Economic Impacts of Marijuana Legalization

With changes coming locally in Pennsylvania, with the state’s Department of Health releasing permits for medical marijuana growers and processors as well as dispensaries late last month, it seemed high time to take a look at the economic impacts of marijuana legalization efforts in other states.

Colorado anticipated $70 million in marijuana tax collections per year, but it hit $121 million in 2015 and over $140 million in the calendar year 2016.1 One estimate put the economic impact for the state of Colorado at $2.4 billion.

In Washington, tax revenues are slowly ramping up, but still far short of the estimated $388 million annually estimated in the legalization effort. Excise tax revenues from marijuana were $62 million in FY 2015, $134 million in FY 2016 and expected to hit $270 million for FY 2017.

Whether all states will hit these targets is not yet clear, and there has not been any analysis of whether legalization has offset or increased other public sector costs. We don’t fully know if legalization has produced any savings from reduced drug enforcement costs, or if those savings are offset by increases elsewhere.

It may be some years before we can really examine the impact of legalization on public costs, but there are other impacts that are receiving less attention. The legalization of marijuana at the state level has created a fundamental conflict with federal law where it is still illegal and controlled as a Schedule 1 drug, the most serious category of illegal substances that have no currently-accepted medical use and a high potential for abuse. As a Schedule 1 drug, the funds for research on medical uses are restricted, so it is even harder to get marijuana reclassified (as could happen if research proved that its medical use was beneficial). As recently as August of 2016, the DEA rejected reclassification based on the recommendations of the FDA.

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) indicated in what is known as the Cole Memo that they would not charge a bank with federal crimes for accepting marijuana money if the financial institution ensures that all state laws and the directives of the Department of Justice have been followed. This situation puts a significant resource burden on institutions that effectively makes accepting these deposit not profitable. Some credit unions and “money service businesses” such as PayQwick are entering the marijuana market, but the uncertain legal patchwork they operate under provides a limited solution.

As a result, marijuana businesses that are legal in their home states cannot use banks or many traditional banking services.They have to pay all of their bills, taxes, and payroll in cash. They can’t get loans or mortgages, and they can’t build credit.

These problems can also extend to companies that supply marijuana businesses and all of their employees. If your income comes from an activity that is not allowed by federal law, then you as an employee may be barred from using a bank or getting credit. Furthermore, since these businesses are paying their workers in cash, any individual with a bank account would be subject to additional scrutiny for making large amounts of cash deposits. This is such a new industry that the potential problems facing employees in these businesses have not yet surfaced, but it is something that policymakers should be considering before significant problems emerge.

 

1.  See Joseph Henchman, Marijuana Legalization and Taxes: Lessons for Other States from Colorado and Washington, Tax Foundation Special Report (Apr. 20, 2016).

The Future of Work [Podcast]

Workforce-Disconnect

In September, Dr. Jerry Paytas was featured on Workforce Central, hosted by the National Association of Workforce Boards‘ President/CEO Ron Painter. Workforce Central features public & private sector leaders in workforce development, education, business and economic development discussing key workforce issues and investment strategies to help America compete globally.

Continue reading “The Future of Work [Podcast]”

Preparing your Local Economy for Climate Change

Climate-Change-&-Economic-DevelopmentMany state governments have devoted a great deal of resources over the past decade to mitigating and responding to climate change through energy and urban planning related efforts. Planners and energy experts are fluent in the language of sustainability, adaptation, resiliency, and mitigation. But ask an economic development official what climate change means to them and it’s possible that they can barely utter the word. Many in the business community have feared that climate change will simply mean more costly equipment upgrades to reduce greenhouse gas emissions. In too many communities, time is still spent debating the veracity of climate science instead of recognizing the impacts already occurring. Economic development officials have a responsibility to help businesses understand the greater implications of climate change – how they can protect themselves from the effects of climate change; how they could develop new products or services in response to climate change; and how they should prepare themselves to recover from climate-related events. Continue reading “Preparing your Local Economy for Climate Change”

Higher Eds use Economic Impact Studies for what?!

University-Economic-Impact-StudyThe answer is Higher Eds use economic and social impact studies for a lot of different reasons. Underlying is the desire to showcase their good work and demonstrate the value their work creates. And they want to communicate that value in terms that will resonate with internal and external audiences.  Audiences may include: public officials, policy makers, community residents, investors, and Higher Ed faculty, staff, students and alumni. Economic and social impact studies help Higher Eds compete for state funding, maintain their tax-exempt status, help defend against criticism and help increase fund-raising. Continue reading “Higher Eds use Economic Impact Studies for what?!”

Economic Development: What I Didn’t Learn in Planning School

131114-Teaching-PlanningI received my Master’s in Urban Planning with a focus on Community Development. I learned a lot about how to design “great places” as the American Planning Association calls them. Characteristics of a Great Neighborhood include… Continue reading “Economic Development: What I Didn’t Learn in Planning School”

Reflections on the Profession

131023-Economic-Development-ProfessionAfter a three-year hiatus, I returned to teaching Urban and Regional Economic Development at Carnegie Mellon this fall. The process of preparing for the course, and the act of engaging with twenty students who represent a new generation of economic development, has caused me to reconsider the state of the profession and where it is headed as well as what new trends are driving it.   I often joke that we are teaching them how to solve the problems of the last generation with tools and policies that will create the problems for their generation to solve.  I call it the full employment policy for economic development. Continue reading “Reflections on the Profession”

National Firm Selected to Perform Economic Data Analysis on RI’s Competitive Strengths, Areas of Improvement as Part of Sustainable Communities Initiative

Governor Chafee Announces Next Action Step in Development of an Integrated Plan to Mobilize State and Community Assets for a Better Rhode Island

January 14, 2013 (Providence, R.I.) – Governor Lincoln D. Chafee today announced the next action step in a multi-agency effort over the next two years to develop an integrated approach for the state to land use, transportation, housing, and economic development. Through an open Request for Proposals (RFP) issued November 7, 2012 by the Rhode Island Economic Development Corporation (RIEDC), in collaboration with the Division of Planning’s Statewide Planning Program, Rhode Island has selected a consulting team to compile economic data, analyze the state’s regional performance, and identify strengths and possible ways to improve Rhode Island’s economy. Continue reading “National Firm Selected to Perform Economic Data Analysis on RI’s Competitive Strengths, Areas of Improvement as Part of Sustainable Communities Initiative”

4 Key Factors Influencing Investment Choices: Think Big, Plan Small, Team Up

Small towns are hot. They’re hip. They’re attracting investment. Am I crazy? Don’t think so and here’s why. Large urban centers and small towns have more in common than you may first think. Big cities are really a mosaic of small towns (neighborhoods) that share a common economic market. That is certainly true of Pittsburgh, my hometown, with more than 50 distinct and colorful neighborhoods comprising the whole. Some of these neighborhoods may be doing better than others no doubt, but by most accounts a growing love and resident attachment to them continues to grow. Continue reading “4 Key Factors Influencing Investment Choices: Think Big, Plan Small, Team Up”

For Richer or Poorer

With all of the negative economic news you may not realize that the American economy continues to generate wealth and profits.  The following slideshow takes a look at why this surplus is not being invested to stimulate demand or create jobs.

Poll Results: The Fourth Economy Index

While we continue to develop this idea, we asked you to provide your confidence level in some broad economic categories. These categories impact areas of the Fourth Economy Index. As you can see from the image above, the overall confidence level in our economic state is less confident, or neutral, than confident in where the economy is heading. There doesn’t appear to be much that we are “very confident” about. Let’s examine how we determined this overall confidence level… Here are the broad categories we asked about… As you can see, the areas of most confidence include the U.S. economy, private sector leadership and innovation investment. The remaining four categories lagged behind greatly, with our educational system having the least amount of backing, considering all neutral attributes. We also asked you to tell us what other economic categories we should measure. The responses were great and included: environmental protection, workforce capacity/ability, collaboration, access to capital, natural resources, U.S. utility patents issued, U.S. technologies licensed, U.S. new high tech products introduced, U.S. R&D investment in technologies, State investments in TBED activities, U.S. manufacturing sales, U.S. exports, U.S. manufacturing jobs created, ROI on federal R&D investment, private funding of tech-based companies, job growth in tech-based sectors, and new ratios such as energy per dollar and productivity in manufacturing sectors. What else should we be measuring to determine the overall state of our Fourth Economy? Use the comments below… Take this month’s poll: Rank the top energy innovations in the last 100 years…