LITTLE ROCK, Ark. — Competing proposals to legalize Arkansas medical marijuana would cost the state more to administer than they would create in new tax revenue, state finance officials said Thursday, projecting they’d need as much as $5.7 million in additional funding if voters approve either measure next month.
The Department of Finance and Administration said each proposal would generate nearly $2.5 million in sales tax revenue annually, though it warned it would take 18 to 24 months to reach that point. The department said the new tax dollars wouldn’t be enough for the costs it and the Department of Health would face for overseeing the medical pot program.
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“At a state sales tax rate of 6.5 percent, I think it would be a challenge for the state of Arkansas to get to a point where it would actually be a revenue neutral proposal,” Paul Gehring with DFA told a joint legislative panel.
Both proposals on the ballot would allow patients with certain medical conditions to buy marijuana from dispensaries, but differ in their regulations and restrictions. For example, one proposal would allow patients to grow their own marijuana if they don’t live near a dispensary.
The analysis looked at estimated sales tax revenue from the dispensaries. It doesn’t include additional costs other agencies have claimed they would face if either measure is approved. The director of the Arkansas State Police, Col. Bill Bryant, told the panel his agency would need $2.8 million in additional funding to hire new staff and buy new equipment if medical marijuana is legalized. The state Crime Lab has also said it would need additional funding if medical pot passes.
The proposal estimated more than $38 million in annual medical marijuana sales. It also doesn’t factor in additional tax revenue the state may see from related businesses, including security and grow lighting, that the dispensaries may need or income tax revenue from workers hired.
The head of Arkansans for Compassionate Care, one of the pro-medical pot groups, dismissed the analysis since Republican Gov. Asa Hutchinson is an outspoken opponent of the proposals. She said it ignores the jobs that she says would be created at the dispensaries and other businesses.
“It will produce a huge amount of revenue and the program will pay for itself,” said Melissa Fults, the group’s campaign director.
A lawmaker on the panel questioned whether the projected revenue was downplayed, noting it was based on per capita sales in only six other states that have medical marijuana. Half the states and the District of Columbia have legalized medical marijuana in some fashion.
“I’m going to remain skeptical until I have numbers from every single state, every one that is legal right now. I’m going to remain skeptical because it appears based off what we’ve looked at that the lower numbers were used,” said Republican Rep. Michelle Gray, who said she’s opposed to both proposals.
Follow Andrew DeMillo on Twitter @ademillo