Ohio Bill Would Significantly Alter Voter-Approved Cannabis Measure

Editor's note: Since this article was published, Ohio's Senate General Government Committee reversed course Dec. 6 on several of its original proposals for a forthcoming adult-use cannabis program. The proposed legislative changes to Issue 2, including the allowance of six plants for home grows, were passed by the Senate on Wednesday. That story can be read here.

Ohio voters who approved an adult-use cannabis legalization measure in November don’t know what’s best for public policy in their state, according to lawmakers who are targeting a plethora of provisions those voters backed at the polls.

Led by Ohio Senate President Matt Huffman, R-Lima, the Buckeye State’s legislative leaders are taking aim at possession limits, tax rates, tax revenue allocations, THC potency caps, dispensary license limits and an outright ban on home grows.

Here is a side-by-side comparison of several proposed changes being moved forward just days before the voter-approved legalization measure takes effect on Dec. 7:

While some of these proposed changes have more leeway in terms of timing for implementation—for example, effective tax rates don’t need to be implemented until licenses are issued and operations commence—others are more pressing for Ohio’s lawmakers, such as Issue 2’s home grow provision and possession limits that will take effect Dec. 7 barring any legislative interference.

These two provisions are perhaps causing the biggest hurry for Ohio’s legislative leaders, who are racing the clock this week in “emergency” fashion.

These proposed changes, and others, were advanced via a 4-1 vote during the Ohio Senate General Government Committee’s hearing Dec. 4, when the body’s members attached the proposed changes as an emergency clause to House Bill 86. An emergency clause goes into effect immediately upon a governor’s signature rather than the typical 90 days in Ohio.

“It would be better for people going forward to know what the law is than people begin spending money or taking actions and then the law changes six months from now or 90 days, you know, a year from now,” Huffman told NBC-affiliate WCMH before the committee hearing.

While H.B. 86 is being used as a vehicle, the underlying legislation aims to revise the state’s liquor control laws and has nothing to do with cannabis. House lawmakers passed H.B. 86 in June behind an 86-6 vote, but any changes to the legislation by the Senate would need to go back to the House for concurrence before being sent to Gov. Mike DeWine.

As an emergency clause, the proposed changes to the voter-approved adult-use cannabis legalization measure requires an affirmative vote of two-thirds of the members of each house to pass, according to Ohio General Assembly. A vote could happen as soon as Wednesday’s (Dec. 6) floor session in the Senate before the bill is sent to the House for concurrence.

In the Buckeye State, Republicans control a 79% majority in the Senate and a 67.7% majority in the House.

The 4-1 vote Monday in the Senate General Government Committee fell along party lines with Sen. Bill DeMora, D-Columbus, alone in his dissent.

“From my mind, the voters’ intent is nowhere to be found in this, what I call, ‘shell’ of what the voters passed,” DeMora said. “And I have concerns about having no [home] grow … I was willing to lessen the six plants per person. I do think that’s too many. But having no growth, I can tell you that more than half the people that voted for this voted because [of] home growth. And so, taking that away from what the voters clearly wanted is something that I have a huge problem with.”

Six plants for many home growers will yield roughly 1 pound of dried flower. For those who use an ounce per month, this yield would last 16 months (the approximate shelf life of product that is properly stored).

DeMora also took issue with the proposed changes to tax revenue allocations.

While Sen. Rob McColley, R-Napoleon, who spent roughly 20 minutes explaining the proposed changes during Monday’s hearing, provided a breakdown of tax revenue allocations, he specifically said the proposed distributions would be derived from the “marijuana receipts fund” (the cultivation tax). It was less clear if the proposed distributions also applied to revenue generated from the excise tax on retail sales.

Notably, DeMora indicated that his fellow Ohio lawmakers are planning to do away with voter-approved tax revenue allocations to municipalities with dispensaries as well as to a social equity and jobs program. Social equity has been a pillar of many recent legalization efforts as one means to try and right the wrongs of prohibition.

“The voters put down what they wanted the money to go towards, and this bill basically gets rid of all that,” DeMora said. “There’s no money to local governments. There’s no money to an equity and job fund that they created. It’s giving more money to the General Revenue Fund. And no offense … I don’t want to give all this money to the General Revenue Fund. I want it to go to local governments, where it’s supposed to go—let them spend it.”

 

McColley said the largest chunk of cannabis tax revenue would be allocated to the state’s General Revenue Fund in large part because there will be a lot of “unanticipated expenses” that often arise as a result of adult-use cannabis legalization.

With 23 states legalizing adult-use cannabis before Ohio, there is more than a decade of precedents for what these “unanticipated expenses” could feature.

With respect to increasing the cannabis excise tax to 15% at retail in addition to creating a 15% cultivation tax in the proposed changes, McColley said he was hoping to find a balance between creating revenue while also eliminating the illicit market.

“This is an opportunity for Ohio, if done correctly, to try and stamp out that black market to the extent possible, and then also put a program in place to make sure that Ohioans have accessible, reasonable and safe marijuana products for their purchase,” he said.

Legalization advocates have long stated that the higher the excise tax rate on regulated cannabis products the more difficult it is to eliminate the unregulated market. Not only are Ohio lawmakers proposing to raise the excise tax on retail sales, but the creation of a cultivation tax has proved disadvantageous to licensed businesses in other adult-use states: notably in California, where regulators eliminated the cultivation tax altogether in July 2022.

In the emergency clause’s proposed changes to potency limits, McColley clarified that the lawmakers’ THC content limit of 50% for extracts would be placed on final products sold in a dispensary and not on products going through the manufacturing process that could be used and diluted before a finished product finds shelf space.

And while the proposed changes would place a 25% THC limit on plant material like dried flower, McColley did not mention that voter-approved Issue 2 allows regulators in the Division of Cannabis Control to establish a THC limit that does not exceed 35%. In other words, based on what voters approved, Ohio regulators hypothetically could set a THC potency cap on cannabis flower at 15%, 20%, 25%, 30%, 35%—basically anywhere at 35% or lower.

In addition to changing or repealing provisions from the voter-approved measure, McColley said the emergency clause aims to address health and safety issues that he believes were omitted from Issue 2.

“So public smoking, vaping and combustion would be prohibited,” he said. “Smoking, vaping and combustion while in a vehicle would also be prohibited.”

Notably, Issue 2 already does this. According to the voter-approved initiative, an adult-use consumer who uses cannabis in public areas or who smokes, vaporizes or uses any other combustible adult-use cannabis product while in a motor vehicle, watercraft or aircraft is guilty of a minor misdemeanor. But more stringent criminal penalties could be implemented by Ohio lawmakers.

McColley also said the emergency clause aims to put protections in place for children by banning packaging, advertising or marketing that uses any graphic or picture that resembles a cartoon character, fictional character or pop-culture figure whose target audience is children.

Again, Issue 2 largely has these protections in place. According to the voter-approved initiative, the Division of Cannabis Control “may adopt narrowly tailored time and place restrictions preventing advertising targeted to minors.” Issue 2 also allows the Division of Cannabis Control to put in place age compliance protections at adult-use retail facilities as well as standards for packaging and labeling, and regulations prohibiting marketing to minors.

McColley said the emergency clause would maintain home-rule authority for townships, cities and villages to regulate the location of cannabis cultivation, processing and retail operations as well as allowing municipalities to prohibit these operations altogether.

Under Issue 2, local control is preserved for municipalities to adopt resolutions to ban or limit the number of adult-use cannabis operators permitted in their jurisdictions. However, municipalities where medical cannabis cultivators and processors exist cannot restrict or limit these licensees from transitioning to adult-use operations, but municipalities can restrict existing medical dispensaries not connected to cultivation or processing facilities from transitioning to adult-use sales within their jurisdictions.

With regard to the number of licensed operators in Ohio, the emergency clause proposes putting a statutory cap of 230 dispensaries in the state, or roughly two retail facilities per 100,000 residents. For comparison, Michigan has 7.3 adult-use dispensaries per 100,000 residents, according to the state’s Cannabis Regulatory Agency.

Under Issue 2, Ohio’s existing medical cannabis operators could apply to transition their approximately 130 retail facilities (113 of which currently have certificates to operate) to adult-use operations, and there would be 50 new licenses available for social equity operators. The Division of Cannabis would have the authority to issue more licenses after two years based on market conditions.

In what McColley called an effort to not oversaturate a single geographic area, the proposals in the emergency clause would prohibit any two dispensaries from being located within 1 square mile of each other unless they were both licensed prior to the effective date of the legislation.

“If the division of marijuana control elected to use a lottery system to award licenses, this would establish guardrails to ensure a level of quality, suitability and operability are maintained in the issuance of new licenses,” he said. “Adult-use marijuana could not be sold sooner than 12 months after the effective date, and the division of marijuana control would be required to adopt and implement rules within 12 months of the effective date and accept applications for new licenses.”

The 12-month emergency clause timeline veers from Issue 2’s timeline, which calls on the Department of Cannabis Control to promulgate rules and begin accepting license applications within six months of the law’s effective date and then issue the first batch of licenses within nine months of the effective date.

But the emergency clause that state senators are trying to push through this week comes nearly two years after they first received Issued 2’s language and a month after Ohio voters approved that language behind a 57% majority—the third largest margin of victory for a citizen-initiated adult-use legalization ballot measure in the U.S.