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Delaware set to debate marijuana legalization again

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A recent report from State Auditor Kathy McGuiness estimated that the annual sales of recreational marijuana could top $200 million in Delaware, leading to a potentially lucrative tax stream. | PHOTO COURTESY OF BUDDING/UNSPLASH

DOVER – As the Delaware General Assembly returns to their legislative work in March, one of the most persistent issues in recent years is expected to return once again: legalization of marijuana.

Although the narcotic continues to maintain an illegal federal status, a growing number of states have chosen to legalize its use, citing public acceptance, tax revenue potential, and a history of disproportionate criminal enforcement among races, among other factors.

New Jersey’s move to legalization, approved by a majority of voters in November and signed by Gov. Phil Murphy in February, is likely to put pressure on Delaware to finally consider the measure as well.

Rep. Ed Osienski

plans to file a new bill on legalized sale to adults in March, restarting the debate that has yet to clear the statehouse in recent years. With a new wave of Democratic legislators elected last year and the creeping risk of falling behind neighboring states on the issue – both the Maryland and Virginia legislatures are considering legalization this year – Osienski believes he may have the votes to pass the bill this year, and even potentially overturn a veto from Gov. John Carney who has not endorsed the idea in the past.

“I think [other states’ move] will help convince some of my colleagues who have been on the fence that now may be the time to get this passed. That’s my hope, at least,” Osienski said.

The economic argument

Proponents of legalization are increasingly pointing to the economic benefit of taxed sales of the drug, as the state already does with alcohol and tobacco. Supportive legislators got a boost from a January report from State Auditor Kathy McGuiness that concluded Delaware could reap $43 million in revenue off retail marijuana sales.

“Inaction doesn’t reward us with curbed usage but will prevent us from realizing economic benefits and the $43 million that could be available if Delaware were to devise a responsible regulatory framework. It’s time to legalize it,” McGuiness wrote in her report.

Her office’s analysis, utilizing prior admissions for adult marijuana usage in federal health surveys, concluded that Delaware possessed an annual market of about $215 million in sales. That figure may even be too low, considering the likelihood of survey participants being truthful about their use.

While McGuiness factored an excise tax of 20% on sales, Osienski is proposing a 15% tax, meaning the potential estimated revenue would be closer to $32 million by McGuiness’s math.

The state auditor also estimated that the industry could grow to create upward of 1,400 jobs over five years in Delaware.

Osienski’s bill will recommend the creation of upward of 125 licenses for recreational marijuana sale, production and processing. He noted that it could create at least 1,000 at typical staffing levels, which produces more personal income tax revenue and trickle-down spending in the local economy as well.

While some states have earmarked revenue from marijuana sales to support a budgetary need like education, Osienski said he wants to avoid earmarks and return the money to the state’s General Fund.

“There’s always some good proposals out there for programs that need funding, and I encourage them to go through the typical legislative process and get those proposals approved,” he said.

Lessons learned

When legislators last debated legalization in 2019, one of the themes proponents warned them of was the potential for Big Marijuana, or national companies often publicly traded or backed by Wall Street hedge funds, to take over the market.

To counteract that threat, Osienski intends to propose earmarking some of the licenses for microbusinesses, which would require the majority owner to be a state resident, and others for social equity, or owned and operated by a minority applicant.

“We’re going to make sure there’s an opportunity and some help for those communities that have been mostly impacted by past marijuana laws so that they have the opportunities to get into the industry,” he said.

Two years ago, Osienski also proposed allowing Delaware’s currently licensed medical marijuana dispensaries to sell to recreational buyers after the market opened. That proposal drew pushback from the state’s medical marijuana patients, who testified that the current supply was already strained.

Now Osienski will propose that new licenses be issued specifically for recreational sale, forcing the state’s medical marijuana suppliers to reapply for new licenses if they want to reach the broader market. The legislator added that he has received support from the Delaware Division of Alcohol and Tobacco Enforcement to police future recreational dispensaries, while the Delaware Office of Medical Marijuana, a health department subsidiary, continues to police medical dispensaries.

Even if Osienski’s bill is passed by the legislature this year, legal marijuana sale in Delaware likely won’t start for at least a year. It designates that a commissioner and an oversight committee be appointed to determine the state’s regulatory framework.

While similar processes have led to lengthy delays in other states that have already legalized, Osienski said that he is proposing a timetable that would ensure the process isn’t dragged out.

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