SB277: A Mixed Bag Of Bipartisan Provisions For Cannabis Sales, Licensees, And Taxes

SB 277 is set to be heard again by the Senate this morning, before the Committee on Finance, in hopes that it will make its way to the Assembly prior to the conclusion of this session. The convergence of such a mixed bag of provisions doesn’t happen often and can only mean one thing–parties on opposite sides of the aisle want their own provisions bad enough to let the other side’s through.

As introduced by Senator Dallas Harris on March 14, with co-sponsor Senators Edgar Flores, Dina Neal, and Rochelle Nguyen, the bill was initially passed on April 13, but then re-read for a second time and referred to committee on April 17. 74% of opinions submitted on the bill are in support, and 25% stand opposed. Although the bill is being pushed forward with fervor, its contents have many questioning whether it will make its final pass.

While several provisions are fairly neutral in their effect, several more carry weighted implications.

As one of its more neutral provisions, SB 277 would require the Cannabis Compliance Board (CCB), prior to adopting, amending, or repealing any regulation, to consider whether the proposed action would likely have an adverse effect on the environment, and if so, whether it could implement any methods to reduce or eliminate that adverse effect, without imposing economic burdens on licensees. 

It would also remove any retail tax imposed upon medical sales.

A positive provision – for both the industry and its governing body – would be the consolidation of the medical and adult-use programs, where all adult-use cannabis establishments would become “dual-use.” The CCB would be prohibited from issuing any additional medical cannabis licenses, and would not renew those already in existence, except for those licensees which are located in “covered” local governmental jurisdiction – that is, localities which currently prohibit adult-use establishments and only authorize those that operate as medical use.  

There are only a handful of jurisdictions that still restrict adult-use establishments, and it has been a great cause for concern for license-holders within those jurisdictions. Medical use remains a limited market, and such prohibitions have not only hindered the operation of such establishments, but has also limited their profits. SB 277 would allow these licensees to continue operating solely as medical facilities, and should their jurisdictions remove the prohibition, the CCB would allow the licensee to apply to become an adult-use facility.

A less-than neutral provision of the bill seeks to increase the application fees for cannabis establishments, specifically by raising (i) the initial issuance fee for adult-use dispensaries from $20,000 to $50,000, and their renewal fees from $6,600 to $9,215; (ii) the initial issuance fee for adult-use cultivations from $30,000 to $33,000, and their renewal fees from $10,000 to $11,054; (iii) the initial issuance fee for adult-use productions from $10,000 to $13,000, and their renewal fees from $3,300 to $4,414; and finally, (iv) the initial issuance of adult-use testing labs from $15,000 to $20,000, and their renewal fees from $5,000 to $8,000.

The bill would allow a retail facility to have more than one entrance, so long as each entrance remains secure, and, here comes what could be considered a rather controversial provision:  it would remove the statutory requirement that an adult-use dispensary cannot sell a consumer more than one ounce of cannabis at a time. Upon passage of the bill, a person over the age of 21 years would legally be authorized to possess, at any one time, 2 ½ oz of cannabis, and ¼ oz of concentrated cannabis.

While the jury might be split on allowing such amounts, all are lying in wait to see what comes of the final provision included in this bill: eliminating a requirement that has been included since the beginning of the cannabis program in 2014 – a person applying to become a cannabis establishment agent shall not have been convicted of an excluded felony offense, which is to say a conviction that constitutes a category A felony, or convictions for two or more offenses that constitute a felony if committed in this State.

With the CCB becoming considerably more conservative in each passing year, it seems contrary to agenda to now become so liberal with its application requirements.  Do we care if an agent has committed a felony? Should it matter so long as the operation is legal? Or is it still important that we only allow law-abiding citizens to participate in this quasi-legal market?