Maryland’s recreational cannabis industry inched a step closer to reality Monday as a state Senate committee passed a bill to get the industry up and running this summer.
Senate Bill 516, now closer to a full Senate vote in the coming days, is expected to go through some final changes as lawmakers settle on a plan in the next two weeks to regulate what could be a multibillion-dollar industry.
Under a ballot referendum voters passed with broad support last year, possession of up to 1.5 ounces of cannabis will become legal July 1.
“We need to get something along to the governor,” Senate Finance Committee Chair Melony Griffith told her colleagues, referring to the quick turnaround needed before the annual 90-day session ends April 10.
Lawmakers have mostly stood by an initial plan they introduced in early February to create several phases of the rollout and direct tax revenues mostly to communities disproportionately affected by the war on drugs. That plan would allow current medical cannabis businesses to convert their licenses into new medical and recreational cannabis licenses before July 1.
A round of new licenses — for growers, processors and distributors — would be made available by Jan. 1 specifically for “social equity applicants,” defined as those who have lived in or attended school in an area “disproportionately impacted” by cannabis criminalization.
Another round of licenses would be distributed after May 1, 2024.
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The legislation would allow for standard licenses for up to 300 dispensaries, 100 processors and 75 growers. Smaller “micro” operations would be afforded additional licenses for 200 dispensaries, 100 processors and 100 growers.
Those timelines, numbers and goals are unchanged in the two versions of the legislation now moving through the House and Senate. But lawmakers have proposed changes — from the tax rate on cannabis sales and how that revenue would be distributed to the language that would allow for future “on-site consumption” licenses.
One of the changes included in the version the Senate committee passed Monday would set a tax rate on cannabis products of 9% starting July 1.
The original bill would have started the tax rate at 6% for the fiscal year beginning July 1, then increased it by 1% each year until it reached 10% for fiscal year 2028. That provision remains in House Bill 556, which the House passed earlier this month.
While lawmakers have said they want to keep the tax burden low so consumers don’t buy from unlicensed sellers, Democratic Sen. Ben Kramer of Montgomery County said during the committee meeting that he thought 9% was “at the very low end to begin with.” He proposed allowing local governments to establish additional local sales taxes of up to 3% so they could benefit more from the “significant windfall” expected from cannabis sales. The current bill does not permit extra local taxes.
“It’s placing all of the burden, the entirety of what we’re about to pass, the responsibilities, it’s going to be on the locals and they are getting literally pennies on the dollar,” Kramer said.
Griffith responded by saying discussions dating back years have focused on a desire to keep taxes low.
“The states that have [kept the tax rate higher] have not seen the outcomes that they had hoped for in terms of the move away from the illicit market,” said Griffith, a Prince George’s County Democrat.
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She also pointed to the amended bill’s increase of the share of tax revenue going to local governments. While the original bill called for 1.5% of tax revenues going to county governments, the amended Senate version increased that to 5%. It also increased, from 1.5% to 5%, the amount each for a new Cannabis Public Health Fund and a Cannabis Business Assistance Fund. It further increased the share for a Community Reinvestment and Repair Fund, from 30% to 35%.
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Concerns also lingered Monday over what the Senate and House bills call “on-site consumption” establishments, which some lawmakers have referred to as bars for people to use cannabis.
Such locations would not be allowed until the later stages of legalization, and senators amended the bill Monday to prohibit restaurants from obtaining an on-site consumption license and to ensure the establishments abide by clean air laws.
“All this is creating a huge loophole in the Clean Indoor Air Act that I’m not particularly comfortable with,” said Sen. Clarence Lam, a Howard County Democrat and a doctor, before the committee passed his amendment to require on-site consumption locations abide by that act.
One amendment that came up short, from House Minority Whip Justin Ready, would have allowed businesses that sell hemp-derived products like CBD and delta-8 to continue operations for another year after July 1. Those businesses have said the bill as written would outlaw their products because of a cap on products that contain even a small amount of THC.
“It’s a fairness issue with this industry,” Ready said of the businesses, which have publicly called on legislators to help them.
The Carroll County Republican’s amendment failed narrowly, 4 to 5.