How soon? Who’s in charge? How high will taxes be? How will criminal records be expunged? MinnPost’s guide to the marijuana legalization bill being considered at the Legislature in 2023 answers these questions and more.
By Peter Callaghan | Staff Writer
The bill legalizing marijuana in Minnesota is 243 pages plus appendices.
While it relies on a dozen existing state agencies, it also creates a new one with sweeping authority and perhaps unrealizable marching orders.
It would make Minnesota the 22nd state to go down this path since the first ones acted a decade ago.
And, according to its sponsors, it is likely to pass before this Legislature adjourns in May.
It is House File 100 and here is a walk-through of its provisions as introduced earlier this month.
When could the program take effect?
That is the most-asked question from those interested in Minnesota joining the other states that permit the growth and sale of marijuana products for other than medical marijuana purposes? The answer isn’t as definitive as people might wish.
First, it depends on when it passes, if it passes. Most sections of House File 100 take effect on July 1 of this year. That is when a new state agency could be formed, officials appointed, the rules-writing process could begin. But former state Rep. Ryan Winkler, the prime sponsor of the 2021 bill that this is patterned after, said he thinks it will take a minimum of 12 months for all that to take place. Minimum.
Then there is the growing season. Producers would have to be licensed before they could begin growing a crop that takes up to nine months to mature. Processing, inspection, testing and distribution would follow.
Sometime in 2025 is when the products would likely be available, Winkler said during a Wednesday briefing conducted by bill drafters. There is a possibility, he said Friday, that the supply could be advanced by allowing the two existing medical marijuana growers to provide product for the recreational market in the period between when final rules are drafted and new growers could produce a crop.
Gov. Tim Walz, a supporter, said he has told the agencies that would have a role in the new legal system to be prepared to move quickly. That would include the Department of Agriculture, Department of Employment and Economic Development and the Department of Public Safety. In all, 13 different existing agencies have a piece of the program.
The bill incorporates the existing hemp-based edibles program put in place last summer. The bill envisions a shorter time-period for rules and licenses governing such “low-dose” products that would likely mean they would be available — under a more-stringent regulatory scheme — well before that.
The bill sets the same age limit as the hemp-based edibles law — 21 — though some opponents of the bill testified that it should be at least 25 because of the way young brains develop and mature.
Regulation and administration
Drafters of the bill want to create a new state agency called the Office of Cannabis Management. It would not only oversee the new recreational marijuana program but take over the existing medical cannabis program from the Department of Health and the hemp-based edibles regulation — what there is of it — from the state Board of Pharmacy.
This agency would draft the rules that would govern licensing, regulation and enforcement. It would set potency standards and limits, work with other agencies and a cannabis advisory board to implement and oversee the program. It would determine how much supply and how many suppliers are enough. It would prepare reports for the Legislature.
It is a big job, one led by an appointee by the governor who would then hire staff and negotiate contracts and agreements. Of the $100 million in appropriations for the first two years, this agency would get $15 million. All this is one reason why Winkler thinks it would take a year.
There are 14 different license types covering growing, processing, retail sales, testing, events, even delivery services.
Taxes and licenses
A fundamental tenet of backers is to keep the taxation and fees low. One-time application fees of $250 would not be followed up with annual renewal payments. The taxes would be among the lowest in the country: 8 percent on top of the current retail sales tax. It would barely raise enough money to cover the costs of the program and therefore not raise money for other areas of state government.
The low license fees won’t provide enough upfront money for the state to set up regulation, so the state’s general fund would have to cover it. One estimate puts the cost to get up and running at $60 million.
The point is two-fold: They want a system where people of different levels of wealth or investment can take part, and they want prices to starve the illegal market as much as possible. One of the new agency’s mandates is to “eliminate the illicit market for cannabis flower and cannabinoid products.” That’s a tall order, not accomplished in the other recreational states, but it is a goal that explains the low taxation.
HF 100 would allow residents over the age of 21 to grow their own marijuana in their home or yard that is not accessible to the public but limits the number of plants to eight and the number of flowering plants to four. They can possess no more than five pounds of flower in their homes and transport no more than two ounces in public. The limits are different for concentrates and edibles.
It also allows people who grow their own marijuana to give — but not sell — no more than two ounces to other people.
As with all marijuana under the law — homegrown or store-bought — people would be allowed to use in their home or yard, on private property not accessible to the public and at specifically licensed events or businesses.
They can’t consume marijuana in cars, schools or prisons or anyplace where smoking of tobacco is not allowed.
Well, there isn’t much and that has upset cities and counties across the state. The bill specifically says local governments can’t regulate or tax the new industry. They especially can’t ban it from their jurisdictions.
Sponsors fear that every city that bans or restricts the new business will create pockets where illegal providers can thrive, said Rep. Zack Stephenson, DFL-Coon Rapids. And any additional costs from local rules and local taxes could do the same.
It does allow so-called time, place and manner regulation such as hours of operation and restrictions on locations near schools, churches, day cares or nursing homes. That’s not enough, local officials argue.
“Metro Cities supports cities maintaining the authority to license adult-use cannabis retailers, including the authority of cities to opt out of authorizing the sale of products in their local jurisdiction,” wrote the organization representing cities in the seven-county metro area. “Local licensing and regulation are vital in managing local enforcement of state laws, and for the provision of public safety.”
The bill does, however, attempt to tip the market toward state-based and smaller businesses. Businesses must be at least 75 percent controlled by residents of Minnesota. That has been questioned by one of the two current medical marijuana providers in the state as a possible violation of the interstate commerce clause of the U.S. Constitution, but that challenge itself is problematic in that the federal government considers marijuana an illegal drug and its growing, sale and use illegal.
Since there is no importation of cannabis allowed under HF 100, all farming and processing would be in-state. While there are situations where a single entity could have more than one of the 14 licenses, it is limited.
The only situation where you can have full vertical integration is in the case of a micro business,” said Leili Fatehi, a lawyer and lobbyist who helped draft the bill. Similar to a craft brewery, microbusiness licenses allow the growing, process and sale of cannabis products by a single operator, though the size of such businesses is limited.
Under the bill, employers cannot require applicants to submit to testing for marijuana as a condition of employment, though there are exceptions for when such testing is required by other state or federal laws. In addition, an employer cannot require random testing of workers.
Employers would be allowed to require testing when they have suspicion that an employee does not possess “clearness of intellect and control of self the employee otherwise would have” or has “violated written work rules prohibiting cannabis use, possession, impairment, sale, or transfer” of cannabis. Testing is also allowed if a worker sustained an injury at work or caused a work-related accident.
The new law would sunset the existing medical program and incorporate it in the new Office of Cannabis Management. The current law governing the medical program is mostly contained in the bill, but it would not continue the system where two companies — LeafLine and Green Goods — are contracted to grow marijuana, produce tinctures, vapes and flower containing THC and sell them to patients approved for the program. Their contracts would expire July 1, 2024.
Such vertical integration — growing, processing, distributing and selling cannabis by one company — is mostly disallowed by the new bill in order to keep big players from dominating the market. Those companies could apply to take part in the new system at one level or the other — growing and processes or retailing — but not all three. The bill prohibits out-of-state ownership, which would preclude the new owners of the two medical marijuana providers as presently incorporated. A letter from LeafLine to the House Commerce Committee said the company believes that would be unconstitutional.
“While we appreciate the intent to ensure state residents receive the bulk of the economic benefits of the legalized cannabis industry, the residency requirement is legally invalid because it runs afoul of the dormant Commerce Clause of the U.S. Constitution,” wrote Dina Rollman, the company’s senior vice president of government affairs.
Instead, patients with authority would purchase their marijuana from the new retailers licensed under the new bill.
Losing a two-company monopoly was fine with the patients who testified at a hearing last week. Patrick McClellan, who lives with muscular dystrophy and was an early advocate for medical marijuana, said the lack of competition has kept prices high. Even the legalization of flower that can be smoked — a move he said the two companies promised would lower costs because of the reduced processing needed — has not had a pricing effect.
Only more supply and more entrants in the market would do that, he said.
There is concern, however, that there would be a gap between when the two companies are shut down and when the same products can be found elsewhere. Extending the two companies’ contracts might be needed, sponsors say. The bill envisions a brief exception to restrictions on vertical integration — one company controlling all aspects of the business — to assure supply.
Finally, the current bill does not provide for access to medical marijuana on behalf of children with seizure disorders, something medical marijuana advocates have asked be remedied.
The bill seeks to clear the records of people convicted of acts that would no longer be illegal. Some lower offenses — non-felony offenses — would be automatically expunged. The state would review records and notify the courts and law enforcement of the expungement that would be ordered by the courts.
Felony offenses would be processed by a new Cannabis Expungement Board with membership to include the chief justice of the Minnesota Supreme Court, the attorney general, various state agency heads, a public defender and a member of the public. The board would review records and determine if the offense would now be a lesser offense or not a crime at all.
Backers estimate there could be 50,000 residents who would benefit from expungement.
These expungements would not be permitted if the offense involved a dangerous weapon, the intent to inflict bodily harm or the intent to cause fear or death.
The bill keeps the current system but moves enforcement from the Minnesota Board of Pharmacy to the new Office of Cannabis Management. It also allows for temporary regulation so the existing market can stay in place while permanent rules are drafted. It creates low-potency licensing for those products.
Sponsors think the hemp edibles and beverage market will evolve with the availability of cannabis. For example, it will be cheaper to make products with cannabis because there isn’t a need to artificially extract the intoxicating compounds. But because hemp products are legal under federal law, they do not face the importation and banking restrictions that cannabis does.
That said, the businesses selling hemp edibles and beverages now will need to be licensed and collect the new taxes.
Another founding principle of the bill is to make sure people and communities that suffered the most from the prohibition of cannabis be allowed to benefit from the legality of it. The bill uses the term “social equity” 41 times. Many of the licenses are aimed at low-cost and ease of entry. And the bill has a series of programs designed to train people about the business and provide grants to help them start businesses. Because marijuana is still illegal under federal law, many banks are fearful that they could be charged with crimes if they loaned money or handled accounts for these businesses.
A division of social equity would be set up in the Office of Cannabis Management that “promotes development, stability, and safety in communities that have experienced a disproportionate, negative impact from cannabis prohibition.”
Social equity applicants receive advantages in licenses and grants. They are defined as veterans, residents of areas with a history of high law enforcement of cannabis related crimes, and residents of areas with high levels of poverty.
Editor’s Note: Peter Callaghan wrote this story. It originally was posted Jan. 17 on MinnPost.com.
Callaghan covers the state government for MinnPost.
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