Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                         Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                      larry.campbell@ks.gov
Topeka, KS 66612                                Division of the Budget                              http://budget.kansas.gov
Larry L. Campbell, Director                                                                        Laura Kelly, Governor


                                                   March 13, 2019


         The Honorable Gene Suellentrop, Chairperson
         Senate Committee on Public Health and Welfare
         Statehouse, Room 441-E
         Topeka, Kansas 66612
         Dear Senator Suellentrop:
                   SUBJECT:       Fiscal Note for SB 113 by Senator Holland
                 In accordance with KSA 75-3715a, the following fiscal note concerning SB 113 is
         respectfully submitted to your committee.
                 SB 113 would enact the Veterans First Medical Cannabis Act by permitting a healthcare
         provider to issue a written certification to a patient with whom the healthcare provider has a valid
         healthcare provider-patient relationship. The bill would establish the Cannabis Regulatory
         Commission within the Kansas Department of Revenue (KDOR). The Commission would be
         tasked with adopting rules and regulations as it pertains to medical cannabis growers, distributors
         and medical use by patients. The Kansas Department of Health and Environment would establish
         a process to certify eligibility for applicants to receive cannabis products based upon information
         received from healthcare providers and would issue identification cards, with a maximum fee of
         $50, to individuals with qualified medical needs so they can receive and possess the appropriate
         cannabis product.
                 The bill would establish licensure criteria for medical cannabis growers and distributors
         and set a cap of $15,000 to apply for a license with a two-year licensure fee not to exceed $90,000.
         Employee permits to work for growers and distributors would not exceed $100. The bill would
         impose a tax of $115 per pound upon the privilege of growing and harvesting medical cannabis
         and monthly returns would be filed with the Director of Taxation to be deposited in the Medical
         Cannabis Harvest Fund in KDOR. A $3.00 per ounce tax would be imposed upon the privilege of
         selling or dispensing medical cannabis consumer products by a licensed medical cannabis
         dispensary and monthly returns would be filed with the Director of Taxation to be deposited in the
         Medical Cannabis Dispensary Fund in the Board of Pharmacy.
                The bill would require a medical cannabis grower, distributor and dispensary to furnish
         additional information as necessary to the Director of Taxation in order to compute the taxes
The Honorable Gene Suellentrop, Chairperson
Page 2—SB 113

assessed by the Act. Medical cannabis consumer products would be exempt from sales tax when
lawfully distributed.
        KDOR indicates the fiscal effect of SB 113 for growing, processing, distributing and
selling medical cannabis in the state would be difficult to estimate because of policy differences.
For comparison purposes, as of February 11, 2019, the Oklahoma Medical Marijuana Authority
reported the approval of 47,090 licenses, including 43,840 for patients, 267 for caregivers, 947 for
dispensaries, 1,600 for growers and 436 for processors. KDOR would need to create a new
division by July 1, 2019, to process the licensing, enforcement and auditing needed to implement
the provisions of the bill. The agency indicates that this would not be adequate implementation
time. In addition, the agency would need technology changes to accommodate the creation of new
tax types. The agency estimates $4.4 million expenditures for FY 2020, including 20,773 hours
for 12.00 additional FTE positions for information technology needs. The on-going expenditures
for the additional FTE positions would be $900,000.
       For FY 2020, the Department of Health and Environment indicates that SB 113 would
require the addition of 5.50 FTE positions for a total of $461,000, $900,000 for contractual
services, $25,000 for communication and $27,000 for computer and office equipment to ensure
compliance with the Act. The continued expenses for staffing, contractual services and
communication are estimated to be $790,000 annually.
       The Board of Nursing indicates that SB 113 would require revision of some regulations.
The Board would need to review, revise and publish the regulations at a cost that would be less
than $1,000.
       The Board of Pharmacy indicates that SB 113 would increase revenue to the Board for the
newly established Medical Cannabis Dispensary Fund. Expenditures from the fund would
primarily be for staff time and resources for inspections and investigations to ensure compliance
with the bill. The volume of activity is unknown; therefore, the precise fiscal effect cannot be
determined.
       The Board of Healing Arts indicates that SB 113 could increase the responsibilities and
workload of investigative, disciplinary, litigation and administrative staff. The volume of activity
is unknown; therefore, the precise fiscal effect cannot be determined.
        The Kansas Sentencing Commission and the Department of Corrections indicate that SB
113 could have a fiscal effect on prison admissions, bed space and the journal entry workload, but
a precise fiscal cannot be determined.
        The Office of Judicial Administration indicates that SB 113 would decriminalize actions
that could be charged as crimes under current law, which could result in fewer cases being filed.
It would still be possible that crimes that would be charged under the provision of current law
would still be charged, but the provision of the bill would be asserted as a defense. However, it is
not possible to predict the number of additional court cases that would arise or how complex and
time-consuming they would be. Therefore, a precise fiscal effect cannot be determined.
The Honorable Gene Suellentrop, Chairperson
Page 3—SB 113

         The Kansas Bureau of Investigation indicates that any additional revenue received through
the state or national criminal history record check would be offset by expenditures related to
staffing and maintenance of the information technology systems supporting that function. Making
the database available to law enforcement could possibly be accomplished by updating existing
interfaces between the Kansas Bureau of Investigation and the Kansas Department of Revenue.
The estimated cost of updating the interface is less than $100,000; however, without knowing the
exact data elements and the timeframe allotted a precise estimate cannot be provided. The agency
is also unable to determine the costs to the forensic laboratory for the testing of seized cannabis so
a precise fiscal estimate cannot be provided. Any fiscal effect associated with SB 113 is not
reflected in The FY 2020 Governor’s Budget Report.

                                                      Sincerely,

                                                      Larry L. Campbell
                                                      Director of the Budget


cc: Alexandra Blasi, Board of Pharmacy
    Dan Thimmesch, Health & Environment
    Jill Simons, Board of Nursing
    Glenda Haverkamp, Insurance
    Paul Weisgerber, KBI
    Lynn Robinson, Department of Revenue
    Janie Harris, Judiciary
    Willie Prescott, Office of the Attorney General
    Linda Kelly, Corrections
    Beth Visocsky, Board of Healing Arts
Statutes affected: 
As introduced: 21-5703, 21-5705, 21-5706, 21-5707, 21-5709, 21-5710, 65-1120, 65-2836, 65-28a05, 65-28b08, 79-3606, 79-5201, 79-5210