OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
SB-1118
AN ACT CONCERNING RESPONSIBLE AND EQUITABLE
REGULATION OF ADULT-USE CANNABIS.
As Amended by Senate "A" (LCO 10470)
OFA Fiscal Note
State Impact: See Below
Municipal Impact: See Below
Explanation
The bill makes numerous changes to employment, licensing,
consumer, economic development, tax, criminal justice, and traffic
enforcement laws to establish a legal recreational cannabis consumer
and business sector, which results in the following fiscal impacts:
State and Local Taxes
The bill establishes the following taxes on the sale of cannabis: (1) a
state cannabis tax on the sale of cannabis based upon the amount of
THC per milligram of certain products and (2) a 3% municipal
cannabis tax for municipalities. The 6.35% general sales tax rate also
applies.
The taxes result in a total revenue gain to the state and
municipalities of $4.1 million in FY 22, $26.3 million in FY 23, and $44.6
million in FY24; the annual revenue gain is expected to grow to $73.4
million by FY 26.
The tables below provide (1) the fiscal impact of each tax component
per fiscal year and (2) the fiscal impact by fund and account.
Primary Analyst: ME 6/8/21
Contributing Analyst(s):
Reviewer: PR
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Fiscal Impact by Tax Component
Tax Type FY 22 FY 23 FY 24 FY 25 FY 26
6.35% Sales Tax 2.1 12.5 23.8 36.8 37.7
State Cannabis Tax 1.0 7.9 9.6 17.0 17.5
Municipal Cannabis Tax 1.0 5.9 11.2 17.4 18.2
Total 4.1 26.3 44.6 71.2 73.4
Fiscal Impact by Fund/Account
Fund/Account FY 22 FY 23 FY 24 FY 25 FY 26
General Fund 2.8 18.4 21.5 33.5 33.5
Special Transportation Fund 0.2 1.0 1.9 2.9 3.0
Municipal Revenue Sharing Account 0.2 1.0 1.9 2.9 3.0
Social Equity and Innovation Fund - - 5.8 10.2 11.4
Prevention and Recovery Services Fund - - 2.4 4.2 4.4
Total State Impact 3.1 20.4 33.4 53.8 55.2
Municipal Cannabis Tax 1.0 5.9 11.2 17.4 18.2
Total - State and Municipal Impact 4.1 26.3 44.6 71.2 73.4
The bill specifies that all state cannabis tax revenue be deposited in
various funds based on the schedule below in the table below:
State Cannabis Tax Revenue Distribution
Fund/Account FY 22 FY 23 FY 24-25 FY 26-28 FY 29+
General Fund 100% 100% 15% 10% -
Social Equity and
Innovation Fund - - 60% 65% 75%
Prevention and Recovery
Services Fund - - 25% 25% 25%
Angel Investor Tax Credit
The bill also extends and expands the existing Angel Investor Tax
Credit, which results in a revenue loss of $15 million annually through
FY 24 and $20 million annually from FY 25 to FY 28.
Licensing Fees
The bill imposes a number of fees on the various license types
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outlined under the bill. Those fees, which are required to be deposited
into the General Fund under the bill, are anticipated to generate
approximately $2 million annually.
The bill also imposes a $1 million license conversion fee for a
dispensary facility to become a hybrid retailer and $3 million
expansion fee for a producer to engage in the adult use cannabis
market. Both fees are to be deposited into the Social Equity and
Innovation Fund. It is anticipated that these fees may generate
approximately $15 million across the FY 22 - 23 biennium.
The actual revenue generated from the licensing fees in the bill will
depend on the number of applications submitted and licenses granted
and may differ from the estimates above.
Social Equity and Innovation Fund
The bill establishes the fund as a separate, non-lapsing fund and
deposits certain licensing fees and a portion of the state cannabis tax
into the fund. The bill appropriates those funds for various purposes
including: Access to capital for businesses; technical assistance for the
start-up and operation of a business; funding for workforce education;
and funding for community investments. Under the bill, the Social
Equity Council will submit expenditure requirements and
recommended adjustments to the Office of Policy and Management.
It is anticipated that approximately $15 million in fee revenue will
be deposited into the fund across the FY 22 - 23 biennium.
Prevention and Recovery Services Fund
The bill establishes the fund as a separate, non-lapsing fund and
deposits a portion of the state cannabis tax into the fund. The bill
appropriates those funds for various purposes including: substance
abuse prevention, treatment and recovery services and data collection.
The transfer of state cannabis tax into the fund is to begin in FY 24
per the bill.
Department of Consumer Protection (DCP):
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The bill requires DCP to license, regulate, enforce, and make certain
recommendations regarding recreational cannabis, resulting in
additional staffing needs. DCP will need to hire 25 staff in FY 22 and
24 additional staff in FY 23, for a cost of $5.4 million in FY 22 and $7.8
million in FY 23 for salaries, fringe benefits, and other expenses. DCP
also has the ability to issue fines for violations resulting in a potential
revenue gain to the General Fund to the extent violations occur.
Social Equity Council
The bill results in a cost to the Department of Economic and
Community Development (DECD) of at least $733,921 in FY 22 and at
least $233,921 in FY 23 and thereafter by establishing a Social Equity
Council within DECD.
The bill creates one executive director position for the council which
is anticipated to result in a cost of $141,770 ($100,000 salary plus
$41,770 fringe). At least one additional staff at an estimated cost of
$92,151 ($65,000 salary plus $27,151 fringe) is anticipated to be needed
to assist in the council's duties as outlined in the bill, including
processing social equity applications.
Additionally, the bill requires the council to field an RFP to conduct
a cannabis study, resulting in a one-time cost of up to $500,000 in FY 22
to DECD. The exact cost will be dependent on the responses to the
RFP, requirements of the study, and negotiations with the third-party
vendor.
Bonding
The bill includes an authorization of $50 million of General
Obligation (GO) bonds to DECD and the Social Equity Council for use
for specified financial assistance and workforce training programs. To
the extent that the bonding authorized in the bill is fully allocated and
expended, debt repayment of up to $2.5 million could begin as early as
FY 23. Total debt service costs for $50 million of GO bonds issued at
market rates in FY 22 is estimated to be approximately $70.25 million
between FY 22 and FY 42.
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Courts and Penalties
The bill requires the erasure of certain police and court records
resulting in a one-time cost in FY 22 of approximately $825,000. To
meet the requirements of the bill the Department of Emergency
Services and Public Protection, Division of Criminal Justice, and the
Judicial Department will require an information technology consultant
to make necessary technology changes.
These sections also result in a potential cost to municipalities to the
extent additional resources are needed due to the requirement that
certain electronic records be deleted. It is anticipated potential costs
will be isolated to municipalities with greater volumes of criminal
records.
The bill creates new violations for cannabis and result in a marginal
cost to the Department of Correction and the Judicial Department for
violations and a revenue gain from fines. On average, the marginal
cost to the state for incarcerating an offender for the year is $2,2001
while the average marginal cost for supervision in the community is
less than $7002 each year. These sections also modify allowable
possession of cannabis and result in: 1) a marginal savings to the
Department of Correction and Judicial Department due to decreased
violations, and 2) a revenue loss from less fines collected.
The bill results in a potential cost to the Division of Criminal Justice
in FY 23 for expert witnesses in cases of cannabis related DUI's.
Typically, an expert witness in DUI alcohol cases range from $725-
$1,500 per case. The extent of the impact will be dependent on the
number of cases that are challenged.
1 Inmate marginal cost is based on increased consumables (e.g. food, clothing, water,
sewage, living supplies, etc.). This does not include a change in staffing costs or
utility expenses because these would only be realized if a unit or facility opened.
2 Probation marginal cost is based on services provided by private providers and
only includes costs that increase with each additional participant. This does not
include a cost for additional supervision by a probation officer unless a new offense
is anticipated to result in enough additional offenders to require additional probation
officers.
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Municipalities:
The bill allows municipalities to implement restrictions on the
smoking of cannabis on public property and restaurants, and to fine
anyone who violates these restrictions. This results in a revenue gain,
anticipated to be minimal, in a municipality that implements these
restrictions. The bill also allows each municipality to vote to prohibit
or otherwise regulate the sale of cannabis in that town. This has no
fiscal impact as it is not anticipated to change the cost of administering
or enforcing any local ordinances.
The bills impact on local police departments can be found in the
law enforcement section, and the bills impact on local tax revenue can
be found in Cannabis taxes section.
Law Enforcement Units
The bill requires the Police Officer Standards and Training Council
(POST) to determine how many drug recognition experts (DRE) are
needed for each law enforcement unit resulting in a potential cost to
various agencies3 and municipalities. If agencies with law
enforcement units and municipalities do not meet the minimum
standard developed by POST, they will need to train additional DREs
resulting in a potential cost. The estimated cost per officer is $15,000
(including the cost to send the officer to training and to cover the
missing shifts with overtime).
These sections also require each police officer who has not been
recertified for the first time after the initial certification to be trained in
advanced roadside impaired driving enforcement (ARIDE) resulting in
a cost to various agencies and municipalities for the training. For
example, the cost for the Department of Transportation to hold
additional classes is estimated at approximately $50,000 annually and
the cost per officer is estimated at $2,000.
3Agencies with law enforcement personnel include Department Emergency Services
and Public Protection, Office of Legislative Management, Department of Energy and
Environmental Protections, the Department of Transportation and the higher
education constituent units.
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Department of Motor Vehicles and Department of Transportation
The bill expands the administrative license suspension process to
drug-impaired drivers and results in a cost to the Department of Motor
Vehicles (DMV) of approximately $720,400 in FY 22 and $748,107 in FY
23 for salary and fringe benefit costs for seven new positions, and a
one-time cost in FY 22 of $115,802 for information technology and
ancillary costs.
The bill also requires the Department of Transportation, in
consultation with DMV and a Statewide Impaired Driving Task Force,
to make recommendations regarding enhanced data collection,
electronic warrants, and feasibility of oral fluid testing in impaired
driving investigations, which does not result in a cost, because it is
within the agencies' expertise.
Department of Revenue Services
The bill results in administrative costs to the Department of
Revenue Services estimated at $383,735 in FY 22 and $693,143 in FY 23.
This includes salary and fringe benefit costs for two Revenue Agents
and five Revenue Examiners, as well as a one-time set-up and
information technology programming cost estimated at $50,000 in FY
22 only.
Department of Emergency Services and Public Protection
Certain cannabis applicants are required to submit to background
checks resulting in a potential revenue gain to the Department of
Emergency Services and Public Protection (DESPP) to the extent
applicants go through DESPP for the background checks4.
Department of Energy and Environmental Protection (DEEP)
The bill establishes penalties for using cannabis on state lands or
waters managed by DEEP. This is anticipated to result in a revenue
gain to the resources of the General Fund to the extent violations occur
in on state parks or forests, or other DEEP-managed properties.
4 Applicants can satisfy the background check requirements through DESPP or a
third-party vendor.
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Attorney General
The bill allows the Office of the Attorney General (OAG) discretion
to end the waiting period required under the bill governing material
changes to cannabis establishments to allow the transaction to proceed.
It also allows OAG to request additional information or documents
relevant to the proposed transaction and stipulates that anyone who
does not comply with these provisions is liable to the state for a civil
penalty not to exceed $25,000 per day recoverable through civil action
brought by OAG. This may result in a revenue gain to the resources of
the General Fund, to the extent violations occur.
Pretrial Intervention Programs
Sections 166 173 replace the existing pretrial education programs
with the new Pretrial Impaired Driving Intervention Program and
Pretrial Drug Intervention and Community Service Program, effective
April 1, 2022. The bill standardizes the number of sessions for each
program and adjusts associated fees. The fiscal impact to the non-
appropriated Pre-Trial account will depend on program participation
levels and the number of participants for whom program fees are
waived. For example, if participation rates remain constant but fee
waivers increase or decrease, the account will experience a shortfall or
surplus.
In addition, these sections may result in a revenue gain to the
Criminal Injuries Compensation Fund for associated application fees.
Senate "A" strikes section 174 resulting in a potential decrease in
licensure revenue due to the elimination of the provisional cultivator
license for certain applicants. The amendment also makes various
technical and conforming changes resulting in no fiscal impact to the
state.
The Out Years
The annualized ongoing fiscal impact identified above would
continue into the future subject to: 1) inflation, 2) the number of
cannabis applications and licensees, 3) the length of time required to
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erase records, 4) the number of law enforcement officers required to
receive additional training, 5) the debt service repayment schedule
established when the bonds are issued, and 6) the number of
violations.
The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly,
solely for the purposes of information, summarization and explanation and does not represent the intent of the
General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety
of informational sources, including the analysts professional knowledge. Whenever applicable, agency data is
consulted as part of the analysis, however final products do not necessarily reflect an assessment from any
specific department.


Statutes affected:
New Bill: 54-142e, 7-148, 31-40q, 30-89a, 14-227b, 14-227c, 15-140q, 15-140r, 12-650, 12-704d, 32-39, 54-41b, 54-56g, 54-56i, 54-66a, 54-56k, 54-56n