LITTLE ROCK — Two proposals on the Arkansas ballot to legalize medical marijuana are estimated to cost the state more to administer and enforce than they would generate in tax revenue, according to a report by state finance officials.
Some members of a legislative committee that received the report Thursday from the state Department of Finance and Administration said they questioned the reliability of the estimates.
Issue 6 and Issue 7 are competing measures that seek to legalize medical marijuana, Issue 6 through a constitutional amendment and Issue 7 through an initiated act. Sponsors of both measures say their proposals would generate enough tax revenue to cover any costs to the state; Republican Gov. Asa Hutchinson has said either measure would be a burden on the state.
Paul Gehring, assistant revenue commissioner for DFA, told the Joint Performance Review Committee on Thursday that to estimate potential medical marijuana sales, the agency contacted tax officials in every state that has legalized medical marijuana but not recreational marijuana and asked for 2015 marijuana sales figures.
Of the 21 states that have legalized marijuana only for medical use, six responded. Gehring said DFA compared the sales figures from those states to the state’s populations to arrive at the following per capita sales totals: Maine, $17.75; New Jersey, 93 cents; Nevada, $13.12; Rhode Island, $20.83; Illinois, $2.15; and New Mexico, $22.35.
The average of those six sales totals was $12.85, Gehring said. Multiplying that by Arkansas’ 2015 population of 2.98 million, DFA arrived at an estimate of $38.27 million in potential marijuana sales for an estimated sales tax revenue of $2.49 million if Arkansas were to legalize medical marijuana, he said.
“One very important point that we did want to make clear to the committee is that these are mature markets and that … we would absolutely not think that we would have $2.4 million in our very first year,” Gehring said.
If Issue 6 passes, DFA is estimated to need to hire 16 to 24 new employees and the state Health Department is estimated to need to hire 10 to 13 new employees, according to the report. Total costs between the two agencies related to medical marijuana are estimated to exceed marijuana tax revenue going to the agencies by between $4 million and $5.74 million, the report states.
If Issue 7 passes, DFA is estimated to need to hire 9 to 14 new employees and the Health Department is estimated to need to hire 23 to 63 new employees, according to the report. Total costs between the two agencies related to medical marijuana are estimated to exceed marijuana tax revenues going to the Health Department — none would be directed to DFA — by between $1.8 million and $5.77 million, the report states.
Arkansas State Police Commander Col. Bill Bryant told the panel his agency expects to need to hire 20 new employees, purchase new equipment, purchase 20 new vehicles and conduct additional training if medical marijuana becomes legal, at an estimated cost of $2.88 million in fiscal 2018 and $2.06 million in fiscal 2019. Neither proposal would direct tax revenue to the agency.
Sen. John Cooper, R-Jonesboro, noted that the sales figures from other states vary widely.
“It looks like these numbers are all over the map,” he said.
Gehring said all the states have different rules on what medical conditions qualify for treatment with medical marijuana, so there is not much consistency in their sales figures.
Cooper said, “With it being all over the place, I even wonder about the average.”
Rep. Michelle Gray, R-Melbourne, said she Googled medical-marijuana tax revenues for two states not in the report, California and Michigan, and found per capita totals that exceeded any in the report.
Gray said after the meeting the report provides a starting point for looking at the measures’ potential fiscal impacts, but “as far as it being actually relevant data, I’m skeptical about that. I don’t believe that so many states … would have all been following this path if it wasn’t at least revenue-neutral, if not generating revenue for the states.”