Would the legalisation of recreational cannabis fill a budget black hole?
Federal or State governments could consider legalising recreational cannabis to fill the budget black holes they will face post the COVID-19 pandemic.
It is unlikely that Australian governments will consider such action, however it would be foolhardy to scoff at any suggestion that helps to replace the billions, perhaps trillions of dollars spent to prop up the economy.
There are certain states in the US, now considering this measure.
Oklahoma lawmaker Scott Fetgatter has stated COVID-19 job losses and low oil prices have left the state more than $220 million in the red. This will be exacerbated by a further $250 million debt next year.
“With the current situation with oil prices being down, COVID-19, the economic impacts from those things, I just am wondering if it wouldn’t be a good idea to have a discussion in the legislature about a full access program adult use over 21 alongside our medical program,” Fetgatter said.
This type of program is already successful in Colorado, where medical and recreational marijuana sales hit a record $1.75 billion in sales last year.
“Colorado brought in $300 million in tax revenue and license fees last year in the state coffers,” Fetgatter said. “In the first year we legitimately could see $100 million a year in increases rendered to the state of Oklahoma.”
"It's very early in the conversation," Fetgatter told the Tulsa World this week. "What's important to me is to make sure we have a program that functions. A lot of people didn't like medical marijuana, and they may not like marijuana, period. I understand that. But it is here and is not going anywhere."
One Senator who doesn’t like it is Senator Ron Sharp of Shawnee who believes legalisation may actually lead to a surplus of pot and an increase in black market sales.
“When you have farmers overproducing, they’re going to want to sell that. When you have a dispensary that has too much marijuana they’re going to try to slip it out the backdoor,” Sharp said. “It’s just not a very feasible idea.”
New York Governor Andrew Cuomo has also rejected the idea, saying recreational marijuana will not be part of the state budget this year.
The state of New York has a $15 billion budget gap, caused by the fallout from the coronavirus.
"It's not likely," he said. "Too much, too little time."
That sentiment was backed by Liz Krueger, the Senate Finance Committee Chair, who is also the prime sponsor of a bill to legalize cannabis. She told public television’s "New York Now" that the provision is on hold.
“I do not believe that marijuana is going to be negotiated in this budget in the next few days,” Kruger said. “I just don’t see it as realistic.”
Kruger believes the governor and Legislature could not negotiate a complicated measure in the budget to set up a legal marijuana system in New York, with all of the distractions caused by the coronavirus crisis.
Drug Policy Alliance’s Melissa Moore was disappointed in the decision but said it was understandable.
"I don't think anyone could have foreseen the circumstances that we would be operating within as we are in the final days of closing the budget here in New York," said Moore, who added COVID-19 is "rightfully" demanding so much of the lawmakers' attention.
"Not moving to legalize cannabis through the budget process right now ... it makes sense," she said pointing to the fact that at times like these Drug Policy Alliance is more focused on “on day-to-day, life-or-death scenarios”.
Moore said she hopes lawmakers will return to the Capitol later this year and legalise cannabis.
Certainly, in these uncertain times, the legalisation of recreational cannabis could have a positive impact on the economy.
Yet, there is much to consider. From how the legal system would work in this sector, to restrictions and how any revenues feed into the tax system.
It is clear that no government will take this path while they are struggling to keep their respective countries afloat, but it may be worth considering down the track when the true nature of the cost of the COVID-19 pandemic is known.
Short-term positions in small, early stage ASX companies,
with high potential and near term price catalysts.
Focusing on resource exploration, early-stage tech, and biotech.
Exceptional opportunities across a broad range of
early-stage growth sectors with strong management.
Seeking 1,000% plus returns across medium to long-term holds.
Longer-term positions in a variety of sectors.
Seeking strong management where traction is established and have entered into a growth phase.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.