LITTLE ROCK — Passage of a ballot item to legalize medical marijuana in Arkansas would burden state regulatory agencies with new responsibilities and costs that are estimated to exceed new revenues, Gov. Asa Hutchinson said Tuesday.
The measure’s sponsor said the governor’s concerns are based on a report that was “result-oriented.”
“This is not to cause fear, but it is simply to bring awareness as to the regulatory cost and the budget impact in the event this amendment would pass,” Hutchinson told reporters in a news conference at the Little Rock headquarters of the state Department of Finance and Administration.
Two medical-marijuana proposals were certified for the Nov. 8 ballot, but the Arkansas Supreme Court ruled last week that no votes for Issue 7 are to be counted because supporters did not fully comply with the state’s requirements for the use of paid canvassers.
Issue 6, which remains on the ballot, would require the state Department of Health to create a process for patients or their caregivers to apply for and receive registration cards allowing the patients to obtain medical marijuana with a doctor’s recommendation.
The measure would require the state Alcohol Beverage Control Division of DFA to establish rules for the operation of marijuana dispensaries and cultivation facilities and to inspect the facilities to ensure they comply with the rules.
Issue 6 also would create a five-member commission, with two members appointed by the House Speaker, two by the Senate president pro tem and one by the governor, which would be responsible for licensing dispensaries and cultivation facilities and establishing the rules for issuing registration cards to patients and caregivers.
Marijuana sales would be subject to state and local sales taxes, with state tax revenue being divided between vocational and technical institutes, 50 percent; the state General Revenue Fund, 30 percent; a fund for workforce skills training, 10 percent; the Health Department 5 percent; ABC, 4 percent; and the new commission, 1 percent.
Hutchinson cited a report by DFA and the Health Department estimating that their costs associated with the measure would be between $1.9 million and $2.7 million for DFA and between $2.1 million and $3.1 million for the Health Department, exceeding estimated annual marijuana sales tax revenues of $2.5 million. He said costs to the state would begin immediately, but it could take up to two years for annual revenues to reach $2.5 million
Little Rock lawyer David Couch, the sponsor of Issue 6, said Tuesday, “The data that the DF&A used to come to the conclusions in its report is result-oriented. They ignored the states that were most like Arkansas with the highest per-capita revenue and included states that had limited conditions and were just starting and used the lowest per-capita revenue.”
More than 30 states have legalized medical marijuana, but the report arrives at its estimate of Arkansas’ potential marijuana sales tax revenue by comparing six states: Maine, New Jersey, Nevada, Rhode Island, Illinois and New Mexico. Paul Gehring, chief counsel for DFA, said Thursday the agency contacted financial officials in every state that has legalized medical marijuana and said the six included in the report were the only states that responded.
Couch also said the measure would require that the marijuana program be revenue-neutral and would allow for fees to be imposed if necessary to avoid cost overruns.
State Banking Commissioner Candace Franks said during the news conference that Arkansas banks would be reluctant to deal with marijuana-related businesses because banks are insured by the federal government, and federal law prohibits marijuana sales.
She said President Barack Obama’s administration has provided banks with guidelines for dealing with marijuana-related businesses, but “the Obama administration’s forbearance could end with the swearing in of a new president in January of 2017, leaving participating banks in an exposed and virtually untenable position.”
Couch noted that both Republican Donald Trump and Democrat Hillary Clinton support medical marijuana and said he believes that with most states permitting medical marijuana use, Congress “will be pretty much forced to deal with this.”