Ezra Eickmeyer, political director for the Washington Cannabis Association.
OLYMPIA, March 12.—A bill that aims to put the medical-marijuana biz on firm ground is running into trouble in the state House as the 2014 Legislature winds to an end – snarled in a high-level dispute over whether cities and counties ought to get a share of the taxes when Washington’s legal marijuana shops finally open their doors.
House Republicans say they want 10 percent of marijuana taxes to go to local governments – possibly tens of millions of dollars every year – and they are willing to hold up the bill to do it. They say the money would compensate cities and counties for planning, zoning and law enforcement costs — and most importantly, for allowing the shops to open in the first place. “This is probably the biggest unfunded mandate we have ever levied on local governments, at a time when they are not in good financial shape as it is,” says state Rep. Cary Condotta, R-East Wenatchee. But House Democrats aren’t eager to give up a dime. They are eying the money as a way to help pay for the state Supreme Court’s costly McCleary decision, which requires them to raise billions of dollars for the K-12 schools.
It’s not the kind of argument that can be ignored. Minority Republicans hold the cards, because it will take a two-thirds vote to pass the bill. A supermajority vote is required because the measure amends Initiative 502, the landmark measure that made marijuana kinda-sorta legal in Washington. What it means is that Republicans and Democrats will have to reach agreement in short order on an issue on which there is no consensus whatever.
And while the battle rages somewhere far overhead, advocates for the medical-marijuana business are puzzled about what to do. They’re not sure they like the bill much, either. The way it is written right now, it will impose a draconian new tax and drive prices sky-high for patients who see marijuana as a necessity. Yet if something doesn’t pass, there’s a chance the feds might crack down and drive dispensaries out of business. “It is kind of a back-and-forth kind of thing,” says Ezra Eickmeyer, political director of the Washington Cannabis Association, which represents the medical-marijuana industry. “People are like, jeez, do we want to commit suicide?”
And so the medical-marijuana measure, Senate Bill 5887, has become the subject of frantic lobbying and bargaining in what may or may not be the final hours of the 2014 Legislature. Lawmakers are scheduled to end their 60-day session by midnight Thursday, though the fact that House and Senate haven’t announced a final deal on the budget is starting to make rank-and-file members wonder if they will be forced to remain in Olympia for a special session after all. The medical-marijuana bill, passed by the Senate Saturday, is among a half-dozen high-profile measures on which the dealmaking seems to be butting up against the deadline. No telling how this one will turn out – but at least one key player, House Finance Chair Reuven Carlyle, D-Seattle, is calling the bill’s prospects “precarious.”
Driven by Feds
State Rep. Cary Condotta, R-East Wenatchee.
Washington’s medical-marijuana trade, like that of 17 other states, has operated in a rather gray area of the law ever since this state’s voters gave it the nod by passing I-692 in 1998. The law allowed limited amounts of marijuana to be grown in collective gardens and sold to patients with medical authorizations. The business has grown to perhaps 500 dispensaries statewide, with an estimated 150,000 customers and gross sales of $300 million annually. Those stats are a bit loosey-goosey, though. The trade has never earned an official sanction, tax figures are vague, and until this point state officials have not demonstrated much interest in providing oversight — as marijuana remains illegal under federal law.
Things are different now. State-regulated shops are about to open across Washington, selling to the populace at large, and federal officials are promising to look the other way. Whopping taxes are expected to generate big money. One Office of Financial Management estimate put the figure at $500 million a year, though many suggest the number was a bit on the high side – nothing like it has been tried before.
But the feds have a problem with the wild-and-wooly medical-marijuana trade. They fret that recreational users might turn to the largely-unregulated dispensaries to beat the high cost of toking. In a pointed letter to state officials last year, U.S. Attorney Jenny Durkan called the lack of regulation of medical marijuana “untenable,” and hinted at federal law enforcement action unless state lawmakers clean up the law.
Tough Bill to Swallow
The measure that passed the state Senate Saturday aims to do just that, providing a new regulatory framework for the business that will bring it into the sunshine. For the first time, medical marijuana patients would be required to register with the state. The state Liquor Control Board – to be renamed the Liquor and Cannabis Board – would adopt rules for dispensaries and products. Collective gardens would be banned – instead, dispensaries would have to get their supply from growers and processors that are regulated and taxed just as they will be when they serve the new retail stores.
Medical-marijuana advocates reluctantly accepted that idea, figuring that economies of scale might keep customer costs about the same. But when the bill passed the Senate Saturday lawmakers added an additional tax to the lineup – a 25 percent tax on retail sales. That brings taxation to the same level as in the new retail stores, eliminating the incentive for recreational users to feign illness, obtain authorizations and purchase at a cut rate. But it does so by driving up the prices for those who need the drug for treatment of cancer, epilepsy and chronic medical conditions. “You’re dealing with people who are on the edge of life and death,” Eickmeyer says. “This medicine can make the difference for those people who are on the verge of either being made vegetables by pharmaceuticals or having a life of their own.” The state doesn’t tax prescription medicine – same should apply here, he says.
But that’s the least of the problems. Now that the bill is poised for a vote on the House floor, it has become tangled in an even bigger debate over the way Initative 502 is being implemented, and the way the taxes will be divvied.
A Big-Picture Debate
House Finance Chair Reuven Carlyle, D-Seattle.
Condotta says the medical marijuana bill provides the leverage to strike a deal on the overarching taxation question. That’s an even more important matter, he says. I-502 is supposed to stifle criminal activity by providing a legal conduit for sale. To make that happen, retail stores need to open across the state. Trouble is, the state attorney general’s office has opined that local governments are free to use zoning rules to prevent stores from opening. Thus many jurisdictions have opted to just say no – on the grounds that marijuana remains illegal under federal law.
Bills that would have preempted local authority to block the stores went nowhere in this year’s session. Condotta has been pushing a different approach. He would give local governments a cut of the big tax proceeds that are expected to be generated. If there’s money involved, he says they’ll see the light.
He has an amendment ready to go the moment House Democratic leaders move the bill to the floor, giving cities and counties 10 percent of the tax revenue – but only those that allow the stores to open. Zoning and planning work alone is likely to cost plenty, he says. “Why would anybody play? If this doesn’t pass, frankly I will encourage every city and county in the state to take a hike. Zone it out, shut it out, and come back and say, when you are ready to give us our cut, or at least a little cut, then we will get on the bandwagon. Otherwise take your program and shove it.”
The view from the other side of the chamber is rather dim. Carlyle says there’s no way to tell what additional costs local governments face, so it’s hard to call it a matter of compensation. Meanwhile the state is going to need plenty of cash in what he calls the “post-McCleary era.” Says Carlyle, “I am not philosophically or ideologically opposed to sharing revenue with local governments. I am opposed to sharing revenue with local governments with absolutely zero data, evidence, metrics or facts with respect to the true impact.”
Is This Bill Really Necessary?
The dispute is colored by a bit of that usual well-founded legislative cynicism. If the issue isn’t settled now, Condotta says you can bet every penny in marijuana-tax revenue will be plugged into the state budget somewhere – and there won’t be a chance for local governments to get a dime. “It will already be budgeted before the first gavel falls,” he says. As for the threats from the feds regarding the medical-marijuana biz – he says talk is cheap. The trade has been carried on under a gray area of the law for some 15 years, and a few more months won’t hurt. If there’s no deal, lawmakers can deal with it next session.
Carlyle isn’t convinced a bill has to pass right now, either. Necessary? “The word is subjective,” he says. But he says it would be good to settle the matter to avoid the “substantial risk” that the feds might try to shut down the dispensaries. Meanwhile, state Sen. Ann Rivers, R-La Center, sponsor of the Senate bill, says she is concerned about the impact on patients of the new 25 percent retail tax. “I would rather wait and have a perfect bill that doesn’t hold medical patients hostage – if we can find a way to do that.”
Those in the medical-marijuana trade feel a chill. Just four years ago the U.S. Attorney’s office directed raids on dispensaries throughout Eastern Washington – a measure of their displeasure with Washington’s largely unregulated system. It could easily happen again. “Having no bill puts us at risk from the feds,” Eickmeyer says.
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