Rhode Island Gov. Gina Raimondo released her proposed budget for 2021 yesterday. Apparently, she's counting on the state to legalize recreational marijuana—and run all the pot shops—to make the numbers work.
Rhode Island has legalized medical marijuana use but not recreational sales or consumption. The Democratic governor is pushing for full legalization, with an eye on the sweet, sweet cash she thinks it'll bring. To that end, Raimondo wants the state to run all the stores and get most of the revenue.
Here's what's in the summary of her budget plan:
The FY 2021 budget includes the legalization of adult use marijuana. This legalization takes the form of a state-control model, similar to how liquor sales are regulated in New Hampshire and over a dozen states. The state would hire a contractor to acquire adult use marijuana and operate retail stores on the state's behalf. This regulatory approach will allow the state to control distribution, prevent youth consumption, and protect public health. Similar to the state lottery and gaming, the state will receive a share of retail sales revenue net of the wholesale cost of marijuana products. The state share is 61 percent, while the contractor would receive 29 percent, and municipalities would receive 10 percent. Regulatory and public health expenditures would be appropriated out of the state share of revenue. Net of those expenditures, the general revenue transfer from adult use marijuana is expected to be $21.8 million in FY 2020.
Fully ending Rhode Island's war on weed would be good news, but Raimondo needs to pay attention to the problems that will arise when you depend on marijuana revenue to balance your budget—and the bad consequences that have come from state-run shops.
Seven states directly own all the liquor shops within their boundaries: Utah, Virginia, New Hampshire, Pennsylvania, North Carolina, Idaho, and Alabama. This monopoly arrangement leads to higher prices and poorer choices, not to mention no small amount of consumer hassle. And with marijuana, the problems will be worse.
Giving the state a monopoly is a way to make sure it gets a share of the revenue. But marijuana is not like hard liquor: It's much easier to manufacture and to sell on the black market in large quantities. Rather than looking at New Hampshire, Raimondo really needs to be looking to places like Canada and California.
In Canada, the government doesn't run all the shops, but it does serve as the monopoly wholesale vendor to retailers and the sole online vendor. The rollout of this system was a mess, causing the province of Ontario to actually lose $42 million last year. The government was not prepared to meet the demand for marijuana; there were shortages and any number of bureaucratic problems. And after I wrote about Canada's problems last year, a few marijuana smokers contacted me to tell me that the quality of pot the state-run wholesalers were distributing was not terribly good.
California should serve as a warning for any governor who casually assumed she can balance a budget with new revenue from marijuana sales. The government there burdened the fledgling pot industry with taxes and regulations, in part to get the money flowing to city and state coffers. The state expected it would get $1 billion in revenue from legal sales from fiscal year 2018–19. Instead it brought in just $288 million. Because of the high taxes and the oppressive bureaucratic environment, three-quarters of all California marijuana sales still take place in the black market or from retailers who aren't properly licensed.
Marijuana Moment notes that Raimondo's plan would permit adults to purchase only one ounce of marijuana per visit and would forbid home cultivation. This is not a recipe for ending the drug war. This is a recipe to profit from regulating purchases of a drug that will otherwise still be forbidden.
Rhode Island should legalize marijuana sales, but it shouldn't attempt to run its own stores. That's not a path for eliminating the black market for weed or for reducing the bad effects of the drug war. And it's most certainly not going to fix a state's revenue or debt problems.