Virginia Governor’s Veto Of Marijuana Sales Bill Would Erase Millions In Revenue For Pre-K And Drug Treatment, State Report Shows

With Virginia Gov. Glenn Youngkin (R) widely expected to veto a lawmaker-passed plan to legalize retail marijuana sales in the commonwealth, a new fiscal impact statement makes clear that rejecting the proposal would mean missing out on tens of millions of dollars in annual state revenue—including for pre-kindergarten programs, community reinvestment and substance use treatment.

Annual government revenue would begin at an estimated $7.3 million in fiscal year 2026, according to the Department of Taxation, rising steadily as the regulated system got off the ground. By fiscal year 2031, the figure is projected to climb to an annual $87.84 million.

All told, by the end of fiscal 2031, retail cannabis is expected to bring Virginia nearly $300 million in total revenue.

The income would come from an 8 percent excise tax on marijuana sales and a 1.125 percent sales tax imposed under the legislation, from Sen. Aaron Rouse (D) and Rep. Paul Krizek (D).

The numbers were published on Friday in a report from the state Department of Planning and Budget.

The top-level revenue projection does not include separate, local taxes of up to 2.5 percent. Depending on how broadly municipalities implement those taxes, they could bring in up to $2 million statewide in fiscal 2026, rising to an estimated $24.09 million by fiscal 2031.

The bulk of the state money would go to community reinvestment. The Cannabis Equity Reinvestment Fund would receive an estimated $1.92 million in fiscal 2026, which would rise to $46.26 million in fiscal 2031.

Money would also go to preventing and treating substance use disorders. That would be about $1.92 million in fiscal 2026, rising to $19.27 in fiscal 2031.

Revenue would also fund pre-kindergarten programs (beginning at $2.56 million initially and rising to $7.72 million annually in fiscal 2031), public health programs ($320,000 initially and rising to $3.85 million in fiscal 2031) and other initiatives.

In terms of how the revenue is divided, that would change over time. Until fiscal 2027, 40 percent would fund pre-K, 30 percent would go to the reinvestment fund, 25 percent would go toward substance use disorders and 5 percent would fund public health programs. After that, 10 percent would go to pre-K, 60 percent to community reinvestment, 25 percent to substance use disorders and 5 percent to public health.

As for costs, preparing for and administering a regulated retail sales program would cost several million dollars per year—about $9.37 million total in fiscal 2026 and an estimated $9.26 annually after that.

Licensing fees for marijuana businesses would pay the bulk of administrative costs at the Cannabis Control Authority (CCA), which would regulate the adult-use retail system. During its first year, however, some funds would also need to come from the state general fund.

New expenses at CCA would include 73 more staff members as well as technology and equipment, vehicles and travel.

The Department of Taxation, meanwhile, would incur estimated costs of $468,950 during the first fiscal year of operation in order to update forms and internal systems.

State Police, meanwhile, would incur just over $200,000 annually to hire two additional staff members to conduct fingerprinting and background checks.

Despite the fiscal impact report indicating that legalizing retail sales could bring Virginia hundreds of millions of dollars in tax revenue over the next several years, the state’s governor is widely expected to veto the lawmaker-passed bills.

Youngkin vetoed a nearly identical proposal last legislative session, and his office has said he’s inclined to do the same this year.

“I think you can cite the fact that time and time again he has been very clear on that,” spokesperson Christian Martinez told Virginia Public Media late last year.

In a veto message at the time, the governor wrote that “the proposed legalization of retail marijuana in the Commonwealth endangers Virginians’ health and safety.”

If the proposal were to become law, it would allow adults 21 and older to purchase up to 2.5 ounces of marijuana from regulated, state-licensed retailers.

Use, possession and limited cultivation of cannabis by adults are already legal in Virginia, the result of a Democrat-led proposal approved by lawmakers in 2021. But Republicans, after winning control of the House and governor’s office later that year, subsequently blocked the required reenactment of a regulatory framework for retail sales. Since then, illicit stores have sprung up to meet consumer demand, feeding an illegal market that some estimates value at nearly $3 billion.

Here’s what Virginia’s reintroduced marijuana sales legislation, SB 970 and HB 2485, would do:

• Retail sales could begin as of May 1, 2026.
• Adults would be able to purchase up to 2.5 ounces of marijuana in a single transaction, or up to an equivalent amount of other cannabis products as determined by regulators.
• A tax of up to 11.625 percent would apply to the retail sale of any cannabis product. That would include a state retail and use tax of 1.125 percent on top of a new marijuana-specific tax of 8 percent. Local governments could levy an additional 2.5 percent.
• The Virginia Cannabis Control Authority would oversee licensing and regulation of the new industry. Its board of directors would have the authority to control possession, sale, transportation, distribution, delivery and testing of marijuana.
• Local governments could ban marijuana establishments, but only if voters approve an opt-out referendum.
• Locations of retail outlets could not be within 1,000 feet of another marijuana retailer.
• Cultivators would be regulated by space devoted to marijuana cultivation, known as canopy size. Both indoor and outdoor marijuana cultivation would be allowed, though only growers in lower tiers—with lower limits on canopy size—could grow plants outside. Larger growers would need to cultivate plants indoors. Secure greenhouses would qualify as indoor cultivation.
• Only direct, face-to-face transactions would be permitted. The legislation would prohibit the use of other avenues, such as vending machines, drive-through windows, internet-based sales platforms and delivery services.
• Existing medical marijuana providers that enter the adult-use market could apply to open up to five additional retail establishments, which would need to be colocated at their existing licensed facilities.
• Serving sizes would be capped at 10 milligrams THC, with no more than 100 mg THC per package.
• No person could be granted or hold an interest in more than five total licenses, not including transporter licenses.
• People with convictions for felonies or crimes involving moral turpitude within the past seven years would be ineligible to apply for licensing, as would employees of police or sheriff’s departments if they’re responsible for enforcement of the penal, traffic or motor vehicle laws of the commonwealth.
• An equity-focused microbusiness program would grant licenses to entities at least two-thirds owned and directly controlled by eligible applicants, which include people with past cannabis misdemeanors, family members of people with past convictions, military veterans, individuals who’ve lived at least three of the past five years in a “historically economically disadvantaged community,” people who’ve attended schools in those areas and individuals who received a federal Pell grant or attended a college or university where at least 30 percent of students are eligible for Pell grants.
• A “historically economically disadvantaged community” is defined as an area that has recorded marijuana possession offenses at or above 150 percent of the statewide average between 2009 and 2019.
• Tax revenue from the program would first cover the costs of administering and enforcing the state’s cannabis system. After that, 60 percent of remaining funds would go toward supporting the state’s Cannabis Equity Reinvestment Fund, 25 percent would fund substance use disorder treatment and prevention, 10 percent would go to pre-K programs for at-risk children and 5 percent would fund a public health and awareness campaign.
• Adults could also share up to 2.5 ounces with other adults without financial remuneration, though gray-market “gifting” of marijuana as part of another transaction would be punishable as a Class 2 misdemeanor and a Class 1 misdemeanor on second and subsequent offenses.
• A number of other new criminal penalties would be created. Knowingly selling or giving marijuana or marijuana paraphernalia to someone under 21, for example, would be a Class 1 misdemeanor, punishable by up to a year in jail and a maximum $2,500 fine, as would knowingly selling cannabis to someone reasonably believed to be intoxicated. It would also be a Class 1 misdemeanor to advertise the sale of marijuana paraphernalia to people under 21.
• Knowingly obtaining marijuana on behalf of someone under 21 would be a Class 1 misdemeanor.
• People under 21 who possess or use marijuana, or attempt to obtain it, would be subject to a civil penalty of no more than $25 and ordered to enter a substance use disorder treatment and/or education program.
• Illegal cultivation or manufacture of marijuana, not including legal homegrow, would be a Class 6 felony, punishable by up to five years imprisonment and a $2,500 fine.
• People could process homegrown marijuana into products such as edibles, but butane extraction or the use of other volatile solvents would be punishable as a Class 1 misdemeanor.

Youngkin has 30 days to act on a bill once it reaches his desk. He can either sign it into law, veto it or allow it to become law without his signature. Lawmakers will reconvene on April 2 to consider overturning any vetoes.

Youngkin is ineligible to run for reelection, and advocates hope his replacement will be more favorable to regulated sales. They’ve noted that a handful of Republican leaders in other states have been more open to marijuana reform.

Lawmakers also sent a number of other cannabis- and drug-policy related bills to Youngkin this session, including measures to expand the medical marijuana system, clear past criminal records for certain cannabis-related conduct, protect parental rights of legal marijuana users and create a process for people imprisoned for cannabis crimes to have their sentences modified.

Yet another bill will take effect without action from the governor: a House joint resolution to re-establish a commission of lawmakers who would study the state’s cannabis system, oversee the implementation of marijuana laws and make recommendations about future legislative changes—what’s seen by some as an indication the legislature is intent on future action around cannabis.

The hope is that even if Youngkin vetoes the current retail sales measure, his successor will sign the next iteration.

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