Marijuana Legalization In Alaska: Potential Economic Implications Jeffrey Dickson – Samuel Dixon – Lee Kearney University of Alaska Anchorage Public Finance Management Spring 2014

Overview Job creation – What it could look like. Tax Revenue – Options & Structures. Prohibition Costs – Governmental Costs

Jobs  5 distinct areas of potential growth: Production – Law & Geography isolate AK. Distribution – Multi-facetted operation. Retail – Face of the industry. “Offshoots” – Nontraditional products. Government – New & Expanded role.

Happening in AK  Eagle River resident is buying up business names.  A Girdwood resident is seeing his business expand.  State of Alaska Department of Revenue: 3 new positions totaling $300,000 in additional personnel costs. Department of Commerce, Community and Economic Development: 9 new positions totaling $954,800 in additional personnel costs. Department of Environmental Conservation: 1 new position totaling $136,900 in additional personnel costs.

Clues from CO & WA  CannaSearch job fair in Denver, Colorado.  Colorado has issued 348 retail marijuana licenses.  Washington officials expect more than 300 retail dispensaries to open this coming summer.

Potential Tax Implications  Adequacy Covers the State’s implementation costs sufficient and predictable funding to support the long-term regulatory and enforcement scheme  Collectable Points to the use of retail sales and excise taxes  Transparency License Fee and $50 ounce wholesale tax

Potential Tax Structures  Colorado 2.9 percent retail sales tax 10 percent state retail sales tax 15 percent excise wholesale tax  Washington excise tax of 25 percent of the selling price of the product (Wholesale and retail levels)

Potential Tax Revenues  Colorado $100 million annually forecasted Currently on pace for considerably less  Washington $259 million annually forecasted  Alaska We predict $20 million annually

Costs of Marijuana Prohibition  Law Enforcement Costs – Arresting those involved in illegal use, sales and production of marijuana.  Court System Costs – The costs of prosecuting those arrested.  Corrections Costs – The cost of incarcerating those found guilty of violations (including parole costs).

How to Calculate Costs A Simple Formula Estimate the percentage of arrests in the state that are related to marijauna offenses. Multiply this by the total costs for all arrests to arrive at the cost related to prohibition for law enforcement. Follow same method for each category.

Three Researcher’s Estimates ResearcherLaw Enforcement Costs Court System Costs Corrections Costs Total Costs Bates$1.8 million$11.75 million$6.28 million$19.83 million FBI/UCR$3.36 million$4.85 million$.90 million$9.11 million Miron$3.61 million$14.17 million$1.75 million$19.53 million

Recommendations  Recommend the Bate’s study be redone in conjunction with law enforcement and the latest data available.  Recommend that the University assess the cost of the policy to itself.  Recommend the University position itself to have an active and leading role in the task force that will be formed should the measure pass.