New York Governor’s Adult-Use Cannabis Legalization Proposal Cut from State Budget: Legalization Watch

New York’s cannabis advocates had a renewed sense of hope at the dawn of the new year, when Gov. Andrew Cuomo vowed in his January State of the State address to renew his push to legalize adult-use in 2020 after last year’s legalization efforts stalled in the legislature.

Cuomo seemed to be making good on his promise when he included a plan to legalize and tax adult-use cannabis in his initial state budget proposal in January, but as the COVID-19 outbreak turned into a global pandemic and the April 1 deadline to approve the sprawling budget loomed, hope that legalization could be accomplished through the budget process began to fade.

Cuomo told reporters March 31 that it was “not likely” that the legalization proposal would be included in the final budget, according to a New York Post report, adding that there was “too much” to accomplish and “too little time.”

“We’re not going to get there,” Cuomo said later, during a WAMC radio interview, according to the New York Post. “In truth, that is something that has to be talked through and worked through, and the legislature wasn’t here.”

As in many other areas of the country, the COVID-19 crisis has stolen the spotlight in New York, and Cuomo has been placing his attention on the virus since the state’s first confirmed case was reported March 1, the New York Post reported.

“I think everyone is just focused on one thing right now,” Joshua Horn, partner at Fox Rothschild, told Cannabis Business Times. “There’s a real problem in New York at the moment. New York is getting hit harder than other states.”

Still, many believed that Cuomo and lawmakers would stay on track to legalize cannabis through the budget process this spring, especially given the shortfalls the state was facing prior to the virus that were only exacerbated by the pandemic.

“There will be, in my view, tremendous budget shortfalls in New York, among other states, in dealing with the virus and the economic fallout from that,” Horn said. “States are looking at deficits, and they’re looking for new sources of revenue.”

According to James Ansorge, a New York-based attorney with Cozen O’Connor, New York faced a $4 billion deficit prior to the coronavirus outbreak, and state officials now predict a shortfall of $7 to $ billion due to the pandemic.

Added pressure to find new revenue streams saw Cuomo and lawmakers continually negotiating the details of the legalization proposal, Ansorge said.

“Everyone wants to get it done—the governor, the majority of the legislature, industry advocates and the people of New York,” he told Cannabis Business Times. “The question is, is there the time and the focus to finalize the deal?”

Although the answer to that questions seems to be a resounding “no,” Ansorge expects the New York Legislature to consider legislative proposals to legalize adult-use cannabis later in the session, although it is unclear when lawmakers may return to attend to regular legislative business.

While the regular session typically runs from January through June, Ansorge said the legislature may not return until summer or even early fall due to the COVID-19 crisis. And even when they do return, he added, the chances of cannabis legalization clearing the legislature are unclear.

“The other complication, politically, is that it’s much more likely for adult-use to be finalized in the budget since it’s a single up/down vote on an omnibus bill, which gives cover to folks whose districts might be on the fence,” Ansorge said. “If it’s done as a standalone bill by the legislature and it’s a roll call vote, it puts some folks in difficult positions during an election year. So, if it’s not done in the budget, the outcome becomes less optimistic.”

Horn, however, believes the coronavirus outbreak could rally the necessary support among lawmakers.

“Once the virus is under control, I could see [legalization] picking up momentum because it will be a brand-new revenue stream, which the state will need due to depletion of its coffers because of the virus,” he said. “In a strange confluence of events, I could see the virus actually pushing this along.”

The fate of last year’s adult-use legislation came down to one swing vote, Ansorge said, and this year’s efforts could be just as close.

“It sounded like there are enough votes in the Senate, but the main disagreement appears to be over … where the revenue will be spent,” he said. “Will it go into a general fund for the state, or will it go to specific social equity and substance abuse programs? That’s the main outstanding issue.”

Taxation, social equity and public safety are the three main pillars of legalization that lawmakers have been grappling with, Ansorge said. Many legislators have expressed concerns over not only where the tax revenue will go, but also the appropriate rates of taxation. Others are wondering how law enforcement should deal with drivers who may be driving under the influence of cannabis, Ansorge added.

“Whenever any state goes forward with adult-use, they have to invest quite a bit in [the] training of the enforcement division, and the details there are always needing to be discussed,” Jessica Wasserman, partner of Greenspoon Marder’s International, Government Relations and Cannabis Law Practice Groups, told Cannabis Business Times.

To address social equity, Cuomo’s legalization proposal includes provisions for what he calls “Opportunity Applicants”—applicants from communities that have been disproportionately impacted by prohibition.

“The broader picture is that the governor has said he wants to pass policy on the merits, not just for revenue, which is a smart and responsible thing to do,” Ansorge said.

Still, a legislative effort to legalize this year could hit other timing snags, depending on how long the coronavirus crisis lasts.

“Another reason it’s really hard to imagine that there would be another bill right away is Cuomo [planned] to go around to various states that had a history of adult-use and … talk to their legislators and regulators, tour some facilities and so on,” Wasserman said. “That would’ve given, I think, a real vision for the social equity piece, which is handled differently in different states.”