Marijuana legalization advances in Virginia, but lawmakers push start date to 2024

Update: Virginia lawmakers vote to legalize marijuana, but House and Senate still have to agree on details

Landmark legislation that would make Virginia the first state in the South to legalize marijuana is heading toward its first full votes before the House and Senate this week.

And while the proposal has garnered consistent — and in some cases bi-partisan — support, significant debate remains on key details of the proposal, including when and how criminal penalties should be rolled back as the state begins working to establish a legal marketplace for the drug.

Lawmakers and advocates said the question became even more important last week as the legislation was amended in both the House and Senate to push the start of retail sales to Jan. 1, 2024, a full year later than the 2023 date proposed by Gov. Ralph Northam.

That would give the state time to establish an independent agency to oversee marijuana businesses, an idea lawmakers said they favored over Northam’s proposal to delegate the responsibility to the Virginia Alcoholic Beverage Control Authority, which, in addition to running the state’s liquor stores, also functions as a law enforcement agency.

However the new approach aimed at emphasizing equity programs and deemphasizing the role of police in regulating the new marketplace could mean that penalties attached to the drug remain in place for nearly four years after lawmakers vote.

“If we know we’re going down the road of legalizing, it seems to me the repeal of simple possession at a minimum should take effect July 1 of this year,” Sen. Jennifer McClellan, D-Richmond, argued during a committee hearing last week. “Otherwise all we’re doing is setting up a situation where people are going to continue paying civil fines for something that’s going to be completely legal eventually.

“And that maintains the disproportionate impact on certain communities, particularly communities of color and poorer communities.”

McClellan’s position is backed by the ACLU of Virginia and Virginia Marijuana Justice, a marijuana reform group, whose leaders argue that delaying the repeal of criminal penalties needlessly prolongs the racial inequities lawmakers say they want to address.

Legislative analysts reported last year that Black people in Virginia are more than three times more likely to be charged with marijuana offenses than White people despite surveys showing the two demographic groups use the drug at the same rates.

“I’m excited that we’ve chosen to have an independent agency, but what worries me is that we are aligning timing of regulation with timing of repealing the prohibition for simple possession, and those two things should not be legislated together,” said Chelsea Higgs Wise, the director of Marijuana Justice.

At McClellan’s urging, lawmakers in the Senate agreed to an amendment that would legalize possession of up to an ounce of marijuana beginning this summer, but the House has not discussed adopting a similar measure and some lawmakers in both chambers remain skeptical of the approach, worrying it would lead to confusion and allow the black market to flourish.

Sen. Creigh Deeds, D-Bath, noted lawmakers have already decriminalized marijuana, which reduced the penalty for possession of an ounce or less from a misdemeanor punishable by jail time to a $25 civil infraction. The Supreme Court of Virginia reports police around the state wrote 4,505 tickets for possession since the decreased penalties when effect on July 1.

“At least where I live, law enforcement don’t feel incentivized to write the tickets and they’re not writing the tickets,” Deeds said.

McClellan responded, “With all due respect, I think that might be different in other parts of the state.”

Other states that have legalized marijuana addressed the gap between legalization and the opening of a recreational marketplace by allowing existing medical marijuana producers to immediately begin selling to the general public — something Virginia NORML, which has long advocated for marijuana legalization, said should be considered in Virginia. “It is going to take time to create new regulations, but we already have licensed operators and we should take advantage of that to expedite safe and legal access for Virginians,” said the organization’s director, Jenn Michelle Pedini.

Lawmakers have broadly rejected that approach in Virginia, fearing it would give the medical marijuana businesses an unfair advantage when the broader retail marketplace opens and make it difficult for small, minority-owned businesses to succeed, which all parties have said is a key priority.

To supporters disappointed by the prospect of a more than three-year delay before the drug is fully legalized and retail sales begin, the legislation’s sponsor in the Senate urged patience.

“Progress takes time,” Sen. Adam Ebbin, D-Alexandria, said. “It takes time to do things right. And, personally, I’d rather be able to get the votes to have a responsibly regulated adult use market in 2024 than have no bill pass at all. And that may well end up being the choice.”

Social equity

Lawmakers have also proposed amendments that aim to tighten eligibility for state incentives aimed at making sure Black residents who bore the brunt of criminal enforcement have an opportunity to profit from the drug’s legalization — something that so far hasn’t happened in other states that have ended their prohibition.

The bill calls for the early distribution of social equity licenses, recipients of which would have access to application assistance and low-interest loans from the state — an effort to address the difficulty of raising capital in an industry where most banks are still either unable or unwilling to issue loans.

Northam proposed eligibility requirements that center on past arrests for marijuana violations by an applicant or family member, or residency in a neighborhood that experienced disproportionate enforcement of marijuana laws or is deemed “economically destressed” based on U.S. census data.

Under Northam’s proposal, someone meeting one or more of those requirements would have had to hold a 51 percent ownership stake in the business in order for it to qualify for an equity license. Both the House and the Senate have raised the ownership threshold to 66 percent. And they introduced restrictions that would limit a successful applicant’s ability to sell or transfer their social equity licenses to owners who wouldn’t otherwise qualify.

Both chambers also added language that would also make the licenses available to someone who attended a historically Black college or university in Virginia, addressing complaints that emerged during public hearings that tying the licenses to criminal charges or areas of residence would unfairly exclude would-be minority entrepreneurs who were nonetheless impacted by prohibition. (Legislative analysists have said a race-based criteria would not withstand legal scrutiny.)

The House also struck language that would make social equity licenses available to businesses that employ at least 10 people who meet the equity criteria, which Del. Schuyler VanValkenburg, D-Henrico, called a “loophole big enough you could drive a truck through.”

Big business and vertical integration

An ongoing area of debate is how far the state should go to discourage large companies from monopolizing the marketplace.

Northam’s legislation would have allowed vertical integration, meaning one company could hold licenses to grow, process, distribute and sell marijuana.

House lawmakers eliminated the provision, arguing that limiting businesses to just one type of license will allow more small, local and minority-owned businesses to flourish.

The measure’s patron in the house, Majority Leader Charniele Herring, D-Alexandria, opposed the move, saying she worries it would limit business growth. “This is an opportunity to build wealth,” she said. “And I get the concern about large businesses and wanting more opportunities for more people — and that would not come with vertical integration — but I think it can.”

Some small business owners also argued during public hearings for a hybrid approach that would allow small, boutique producers to both grow and sell their products directly to the public without having to go through a middle-man distributor.

The Senate, meanwhile, has advanced legislation that allows companies to vertically integrate but charges a hefty licensing fee of $1 million, which would help fund social equity provisions in the legislation.

Medical producers

The debate over vertical integration has left the state’s four medical marijuana producers feeling squeezed. State law that established the program mandated the operators integrate their operations, with growing, processing and sales initially required to take place in the same building.

The facilities, including one in Richmond that cost more than $30 million to construct, began opening to the public over the summer, and their owners worry that if they’re not also allowed to sell their products to recreational customers, they’ll be forced out of business.

“If a market expands that’s serving a much broader group of customers, they’ll be able to achieve bigger scales and lower product pricing,” said Adam Goers, the vice president of Columbia Care, a New-York-based marijuana business that holds the medical license to serve the Hampton Roads area. He said that would leave medical customers without access to retail stores with pharmacists on site and specialized products like suppositories, which they say recreational stores are unlikely to offer.

Co-located medical and retail dispensaries are currently permitted in the Senate’s version of the legislation, though they would have to apply for and be granted recreational licenses. Lawmakers in the House have sounded more skeptical in hearings, saying they’re concerned letting vertically integrated medical processers participate in the retail market would give them an unfair advantage over recreational businesses barred from holding multiple licenses.

Local control

In the original proposal offered by Northam, local governments had to specifically opt-in to allow retail sales within their jurisdiction.

Lawmakers in the House of Delegates have struck those provisions, recalling the patchwork of exceptions written into state code allowing certain businesses to sell liquor in counties where local governments had otherwise banned it.

“We had certain business entities and local governments come to us wanting carveouts allowing them to sell liquor by the drink,” said Del. Chris Hurst, D-Botetourt. “There were more than 30 plots of land carved out in the various dry counties.”

The Senate version maintains a local option to prohibit retail sales, but requires local governments to actively opt out. Residents would also have a say; the legislation allows citizens to petition for a ballot referendum on the issue.

Republicans on the committees were the most vocal in their support for giving local governments the authority to block retail sales. “I’ve heard from a number of my localities expressing some extreme concern about this,” said Sen. Ryan McDougle, R-Hanover.

Opposition

While polling shows broad support for marijuana legalization both nationally and in Virginia, lawmakers have heard from a steady stream of opponents as it’s made its way through the committee process, including a coalition of groups that includes the Virginia Catholic Conference, the Virginia Association of Chiefs of Police and the American Automobile Association.

Broadly, they argue legalization will lead to increased rates of drug addiction, more usage by children and an increase in driving while intoxicated. “We oppose any kind of marijuana legalization due to the countless unintended consequences, like pediatric poisonings, youth increases in use; I could go on and on,” said Mary Crozier with the Community Coalitions of Virginia.

On the other side of the debate, representatives of addiction services groups, which would receive increased funding under the bills, argued that legalization would help people addicted to drugs and make their recovery smoother by eliminating the repercussions that come along with criminal charges.

Republicans who have reviewed the bill have generally opposed it, but it has picked up some yes votes from GOP members as it’s made its way through committee, including Senate Majority Leader Tommy Norment, R-James City, and Del. Berry Knight, R-Virginia Beach.

Those votes won’t necessarily translate to support when the legislation goes before the full chamber, but a survey released this week by Christopher Newport University’s Wason Center for Public Policy shows support is growing among Republican voters in Virginia, with 51 percent of respondents in favor of legalizing recreational use by adults.

At least two other GOP lawmakers in the Senate, Sens. Bill Stanley, R-Franklin and Siobhan Dunnavant, R-Henrico, have said they’re open to legalization but still reviewing the legislation.

“It’s a pretty extensive bill,” Stanley said. “I haven’t made a determination yet, I just hear the brownies are friggin’ awesome.”