With two weeks to go before lawmakers vote on new marijuana legislation, state analysts have yet to calculate the fiscal impact of Maine’s adult-use cannabis bill.

Lawmakers tasked with setting up the new recreational market had projected Maine would collect about $21.4 million a year in taxes once the market matured. On Thursday, the Legislature’s nonpartisan Office of Fiscal and Program Review told the committee its proposed rewrite of a voter-approved cannabis law would have netted even more, about $27.7 million a year, before the committee changed its proposed tax scheme.

According to new tax projections from the state Department of Administration and Financial Services, which state analysts hadn’t had an opportunity to review on Thursday, the committee’s decision to levy a combination 10 percent excise and 10 percent sales tax on cannabis will not generate as much revenue as a 20 percent sales tax, although how much less was uncertain Thursday.

In addition, the new information from the financial services agency means the cost of implementing a new regulatory structure could be more than the $2 million projected in the fiscal note for the adult-use cannabis bill because state agencies now say they need more than 17 people to license, regulate and tax the new industry. The exact number of staff the agencies believe they need was uncertain on Thursday.

That leaves both revenue and cost estimates uncertain just two weeks before an Oct. 23 special session vote, principal analyst Marc Cyr said.

“We’re submitting a fiscal note that has more cautionary notes than real projections because we haven’t had time to calculate the impact of all the last-minute changes, and because we are only just now getting some of the information we need from state agencies,” said Cyr, who is in charge of preparing legislative fiscal notes. “We got new information just five minutes before I came here.”

Cyr told lawmakers that he hoped to provide a more up-to-date version of the financial impact of the proposed bill before the special session.

One of the committee’s co-chairmen, Sen. Roger Katz, R- Augusta, told Cyr that he sympathized with his office’s frustration over the lack of state assistance in preparing for evaluation of the proposed adult-use marijuana rewrite. The committee has often complained about how it wanted state agency assistance in crafting the bill, or information that would have guided them, but was largely ignored by the administration of Gov. Paul LePage.

It will be harder to sell the bill to his colleagues without the full financial data, but not impossible, Katz said.

“The exact tax structure has never been the centerpiece of this legislation,” Katz said. “The referendum legalizing marijuana was approved by the voters. Like it or not, that’s the law, and both sides of the marijuana debate will benefit from clear and responsible regulation. We certainly wish we had had better cooperation from the administration in crafting the tax details, but we are comfortable with the job we’ve done.”

If the legislative overhaul of the voter-approved Marijuana Legalization Act is approved on Oct. 23, the bill goes to LePage, who has spoken out against legalization of recreational marijuana. The bill covers a range of topics, from taxes to licensing to rules for people who grow their own marijuana for personal use.

It also addresses how local municipalities can decide whether or not to participate in Maine’s new marijuana industry. The voter-approved law had explicitly said towns could prohibit marijuana businesses from operating in their town. The legislative rewrite says that towns must opt into the industry, much like a town votes to allow alcohol sales, rather than have to adopt a ban to opt out of the industry.

Several members of the committee objected to the change in language, saying that voters legalized marijuana use, and that it is unfair to treat it like it is still a prohibited substance. It would require an applicant to persuade a town to enter into the marijuana business, which would be a lot harder than simply persuading a town not to adopt a marijuana business ban.

Despite the objections, the municipal opt-in language remained intact in the final version of the bill to be considered during the special session.

The fiscal note submitted to the committee Thursday was for a version of the bill that called for a 20 percent sales tax. In it, analysts assumed recreational marijuana sales would begin Jan. 1, 2019, and that after a one-year ramp up, the state could expect to make $27.7 million a year in adult-use cannabis taxes that would be split among the general fund, a police and prevention fund and host towns.

But the final version of the committee bill calls for a 10 percent excise tax on wholesale transactions and a 10 percent sales tax on retail sales. Lawmakers had hoped the combination would generate as much tax revenue as the 20 percent sales tax. At the time, using calculations from an old fiscal note, the committee estimated a mature market would generate about $21.4 million a year in state taxes.

But Cyr warned the committee on Thursday that the Department of Administration and Financial Services had just shared new data with his office indicating that the combination tax would not generate as much money as a 20 percent sales tax.

And his expense estimates also may be too low, Cyr said. The Office of Fiscal and Program Review had been waiting to see if state agencies that have been tasked with overseeing some part of the adult-use marijuana industry would testify before the legislative committee and tell lawmakers how many people they would need to hire to regulate the market, he said. That never happened.

To determine the bill’s financial impact, Cyr’s office had been forced to estimate how many people the state financial services and agriculture agencies would need to hire to license and regulate the industry. In its fiscal note, the office predicted these agencies would need $2 million a year to pay for 17 employees, as well as necessary equipment and consulting fees.

But in its Thursday memo, Administration and Financial Services said the state would need to hire more than 17 people, Cyr said. As a fiscal analyst, Cyr said he wasn’t in the position to question the staffing request, and noted that he hoped that someone on the legislative side might be able to question the agency about its rationale for those staffing levels.

Cyr said he could not share the memo from Administration and Financial Services, but said that the department’s data would be incorporated into the updated fiscal note he will provide to the committee.

A call to the Department of Administration and Financial Services requesting the memo was not returned Thursday.

Penelope Overton can be contacted at 791-6463 or at

poverton@pressherald.com

Twitter: PLOvetonPPH

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