Will Humble, MPH 6/7/16AZPHA – ARIZONA PUBLIC HEALTH ASSOCIATION 1 How the 2016 “Regulation and Taxation of Marijuana Act” Would Work in Arizona

Learning Objectives Understand the anticipated regulatory structure of the Regulation and Taxation of Marijuana Act Learn how the Act would interface with the existing Arizona Medical Marijuana Act Understand how retail marijuana stores would be established and how many could exist Learn what changes would occur within Arizona’s Criminal Code for possession of marijuana Become familiar with how the new regulatory program would be funded Be able to explain how revenue would be created by the program, and where excess revenue would be distributed

Important Dates November 2010: AZ Medical Marijuana Act (AMMA) passes April 14, 2011: AZ Department of Health Services launches the program and begins accepting applications for qualifying patients and designated caregivers December 6, 2012: First medical marijuana dispensary opens and dispenses. August 2016: ADHS has issued about 100,000 qualified patient cards and has licensed about 90 operating dispensaries. November 8, 2016: Arizona Voters Decide fate of the Regulation and Taxation of Marijuana Act

Regulatory Structure ◦The Arizona Department of Marijuana Licenses and Control (ADMLC) and a 7 member Marijuana Commission would be created ◦ The Agency Director would be appointed by the Governor and can be fired “for cause” ◦Commission would consist of 4 members with no financial interest in any marijuana establishment and 3 members who are controlling persons from a marijuana business ◦ The new Agency would take over the existing Medical Marijuana program (including regulatory authority) from the Arizona Department of Health Services in September, 2017 ◦The new Agency must adopt Rules (Administrative Code) for the program by September 1, 2017

Regulatory Structure ◦The basic charge for new Agency would be to: “… enforce the laws and rules related to the production, manufacture, transportation, sale, storage, distribution and testing of marijuana… and shall conduct investigations of compliance… as necessary to enforce this chapter (statute) or rules…” ◦The new Agency would administer applications for existing Medical Marijuana Dispensaries to become “Reorganized Marijuana Businesses” (marijuana retail stores) ◦The Marijuana Commission (within the new Agency) would approve and deny licenses for qualified Reorganized Marijuana Businesses by December 1, Until December 1, 2017, only reorganized marijuana businesses can apply for licenses ◦Retail sales could begin on March 2, 2018.

Retail Marijuana Sales – the Basics ◦Anybody 21 years old and above could buy marijuana (including extracts and edibles) at retail marijuana stores beginning March 2, 2018 ◦Retail stores would include a 15% surcharge on marijuana sales ◦Medical marijuana patients (including patients under 21) could continue buy from medical marijuana dispensaries without the 15% surcharge ◦Medical marijuana dispensaries could be at the same location as the retail marijuana store

Medical Marijuana Dispensaries v. Retail Stores ◦Prices will be lower at medical marijuana dispensaries because there would be no 15% surcharge. Only medical marijuana patients could buy at the less expensive medical marijuana dispensaries ◦Retail sales at stores would be limited to selling 1 ounce (28.3 grams) of marijuana; or a maximum of 5 grams of concentrated marijuana (as an extract, resin or as an extract and resin ingredient in edibles) ◦Medical marijuana patients could continue to buy up to 2.5 ounces (70.7 grams) every 2 weeks from medical marijuana dispensaries

Regulations for Marijuana Establishments ◦The Arizona Department of Marijuana Licenses and Control would set operating regulations for: ◦Lice nsing, renewal, suspension and revocation ◦Standards for working at a marijuana store ◦Physical plant security standards ◦Product tracking procedures ◦Marijuana production and cultivation standards ◦Packaging and labeling requirements ◦Marijuana testing standards ◦Marketing and display standards ◦Standards for transferring ownership of a store

Cultivation License Tiers ◦The Arizona Department of Marijuana Licenses and Control would set cultivation regulatory standards for supplying the stores with marijuana ◦At least 3 cultivation tiers would exist: ◦Unlimited Production ◦Mid-volume Production ◦Low-volume” production ◦Re-organized medical marijuana businesses would qualify for the unlimited production tier ◦New retail marijuana businesses (that were not former medical marijuana dispensaries) must start at the lowest tier of production and can only advance to the next level until they can prove sale of 85% of their product

Number of Stores/Dispensaries ◦As of June, 2016, the Arizona Department of Health Services had 99 licensed or certified medical marijuana dispensaries ◦Approximately 30 additional certificates expected in the Summer of 2016, bringing the total to about 120 ◦Each currently existing medical marijuana dispensary could re-organize as a Reorganized Marijuana Business, or “retail store” and begin operating December 1, Until December 1, 2017, only reorganized marijuana businesses can apply for licenses ◦Retail sales could begin on March 2, ◦By early 2018 the number of Reorganized Marijuana Businesses (retail stores) would be a subset of the approximately 120 medical marijuana dispensaries

Number of Stores/Dispensaries ◦The Arizona Department of Marijuana Licenses and Control would be required to begin issuing additional Marijuana Retailer licenses in late 2017 ◦New licenses would be limited to 10% of the number of Series 9 liquor licenses. Current limit would be 147 Marijuana Retailers ◦After 2021, the Agency could issue additional retailer licenses as needed to “… minimize the illegal market… to meet demand… or to provide for reasonable access to marijuana retailers in rural areas”

Marijuana Store Locations ◦Cities, towns and other political jurisdictions can establish reasonable zoning standards for marijuana stores as long as the standards are consistent with the Act ◦Cities, towns and other political jurisdictions may prohibit the licensing of new marijuana retailers and cultivation facilities, except that: ◦The ordinance must be enacted by a referendum or initiative on a general election ballot; and ◦The ordinance can’t prohibit a zoning application for a reorganized medical marijuana dispensary to become a retail store or prohibit them from operating as a manufacturer or cultivator

Stopgap Measures ◦If the Arizona Department of Marijuana Licenses and Control doesn’t implement the law by September 1, 2018, existing medical marijuana dispensaries can transition to a Reorganized Marijuana Business (retail store) without Agency approval ◦Localities could then license and regulate the Reorganized Marijuana Businesses ◦If the new Agency doesn’t implement the law, applicants can file a Mandamus action in Superior Court to compel action

Current Marijuana Possession Laws ◦Currently, any possession of marijuana by a non-medical marijuana cardholder is a felony, even 1 marijuana cigarette ◦Many people charged with possession of small amounts are offered probation under the condition that they complete a treatment program (ARS ). In addition, ARS gives county attorneys the option to refer marijuana offenders to treatment and dismiss the charge upon successful completion. ◦Only qualified Medical Marijuana Patients are currently protected from prosecution for possession. Qualified medical marijuana patients can legally possess up to 2.5 ounces (70.7 grams) of marijuana, or 12 plants if they are authorized to cultivate ◦Qualified medical marijuana caregivers can possess more than 2.5 ounces (up to 2.5 oz per patient- limit 5 patients)

Marijuana Laws, if Initiative Passes ◦Anyone 21 or older could legally possess up to 1 ounce of marijuana (about 40 – 60 joints); including a maximum of 5 grams of concentrated marijuana (as an extract, resin or as an extract and resin ingredient in edibles) ◦Anyone 21 and older would be able to grow up to 6 of their own marijuana plants as long as they meet security standards (limit 12 per household) and possess all the marijuana the plants produce ◦Anyone under 21 possessing less than 1 ounce of marijuana (or less than 5 grams of concentrate) could be charged with a petty offense punishable by a fine of not more than $300 and up to 24 hours of community restitution ◦Anyone (21 or older) who sells or gives any marijuana to a non-medical marijuana cardholder under 21 could be charged with a petty offense punishable by a fine of not more than $300

Marijuana Laws, if Initiative Passes ◦Anyone 21 or older who isn’t a dispensary agent or establishment employee or a medical marijuana caregiver with multiple patients, who possesses more than 2.5 ounces of marijuana would still be subject to a felony ◦Anyone under 21 who is not a medical marijuana cardholder that possesses more than 1 ounce of marijuana (or more than 5 grams of concentrate or concentrate in edibles) would still be subject to a felony charge ◦Anyone 21 and older who possess more than 1 ounce but less than 2.5 ounces could be charged with a petty offense and fined up to $300 (exemptions for medical marijuana patients)

Marijuana Laws, if Initiative Passes ◦Any medical marijuana qualified patient, caregiver, or dispensary agent acting within the scope of the Arizona Medical Marijuana Act would continue to enjoy the Act’s protections ◦The law does not authorize persons to, nor does it prevent the imposition of civil or criminal penalties for operating a motor vehicle while impaired with marijuana, however the current criteria for proving impairment may not be the same ◦Landlords/land-owners could prohibit producing, processing or manufacturing marijuana on their property ◦Workplaces could still “… enact and enforce workplace policies restricting the consumption the consumption of marijuana by employees”, however the burden of proof would be on the employer to show that the employee performed a task while impaired, constituting negligence or malpractice. ◦Possessing or using marijuana on school grounds and other prohibited areas is unchanged

Regulatory Funding Sources ◦The Arizona Department of Marijuana Licenses and Control would initially be funded by the Arizona Medical Marijuana Fund (currently contains more than $12 million) ◦After covering initial expenses, the Department of Marijuana Licenses and Control would return unused funds to the Arizona Medical Marijuana Fund (which would reside within the same agency) to continue operating the medical marijuana program ◦No state general funds would be used for the program, including costs for collecting tax revenue

Tax Revenue ◦The law would create the “Marijuana Fund” funded by the 15% surcharge tax on all marijuana sold at Marijuana Establishments. ◦The Tax Foundation estimates $113 million in new tax revenue per year to the Marijuana Fund, while the Arizona Legislature’s Joint Legislative Budget Committee projects $53.4 million. Revenue is first be used to fund the program. Excess revenue would be distributed as follows: ◦40% to school districts and charter schools for things like teachers salaries, operations costs for K-12 education ◦40% to school districts and charter schools for full day Kindergarten ◦20% to the Arizona Department of Health Services, who would distribute the funds to AZ Poison Control Centers for public education regarding the harms of alcohol, marijuana and other substances

Summary The Arizona Department of Marijuana Licenses and Control would be created if Regulation and Taxation of Marijuana Act passes The Agency Director would be appointed by the Governor along with a 7-member Marijuana Commission. The new Agency would take over the existing Medical Marijuana program from the Arizona Department of Health Services in September 2017 Existing medical marijuana dispensaries could transition into marijuana retail stores, with a maximum of about 147 stores statewide for the first few years

Summary Anybody 21 years old and above could buy marijuana at the retail stores (beginning March 2, 2018) Medical marijuana dispensaries could co-exist with retail marijuana stores Prices will be lower at medical marijuana dispensaries because of the lack of the 15% surcharge tax Only medical marijuana patients could buy at the less expensive medical marijuana dispensaries

Summary Currently, any possession of marijuana by a non-medical marijuana cardholder is a felony, even 1 marijuana cigarette. In practice, many people charged with possession of small amounts are offered probation under the condition that they complete a treatment program (ARS ) If the Act passes, anyone 21 or older could legally possess up to 1 ounce of marijuana; including up to 5 grams of concentrated marijuana (as an extract, resin or as an extract and resin ingredient in edibles) and grow up to 6 of their own plants Possession of more than 2.5 ounces by anyone 21 or older (who isn’t a dispensary agent or establishment employee or a medical marijuana caregiver) would still be a felony

Summary Possession of more than 1 ounce of marijuana; or 5 grams of concentrate as an extract, resin or as an extract and resin ingredient in edibles by anyone under 21 (who is not a medical marijuana cardholder) would still be a felony The law does not authorize persons to, nor does it prevent the imposition of civil or criminal penalties for operating a motor vehicle while impaired with marijuana, however the current criteria for proving impairment may not be the same Landlords/land-owners could prohibit producing, processing or manufacturing marijuana on their property Workplaces could still “… enact and enforce workplace policies restricting the consumption the consumption of marijuana by employees”

Summary The law would create the “Marijuana Fund” funded by the 15% surcharge tax on all marijuana sold at Marijuana Establishments The Tax Foundation estimates $113 million in new tax revenue per year to the Marijuana Fund, while the Arizona Legislature’s Joint Legislative Budget Committee projects $53.4 million Excess revenue would be distributed to school districts and charter schools, full-day Kindergarten and for public education regarding the harms of alcohol, marijuana and other substances