Bill Summary – FastDemocracy

LEGISLATIVE SERVICES AGENCY
                OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
                                    200 W. Washington St., Suite 301
                                         Indianapolis, IN 46204
                                             (317) 233-0696
                                                iga.in.gov
                                FISCAL IMPACT STATEMENT
LS 6174                                                           NOTE PREPARED: Oct 21, 2020
BILL NUMBER: SB 87                                                BILL AMENDED:
SUBJECT: Cannabis Regulation.
FIRST AUTHOR: Sen. Tallian                                        BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED: X GENERAL                                         IMPACT: State & Local
                X DEDICATED
                  FEDERAL
Summary of Legislation: The bill establishes the cannabis compliance commission to regulate all forms
of legal cannabis in Indiana, including industrial hemp and low THC hemp extract.
Effective Date: July 1, 2021.
Summary of NET State Impact: The bill is estimated to increase annual state expenditures between
$500,000 and $600,000 to establish and operate the Cannabis Compliance Commission and a legislative
advisory committee. These costs may be increased depending on the number of employees needed to regulate
legal cannabis. The costs may be at least partially offset with fees established by the commission.
Additionally, fines and penalties could lead to increased revenues over time. The actual impact on the state
General Fund will depend on when revenue streams are sufficient to meet the costs of the new commission.
Explanation of State Expenditures: The bill establishes the commission, comprised of four commissioners
and an executive director, plus other staff necessary to fulfill its duties. The commission will regulate,
enforce, and carry out the state laws concerning industrial hemp and sales and distribution of low THC
products.
Other state commissions with regulatory responsibilities had annual administrative expenses in FY 2020 of
between $500,000 and $600,000. Costs will ultimately depend on the hiring decisions and the level of
enforcement undertaken by the commission, yet could be expected to have similar costs during the
implementation years.
The bill also establishes an advisory committee. The cost will depend on the budget established by the
SB 87                                                1
Legislative Council. Recently, budgets for committees of similar size have been $13,500 per interim.
Marijuana is federally classified as a Schedule I controlled drug with no medically indicated uses. Although
33 states have medical marijuana programs, future federal responses to state initiatives is unknown. A federal
appropriations bill for the U.S. Department of Agriculture removed industrial hemp from Schedule I. The
State Seed Commissioner in conjunction with the Indiana Hemp Advisory Committee submitted a state hemp
plan in December 2019 to the U.S. Department of Agriculture, received edits, and planned to resubmit the
plan this past summer.
Additional Information - Commission: The commission is comprised of four commissioners appointed by
the Governor. Each commissioner is entitled to salary per diem and reimbursement of traveling and other
expenses. The commissioners must execute surety bonds of $10,000 and an oath of office. The
commissioners will appoint an executive director, and may employ all necessary employees, determine their
duties, and fix their salaries with the approval of the State Budget Agency.
The commission will regulate, enforce, and carry out the provisions of IC 15-15-13, which are currently
assigned to the Indiana State Seed Commissioner, and IC 24-4-21 and IC 24-4-22 which are unassigned. The
commission will also advise the General Assembly and permit and encourage research concerning cannabis.
In its regulatory capacity, the commission will issue orders, assess civil penalties, bring actions in courts, and
hold its own hearings. The employees of the commission will inspect for potential violations of laws. The
commission may also prescribe forms for documents, applications, permits, and licenses.
Comparison Commissions: The high-end of the range of agency costs was based on the Indiana Gaming
Commission (IGC), which has 7 commissioners and an executive director, with administrative and operations
expenses and internal services costs of about $550,000. The low-end is represented by the Alcohol and
Tobacco Commission (ATC), which has 4 commissioners, an executive secretary, and annual expenditures
for administration and internal services of about $530,000. [Internal services include databases, software,
human resources services, and telephone expenses.]
Total IGC and ATC expenses are determined by their overall enforcement activities, the number of regulated
entities, the complexity of items to be regulated, and the number of facilities to be inspected. Ultimately, the
number of regulated entities under this bill may increase over time leading to increased expenditures by the
commission in future years.
State Seed Commissioner: The bill would transfer activities concerning industrial hemp from the State Seed
Commissioner to the commission. The State Seed Commissioner licensed 256 grower and grower handler
sites in 2020. The 2021 hemp production is anticipated to be a commercial crop, if the federal approval of
rules is completed.
Explanation of State Revenues: The commission will have the authority to assess civil penalties and bring
appropriate actions in court. Penalties are deposited in the state General Fund and criminal fines are
deposited in the Common School Fund.
The commission would also establish fees for licenses, permit, and applications, and charge reasonable fees
for research permits. These fees would offset some of the costs of the commission. [Hemp grower and
handler license application fee is $750.]
SB 87                                                   2
Additional Information - Any revenue received will depend on the fees set by the commission. The following
table shows the revenue received from licenses and permits and fines and penalties in FY 2019 by other
Indiana regulatory commissions. These are mature agencies with large portfolios of businesses regulated.
A new regulatory body may have more limited revenues immediately.
                                               License and Permit Revenue      Fines and Penalties
 Alcohol and Tobacco Commission                         $14.0 M                     $646,550
 Gaming Commission*                                     $7.1 M                       $2.1 M
 *Transfer fees of $56 M were also received.
Explanation of Local Expenditures:
Explanation of Local Revenues: If additional civil actions occur, revenue could increase. The impact is
indeterminate and will depend on administrative actions.
State Agencies Affected: Cannabis Compliance Commission, General Assembly and Legislative Council,
State Seed Commissioner.
Local Agencies Affected: Trial courts.
Inf ormation Sources: h tt p s: / / www.o i s c .pu r du e .edu/hemp/pdf/minutes_080119.pdf;
https://www.oisc.purdue.edu/seed/hemp/hemp_faq.pdf; Indiana Transparency Portal, Total State
Expenditures, FY 2015 to FY 2019; FY 2019 Indiana Handbook of Taxes, Revenues, and Appropriations;
https://www.oisc.purdue.edu/hemp/pdf/hemp_faq_100820.pdf; https://www.in.gov/isda/3844.htm.
Fiscal Analyst: Karen Rossen, 317-234-2106.
SB 87                                                      3
Statutes affected: 
1. Introduced Senate Bill (S): 15-15-13-0.5, 15-15-13-1, 15-15-13-2, 15-15-13-7, 15-15-13-8, 15-15-13-9, 15-15-13-10, 15-15-13-11, 15-15-13-12, 15-15-13-13, 15-15-13-13.5, 15-15-13-14, 15-15-13-16, 15-15-13-17, 15-15-13-19, 15-15-13-20, 15-16-2-36, 24-4-21-1, 24-4-21-5, 24-4-22-1, 24-4-22-4