A week after New Jerseyans voted to legalize cannabis, Gov. Phil Murphy and state lawmakers are at odds over legislation that would allow the state to become the only adult use market between Washington, D.C., and Massachusetts.

On Monday, the Senate Judiciary Committee and the Assembly Oversight, Reform and Federal Relations Committee advanced the legalization bill, NJ S21 (20R) / NJ A21 (20R), after roughly six hours of cumulative testimony. The measure was introduced and placed on the legislative fast track last week, just days after two-thirds of the state’s voters backed a ballot question that amended the state’s constitution to legalize the sale and use of cannabis.

While the state’s leading Democrats have all said they’d like to move enabling legislation as quickly as possible — the drug will remain illegal until they do — Murphy, Assembly Speaker Craig Coughlin and Senate President Steve Sweeney aren’t on the same page when it comes to cannabis tax policy.

Coughlin issued a statement Monday afternoon calling for an “an additional user fee on cannabis consumers.” That could potentially violate the constitutional amendment, which caps retail taxes on cannabis sales at 6.625 percent, the current state sales tax. Local governments can impose an additional 2 percent tax on all cannabis transactions, including wholesale and cultivation-related transactions.

Murphy praised Coughlin’s position during his regular Covid-19 press conference on Monday, noting that he has supported an excise tax, albeit at the cultivation level, “from day one.” The ballot question’s tax language only referred to retail sales and local taxes.

Shortly after Murphy’s press conference, Sweeney issued a joint statement with lead sponsor Sen. Nicholas Scutari (D-Union) and Sen. Teresa Ruiz (D-Essex), drawing a line in the sand on new cannabis taxes.

“We should not impose any additional taxes that will put the cost of legally purchasing marijuana out of reach for the communities that have been impacted the most,” they said.

Similar disagreements contributed to delays in moving last year’s legalization bill, NJ S2703 (18R), which is the foundational text for the current enabling legislation.

This time around, lawmakers and administration officials are working against the clock on the constitutional amendment’s Jan. 1, 2021 effective date. In the meantime, pressure is mounting on lawmakers and the Murphy administration to halt cases and arrests relating to cannabis.

The Senate Judiciary Committee on Monday passed a bill, NJ S2535 (20R), that would decriminalize possession of up to six ounces of cannabis. Attorney General Gurbir Grewal has promised guidance to prosecutors and law enforcement officials who are struggling to navigate the perception the drug is already legal, though they’ve been encouraged to use their discretion in pursuing any new cases.

Sources close to Sweeney, who pushed for lower cannabis taxes throughout the previous legislative session, say the Senate president is unlikely to move on allowing for taxes beyond what’s specifically laid out in the constitutional amendment.

“We’re having productive conversations with the Legislature,” one administration official told POLITICO, adding that the excise tax is “the number one priority right now — making sure we have adequate revenue to undo some of the worst excesses of the War on Drugs.”

There’s a lot of daylight between those positions, even after Scutari and Sweeney — who’s also a primary sponsor of S21 (20R) — announced with Ruiz that they were working on amendments that would reallocate the balance of cannabis revenues to “impacted communities to reverse the harmful effects of systemic racism in our criminal justice system, from arrest to sentencing to incarceration.”

The specifics of those changes will need to ameliorate lawmakers and advocates who had pounced on language contained in NJ S2535, which was released late Friday. The initial draft was viewed by many progressives, including several Murphy allies, as an inadequate salve for minority communities harmed by the disproportionate enforcement of the state’s current drug laws.

After Monday’s Judiciary Committee hearing, Sens. Troy Singleton (D-Burlington) and Shirley Turner (D-Mercer) issued a statement calling for amendments that would give women and minority business owners greater access to capital and allocate 25 percent of recreational cannabis sales tax revenue to “impact zones,” which the bill broadly defines as urban communities with a history of high rates of arrest for cannabis-related offenses.

Ruiz said she plans to introduce a bill that would move a portion of whatever revenue is generated through legal cannabis to school districts located in those zones.

It’s unclear if the amendments being worked on by Sweeney, Scutari and Ruiz, which are incorporating Singleton and Turner’s suggestions, will be enough to satisfy the advocates who on Monday called for a more aggressive bill.

While the bill includes language assuring that 30 percent of new dispensary, processing and cultivation licenses go to entities controlled by women, minorities or disabled veterans — along with additional carve-outs for smaller retailers dubbed “micro-businesses” — that still “gives 70 percent of the … windfall, quite frankly, to white men,” said the Rev. Charles Boyer, a legalization advocate and the pastor of Bethel A.M.E. Church in Woodbury. “The bill as written just adds to the systemic racism rather than gets around it.”

Boyer, along with representatives from other progressive groups, were quick to praise Murphy and Coughlin’s stance on imposing taxes beyond what’s described in the constitutional amendment.

“The current legislation without the excise tax doesn’t necessarily generate sufficient revenue to take care of all the things we need to take care of, social services and infrastructure for the communities harmed by the War on Drugs,” said ACLU-NJ’s Amol Sinha, who chaired the campaign committee supporting the cannabis ballot question. “The excise tax is the most efficient way to do that.”

Senate lawmakers like Sweeney and Scutari are concerned any additional taxes would leave the industry in a poor position to compete against the prices offered by drug dealers.

“Believe it or not, people are asking for money,” Scutari said during the hearing. “My Republican colleagues could probably agree we don’t want to overtax or overburden a product before it’s being sold because we’re already competing with the black market.

“If we overprice the product before it’s sold, no one will buy it legally,” he said.

The tax structure of the current bill likely wouldn’t leave a lot of room to fund new programs. In a statement issued after Election Day, the ratings agency Moody’s said it wasn’t projecting recreational cannabis to have any meaningful impact on the state’s balance sheet for at least the next two to three years.

Even with the changes being brokered in the Senate, which would assure at least some revenues for impact zones, those monies will only flow after the state makes appropriations supporting the Cannabis Regulatory Commission, which is being set up to govern the industry, as well as to local governments for training law enforcement officers on drug recognition.

Those amendments won’t necessarily change the fact that the appropriation of cannabis revenues will likely be a function of the budget process, Assembly Oversight, Reform and Federal Relations Committee Chair Joe Danielsen (D-Middlesex) said during Monday’s hearing.

That sentiment was also echoed by Scutari.

“The divvying up of the spoils of the program is something that I believe should be done through the budgetary process, depending on how much we receive from the program,” he said. “We already need to pay for the program in and of itself.”

The legalization bill is scheduled for hearings in both the Assembly Appropriations and Senate Budget and Appropriations Committees Thursday.

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