Retail sales of recreational marijuana would begin in Virginia on Jan. 1, 2023, under legislation authored by Gov. Ralph Northam’s administration, which in addition to ending the state’s prohibition on the drug would expunge many past criminal convictions and create a state fund to help people arrested for marijuana crimes start legal businesses.
Northam came out in favor of legalization late last year and his bill, first made public Wednesday, represents a starting point for what’s expected to be a long debate during the legislative session that begins this week.
“Marijuana prohibition has historically been based in discrimination and the impact of criminalization laws have disproportionately harmed minorities in low income communities as a result,” said Sen. Louise Lucas, D-Portsmouth, who is carrying the legislation in the Senate with Sen. Adam Ebbin, D-Alexandria. “We’re focused on undoing those harms.”
When Northam announced his support for legalization, he said he did not plan to rush the process, citing the experience of regulators in other states. True to his word, his legislation lays out a two-year timetable in which officials would begin drafting regulations and issuing licenses to marijuana businesses before retail sales would begin in 2023.
“We’ve done the research and we can do this the right way,” he said during his State of the Commonwealth address Wednesday night.
Until then, most of the state’s current laws governing the drug would remain in place and the drug, while currently decriminalized, would remain illegal and subject to existing criminal and civil penalties.
The decision is likely to disappoint criminal justice advocates, who have argued for an immediate end to the state’s prohibition, enforcement of which has disproportionately targeted Black Virginians.
Likewise, operators of Virginia’s tightly-controlled medical cannabis dispensaries, have been lobbying for permission to begin recreational sales this year to serve as a stop gap while regulators establish rules and begin a broader licensing process.
However, legislative analysts who studied the issue last year recommended against that approach, arguing early access to the retail market would give medical producers an unfair competitive advantage and, in any case, would be unlikely to meet anticipated demand for the drug.
Taxes and oversight
Northam proposes handing regulatory control of the new marketplace to the Virginia Alcoholic Beverage Control Authority, which would be renamed the Virginia Alcoholic Beverage and Cannabis Control Authority.
But unlike the state’s monopoly on the sales of liquor, in which sales are restricted to state-run retail stores, the authority’s role in the marijuana industry would be limited to developing and enforcing regulations and licensing producers, processers and retailers.
Northam proposed a 21 percent tax rate on retail sales, which, combined with the existing state sales tax and optional three-percent local tax would bring the total potential levy to nearly 30 percent, which the state’s Joint Legislative and Audit Review Commission (JLARC) estimates would bring in $37 million in new tax revenue the first-year sales are legalized, rising to an estimated $183 million in year five.
JLARC found 30 percent is on the high-end of tax rates assessed in other legal states, comparable to Colorado and Illinois but still less than the 36 percent and 47 percent charged in California and Washington, respectively.
The revenue would be divided four ways, with 40 percent going to pre-K programs for low-income families, 30 percent going to social equity programs, 25 percent going to substance abuse prevention and treatment programs and five percent going to public health programs.
The decision to charge the state’s alcohol control authority with overseeing the new marketplace was not a given. JLARC said the upside of such an approach is faster implementation of new regulations with a lower operating costs. The commission said the downside is that creating a new, dedicated state agency would have more flexibility and a greater focus on equity programs lawmakers have emphasized as they pursue legalization.
The liquor authority would be advised by a new Cannabis Control Advisory Board, which would be tasked with making recommendations as regulations are developed governing cultivation, security, quality testing, advertising and other restrictions and rules.
Northam proposes an array of equity programs aimed at making sure Black residents, who bore the brunt of criminal enforcement under prohibition but have struggled to gain a foothold in other states’ legal marketplaces, have an opportunity to profit from the drug’s legalization in Virginia.
“It’s important that people who have been damaged by the war on marijuana not be denied opportunity,” said Ebbin, the bill’s co-patron in the Senate.
The legislation would grant social equity licenses for businesses that are owned by people who were arrested or convicted of a marijuana offense or are the family member of someone who was, people who have lived for at least three years in a place the state determines was disproportionately policed for marijuana crimes or is determined to be economically depressed. Alternatively, businesses that aren’t owned by people who meet that criteria could still be eligible if they employ at least 10 full time employees who do.
The proposed qualifications were recommended by JLARC as an alternative to race-based criteria, which the commission said is generally only allowed by courts in instances where there is already a documented history of race-based exclusion.
Social equity licensees would be given a six-month head start to apply for licenses to operate marijuana businesses as well as technical support from the state and, potentially, lower application fees.
The legislation also proposes offering state-financed, low-interest business loans to help applicants start their businesses — an effort to address the difficulty of raising capital in an industry where most banks are still either unable or unwilling to issue loans.
The loan program would be financed by a new Cannabis Equity Reinvestment Fund, to which Northam proposes dedicating 30 percent of new tax revenue from marijuana sales.
The new fund would be controlled by a new board, the Cannabis Equity Reinvestment Board, which would more broadly be tasked with financing initiatives aimed at “making whole again families and communities historically and disproportionately targeted and affected by drug enforcement.” The proposed legislation specifically references scholarships, grants and contributions to the Virginia Indigent Defense Commission, which oversees legal representation of poor criminal defendants.
The Virginia Legislative Black Caucus, which endorsed the legislation Wednesday morning, called the provisions essential.
“I think Virginia has an opportunity to make sure that African Americans — Blacks in the commonwealth — get their fair share,” said the caucus’ leader, Del. Lamont Bagby, D-Henrico. “That is our focus.”
Expungement and resentencing
Northam proposes a multi-pronged approach to addressing old marijuana convictions.
All past misdemeanor marijuana charges and convictions would be automatically expunged by July 1, 2022, sealing the vast majority of criminal records related to the drugs. The legislation includes the caveat that all fines, court fees and restitution related to the charges must paid before they are cleared.
For more serious convictions, such as possession of large amounts or distribution, the legislation would allow a person to individually petition a judge to have their records expunged in light of the drug’s legalization.
And people currently serving jail or prison sentences related to marijuana charges would be entitled to have their sentences reconsidered by a judge as long as they were not convicted of possessing more than five pounds of the drug, convicted of a third felony offense or convicted of distributing the drug to minors.
“We’re going to have a multi-billion industry that we’re about to hopefully pass, so we want the folks in our communities that have been harmed and penalized by that not to still be in prison for something that’s hopefully going to be legal,” said Del. Don Scott, D-Portsmouth.
Possession limits, home grows and driving
Northam proposes limiting adults to possessing no more than one ounce of the drug, which is in line with the limits set in most other states, according to JLARC.
His legislation would also allow home cultivation, but only four plants per household, and only two of the plants could be “mature.” The legislation would require the plants not be visible from the street and “reasonable precautions” to prevent underaged access. Northam also proposes requiring each plant be tagged with the owner’s name, driver’s license number and a notation that it’s being grown for personal use.
With the drug’s legalization, criminal penalties would remain for unlicensed distribution, albeit with significantly reduced penalties.
Possessing more than an ounce but less than five pounds would result in a $25 civil fine, the current penalty for people caught with small amounts marijuana under decriminalization legislation that last passed last year.
People caught with five pounds or more would face felony charges punishable by between one and five years in prison and up to a $250,000 fine.
The punishment for a first-time charge of possession with intent to distribute would drop to a class 2 misdemeanor.
People under 21 caught with the drug would face a $250 civil penalty. Juveniles would face a maximum $200 fine. However, the legislation would allow judges to offer alternative sentencing programs that include drug treatment or education.
The legislation aims to address driving while under the influence of marijuana — which, unlike alcohol, can’t be reliably proved with a breath or blood test — by allowing a judge to infer guilt if there is an open container of marijuana in the passenger area and the accused appeared through conduct, speech and appearance to be intoxicated. (Last year lawmakers banned searches based on a police officer detecting the odor of marijuana).
Local control, referendums
Northam proposes giving local governments the authority to authorize or ban retail marijuana sales within their borders and set hours of operation.
But the legislation would also give local residents a say, allowing citizens to force a referendum that, if adopted, would open the jurisdiction to marijuana sales and, if rejected, end legal sales even if the municipality’s board has already approved them.
Local governments and residents would have less authority when it comes to manufacturing, processing and other non-public-facing marijuana businesses, though the siting of such businesses would be subject to local zoning rules.
Proposed business locations would be approved as part of the state’s licensing process, which include an opportunity for local residents and government officials to weigh in.
The legislation proposes some limits on where marijuana businesses can locate, specifically refencing locations that would disrupt churches, schools, hospitals and playgrounds. In residential neighborhoods, the licensing board could also consider arguments that a business would adversely affect real estate values.
The legislation also sets density limits, preventing any marijuana business from operating within 1,000 feet of another. And more broadly, regulators would be tasked with determining an appropriate number of licenses for a given area and respond if the number of licenses in a given area becomes “detrimental to the interest, morals, safety, or welfare of the public.”