State start-up costs for legal pot: $2.2 million

MONTPELIER — State officials estimate the state’s start-up cost for legal marijuana to be $2.2 million dollars, paid for by future receipts, or what one lawmaker referred to as “deficit spending.”

On Tuesday, the Senate Finance Committee took testimony on what would be needed for the state to implement legal cannabis, with a target legalization date of Jan. 1, 2018.

Finance Commissioner Andy Pallito outlines the state’s start-up costs to regulate legal marijuana. (VPB/Josh O’Gorman)

At $920,000, the largest of the expenditures would be for the Vermont Department of Taxes, which would be charged with developing a system to collect excise taxes from distributors.

Also included is $500,000 for the Department of Health to do educational outreach to teens, including specific efforts to reach out to gay, lesbian, bisexual and transgendered teens. According to the Vermont Youth Risk Behavior Survey, these populations are more likely to use marijuana than their peers.

On the public safety front, $470,000 would be used to train police to identify drivers who are under the influence of marijuana or other drugs, processing applications for growers and retail operators, and lab equipment for testing.

The Agency of Agriculture would also receive $230,000 to make sure the product being grown is free of such things as pests and mildew. Under the terms of the current draft bill, agency officials can inspect plants, and if found unhealthy, can order a stop on their sale, or order the plants be treated in a particular manner or even destroyed.

All told, the start-up efforts would create eight new positions within state government.

Finance Commissioner Andy Pallito told the committee that, rather include the money in the FY 2017 budget currently being discussed in the State House, an account would be created to pay for the expenses “based on future anticipated receipts in 2018.”

This proposal raised the eyebrows of more than one committee member. Sen. Michael Sirotkin, D-Chittenden, asked if their was precedent for such a proposal.

Kevin Mullin discusses legalizing marijuana.

Josh O'Gorman / VPB

Kevin Mullin discusses legalizing marijuana.

“It’s called deficit spending,” said Sen. Kevin Mullin, R-Rutland, during a break in the hearings. “We try not to do that.”

Pallito said the money has to come from somewhere.

“The bottom line is, it’s going to take some money to get the program up and running,” Pallito said.

James Pepper, director of intergovernmental affairs and policy adviser for the Shumlin Administration, said the money could be generated in FY 2017 if the date is moved up for the granting of licenses for growing and selling.

The subject of license fees arose again when Mullin, noting that Vermont currently contains 17 “dry towns” that do not allow alcohol, asked what would happen if someone invested a large amount of money in an operation — nonrefundable license fees alone range from $5,000 to $15,000 — only to have a town ban such operations.

“You could spend a million dollars getting that facility ready, only to have the rug pulled out under you,” Mullin said.

Josh O'Gorman / VPB

Ginny Lyons discusses legalization. (VPB/Josh O’Gorman)

On the other hand, Sen. Virginia Lyons, D- Chittenden, asked if municipalities could impose a 1-percent option tax to support law enforcement, or anything else.

After hours of discussion, it was clear to committee members they were not ready to vote on the bill, having not decided on what tax rate they would set. Proposed tax rates range from 20 percent to 37 percent, or a tax rate that increases incrementally over three years from 10 percent to 20 percent.

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