EDITOR’S NOTE: NJ Cannabis Insider is hosting a day-long conference and networking event March 16 at the Carteret Performing Arts Center, featuring many of the state’s leading power players. Tickets are limited.
Gov. Phil Murphy now expects legal weed sales to generate $4 million in state taxes for the rest of the current fiscal year, which ends June 30.
The anticipated revenue — laid out in the budget brief released by the Treasurer’s Office — is a big revision from the spending plan Murphy signed last June, which anticipated the state wouldn’t take in a dime from legal weed sales by mid-2022.
Analysts and those closely following every nuance on cannabis emanating from Trenton say it signals this: despite the recent opening hiccups, the governor fully expects adult weed sales to be up and running in the coming months.
“We understand the CRC (Cannabis Regulatory Commission), at its meeting on March 24, will give the green light to some of the incumbent medical licensees to begin recreational sales,” said Cantor Fitzgerald cannabis analyst Pablo Zuanic.
“If so, taking into account processing, (New Jersey) should be able to begin recreational sales a month later, like late April or early May. The assumption is that they are going to start in May.”
But getting there is proving to be a daunting task.
Already on the radar of the governor’s office is beefing up an understaffed Cannabis Regulatory Commission that’s mired in reviewing hundreds of license applications.
The state agency is expected to complete the 90-day review for the first eight of about a dozen applications from alternative treatment centers to expand to the adult recreational market on March 15. The commission will give an update on those applications at its March 24 meeting.
At the commission’s last hearing on Feb. 24, panel Executive Director Jeff Brown said an additional 360 applications for conditional and annual licenses have so far been received and are also under review.
The commission has posted numerous positions, many in the Investigator title series, over the last several months.
“The CRC’s primary hiring focus is to fully staff up compliance, investigations and licensing over the next year,” said Murphy spokesman Michael Zhadanovsky in an email on Friday to NJ Advance Media. “Governor Murphy’s FY 2023 budget proposal increases the CRC’s operating budget significantly, with the biggest driver of the increase being the hiring of more staff.”
Murphy’s proposed $48.9 billion budget expects the state will take in $19 million from legal weed taxes for the fiscal year that begins July 1.
Zhadanovsky said the projected $19 million is after the 6% sales tax is applied to total cannabis sales.
“$19 million is the expected revenue from recreational sales for the general fund, not the total amount of expected revenue,” Zhadanovsky said in an email after Murphy’s budget speech on Tuesday. “Significantly more funding will be dedicated for CRC operations and impact zone investments.”
Wall Street analyst Zuanic said the $19 million earmarked for the general fund equates to about $320 million total weed revenue after the 6% tax is factored in.
“It sounds quite low from what we believe is the potential,” Zuanic said. “So the governor is being conservative.”
Zhadanovsky clarified there were separate funds for Impact Zone Investments, which will receive 70% of all fees, fines and tax revenue collected from cannabis sales. The remaining 30% supports the operations of the Cannabis Regulatory Commission and any excess balances can go to the state budget’s General Fund.
Zhadanovsky said spending on the commission is projected to increase from $9.325 million to $17.3 million in the fiscal year that begins July 1 to support the commission’s efforts to hire more staff.
“When the CRC was established last year, it began with 21 staff members, and is now at 60,” Zhadanovsky said on Friday. “The CRC plans to increase staffing further throughout the year.”
Coincidentally, on March 4, the CRC posted a new job opening: Supervisor of Investigations to be a part of the CRC’s Compliance and Licensing Unit.
The agency is now taking applications until March 21 for the position that pays from $78,283.00 to $111,555.82, depending on experience.
The crushing workload the panel is under wasn’t lost on Raymond Mercer, who is part of a group applying for a cannabis manufacturing license and spoke up Wednesday at the second of three regional hearings by the CRC on how to best use cannabis revenue for social justice programs.
“I think hiring some more people for the CRC (would help),” Mercer said on Zoom. “I’m sure you guys are backed up.”
“You mentioned that there are hundreds of conditional (license) applicants — 45 pages each and if there’s 1,000 applicants after the upcoming March 15 deadline, that’s 45,000 pages — that’s a lot of people who need to read those pages,” Mercer continued. “I think helping the CRC help itself would help everyone.”
Cannabis attorney Charles Gormally at Brach Eichler said the market delays in New Jersey are from a combination of factors, and an overwhelmed panel that is setting the regulatory framework for the entire industry is just one of them.
“The evolution from a well-financed government war on drugs, to the development of well-organized and fully functioning cannabis businesses, has not been on a linear trajectory in New Jersey,” said Gormally. “Then layer in some sorely needed social justice priorities promoting those who have been robustly damaged by cannabis prohibition for participation in this new business, but not providing them any capital support to achieve this.
“Top it off with empowering local governments to pick who they want to operate businesses in their towns, and you can begin to understand why every projected date since the constitutional amendment was adopted, has not been achieved.”
Wall Street analyst Zuanic said a new market like New Jersey has to prove three things.
“When a program is going up and running, there are three A’s that drive the growth and size of the market: affordability in terms of prices, access in terms of number of stores available, and assortment of products,” Zuanic said.
New Jersey currently has 23 alternative treatment centers that sell to the medical patient population.
“There’s just not enough stores and there is also an illicit trade out there,” Zuanic said. “That’s why things in the beginning are slow.”
Our journalism needs your support. Please subscribe today to NJ.com
Suzette Parmley may be reached at sparmley@njadvancemedia.com or follow her on Twitter: @SuzParmley