October 1, 2022 | By Emily Hines
A vote for Issue 4 will legalize “adult use” marijuana in Arkansas, but Arkansans shouldn’t vote for it. Here’s why.
What the measure will do for Arkansas:
Create jobs.
Bring people to Arkansas to live, work, and relax.
Replace opioids as a legal source of pain relief for more people.
Give tax money to police offers, UAMS, and drug courts.
Make more money for the people who are already in business.
Good and Bad Things in the Law
The “Arkansas Adult Use Cannabis Amendment” changes the “Arkansas Medical Marijuana Amendment” (Amendment 98) that voters approved in 2016. The 2022 Amendment will legalize possession, personal use, and consumption for adults over 21. It will do some good things for Arkansas entrepreneurs and marijuana patients:
- The measure removes residency as a requirement to qualify as a patient in the state.
- Medical marijuana will be tax-free.
- The measure increases the number of plants a dispensary can grow or possess from 50 to 100.
- New cultivators can have 250 mature plants starting November 2023.
That’s where the good news stops.
The measure does not allow any form of home cultivation. It does nothing for those already incarcerated or facing marijuana drug charges. It does nothing to address the harms imposed on communities by the war on drugs.
On the contrary, it enables the rich to continue monopolizing Arkansas’ cannabis market and make money on ordinary people.
Proponents praise the measure’s conditions on tax distributions, expanded licenses, and less restrictive ownership rules. However, these components benefit existing cannabis license-holders and influence voters to approve the measure.
New cultivation businesses can open, but not until after November 2023. They will have missed out on nearly a year’s worth of revenue compared to stores owned by the dozen licensed medical marijuana businesses currently approved.
The benefits act as a smokescreen for what else the measure will do for Arkansas’ economy. Arkansans deserve to know that if they vote for Issue 4, they relinquish control of Arkansas’ share of a $20.47 billion global market to a small group of individuals.
The measure is expected to pass. Because it is a Constitutional Amendment, it will be difficult to change without another statewide vote.
The Tax Breakdown
One piece of the measure promoted by advocates is the tax distribution scheme.
When adult-use consumers purchase a marijuana product, they could pay up to 10% for a supplemental tax (in addition to state and local sales tax).
The Arkansas Economic Development Institute (AEDI) estimates that by 2027, the state could collect up to $303.6 million in revenue from the supplemental tax alone.
Arkansas will not collect an excise tax on wholesale sales or transfers from cultivation centers to dispensaries—a potentially massive loss of revenue.
For comparison, Colorado currently requires a 15% retail marijuana sales tax and an additional 15% excise tax on the first sale or transfer of unprocessed marijuana by a retail marijuana cultivation facility. In 2021 alone, Colorado collected $118,538,471 in excise taxes that directly funded public schools.
Money for Votes: Why Tax Money to Police Officers, UAMS, and Drug Court?
The new Amendment requires the state to distribute:
- 15% of the tax revenue to law enforcement,
- 10% to the University of Arkansas for Medical Sciences (UAMS), and
- 5% to the state drug court program.
Any remaining revenue will go to the state general fund.
The state will distribute the 15% allocated to law enforcement as an annual stipend. Officers certified by the Commission on Law Enforcement Standards and Training (CLEST) and in good standing receive additional tax dollars on their paychecks.
The Commission trains and certifies Arkansas police officers according to standards set by the 10-member board. The governor appoints the president and board members for several-year terms.
Increasing the individual officers’ pay through marijuana tax revenue isn’t necessarily bad for the state. Salary.com estimates that the typical salary range for an Arkansas officer is between $52,600 and $61,300.
The problem is that this distribution seems like bribery for votes. Law enforcement’s support could help the measure pass. When it does, they get a kickback on their paychecks.
The 10% tax allocated to UAMS sounds good, too. However, the measure states that the tax can be used “for operations.” It does not direct the funds toward any marijuana or drug research. This part could be to sway healthcare and UAMS votes, as well as public sentiment toward the measure.
Additionally, the measure doesn’t specify a particular use for the 5% reserved for drug courts. Does this mean the state can use legal tax revenue to prosecute those charged with marijuana crimes before the Amendment? The idea behind funding drug courts could be to promote rehab programs. However, the measure doesn’t address this one way or the other.
The remaining 70% of the marijuana tax revenue goes into Arkansas’ general fund for the legislature to distribute without additional stipulations like funding education, expungement, or drug rehab programs.
Who Gets a Dispensary License?
Another component furthered by the measure’s advocates is that it will expand the number of licenses available. True, the measure will allow the state to license a total of 20 cultivators and 120 dispensaries. The current law allows at most eight cultivators and 40 dispensaries.
Before addressing how the measure will allocate these licenses, I want to point out that the measure requires the state
Alcoholic Beverage Control (ABC) Division of the Department of Finance and Administration
to create rules for and license the new retail marijuana cultivation facilities and dispensaries. It took ABC over three years to issue the first license to an Arkansas cultivation facility after citizens approved Amendment 98 in 2016. ABC’s new Medical Marijuana Commission now holds monthly rulemaking meetings, so the process should be faster than during the medical program’s inception.
Additionally, the referendum requires ABC to “issue” licenses by a particular date in 2023.
If approved, the “Arkansas Adult Use Cannabis Amendment” will authorize new license applicants according to three categories. The three commercial adult-use licenses include Tier One adult-use cultivation facility licenses, Tier Two adult-use cultivation facility licenses, and adult-use dispensary licenses.
Tier One Adult Use Cultivation Facility Licenses
The measure requires ABC to issue Tier One licenses to each cultivation facility already licensed under Amendment 98 by March 7, 2023. The Tier One license will allow existing licensees to cultivate, prepare, manufacture, process, package, sell, and deliver cannabis to another commercial establishment. The newly allowed activities will be in addition to processing and selling medical marijuana under Amendment 98 on the same premises.
There will only be eight Tier One licenses. The state has licensed five cultivation facilities to date, but only three are in operation. The measure does not mention an application process for the additional Tier One licenses.
Tier Two Adult Use Cultivation Facility Licenses
By November 8, 2023, ABC shall issue 12 Tier Two adult-use cultivation facility licenses to new applicants. The licenses will be awarded by lottery, with no specifications as to the procedure except that it is ABC’s responsibility. Although Tier Two cultivators could have 150 more plants than existing locations, the problem is the November deadline.
The state must issue Tier One licenses by March 7, 2023. The Tier One licenses go automatically to existing medical cultivators. Existing businesses can start selling products to retail dispensaries without any licensing process in March. The new cultivators can’t start to grow until at least eight months later.
New Adult Use Dispensary Licenses
The measure authorizes ABC to issue 40 additional adult-use dispensary licenses by July 5, 2023. ABC will select the new licensees by a lottery process.
The measure caps the total number of adult-use dispensaries (including those going to existing medical dispensaries, discussed below) at 120.
Finally, the measure requires newly licensed adult-use dispensaries to be located at least 5 miles from a dispensary licensed under Amendment 98. This location limit will prevent overcrowding and competition.
Adult Use Dispensary Licenses for Medical Dispensaries Licensed Under Amendment 98
The measure gets good for existing medical dispensaries. Each existing dispensary license-holder, as of November 8, 2022, will receive two adult-use licenses by March 7, 2023.
One will be to open an adult-use establishment on the same premises as the existing medical dispensary. The second license will allow them to open another location, at least 5 miles from a medical dispensary, for only adult-use sales.
Awarding both licenses happens without any mention of an application or other licensing processes. Plus, they can still sell medical marijuana to registered patients tax-free. Does this scream “mafia” and “oligarchy” to anyone else yet?
New Ownership Rules
The measure takes several steps to appeal and amend sections of Amendment 98 regarding ownership of cultivation facilities and dispensaries. Again, these measures benefit Arkansas’s wealthy and existing cannabis business owners.
Background Check Requirements: Section 8(k)
Under the current law, each applicant must undergo a state and national criminal background check conducted by the Identification Bureau of the Department of Arkansas State Police and the Federal Bureau of Investigation. If the measure passes, individuals with less than 5% ownership will be exempt from the criminal background check requirements.
Residency Requirements: Section 8(c)
Current law requires each applying for a dispensary or cultivation facility and 60% of the interest owners to have resided in the state for the previous seven consecutive years. The measure will repeal this section. Anyone from outside Arkansas could apply for a license, including foreigners.
Ownership Limits: Section 8(i)
An individual can currently own an interest in only one medical cultivation facility and one medical dispensary. Without changing medical ownership limits, the measure would allow an individual or entity to own an interest in 18 adult-use dispensaries. Eighteen! Think of the money. For reference, Arkansas medical marijuana sales totaled $264.9 million in 2021.
Who is Funding the Ballot Measure?
When voting on Issue 4, it’s important to know who is funding it.
Eddie Armstrong founded Responsible Growth Arkansas, the group promoting the ballot initiative. He previously served as minority leader in the state House of Representatives.
Armstrong’s Ballot Question Committee report listed $1,750,000 in initial donations from existing cultivators.
According to financial reports submitted to the Arkansas Ethics Committee, five donors contributed $350,000 each to start the campaign. The donors—Bold Team, Good Day Farms Arkansas, Osage Creek Cultivation, DMCC (Delta Medical Cannabis), and NSMC-OPCO (Natural State Medicinals Cultivation)—are all existing cultivators.
A review of the other financial reports shows that existing marijuana businesses donated an overwhelming majority of their $4 million budget.
The new applicants for licensed adult-use dispensaries and cultivators can begin functioning in November 2023. Current medical facilities can begin selling to adult-use stores in March 2023. Why do new businesses have to wait eight months to start?
The measure leaves the rules up to ABC.
If the text of the measure wasn’t clear, the dollars should speak for themselves. This ballot measure will benefit existing license-holders at the exclusion of everyday Arkansans.
In Conclusion
I grew up in Arkansas. I spent four years at the University of Denver studying Colorado’s successful marijuana laws.
I am excited to hear that marijuana legalization is on the ballot. Legalization and commercialization are beneficial for the state. However, after reading the Arkansas proposal, I am 100% offended by the ramifications of this ballot measure.
- The tax distributions will sway public opinion toward voting for the referendum.
- The licensing scheme allows existing licensees to benefit immediately while new applicants wait for ABC to effect lottery procedures.
- The revamped ownership requirements allow the rich and foreigners to expand their interests and increase their profits.
- Finally, the measure is funded to the tune of millions of dollars directly from the existing industry. It benefits the wealthy and existing license-holders without addressing Arkansas’ needs.
- There has to be a better way.
If Issue 4 passes, I will be happy—for medical marijuana patients who will pay no tax on their medicine and newly qualified patients from Tennessee, Kansas, and Texas who will come to Arkansas to purchase.