BUFFALO, N.Y. — On the eve of 420 Day, a counterculture holiday based on the celebration and consumption of cannabis, New York Gov. Kathy Hochul was talking tough again about cracking down on illegal pot shops.
The bottom line for the state in licensing retail marijuana sales was money. However, the revenue it had hoped to raise is falling short of expectations. This is not only because of the clunky rollout of the program, which the governor herself has called a disaster but because of the proliferation of shops selling weed without a license and getting away with it.
"We've waited far too long for this reckoning with all the illegal shops and your day has come," the governor said in Albany on Friday.
It was the fourth time in the last year that Hochul stood before reporters vowing to crack down on illegal shops. But now there's some new laws included in the state budget to buttress the rhetoric.
Beyond facing fines, any businesses caught selling pot without a license could be padlocked. It would also be a separate crime to remove the lock, something some unauthorized shops were doing without penalty prior to this.
In addition, stores selling pot illegally — who have a license is to sell other products like tobacco, liquor, or lottery tickets — risk forfeiting those licenses as well.
Even the owners of buildings who rent space to those found in violation could be fined if they don't try and evict a rogue pot shop.
"And eventually we'll see the diminished number of the illegals (shops) and an increased number of legal that will right set this whole dynamic here."
What were they expecting?
The dynamic Hochul referred to as outlined in a recent article in Reason Magazine titled "Political Stupidity and Bureaucratic Bungling Created New York's Pot Legalization 'Disaster.' "
The author of the article, syndicated columnist Jason Sullum, noted that three years after the state legalized recreational marijuana, unauthorized weed shops outnumber licensed dispensaries by 23 to 1.
"I saw a New York Times reporter say that legislators did not anticipate that all these illegal businesses would crop up. Well, what did they think would happen?" Sullum asked during an interview with 2 On Your Side.
Illegal shops have flourished as consumers seek to avoid the heavy taxes, that licensed shops are forced to collect on behalf of the state, which makes the products in legal shops more expensive.
Hochul made no mention on Friday of reducing those taxes as a means to solve the problem but is prepared to spend millions of taxpayer dollars on enforcement against a black market that critics say the state, through its own actions, largely created in the first place.
"Honestly, the best thing to do when you start out this process is set taxes at zero because that's the rate that's paid in the black market. And then, maybe after the industry is established, if you are looking for revenue, you can start to tax them," Sullum said.
According to Sullum, despite having the benefit of researching how legal marijuana sales have gone in other states that enacted programs a full decade before New York did, New York's program faced an uphill battle in many cases because of the state's own doing.
"The existing medical marijuana dispensaries were not allowed to serve the recreational market, which seems insane, but is obviously a measure to protect the new entrants," Sullum said. "Then they established this complicated and painfully slow process for getting licensed where you had particular preferences for certain categories of people, including people who they said had been harmed by the war on marijuana."
Sullum is referring to the state's decision to offer initial dispensary licenses to entrepreneurs with marijuana convictions.
"That meant that other people with more business experience and a better ability to jump into the market were excluded to begin with, which prompted lawsuits that further delayed the whole process," he said.
Taking that and more into account, Sullum says it's no wonder that unauthorized operations were bound to flourish because they are "filling a huge supply gap left by the state's incompetence."
"The underlying problem is that it's too expensive and too difficult to get into this business and the legal businesses are systematically disadvantaged compared to the black market. And if you respond by not correcting those problems, which would be to reduce the taxes and regulations, but you instead respond by cracking down on the unlicensed businesses then you are basically starting the war on weed again, and that was supposed to be over," Sullum said.
Growers upset with governor
Meanwhile, licensed growers are upset with the governor, saying she failed them by not getting a relief program into the budget to keep them afloat amid the losses they've sustained due to what they call the disastrous rollout of the state's marijuana program.
“In an industry crippled by bureaucratic delays and ineffectual policies, the CFA has repeatedly sought intervention from the Governor's office. Our efforts, dating back to May 2023, have been met with nothing more than form letters, delays, excuses, rejection, and platitudes," said Joe Calderone, President of the Cannabis Farmers Alliance.
“On March 4, during the Farm Bureau’s Taste of New York event, Governor Hochul looked our farmers in the eye, promising to work with the legislature on providing immediate cash relief. Yet, here we are, the crisis worsening, with Hochul's office showing a chilling disregard for those same farmers. Let us be clear: the legal cannabis market in New York is on the verge of collapse. As the Governor takes a victory lap on the 105th dispensary opening, another area where she over-promised and under-delivered, our farmers are on the brink. Our members and stakeholders need action before the entire supply side of the industry collapses."