Nevada not ready for recreational marijuana
June 27, 2017
In January, Education Week's annual Quality Counts report ranked Nevada last in K-12 education, while Massachusetts ranked first.
Last November, both Nevada and Massachusetts voters passed marijuana industry-written initiatives legalizing commercial pot. In both states, a one year period was provided for state government to develop their recreational marijuana program, including drafting comprehensive regulations.
In the name of educational funding, Nevada politicians and the marijuana industry last December entered into an unholy alliance to heedlessly rush the process. An "Early Start" program was conceived by political insiders to advance the "first sale" date to July 1, 2017. This "Early Start" program was never the subject of any public hearings, state legislative approval or Nevada Tax Commission action prior to the announcement.
Governor Sandoval proposed a 10 percent retail sales tax on recreational marijuana for education. His rosy two year forecast of $60 million in revenue runs counter to initial experiences in Colorado ( revenue 1/3 of forecast) and Alaska (1/5 of forecast). Our new state motto: "Light one up for the kids." In dramatic contrast, the Massachusetts state legislature, citing the myriad complexities of legalization, including fundamental conflict with federal law, passed legislation last December, signed by Governor Baker, extending their "first sale" deadline to 18 months. Massachusetts will begin sales July 1, 2018 — a full year after the Nevada start date. Massachusetts legislators weren't impressed with the new money for education argument and vowed to get it right on prudent implementation.
The "Early Start" program beginning July 1 is without adequate preparation. Nevada has hired only four new employees to run a complicated "seed to sale" recreational marijuana program that required Colorado to add more than 50 additional employees in 2014.
On June 20, "Early Start" was thrown into legal turmoil by the grant of a preliminary injunction by Carson City District Judge James Wilson against the Nevada Tax Commission. The commission was enjoined from licensing any retail marijuana distribution other than by wholesale alcohol distributors. The judge found the tax commission to have adopted invalid temporary regulations and as having engaged in improper "ad hoc rulemaking." The court noted the marijuana initiative provides an 18-month "exclusive right" to liquor wholesale dealers to act as marijuana distributors.
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In finding for Nevada's alcohol distributors and against the state tax commission, the judge found untruthful the department's representation that no liquor wholesale licensee as having any interest in applying for a retail marijuana distributor license. Judge Wilson found the department's own documents contained expressions of interest from 29 wholesale liquor licensees.
Both Colorado and Nevada governors appointed a Task Force on implementation of the marijuana initiatives passed in their states. Due to delay in appointment of members by Governor Sandoval, the Nevada Task Force report wasn't completed until May 30 — only one month before July 1 "Early Start." Nevada permanent marijuana regulations are yet to be drafted. In contrast, Colorado had its Task Force report finished 9 ½ months prior to "first sale" on January 1, 2014.
Because of uncertainties, the legislature's final day decision to apply retail marijuana taxes to a "rainy day" account rather than to education was at least prudent. As one Nevada newspaper editorialized: "We think selling marijuana to raise money for schools makes about as much sense as selling child porn to raise money for daycare."
By shortening "first sale" time to only six months, Nevada stands alone in a wild ride to "Early Start."
Jim Hartman is an attorney residing in Genoa