Introduction by Croakey: Legalise Cannabis Senate candidate for Victoria Fiona Patten visited the United States last month to investigate the impact of cannabis law reform in New York State, which legalised the medicinal use of cannabis in 2016, and ended prohibition for recreational use in 2021.
Patten writes below that the legal cannabis market in New York State is providing much-needed tax revenue to help pay for government-run programs, while also generating game-changing levels of funding for non-profit organisations to provide essential services like housing, education, training, and employment.
Fiona Patten writes:
Back in January, the New York State Government put out a media release exuberantly titled: ‘THANK YOU, NEW YORK! THE OFFICE OF CANNABIS MANAGEMENT CELEBRATES $1 BILLION IN CANNABIS RETAIL SALES WITH HISTORIC PRESS CONFERENCE’.
This was on the back of the release of the Office of Cannabis Management Annual Report.
In Australia, it sounded strange to hear a government celebrating cannabis sales rather than cannabis seizures!
As lead candidate for the upcoming Victorian Senate election with the Legalise Cannabis Party, I visited New York a couple of weeks ago to learn about their model of legalisation.
That billion-dollar sales figure was way more interesting than it first seemed:
-  It wasn’t feeding into the black market
- Â It generated around $150 million in annual taxes and licensing fees
- Â It helped fund other important initiatives in the state of New York.
And that’s just the beginning.
Shifting focus
New York’s approach to cannabis law reform shifts the focus from hard-line law enforcement to prioritising public health and safety, social justice, and equitable economic development, designed to help undo the harm caused by cannabis prohibition.
Granted, it hasn’t been easy. There are still too many unlicensed dispensaries that bypass paying tax and sell unregulated products.
But that, too, is changing.
Less than two years ago the legal licensed market accounted for around two percent of all shopfronts. That figure is now 20 percent, and experts estimate that when factoring in both licensed and unlicensed operators, the industry is worth at least $7 billion annually.
So, as more stores are licensed and illegal ones are given the boot, state revenue from cannabis sales is expected to increase at least seven-fold.
When New York introduced its landmark cannabis law reform in 2021, it stipulated that individuals impacted by cannabis prohibition be the first to be issued with licences. This was via the Conditional Adult-Use Retail Dispensary Licenses (CAURD) program that aimed to make social equity entrepreneurs the bedrock of New York’s adult-use cannabis market.
Under this policy, people with cannabis-related convictions – including possessing or selling cannabis – are prioritised over commercial entities. Charities that worked with people and communities affected by prohibition are also favoured.
The Office of Cannabis Management’s 2024 annual report notes that 569 of the 1,017 Adult-Use Retail Licenses were issued to CAURD program participants. Around 54 percent of all licences in New York are social equity ones.
Housing Works
The first ever licensed dispensary to open in New York was the non-profit organisation, Housing Works. Housing Works is a charity providing housing, healthcare, and vocational training to thousands of New Yorkers annually.
Subsequent licences have been issued to other charities who also deal with recidivism, employment, family violence and homelessness.
But this ain’t charity. This is New York, where the dollar is queen, baby.
Housing Works turned over $45,000 US in its first three hours of operation and logged a whopping $24 million US in sales in its first 12 months! This money goes directly into funding their many initiatives that help provide housing, support, training and employment to marginalised communities such as the LGBTI community, people leaving prison and people with addiction.
Like many of the non-profit organisations we have in Australia, Housing Works also runs bookshops, cafes, and op shops.
But something tells me it’s not the books, cakes and coffee bringing in the big bucks.
So, not only is the legal cannabis market in New York providing much-needed tax revenue to help pay for government-run programs, but it also generates game-changing levels of funding for non-profit organisations to provide essential services like housing, education, training, and employment.
Of course, the past three years hasn’t been without teething problems. While the government’s legislation focussed on social equity and righting the wrongs of prohibition, many CAURD program licence-holders do not have the required finances or business backgrounds.
Without the necessary skills to run a small business and navigate the complicated regulatory and tax systems that have been introduced, the practical implications for these people can be devastating.
It’s why Housing Works also helps people who qualify for the CAURD program with training and hands-on work experience at their stores and offices.
They will also provide practical support for CUARD businesses like payroll management and book-keeping. They will even provide capital for these individuals and small organisations to help them get going.
Regulatory benefits
While the New York model isn’t perfect, it’s far better than the prohibitionist approach that wastes taxpayer money, enriches criminals and disproportionately targets the more vulnerable members of communities.
It helps people with past convictions move away from the criminal justice system, ensures a regulated and tested product is sold and puts money directly into the communities most affected by cannabis prohibition.
I suppose a rare benefit of Australia’s painfully slow adoption of progressive cannabis law reform is that we get to see what other countries do and learn from it.
A report on cannabis regulations in Australia found that an estimated $2.1 billion is spent on law enforcement resources per year as part of the country’s ongoing prohibitionist approach.
From the large-scale efforts to seize weed that these taxpayer billions go towards, a measly 2.6 percent of the 441 tonnes of illegal cannabis Australia consumes annually is confiscated.
Yet economists estimate the size of the illicit retail cannabis market in Australia to be around $5 billion.That’s less than the overall consumption in New York; a state with a smaller population (20 million) than Australia.
So, Australia spends $2.1 billion a year trying to stop the estimated 2.9 million adult users from spending $5 billion a year on black market pot! Oh, and the return on investment? Around $130 million worth of cannabis plants which the cops seize annually.
Now I have no aspirations to be Treasurer, but I’m happy to advise Dr Jim Chalmers or Angus Taylor as to why this is such a terrible investment.
The steps New York took to reach socially-conscious law reform were based on a 2018 assessment of the possible impact of regulating cannabis in New York State.
The report assessed the health, public safety, and economic impact of legalising cannabis based on reviews carried out by New York State agencies. It found the positive effects of regulating an adult cannabis market far outweigh the potential negative impacts.
The report acknowledged the potential for substantial tax revenue, which can be used to help support program initiatives in areas such as public health, education, transportation, research, law enforcement and workforce development. It concluded tax revenues can also support community reinvestment in health care and employment.
Finally, the report stated that legalisation of cannabis will address an important social justice issue by reducing disproportionate criminalisation and incarceration of minority communities.
And in Australia?
According to the most recent national data produced by the Australian Criminal Intelligence Commission, cannabis accounted for nearly half (47.1 percent) of the 140,624 drug-related arrests across Australia.
Yet the primary output of law enforcement spending continues to be arrests for low-level use and possession offences. People from disadvantaged backgrounds are, of course, most affected.
According to a National Drug Law Enforcement Research Fund report, the average cost of arrest for a cannabis offence has been estimated to be between $2,000 and $3,000. And we arrest about 70,000 people every year.
Surely, we can see by now that not only does prohibition not work, but it’s also an embarrassingly woeful waste of taxpayer money.
Like New York, we could be diverting the multi-billion-dollar cannabis black market into a regulated market so that the revenue goes back into the community, not the pocket of criminals.
See Croakey’s archive of articles on the social determinants of health
