After many grueling years of grassroots organizing, intensive lobbying and epic state-by-state battles to legalize adult-use cannabis, will it be the coronavirus pandemic that finally pushes cannabis over the finish line?
We’ll return to that question in a moment, but first, let’s take a moment to recap the state of cannabis as it relates to the pandemic. While some hopeful signs indicate that the death toll from the COVID-19 / coronavirus pandemic may be lower than initially feared, one thing’s for certain: The aftermath is going to be bruising.
The pandemic has upended nearly everything we once took for granted, and the cannabis industry is no exception. As we recently reported, the question of whether or not dispensaries would be classified as essential businesses contributed to a nail-biting few days last month. Since then, dispensary operators have had to adapt on the fly to social distancing precautions such as curbside pickup, accelerated rollout of cannabis delivery service and even cannabis drive-thrus.
But the global pandemic has even larger implications for the industry as a whole. With many states bracing for unprecedented budget shortfalls in the wake of costly emergency measures, unemployment payouts and other taxpayer bailouts, some analysts are eyeing the tax revenues that would be generated by adult-use sales as a potential source of income.
Cannabis and Coronavirus: A Budget-Saving Genie in a Bottle?
It’s safe to say that right now, budget makers in every state in the union are looking towards the future with dread. To give one poignant example, New York State—currently the nation’s coronavirus epicenter—is expecting a $4 to $7 billion budget shortfall this year, potentially as much as 12.5% of the entire state’s budget.
In what’s regarded as a conservative estimate, back in 2018, the New York City comptroller estimated that legalizing adult-use cannabis could bring in some $1.3 billion a year. Ironically, New York narrowly missed out on approving adult-use cannabis last year. And according to vocally pro-legalization Governor Andrew Cuomo, it probably won’t this year, either.
Of course, racing to approve adult-use cannabis is hardly a panacea, as California’s painful example demonstrates. When the world’s largest legal cannabis market opened for business in 2018, expectations were high—no pun intended—that taxes on cannabis could help power a raft of state-funded projects. Instead, revenue has been disappointing at best, with many cannabis users resorting to the still-thriving black market rather than filling the state’s coffers.
Cannabis and Coronavirus: Looking Ahead
As the blowback from the COVID-19 / coronavirus pandemic continues to play out, many forecasters predict a vastly changed economic landscape. And while it’s far too easy to make predictions about winners and losers, it’s clear that cannabis stands to gain. As a recent article in Forbes suggests, the pandemic has pushed cannabis firmly into the mainstream. While some states and municipalities have quibbled over whether medical or recreational dispensaries should qualify as essential service providers, this moment has only underscored what a firm majority of Americans already know: Even without a prescription, cannabis is an essential medicine.
As always, we’ll keep you updated on developments as they unfold. But we’re betting that the current financial realities will play a major role in the story of legal cannabis. As DataTrek market analyst Jessica Rabe explained in a recent note, taxing cannabis was already a uniquely attractive method for states to boost their income before the pandemic hit. Now, those who saw it as a social ill may begin recognizing it as a lifeline instead.