Report identifies $6.6 million price tag for legalizing marijuana in ND, but tax revenue unknown
BISMARCK — Legalizing recreational marijuana in North Dakota will cost state agencies and local governments more than $6.6 million over the next few years, according to estimates lawmakers received Wednesday afternoon, Sept. 12.
But some other costs, as well as potential tax revenue, remain unknown, the report said.
The measure will ask voters in November to legalize “non-violent marijuana related activity” for people over 21, except for selling to minors. It would also create a process for expunging records of those previously convicted of a crime that’s legalized by the measure.
The largest expected price tag would come from an “education campaign on the health impact and physical addiction attributed to marijuana use among youth,” according to the state Department of Health. The agency predicted it would spend $3.7 million on that during the 2019-21 budget cycle.
During a Legislative Management meeting Wednesday, House Minority Leader Corey Mock, D-Grand Forks, unsuccessfully argued against including the Health Department’s figures because the measure doesn’t explicitly require an education campaign. The committee voted to accept fiscal impact statements for all four measures on the ballot.
Attorney General Wayne Stenehjem’s office estimated the marijuana proposal would cost $1.1 million to expunge 179,101 records with 124 temporary staff. North Dakota county governments and the state court system also predicted that provision would carry some costs.
But several state agencies said the measure’s fiscal effect is hard to pin down. The Department of Human Services said there’s not “enough substantiated research to quantify the potential increase in costs” to the state’s largest agency, and the Highway Patrol said it would depend in part on the measure’s “legal interpretation.”
The state Tax Commissioner’s Office said marijuana products and paraphernalia would be subject to the state’s 5 percent sales and use tax, along with any local sales taxes, but it couldn’t provide an accurate revenue projection. The measure doesn’t include a specific “drug tax,” the report said.
David Owen, the chief backer of the marijuana measure, called the report “fair” but said legalization would bring in far more tax revenue than its projected costs. He argued $6.6 million represents a small portion of overall government spending.
“What it shows is this bill’s not expensive, the sky’s not falling,” Owen said.
Bob Wefald, a former judge and attorney general who’s leading a group opposing the measure, predicted it will cost more than $6.6 million and said a “clever lawyer” would argue sales tax doesn’t apply to marijuana.
“It’s going to be a financial disaster for the state of North Dakota,” Wefald said.
State officials appeared to overshoot the estimated impact of the medical marijuana measure that passed in 2016. That law was expected to cost $8.7 million in one-time and 2017-19 expenses but only cost $363,426 in the fiscal year that ended June 30.
Jason Wahl, the state’s top medical marijuana regulator, said the law changed significantly between the measure’s passage and its implementation, causing the wide gap between estimated and actual fiscal impact.
A proposed change in state law allowing volunteer emergency responders to apply for free red personalized license plates would cost the state about $3.5 million in lost revenue every two-year budget cycle, according to a Department of Transportation fiscal note.
The state’s Highway Tax Distribution Fund would lose almost $13.9 million over 10 years, while the Parks and Recreation Department would lose nearly $3.9 million because the plates would serve as an entrance pass to state parks. Eligible volunteers would include firefighters and emergency medical personnel.
Norval Semchenko, a retired farmer from Max who’s pushing the measure, said the projected expense is “mighty small potatoes” compared to what it would cost to employ the emergency responders.
“There’s a cost to this, but … they get so little recognition,” he said.
Ethics, citizen voting
Budget officials weren’t able to come up with a full fiscal assessment of the measure that would create an ethics commission to investigate public official malfeasance and add other anti-corruption language into the state constitution. Joe Morrissette, the Office of Management and Budget director, wrote in a letter that the measure doesn’t specify whether the commission will be part of a state agency or if paid employees will be required.
A whistleblower hotline is expected to cost $672 every two years, Morrissette wrote.
Another constitutional measure seeking to ensure only U.S. citizens vote in North Dakota elections wouldn’t impose any costs on state or local governments because it wouldn’t change election procedures, Secretary of State Al Jaeger wrote in a letter. State law already requires North Dakota voters to be U.S. citizens.
Officials also said Wednesday that the crime victims’ rights measure known as Marsy’s Law cost $285,386 in fiscal year 2018, but some expenses remained undetermined. The constitutional measure passed in 2016 and provides 19 rights to victims, such as the right to prevent the disclosure of information that could be used to locate or harass them and to be promptly notified of criminal proceedings.
The measure was previously projected to cost nearly $4 million in the 2017-19 biennium.
Much of the actual cost came from county and local governments that helped pay for a statewide automated victim information and notification program. Stenehjem’s office said it had spent $94,210 on Marsy’s Law projects, but couldn’t quantify costs associated with additional staff time.
The North Dakota court system said Marsy’s Law has resulted in a heavier workload, but it doesn’t have records on the number of cases that have been affected by the measure.