Almost a year after Gov. Phil Murphy took office promising to legalize adult recreational cannabis use, the state Legislature is planning to take up the issue today in both the Senate and the Assembly.
Lawmakers have released a proposed bill that covers issues from taxes, requirements for retail, wholesale and distribution, conditions for locations and persons eligible for licensure, the role of law enforcement and even specifications for marketing. The 152-page document is called the “New Jersey Cannabis Regulatory and Expungement Aid Modernization Act.” Committees are expected to hear testimony and vote on it as early as this afternoon.
The bill (S-2703) has been amended since its first introduction and finally been released after months of closed-door negotiations. The legislation in the Senate is sponsored by Senate President Steve Sweeney (D-Gloucester) and Sen. Nicholas Scutari (D-Union). In the Assembly, it is A-4497 sponsored by Assembly members Annette Quijano (D-Union), Jamel Holley (D-Union) and Britnee Timberlake (D-Essex). Another bill in the Assembly (A-4498) would deal with expungements of related criminal records in more detail.
The reasons for the legalization of cannabis, according to the bill, are principally to “strike a blow at the illegal enterprises that profit from New Jersey’s current, unregulated illegal market” and also to use the tax revenue generated “to bolster effective, evidence-based drug treatment and education, and to reinvest in New Jersey communities.”
“New Jersey cannot afford to sacrifice its public safety and civil rights by continuing its ineffective and wasteful past marijuana enforcement policies,” the text of the bill reads.
Priority for Democrats
Legalizing adult-use cannabis has been a priority for Democrats during this legislative session as they were unable to make any headway under former Gov. Chris Christie, a Republican. They’ve cited data showing cannabis arrests cause extensive harm to communities of color and that arrests take up significant law-enforcement time and resources in the state.
Indeed, in 2014, New Jersey law-enforcement officers made nearly 25,000 arrests for marijuana possession. That works out to one arrest for marijuana possession approximately every 21 minutes that year. What’s more, black New Jerseyans are nearly three times more likely to be arrested for marijuana possession than white New Jerseyans, despite similar usage rates.
In dollars, New Jersey spends approximately $127 million per year on the enforcement costs of marijuana possession.
The bill contains many controversial provisions, so it is unlikely to remain exactly as written. What’s more, although Murphy is very much in support of the legislation, he could change various provisions by conditionally vetoing it, requiring Republicans to join with Democrats to override the governor’s veto.
One ounce or less
The following are some of the major provisions and takeaways of the bill:
It removes reference to “marijuana” and instead replaces it with the scientific name “cannabis.” No explanation for this change is given, but advocates have been pushing for it.
It would legalize adult possession or use of one ounce or less (28.38 grams) and asserts that cannabis will be regulated like “alcohol for adults.”
Individuals must be 21 or older to consume, purchase, or participate in the market at any level — with exceptions for minors in the medicinal program and those assisting law enforcement in workplace investigations.
Tax rate: 12 percent? 25 percent?
There would be a 12 percent tax, although Murphy has suggested he’s open to a tax rate as high as 25 percent. Sweeney says he won’t go higher than 12 percent — he previously advocated for 10 percent. Medicinal marijuana would remain untaxed.
There would also be a bonus 2 percent excise tax raised for towns which allow cannabis businesses to operate within their borders. Localities have long asserted that 2 percent is not nearly enough of a windfall for them.
The bill also includes skeleton expungement language for those previously convicted of marijuana possession and who have criminal records as a result. Sweeney has said he expects a separate piece of legislation will deal with expungement in more detail. As written, S-2703 would require the creation of an electronic filing system and mandate expedited expungements for those with low-level possession records.
Cannabis delivery services would also be permitted under this new bill and not just for medicinal use. That means companies like Eaze and other third-party tech platforms would be able to receive, process, and fulfill orders. However, those deliveries would need to be made in person by a state-certified “cannabis handler.” Those handlers would also be required to maintain a log of their deliveries.
Cannabis dispensaries (retailers) will be allowed to develop “consumption areas” for cannabis use on the premises (both indoor and outdoor) if they obtain permission from both the state and local governing body. Smoking or consuming cannabis products in public spaces would still be prohibited, though it may be permitted in hotels in up to 20 percent of their guest rooms.
Four classes of license
Four classes of license would be available under the new bill: Wholesaler (sells to retail), processor (processes cannabis products and sells to wholesalers or retailers but not to consumers), retailer (sells to consumer), and grower/cultivator.
Companies could hold more than one of these licenses at a time.
The legislation does not enumerate a specific quantity of licenses that would be made available. Rather, retailer licenses would be given “to meet the market demands of the State, and regard to geographical and population distribution.”
The bill also sets a requirement for 10 percent of all licenses to go to “micro-businesses,” giving small-business owners equal access to the industry as larger monied interests from out of state.
New in this version of the bill is the requirement that applicants seeking to be a licensed cannabis business in the state must sign an agreement they will hire workers represented by labor unions. Micro-business owners would be subject to exceptions from this rule.
Applications for licenses would also be ranked, with each application scored and reviewed based upon a to-be-determined point scale. Points would be awarded on the following basis: whether the applicant is part of a collective bargaining agreement with a labor organization representing cannabis workers (in New Jersey or another state), whether the applicant is a current resident of an impact zone or has presented a plan to employ a select number of employees who reside in an impact zone. The reason for this latter segment is, according to the bill, to account for areas “for which past criminal marijuana enterprises contributed to higher concentrations of law enforcement activity, unemployment, and poverty.”
Impact zones, to be identified, would be the first geographic areas in which cannabis businesses are located. Zones must have a population of 120,000 or more, or they must have a high crime index as measured by the State Police, an annual average unemployment rate of 15 percent and rank in the top 33 percent for cannabis- or hashish-related arrests, the bill said.
Using census data for population, Elizabeth, Jersey City, Newark and Paterson would be eligible for the impact zone prioritization.
Licensees would also be subject to a background check of their criminal history. However, the newly established commission to oversee the industry would not be able to reject a proposal due to any prior conviction involving a controlled dangerous substance or cannabis-related indictment. These checks would primarily be used to prevent “fraud, deceit, or embezzlement” or “employing a minor in a drug distribution scheme.”
To qualify as a micro-business, an applicant would need to employ no more than 10 employees, operate a cannabis establishment that covered no more than 2,500 square feet, and possess no more than 1,000 cannabis plants each month among other quantity restrictions.
Cannabis Regulatory Commission
The bill would establish a “Cannabis Regulatory Commission” to monitor the industry. It would be “in but not of the Department of the Treasury,” meaning it would be affiliated but independent of the department. The commission would be led by five members appointed between the governor and the Legislature. It would also be tasked with overseeing an “Office of Minority, Disabled Veterans, and Women Cannabis Business Development” to promote representation in the industry from such communities.
The chair and the other members would serve, full-time, for five-year terms and receive an annual salary established by the governor, which for the chair would be no more than $141,000, and for the other members no more than $125,000. No member of the commission would be permitted to have a conflict of interest with any cannabis grower, processor, wholesaler, or retailer.
At least one member of the commission would have to be a representative of a national organization “with a stated mission of studying, advocating, or adjudicating against minority historical oppression, past and present discrimination, unemployment, poverty and income inequality, and other forms of social injustice or inequality.”
According to the bill, the commission would produce biannual reports to be sent to the governor and Legislature regarding its regulation and enforcement actions.
New Jersey would also most likely be the source for much academic research on legalization as the commission’s report would have to include: the number of criminal arrests or charges for obtaining or possessing, manufacturing, and distributing cannabis; the number of motor vehicle stops by law enforcement for driving under the influence of cannabis; the total number of personal-use cannabis licenses; data about those participating in the industry from socially and economically disadvantaged communities, and the total amount of tax revenue generated by the excise and sales tax on personal-use cannabis collected by the state — all cataloged by race, ethnicity, gender, and age.
The legislation also calls for the designation by the governor of a public research university to review the commission and make those findings available to the governor and Legislature.
Expunging old records
Though the expungement portion of the “New Jersey Cannabis Regulatory and Expungement Aid Modernization Act” may be detailed in forthcoming legislation, the legislation itself would require the Administrative Office of the Courts to create an electronic filing system for expedited expungements for those with low-level cannabis convictions within six months of the bill’s enactment. The expungements would be provided free of charge, and the Judiciary Ombudsman would be required to submit the expungement petition to the appropriate court and provide assistance to those who need it.
That could be more than 280,000 people, according to ACLU data.
The legislation also calls for a public information campaign — in both Spanish and English — to alert communities to the availability of expedited expungements. This was a major pressure point for individuals like Akil Roper, chief counsel of re-entry at Legal Services of New Jersey (LSNJ), who noted in a previous interview that the time and effort required to get the public up to speed with expungement processes can be onerous and prohibitive.
Money, money, money
The tax revenue generated by sales of legalized cannabis, except for the 2 percent excise tax revenue collected by a local governmental entity, would be collected by the Director of the Division of Taxation and deposited into a new “Cannabis Regulatory and Expungement Aid Modernization Fund.”
The bill also requires all growers and processors to report their inventory — including cannabis flowers, leaves, and young plants — to the commission and the Division of Taxation.
This money would go toward funding the commission’s operations as well as defraying costs for those seeking expedited expungements. Anything remaining would be deposited in the state’s general fund.
The bill language estimates that “hundreds of millions of dollars” will be generated by adult-use legalization. A report by New Jersey Policy Perspective released in March estimated $300 million would return to the state in revenue — assuming the state taxed it at the governor’s preferred 25 percent. If taxed at 12 percent, as proposed by Sweeney, that amount would presumably be significantly less.
And if the tax rate ended up at 12 percent, the 2 percent excise for localities would only garner a fraction of that.
What’s in it for municipalities?
Local leaders have made their distaste for the 2 percent excise tax no secret. They’ve argued that 5 percent would do more to cover the costs required to implement and enforce legalization in their cities and towns, but Sweeney has come out firmly in favor of the 2 percent.
However, the bill states that for two years following the effective date of the legislation, the Police Training Commission in the Department of Law and Public Safety would be required to reimburse the expenses incurred by any county or municipality for the training costs associated with the attendance and participation of a police officer from its law enforcement unit. Those reimbursement funds would go into a designated “Law Enforcement Officers Training and Equipment Fund” for each municipality.
Not all cannabis possession or use would be legalized, so police will still have responsibility for controlling it. Under-age use, driving under the influence, black market distribution, and possession of more than one ounce would still be illegal.
Despite their lack of control over how much revenue they’ll receive, local governments would be able to enact ordinances prohibiting cannabis establishments from operating within their jurisdictions.
Rules about packaging and advertising
The legislation also lays out requirements for packaging and advertising, addressing the fears of many New Jerseyans that cannabis would be easily accessible (or even marketed) to children.
Under the bill, regulation would prevent marketing of cannabis items and paraphernalia to people under the legal age to purchase the drug. Under those restrictions, packaging would be prohibited from featuring false statements, promoting overconsumption, depicting anyone under the legal age consuming cannabis, or including objects like toys, characters, or cartoons.
What’s more, no licensed cannabis establishment would be permitted to advertise any cannabis items or paraphernalia on television or radio between the hours of 6 a.m. and 10 p.m. and they could not engage in advertising unless the business had “reliable evidence that at least 71.6 percent of the audience for the advertisement is reasonably expected to be 21 years of age or older.” No cannabis-related business would be permitted to advertise within 200 feet of an elementary or secondary school grounds.
Cannabis containers would need to be child-resistant and include warning labels. Those labels would have to include information like the amount of THC (the psychoactive component of cannabis), serving size, weight, strain, growth method (whether it is organic or not) and a list of all pesticides, fungicides and herbicides used during the cultivation of the cannabis.
The bill goes as far as to set a “standardized serving of cannabis products” at no more than 10 milligrams of active THC (no more than 100 milligrams of active THC for edibles).
The arguments against
Though the legislation proposed is among the most comprehensive of all legalization texts in the nation, not everyone is sold on the idea.
Sen. Gerald Cardinale (R-Bergen) said he plans to testify in opposition, writing in a statement ahead of the hearing: “While I intend to offer testimony to the Budget Committee on Monday, in the time I will be allotted, I can only scratch the surface.” Cardinale wrote that “our challenge is to educate our colleagues and our constituents on the risks of legalization and shed light on the certain unintended consequences it will have on our children and our culture.”
He noted that there is much research still to be done on cannabis use and mentioned an increase in reported instances of intoxicated driving and cannabis-use disorder or addiction, both of which would require significant resources from state and local governments to ameliorate.
Businesses in the state are also concerned that not enough is being done to address potential cannabis use in the workplace.
“Legalization is more than a social issue; it could have real impacts on the workplace, including the safety of workers,” New Jersey Business & Industry Association vice president Mike Wallace said in a statement. “Specifically, we are asking that any law making marijuana legal for recreational adult use or expanding the State’s medical marijuana program also give employers the right to prohibit employees from using it in the workplace or coming to work under the influence of it.”
The state Senate and Assembly budget committees are scheduled to meet at 10 a.m. today to debate and vote on the legalization bill. As discussions are ongoing between the Legislature and governor, it is highly likely more changes will be made before anything is signed into law.