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The NYS Cannabis Budget: A Closer Look

2022 marks a momentous year for cannabis in New York State. Last spring, the landmark Marihuana Regulation and Taxation Act (MRTA) was signed into law, so 2022 is all about policy development and implementation under this new enabling statute. And with implementation comes costs. Until the annual adult-use market is both fully licensed and fully operational, the state will not be able to fully realize the potential tax revenue from recreational cannabis sales—tax revenue intended, in part, to cover the costs of program administration. Necessarily, that means that the state will have to fund—at least initially—some of the implementation itself, through traditional mechanisms such as the General Fund, bonding, or come up with other creative methods for doing so.

The natural place to start when it comes to public funding at the state level, is the executive budget. On January 18, 2022, Governor Hochul’s proposed budget for Fiscal Year 2022-23 was announced and formally introduced to the state legislature via a series of related bills pursuant to regular legislative procedure. In this budget, “cannabis management” as a line item is set to receive $46,000,000 for the upcoming fiscal year, running from April 1, 2022 through March 31, 2023. According to the Executive Budget Briefing Book, such funding for the Office of Cannabis Management (“OCM”), “is responsible for developing a comprehensive regulatory structure to monitor and control the cultivation, processing, manufacturing, distribution, transportation, and sale of cannabis in New York State.”

Detailed line items breaking down such funding were not including in the State Operations Budget bill. However, according to a budget request submitted by the Division of Alcoholic Beverage Control, the state agency which houses the OCM, general fund appropriations to the OCM include funding for the recruitment and retainment of 208 Full time Employees (“FTEs”) to aid in both the development and enforcement of regulations and related policy for the states various cannabis programs.

The briefing book also includes projected tax revenues for the next several fiscal years particular to cannabis. The book estimates the projected revenue for FY2023 to be $56,000,000.

In addition to the State Operations Budget bill, discussed above, there is also the Aid to Localities bill. Under such legislation, Cornell University is set to receive $250,000 for cannabis-focused workforce development. The money is specifically allocated to support the Cannabis Workforce Initiative at the Cornell University School of Industrial and Labor Relations. The “cannabis management program” is also set to receive $50,000,000 under this bill for a social equity funding plan approved by the Dormitory Authority of the State of New York (DASNY). Presumably, such funding is seed money for the $200,000,000 public-private social equity fund initially announced by Governor Hochul in her inaugural State of the State address on January 5, 2022.

Board Chairwoman Tremaine Wright and Member Reuben McDaniel, also the CEO and President DASNY, spoke on the creation and nature of the fund at the last meeting of the Cannabis Control Board (“CCB”) held on January 25, 2022.

Wright made some general remarks on the intent and nature of the fund, stating: “I’m thrilled that the Governor’s Executive Budget includes the creation of the New York Social Equity Cannabis Investment Fund with a public/private partnership. The funds will grow to $200 million and provide capital funding to eligible equity applicants for communities impacted by disproportionate policing during decades long of cannabis prohibition.”

McDaniel provided further context surrounding the fund: “This will allow us to assist our social equity applicants who are interested in retail licenses have the funding they need for capital improvements to open their facilities in a timely manner. So that as the Board and the staff roll out licenses, we will also be able to help with facilitating the build-out of facilities to execute on those licenses.”

Such funding is a promising start towards both getting the state's adult use licensing and taxation structure up and running as well as providing much needed resources for social equity applicants. That said, such proposed budget legislation is subject to state legislative approval as well as potential debate and amendments. Thus, while it is a good start, such bills still need to pass the legislature prior to being available at the start of the fiscal year in April 2022.

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