Lawmakers in tug-of-war over marijuana implementation

Three bills debuted in the Montana Legislature during the week of March 29 with vastly different approaches for regulating voter-approved recreational marijuana in the state, and all of them moved forward after a week of whirlwind hearings that nearly left Republican leadership’s favored approach dead in committee.

After Montana voters legalized the sale and consumption of recreational marijuana last year by ballot initiative, the Montana Legislature was tasked with implementing a program. The three major proposals -- House Bill 670, 701 and 707 -- are all sponsored by Republican lawmakers and are massive, varying in length from 42 pages to 144.

None of the bills are drawing universal support, and many lawmakers expressed frustration as the bills were rushed through hearings and votes ahead of a key deadline on April 8. The proposals are not only dividing members of Montana’s existing medical marijuana industry, but also conservation groups, anti-marijuana advocates, hemp growers and tax analysts, as each bill offers a different take on how marijuana should be regulated and where a projected $52 million in annual tax revenue should go.

House Bill 701 - The ‘Comprehensive’ Bill

HB 701, sponsored by Rep. Mike Hopkins, R-Missoula, and drafted with input from Republican Gov. Greg Gianforte, had the biggest initial hearing, drawing more than three dozen witnesses from medical cannabis dispensaries, marijuana advocacy groups and drug abuse prevention organizations. The majority of those who weighed in, though -- more than 30 -- did so as opponents.

It proposes a vast restructuring of the recreational marijuana legislation passed by Montana voters in Initiative 190 last November, including new licensing schemes for marijuana growers, transporters, and sellers, plans to distribute recreational marijuana tax revenue to the state general fund and a new addiction recovery program from Gianforte. It also includes a clause that gives counties more choice as to whether they allow marijuana sales at all.

Hopkins called the bill “one of the most comprehensive” recreational marijuana programs in the nation for the way it builds on the state’s existing medical marijuana program, which has undergone a series of dramatic reforms since it began in 2004.

“We are looking to learn from the mistakes of our past in this policy area,” Hopkins told the House Business and Labor committee. “We are going to start out this time with a controlled, safe, responsible system.

But most of the bill’s handful of proponents came with proposed amendments to fix aspects of the bill they said they saw as lacking. Colleen Smith, executive director of Youth Connections, a substance abuse prevention group, said she and her organization wanted amendments to put a 15% cap on THC concentration in adult-use marijuana flower. Steve Zabawa, founder of “Safe Montana,” a group that opposed marijuana legalization, said he supported the bill, but wanted implementation of the program delayed to January 2023. HB 701 proposes shifting the start date to January 2022.

Many opponents said the medical marijuana dispensaries they operate in the state could be destroyed by provisions in HB 701, including a clause that counties must “opt-in” to allowing marijuana sales in their jurisdiction. If residents of a county vote against allowing weed sales, medical providers in those counties could be forced to close, too.

Adam Arnold, co-founder of Collective Elevation, one of the largest medical marijuana providers in the state, said it was “hard to pick one particular piece of this bill that’s the most devastating,” but cited the county opt-in clause as being dangerous for his business and others. He asked for an amendment to “grandfather” existing medical marijuana businesses into the program to prevent counties from shutting them down. Arnold said the bill risks eliminating jobs for thousands of Montanans and unfairly punishes medical providers after years of complying with shifting regulations.

“We’ve had inspections, we’ve talked to the state, talked to the county, we’ve got state zoning, we’ve regulated and really worked our butts of to show that we’re reputable businesses, and here you're threatening to take away our entire life’s work, and not just mine, but thousands and thousands of Montanans,” Arnold said.

Other opponents said the bill would allow huge marijuana firms to move in and command the market after the grace period for resident medical providers to join the market ends, as the bill does not require out-of-state companies to enter the market at the lowest dispensary “tier.”

A House committee initially killed the bill after some members expressed concerns it had been rushed through the process, but after a 45-minute recess and conferencing with Republican leadership, the committee reversed their decision, passing the bill 12-6. HB 707 similarly died before being revived by the Business and Labor Committee.

“We wanted more options -- that’s why we reconsidered,” said Business and Labor Chair Mark Noland, R-Bigfork. He added that he knows not every lawmaker is pleased, but said they’ll do “everything they can” in the House to produce a comprehensive implementation bill.

House Bill 670 - The ‘Conservative Approach’

During its hearing, proponents called HB 670, sponsored by Rep. Derek Skees, R-Kalispell, “a conservative approach,” as opposed to HB 701.

Skees collaborated with Rep. Matt Regier, R-Kalispell, to draft the bill, which proposes altering existing law to tax recreational marijuana at a 15% rate, compared to the 20% rate codified by voter initiative 190 in the November 2020 election, and increasing the medical marijuana tax rate from 4% to 5%. The bill garnered more support from existing medical marijuana providers than HB 701, with proponents praising how closely Skees’ bill sticks to the language of the original marijuana legalization law.

Under the bill, one third of revenue from medical and recreational marijuana would be directed into a “marijuana revenue trust fund” for use in covering anticipated costs associated with legalizing recreational cannabis, while two thirds of revenue would fund public retirement systems.

Skees and Regier told the committee the bill would be a fiscally responsible solution to regulating recreational marijuana, despite both of them also admitting they personally voted against Initiative 190 last fall. Skees said the trust fund would be devoted to covering potential costs of the legalization of recreational marijuana, though neither lawmaker gave much detail as to what those costs might entail.

The legislation would also give the Department of Revenue until March 2022 to fully implement the program, rather than October 2021 as originally mandated by I-190 and January 2021 as proposed in HB 701.

“This is not a race to get recreational marijuana up and going, but a timeline for a thoughtful and quality rollout of a major industry that will have huge impacts on Montana’s future,” Skees said.

Regier told the committee he based the program’s tax structure on other states that have passed recreational marijuana, and that HB 670 built on the regulatory framework laid by Montana’s medical marijuama program, which started in 2004.

Some medical cannabis providers testified in support of the bill, including Antonette Lininger, owner of Sacred Sun Farms, a medical dispensary with locations in Bozeman, Glendive and Wolf Point. Lininger said she liked that the bill didn’t abandon the framework laid for medical marijuana, instead folding it into the Department of Revenue’s overall regulatory structure for marijuana.

“It seems silly to start from scratch, and frankly, very difficult,” Lininger said. She testified against HB 701 the next day, accusing it of doing just that.

Proponents of the bill often indicated they preferred HB 670’s approach to regulation over HB 701, which seeks to make sweeping alterations to the regulatory structure passed into law by I-190.

Barbie Turner, senior manager at Alternative ReLeaf, a medical dispensary in Libby, said revisions to Montana’s medical marijuana program during the 2017 session helped her business grow and become successful within the state’s regulations.

“We are asking for you to continue to regulate in a way that prioritizes Montana-made businesses, and not reinvent a system that is currently thriving and proven to work,” Turner said. “This system works. Other proposed legislation that we’re seeing is overburdensome -- it’s going to be super hard for businesses like myself and it’s going to make it super easy for huge corporations.”

Opponents from drug use prevention groups expressed concern over a lack of language preventing dispensaries from operating within a certain distance of youth facilities, unclear cannabis labeling requirements and a lack of clear restrictions on electronic advertising for marijuana. Conservation groups also opposed the bill, which does not distribute marijuana tax revenue to forest and wildlife management programs as was originally stated in I-190.

Jake Brown, representing Montana Conservation Voters, opposed the bill.

“Simply put, we believe that this body should honor the intent of the voters and pass legislation that uses the revenue from marijuana to fund our outdoors and our public spaces and public lands,” Brown said.

Many of the bill’s opponents focused on areas they thought needed amending to be more workable. Ian Foley testified against the bill on behalf of the state Department of Agriculture, saying a provision in the bill allowing outdoor growing of weed would harm industrial hemp growers due to cross pollination.

During the hearing, Regier told the committee he’d be open to a number of amendments, but said the focus of the bill would remain on defraying expected costs from legalizing recreational marijuana, rather than putting all the money toward “fun” projects as proposed by I-190.

“It’d be the same as taking your personal budget and saying, ‘let’s go to Disneyland first, and then we’ll pay our utility bill second,’” Regier said. “We can’t go out and play with the money first, and then have the taxpayers stuck with the bag later.”

The committee approved HB 670 on an 11-9 vote.

House Bill 707 - The Last-Minute ‘Simple’ Bill

The House Business and Labor Committee also heard a last-minute recreational marijuana implementation bill sponsored by Rep. Brad Tschida, R-Missoula. HB 707 would eliminate any tax on the sale of medical or recreational marijuana and instead impose a 20% tax on wholesale weed, all the revenue from which would be deposited directly into the state general fund -- its primary “checking account.” The bill would also require people who grow marijuana for personal use to apply for a “purple card” under the Department of Revenue.

Tschida called HB 707 a “simple” bill, and said taxing marijuana at the wholesale level would produce “fewer entities” the state has to oversee for taxation, and said it could help avoid a marijuana black market.

“We were hoping to incorporate this language into another bill if possible,” Tschida said. “There’s no sense in running multiple bills that are simply making a small change to the language of the marijuana initiative.”

No one testified in support of the bill, and Pepper Peterson of the Montana Cannabis Guild spoke against it, calling it “the least considerate” of the existing marijuana industry of the proposed marijuana bills. Peterson was responsible for drafting the language in voter Initiative 190.

“The wholesale component of this is destructive to the existing marketplace,” Peterson said. “Folks that are in the wholesale market need skin in the game in the retail market. Otherwise, they have no care as to what the price is.”

Peterson added that such a scheme would push out small-scale retailers and allow the “Wal-Marts of weed” to dominate the state market. Conservation groups also testified against the measure for its lack of dedicated funding for conservation causes.

Whichever recreational marijuana bill emerges must advance to the Senate by April 8, or it will be considered dead.

Austin Amestoy is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Montana Newspaper Association and the Greater Montana Foundation. He can be reached at austin.amestoy@umontana.edu.