The Massachusetts Cannabis Advisory Board is considering a reduction to license fees as part of a larger effort to harmonize the regulation of the state’s medical and adult-use cannabis markets.
“To run its medical program, the commission needs only $2.8 million. Yet it appears that the licensing fees collected are four times that amount,” said advisory board member Frank Shaw. “This is a clear indication that the fees are set too high. There are a limited number of licenses sustaining the program and yet they pay fees creating surplus revenue far beyond what it needs to be in operation.”
Shaw, who weighed in during the Feb. 24 meeting of the advisory board’s Industry Subcommittee, estimated that the medical cannabis industry generates about $11.5 million each year in licensing fees, while the state only needs $2.8 million to operate the medical program, according to the Cannabis Control Commission’s (CCC) annual activities report, released in October. The $2.8 million figure does not include the payroll costs of licensing, enforcement and legal work associated with overseeing the medical cannabis program, according to CCC spokesperson, Tara Smith.
The state has 141 medical licenses, as of the Feb. 10 CCC meeting, between provisional, final licenses and commence operation orders, all of which require an annual $50,000 fee, creating a $7 Million windfall for the state, according to Shaw’s calculation. The actual amount is likely much smaller, according to Smith, who said that the CCC lowered the application fee for vertically integrated medical cannabis providers to $3,500.
In addition, the state also collects $500 each year for over 9,000 employees in the medical cannabis industry, generating $4.5 million.
Comparatively, the most expensive annual licensing fees for adult-use facilities is $10,000, and agent registration is $115 every year.
The medical license fee schedule was created when the Department of Public Health was still in control of the program. At the time the fees were intended to fund the program. Since then, the adult-use market has come online flooding state coffers with cannabis tax revenue.
“I think we can safely state that lowering fees will not result in a negative financial impact to the commission,” said Shaw.
Commissioner Nurys Camargo noted that the licensing fees do not go directly to the CCC, but instead are paid to the state’s Marijuana Regulation Fund, which provides the funding for the CCC. Any changes to the rates of funding would have to go through the legislature.
“It’s a reminder to us that the commission relies on the legislature for funding,” said Camargo. “This is perfect timing in terms of advocating for funding for the next year.”
The subcommittee is also recommending that the state strip the requirement that all medical cannabis operators be vertically integrated, which has previously been discussed by the group.
“The Department of Public Health seemed to be, at the time, concerned about diversion and that hasn’t really proved out,” said subcommittee chair Michael Dundas.
The change in that requirement may already be in the works with or without the advisory board’s input.
Senate Bill 2663, which would eliminate the vertical integration requirement was filed on Feb. 7 and is currently before the Senate Ways and Means Committee.
As another component to allowing non-vertically integrated medical facilities, the committee is also recommending that cultivators and product manufacturers that are currently licensed in the adult use market be allowed to sell to medical dispensaries. Currently, the only transaction between adult use and medical license holders that is permitted is transfers between colocated license holders.
“It would seem like there really shouldn’t be any rationale for not allowing a recreation-only cultivator or manufacturer sell to a medical operator,” said Dundas. “If a colocated company can do it, it would suggest that there is no problem there.”
