On January 1, 2021, adult-use cannabis will be legal in New Jersey … but as of this writing, the state still lacks regulations to govern the commercial production and sale. And advocates are concerned that hasty efforts to usher in legislation will result in an inequitable system that favors the interests of Big Cannabis over racial and social justice.
On November 3, 2020, two-thirds of New Jerseyans voted to approve the referendum amending the state constitution to legalize the possession and use of cannabis by adults 21 and over, and to legalize the cultivation, processing and sale of cannabis. Three days later, state Senator Nick Scutari (D) and state Senate President Stephen Sweeny (D) filed a 216-page bill, titled the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (the CREAMM Act), detailing how the new cannabis system would operate, including those most likely to profit. The CREAMM Act was introduced together with a measure to decriminalize possession of up to six ounces of cannabis — the highest threshold in the country (as well as decriminalizing possession of psychedelic mushrooms). That measure has since stalled, but state lawmakers are reportedly moving forward with the CREAMM Act. In early December, a deal was purportedly struck between the Senate, Assembly and governor, upon which the Senate was scheduled to vote by December 17 (there was no Assembly timeline yet).
Critical provisions of the CREAMM Act, as introduced, include: adults may purchase and possess up to one ounce of cannabis or five grams of concentrated cannabis; local jurisdictions are permitted to ban retail facilities, but not delivery; retailers may permit social consumption, subject to local approval; licensees are required to have at least one “significantly involved person” who has resided in the state for at least two years; 15% of licenses reserved for minority-owned business; 15% of licenses reserved for women-owned businesses; caps on the total number of licenses; and a prohibition on home grow.
Provisions concerning social justice are the most controversial of the bill. For instance, while the first version of the CREAMM Act called for caps on the number of licenses, reserving a portion of those licenses to microbusinesses (those with 10 or fewer employees), a more recent Assembly version raised the cap, while a more recent Senate version dispensed of the cap altogether. Identical versions of the act must pass the Senate and House to become law.
The Senate’s approach was reportedly favored by Governor Phil Murphy as a means to support the program’s growth and provide women and minorities access to the industry. But the deal struck among lawmakers caps the number of licenses at 37 for the first 24 months of the grogram — not including microbusinesses.
Also controversial is the prospective tax rate and allocation for cannabis sales. The constitutional amendment that voters approved allows a 6.625% tax rate — the lowest nationwide adult-use cannabis tax rate (as of June 2020, California and Colorado each imposed a 15% sales tax rate, Nevada imposed 10%, Oregon imposed 17% and Washington imposed 37%). The amendment also permits local municipalities to charge an additional 2%. Lawmakers in New Jersey disagree as to whether additional fees are appropriate, with some arguing that a lower tax rate will encourage sales, allowing the program to effectively compete against the legacy market.
The original CREAMM ACT called for tax revenue to be allocated strictly between administrative costs associated with the program and training police on issues such as detecting intoxicated drivers — a low blow to advocates who seek, among other things, for cannabis tax revenue to be allocated to community reinvestment and social justice programs, such as expungement and re-entry programs, food assistance, legal aid and health care, among others.
The latest version calls for an additional 0.33% tax imposed upon cultivators, bringing the total tax rate up to 7% (still comparatively low) and confers the right — but not the obligation — upon the regulatory commission to charge additional fees based upon the price of one ounce (70% of this new cultivation tax revenue will be allocated to equity programs, reserving just 30% for administrative costs and police departments. Advocates had hoped that 70% of all taxes would be reserved for equitable programs).
Advocates also seek to allow medical patients to grow their own cannabis at home — a measure that would be consistent with almost every other adult-use market and most medical markets in the country. This issue remains unresolved.
Jess Gonzalez, an attorney and renowned social justice advocate, stated: “The biggest challenge NJ is facing is the race against the clock. … Legislators attempted to ramrod this legislation with the expectation that it would be a smooth ride to the Governor’s office, yet they failed to take into consideration its longstanding [social justice] advocates. … One of the legislature’s greatest mistakes was not listening to advocates who have a narrow focus on the cannabis industry absent from a legislator’s day-to-day. While January 1 inches closer, legislators should take heed that ‘Unreasonable haste is the direct road to error.’”
Ultimately, absent equity, the black market will continue to flourish over a regulated market, presenting myriad regulatory, enforcement and health concerns, as seen in California particularly. New Jersey legislators must prioritize equity in tandem with the program’s launch or they are potentially risking the program’s success.