November 6, 2020

How Arizona’s cannabis legalization proposition might impact NM

Election Day in New Mexico resulted in a slight expansion of the state’s Senate, and a very slightly reduced, but still large, House Democratic majority. But while New Mexico voters cast their votes on Tuesday, voters in neighboring Arizona voted overwhelmingly to legalize recreational-use cannabis, something the New Mexico Legislature has not been able to pull off, despite years of attempts. 

Arizona may be at least a year away from seeing any significant tax revenue from legalized cannabis, but the proposition included an expungement provision and will allow medical cannabis dispensaries to start selling it for recreational-use by next spring, just as the New Mexico Legislature is set to wrap up their regular legislative session. 

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Whether social and restorative justice or tax revenue is most important seems to be a matter of opinion among proponents and advocates. But most agree that it is imperative that New Mexico lawmakers legalize recreational-use cannabis next year if they want to achieve parity with the neighboring state to the west.  

What’s at stake

In the past several years, legalization efforts have stalled in the Senate, which has been more consevative on many issues, including cannabis. Senate Majority Leader Peter Wirth of Santa Fe said he’s optimistic the Senate seats Democrats picked up on Election Day will help get a cannabis legalization bill to the governor’s desk. 

“No question our landscape has changed internally in the Senate with seven new members and voters having spoken loudly and clearly,” Wirth said. “One of the issues that I’ve been very cognizant about is not losing the opportunity to move forward with recreational cannabis. And I think part of that is tied to our neighboring states, for sure.”

One of the common selling points for legalizing cannabis is not only the tax revenue from New Mexico residents, but the potential to bring in more money from tourism. According to a study released in 2019, Colorado saw a significant increase in tourism revenue in 2018 and the study found that many tourists spent more time in the state because of legal cannabis. But Wirth said there are also missed revenue opportunities when New Mexicans travel to Colorado, where cannabis is legal, and spend money outside the state.  

“We have an opportunity to take advantage of a new industry that can help diversify our economy and bring lots of jobs, especially on our borders,” Wirth said. “So the timing is important, because the longer we wait, the more economic impact we lose as our sister states move forward.” 

Wirth said it’s still too early to say what a legalization bill might look like or who, in the Senate, might sponsor it. But, he said, his goal is to find common ground among proponents and streamline any competing bills into cohesive effort. 

“One of the things that’s very important to me is going to be working to really get the different versions and competing ideas being presented, get folks in the same room, and try and get kind of one plan,” Wirth said.

During the 2020 legislative session, there were two recreational legalization bills, one in the Senate and one in the House, that were nearly identical. But during the 2019 session, a group of Republican Senators offered up their version of a legalization bill that included a provision that would require cannabis to be sold by state-run stores. Eventually a compromise was made between House Democrats and the Senate Republican sponsors and the two bills were combined into the House bill. That legislation failed to make it out of the committee process. 

There are too many variables to try and speculate which lawmakers might vote for legalization next year, including how to tax recreational-use cannabis. But another sticking point for some lawmakers will likely be if a legalization bill will address equity and restorative justice. 

More than just revenue 

Emily Kaltenbach, the director of the Drug Policy Alliance in New Mexico, said the next legislative session is key if lawmakers want to see increased revenue from cannabis. 

“We haven’t missed the opportunity,” Kaltenbach said. “I think in January we do need to kick it into high gear, because otherwise we’re going to continue to see an outflow of dollars from New Mexico that could instead be reinvested back into communities in our own state.”

If New Mexico lawmakers do not approve legalization in 2021, Kaltenbach said, New Mexico would be “years behind Arizona.” Beyond that, Kaltenbach said, the 2022 session will be 30 days and devoted to budget issues, making it even more difficult to pass a comprehensive legalization bill. But she also said rushing a bill through just for the sake of legalizing cannabis without first addressing the legal ramifications from previous drug laws could miss the mark completely. 

“I just caution that we can’t be rash and just pass a simple legalization measure,” she said “It has to be rooted in social justice and equity.”

Kaltenbach said the Drug Policy Alliance would not support a measure to legalize cannabis that doesn’t also address social justice issues like expungements and opportunities in the legal cannabis market for those who were convicted under previous drug laws. 

Rep. Javier Martínez, D-Albuquerque, and Sen. Jacob Candelaria, D-Albuquerque both said similar things when speaking with Growing Forward, a podcast collaboration between NM Political Report and New Mexico PBS. 

Martínez has been at the forefront of legalization efforts in the House and said on the podcast his main goal is to reverse what he said are negative effects of the war on drugs. 

“I’ve seen the impacts of that war as well, particularly in communities of color through incarceration and criminalization,” Martínez said. So, to me it’s important that when we work on legalizing cannabis that social justice is at the forefront of that fight.”

Candelaria, who is a medical cannabis patient said a legalization bill that doesn’t address social issues is a deal breaker. 

“I have no intent on voting for a piece of recreational legalization next session unless it incorporates fully and embraces these very difficult issues and proposes responses,” Candelaria said. 

Another sticking point, especially for existing medical cannabis patients will likely be whether the current medical program will be protected if recreational use of cannabis is legalized. 

Kaltenbach said rushing through legislation without making sure there is enough cannabis for patients could result in patients not being able to get their medicine. 

“I also caution that we don’t want to see what happened in Illinois, where on day one, there was such a rush for products that you ended up having more demand than supply, and that can really hurt the medical patients,” Kaltenbach said. “It’s not a race against Arizona. This is about creating smart and thoughtful legislation and regulation that stands up a new industry that’s responsive to New Mexicans and invests back into the New Mexico communities.”

Still, some say New Mexico may be leaving money on the table without true legalization.  

Where New Mexico stands now

Currently cannabis is only legal in New Mexico for medical use, although non-medical use or possession of small amounts is decriminalized in the state. But since last month, and in response to a court order, the state Department of Health relaxed rules for who can purchase medical cannabis in New Mexico. 

In October, a Santa Fe state district judge ordered DOH to broaden who the department allows to become a reciprocal patient. Those are patients who have already been authorized to use medical cannabis in another state or jurisdiction. In other words, someone with a medical cannabis authorization from another state can become a reciprocal patient in New Mexico. States like California and Oklahoma have fewer restrictions than New Mexico when it comes to becoming a medical cannabis patient. The judge’s October ruling also means New Mexicans who are unable to get a medical cannabis card can apply online for an authorization through California’s medical program. 

Albuquerque-based lawyer Patricia Monaghan specializes in cannabis law. She said some may see the loosening of reciprocity rules as de facto legalization, but she sees it as a “loophole” that only some will take advantage of. 

“I don’t think that many people will do it, because it’s a big hassle,” Monaghan said. “I think the ruling is actually more incentive to motivate the passage of full legalization in the state.”

Monaghan said she thinks the loophole will mostly help would be patients who suffer from symptoms that are not on the state’s list of qualifying conditions like anxiety or ADHD.  She said she tested the process of getting a medical cannabis authorization through California’s medical program. 

“I found a website, and you go on there, and within 15 minutes, you are talking to a doctor in California, and they are emailing you your California authorization for $40,” Monaghan said. I mean, it is amazing.”

Currently the only taxes associated with medical cannabis sales are gross receipts taxes, which varies between counties and municipalities, but is roughly between five and 10 percent. But there is a pending state Supreme Court case over whether medical cannabis is exempt from gross receipts taxes. If the high court decides to hear the case and rules that medical cannabis sales should not be taxed, the little revenue the state sees may disappear. 

But economist Kelly O’Donnell told NM Political Report said New Mexico could see $100 million in tax revenue in the first year of legalization. 

She said expanding reciprocity or loosening requirements for getting a medical cannabis authorization is really just a “slight broadening of eligibility for New Mexico’s medical cannabis program.”

“That’s not legalization by any stretch of the imagination,” O’Donnell said. 

In order for the entire state to see a benefit from cannabis, she said, there needs to be some sort of tax revenue.  

“I guess the take-home message would be that if you are considering a legal market for recreational cannabis on the grounds of revenue, then simply loosening the rules for medical cannabis is not going to get you there,” O’Donnell said. “You really do need a recreational cannabis law that includes a pretty substantial path, otherwise, you’re not going to get the benefit of legalization.”