First look at Montana cannabis bill shows framework, allocation of revenues

On Wednesday a draft of the bill became available for the first time, coming in at 264 pages. The bill will mostly funnel revenue from a 20% tax on recreational cannabis to the state’s general fund after the first $6 million goes toward a drug and addiction treatment program sought by Gov. Greg Gianforte.

The legislation would also allocate a smaller percentage of funding toward parks and trails, which the ballot initiative that legalized cannabis dedicated roughly half the money to.

Rather than giving local jurisdictions the option to deny marijuana sales in that jurisdiction, counties would have to opt to allow it. Another component of the bill allows business licenses for tribes to sell just outside reservation boundaries.

The legislation will be carried by Rep. Mike Hopkins, R-Missoula, after months of collaboration with legislative leadership and the governor’s office, and deviates a great deal from the ballot initiative 57% of voters passed last year.

Hopkins said the Montana bill differs from other states’ implementation in that it doesn’t piecemeal the recreational industry into place but puts it all on the table at once. 

“This one, you’re going to be able to push the start button and it’s a fully functioning, operational marijuana system for the state of Montana,” Hopkins said Wednesday. 

The largest structural piece of the proposal is to move the medical program, now under the Department of Public Health and Human Services, under the Department of Revenue, along with the employees attached to the program. DOR would then oversee both the medical and the recreational programs.

The bill appropriates $6.1 million for fiscal year 2022 for 51 total employees, 22 of which are from the medical program in the state health department to be transferred to the revenue department. Fiscal year 2023 would get $7.7 million for a total 68 employees. 

Medical providers will also get an 18-month head start on the market before the department issues any new business licenses. That’s six months longer than the moratorium on new licenses the ballot initiative set out last year.

“Our folks in medical community have put up with a long set of renovations,” Hopkins said. “They’re in good standing.” 

Since voters approved recreational cannabis in November, the medical marijuana industry has been in limbo awaiting an answer as to whether it would be cast into a new system retooled to fit with the recreational program.

Medical marijuana was approved by voters in 2004, and the industry has been battle-tested by the Legislature and the courts in the last decade on its way to credibility. Medical marijuana providers are required to follow the seed-to-sale tracking system, which with regular inspections is meant to capture any product flowing in from the black market or out the back door into it. Hopkins’ bill will propose bringing this tracking system into the recreational industry.

Recreational marijuana will be taxed at 20%, while the medical tax will remain at 4%.

Tax revenues and fees from both medical and recreational marijuana will go into a special revenue account. From there, the medical tax revenues will cycle back to pay for the medical program.

The recreational revenues will first fill up Gianforte’s HEART fund to $6 million for drug addiction treatment, $500,000 of which will go to Indian Health Services. That proposal to provide community substance use disorder treatment had previously failed to get funding from a budget committee.

Then the state’s general fund will see 88% of the remaining revenues, a huge shift from the 10% allocation it had in the ballot initiative, while programs related to nongame animals, trails and parks will each get 4% each. That money would be capped at $650,000 across each of the three programs.

Hopkins said Wednesday he believes the projections issued last year “underestimated” the amount of participation in the upcoming market. The Bureau of Business and Economic Research at the University of Montana, which projected tax revenues could come in over $50 million by the market’s fourth year in business, had said then its estimates were conservative. 

The bill is in several ways more prohibitive than the ballot initiative’s language. Businesses must grow indoors, while home grows would be illegal. THC, the psychoactive ingredient in cannabis, would be limited to 35%. Any marijuana in a vehicle must be locked in a storage compartment, the trunk or the back seat of a trunkless vehicle. 

Anyone who transports marijuana, including delivery drivers, would also be required to be licensed through the revenue department. 

It also extends the enterprise to tribes, allocating a license for each of the eight tribal governments in Montana. Marijuana is still a Schedule I drug, so the tribes’ affiliations with the federal government prohibit its sale on reservation lands. Hopkins’ bill would allow for cultivation and a dispensary located within 25 miles outside of the reservation boundary, if the county agrees.

J.D. “Pepper” Petersen, CEO of the Montana Cannabis Guild and one of the people at the front of the legalization campaign, said Wednesday the legislation should be written to align with the version of legalization voters passed last year.

“No doubt we will be going over the package with a fine tooth comb,” Petersen said. “It is likely we will be working to offer some amendments to the package, especially as it relates to offering restorative justice to those who were victims of the punitive anti-marijuana measures of the past.”

While the draft includes funding for parks and trails, it does not identify funding for public access easements as the ballot initiative set out. Conservation groups campaigned for the initiative on that premise, and one of those organizations said Wednesday they would rally to oppose the funding allocations in the coming weeks.

“Now comes the shell game with voter-approved conservation dollars,” said Frank Szollosi, executive director of the Montana Wildlife Federation, in an emailed statement Wednesday. “State politicians just extended the 67th Legislature to to divvy up a huge windfall from the federal government, there’s just no sound fiscal rationale to contradict the will of Montana voters. … These accounts help keep families on their ranches into the future, increase hunter-angler access and improve our overtaxed state parks.”