuana legalization has steadily increased over the years. Recent polling by Gallup found that 68% of U.S. adults think marijuana should be legalized for recreational use, up from 66% the year prior. With Democratic President Joe Biden in the White House and the party currently maintaining a majority in both the House and Senate, federal legalization of marijuana could be closer than ever.

But for now, it remains a state-by-state decision.

New Jersey is the most recent to join the party. Democratic Gov. Phil Murphy signed reform legislation in late February after voters approved the measure in November. A report from nonpartisan think tank New Jersey Policy Perspective estimates the state could see at least $300 million in tax revenue annually.

For Virginia, pot legalization could bring in $698 million to $1.2 billion annually in economic activity and up to $274 million in tax revenue per year, according to a study from the governor's office.

Northam also acknowledged racial disparities in drug convictions in his recent State of the Commonwealth address. "Reforming our marijuana laws is one way to ensure that Virginia is a more just state that works better for everyone," he said.

Not all constituents are satisfied with the pace of change. The American Civil Liberties Union of Virginia said the legislation pays "lip service," but "does nothing to help continued racial disparities that we're seeing with decriminalization until 2024," TV station WWBT, an NBC affiliate in Richmond, Virginia, reported.

A spokesperson for the governor told CNBC that "there's still a lot of work ahead, but this bill will help to reinvest in our communities and reduce inequities in our criminal justice system." The spokesperson said the governor's top priority is making sure Virginia legalizes marijuana in an equitable way.

More governors call for legalization

In Pennsylvania, Gov. Tom Wolf renewed calls for legalization of marijuana in his state budget address, highlighting it as a priority for this year after neighboring states have either approved or are considering legalization.

"I urge the legislature to join me in building a foundation now to strengthen Pennsylvania's economy by legalizing cannabis for adult use," the Democratic governor said in a message to the Legislature in September.

The governor also highlighted racial justice as a priority for legalization. "This is revenue that can help Pennsylvanians adversely impacted by the criminal justice system access restorative justice programs."

Black people in Pennsylvania are three times more likely than whites to be arrested for possession of marijuana, according to the state's ACLU chapter. Wolf's office did not respond to a request for comment.

Highlighting the drawbacks

Washington, which in 2012 became one of the first states to legalize recreational weed, earned a total of $395.5 million in legal marijuana tax revenue and license fees in fiscal 2019, according to the state's annual report. The legal marijuana market in the state also supports more than 18,500 jobs according to a recent study by Washington State University.

But as with many good things, there are often drawbacks. A study out of the University of Washington and published in the American Journal of Preventive Medicine showed that cannabis legalization in the state and a general change of attitude toward the plant began to slow a downward trend of teen cannabis use.

The study's lead author, Jennifer Bailey, said "we really don't want teen use to increase," but added that it will take several decades to fully understand the impacts of legalization, as it did with alcohol post-Prohibition. She also highlighted racial justice, tax windfalls and cannabis research as important benefits of legalization.

Many states work language into cannabis legislation that would see communities affected by racial inequity in the criminal justice system benefit the most from legalization. But even policies crafted to benefit communities of color sometimes miss their target.

Illinois, for example, still has zero minority-owned cannabis shops a year after the state legalized the plant even though the legislation contains language to limit dispensaries to give an advantage to minority communities. The Illinois governor's office did not immediately return a request for comment.

"There's a small section of people who have cash and control of the money. When you have an industry and emerging market, and you can only join if you have cash, you've already eliminated Black people," Democratic state Rep. La Shawn Ford, a member of the state Legislative Black Caucus told Politico.

Divided government roadblocks

States like Wisconsin that have divided government can find it harder to pass comprehensive cannabis reform. Democratic Gov. Tony Evers recently said that he will propose legalizing recreational marijuana in Wisconsin, citing potential tax revenue of more than $165 million annually for the state.

"Legalizing and taxing marijuana in Wisconsin — just like we do already with alcohol — ensures a controlled market and safe product are available for both recreational and medical users and can open the door for countless opportunities for us to reinvest in our communities and create a more equitable state," he said in a statement recently.

But with Republican lawmakers currently controlling the Wisconsin legislature, passage is unlikely.

A similar fate is shared by many Southern states. Lawmakers in Mississippi's House and Senate are currently battling over language for a medical marijuana bill after a measure mandating a state medical marijuana program was approved by Mississippi voters.

In Minnesota, HF 600 recently became the first adult recreational use bill to make it out of committee in the state. Minnesota's Senate is controlled by Republicans, and the House is controlled by Democrats, making the likelihood of the bill's passage hazy. Democratic Gov. Tim Walz recently called on the Legislature to consider legalizing marijuana to boost the state's economy in a briefing focused on his budget proposal. Requests for comment from Walz's office were not immediately returned.

Even ballot initiatives approved by voters can go up in smoke. A South Dakota circuit court judge appointed by Republican Gov. Kristi Noem recently ruled that a constitutional amendment approved by South Dakota voters to legalize recreational marijuana was unconstitutional. The ruling states that the amendment would have "far-reaching effects on the basic nature" of the state's government.

Recently, Kansas Gov. Laura Kelly, a Democrat, announced a proposal that would legalize medical marijuana in the deep red state in order to raise the revenue required to expand Kansas' Medicaid program to nearly 200,000 residents who currently lack coverage. The Republican-controlled Legislature is expected to reject the proposal, but House Majority Leader Dan Hawkins did not take medical marijuana off the table. In a statement to Politico he acknowledged rising support for drug reform, but said it's still too early to predict how the debate will play out.

In all, about 12 states are currently considering some kind of cannabis reform legislation. States like New York, Connecticut, New Mexico and Hawaii could soon see legislation on governors' desks.

"It's not a matter of if'' a deal gets done, New York state Senate Majority Leader Andrea Stewart-Cousins, a Democrat, told The New York Times in January. "It's a matter of how and when."

CORRECTION: This story has been updated to reflect the study published in the American Journal of Preventive Medicine was conducted by the University of Washington. A previous version misstated the university's name.

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