Oct. 14 2015 11:30 AM

Jones leading way in Senate on bill favoring dispensaries

After clearing the state House of Representatives by an overwhelming majority this month, a legislative package to tax and regulate medical marijuana dispensaries has a strong likelihood of making it to Gov. Rick Snyder by the end of the year.

Importantly, State Sen. Rick Jones, R- Grand Ledge, said he supports the bipartisan dispensary proposal that passed the state House 95-11 on Wednesday. Jones chairs the Senate Judiciary Committee, which will hold hearings on the legislation.

Backing by Jones, a former Eaton County sheriff, reflects law enforcement’s evolving position on dispensaries over the past year.

In 2013, Jones praised a state Supreme Court decision that banned patient-to-patient sales of medical marijuana, which Jones said at the time would shut down dispensaries across the state. In December 2014, law enforcement lobbyists were instrumental in halting a dispensary-regulation bill in the Senate during the Legislature’s lame-duck session.

But now, Jones said, it’s time to put a system in place to regulate the industry.

“I think it’s time to have dispensaries,” Jones said days after the House vote. “The system is currently not working very well.”

The court rulings caused most dispensaries in Michigan to close. Today, dispensaries in some communities, including Lansing, have reopened and are thriving because authorities look the other way, while in other jurisdictions they are nonexistent.

The House voted on a three-bill package that — taken together — would tax and regulate the growing and selling of medical marijuana, establish a “seed to sale” tracking system and allow for the consumption of edible forms of marijuana.

“I’m going to support the package of bills,” Jones added. “I want to make sure the State Police and prosecutors and sheriffs are all on board, but they will be. They want order, they want something that works. I think it’s a good thing.”

Jones said he’s “pretty sure” the Senate will have the necessary 20 votes to pass.

Some advocates were concerned that a version of the dispensary bill passed out of committee in September would drive patients to the black market because of an 8 percent excise tax that would have likely been passed down to buyers, on top of a 6 percent sales tax. The full House changed the excise tax to 3 percent.

While some fear the legislation — which has been several years in the making — would be overly burdensome, costly, attract outside business interests and drive patients to the black market, others see it as a compromise in resolving the gray legal arena in which dispensaries across the state operate in now.

“They certainly will provide clarity on the legality of provisioning centers and will provide a path for licensing,” said Robin Schneider, legislative liaison with the National Patients Rights Association.

Schneider, who has been active with medical marijuana law reform in Michigan for several years, said her organization supports the three-bill package passed by the House this month by similar margins.

Her association's endorsement is a sign that the bipartisan legislation — which still has pros and cons, Schneider noted — has support among the medical-marijuana community.

“I would say there is a small voice of people who are opposed to the bills who don’t like regulation,” Schneider said. “They just want a free-for-all. I can understand where they’re coming from, but I don’t see us making progress on this issue without additional regulation.”

Taking on a ‘whole new life’

House Bills 4209, 4210 and 4287 are a sweeping alternative to what legislators introduced at the beginning of this year’s session.

State Rep. Mike Callton, the bill’s Republican architect from Nashville who is credited for drumming up support among legislators on the issue, originally proposed a “local control” bill this year that would allow municipalities to allow dispensaries if they chose.

Since then, HB 4209 was modified to effectively set up a tiered commercial growing and retail system that takes aspects of state liquor and gaming laws. Callton said a large factor for setting up the system for medical marijuana was driven by the likelihood of legalized recreational marijuana in Michigan. Two separate groups are collecting signatures for ballot proposals to appear before voters in 2016.

“It’s taken on this whole new life as we’re trying to get stakeholders on board like the State Police, the Governor’s Office and regulatory agencies,” Callton said of his dispensaries bill.

It would be beneficial to have a system in place if and when full legalization happens, he said.

“With the possibility of a legalization referendum, we thought we should put some sort of regulation in place before that happens,”

Callton said. “That’s what this has become.” Two different groups are collecting signatures to put legalization on the 2016 ballot.

HB 4209 would:

— Require state licenses for growers, processors, “secure transporters,” provisioning centers and “safety compliance facilities,” which would first need approval from the local municipality. Local units of government could decide whether to authorize the activity.

— Create a five-member state Medical Marihuana Licensing Board, appointed by the governor, to administer the law and set licensing fees.

— Set a 3 percent excise tax on the gross retail income of each dispensary.

— Allow for commercial growers at different tiers (a minimum of 500 and a maximum of 1,500 plants) to sell to processors (who make marijuana-infused products) or dispensaries.

— Require product testing at “safety compliance centers.”

— Require a third-party “secure transporter” to transfer marijuana between facilities for a fee.

— Send excise tax revenue to local units of government and the state’s General Fund.

HB 4287 would establish a “seed to sale” tracking system to keep tabs on where marijuana was grown, processed, transferred or stored under the Act. Law enforcement would have real-time access to the system.

HB 4210 would clarify the use of marijuana-infused products like edibles, tinctures and topical oils.

The Department of Licensing and Regulatory Affairs estimates that HB 4209 would cost $21.1 million, largely for additional personnel to oversee the program, according to a House Fiscal Agency report.

“If the costs estimated … were divided equally amongst medical marihuana patients, the average amount ultimately incurred by each patient would be $227,” according to the report. That might not reflect the true costs of the system, the report adds, if patients choose to obtain marijuana “on the black market rather than pay potentially higher prices charged by provisioning centers.”

‘Layers of bureaucracy’

State Rep. Jeff Irwin, D-Ann Arbor, withdrew his support for the bills before the full House vote because of what he saw as overly burdensome regulations and taxes that would drive customers to the black market.

Irwin was a co-sponsor of the dispensary bill when it was introduced at the beginning of the year.

While Irwin hopes the Senate avoids adding “additional layers of bureaucracy,” he said he is satisfied with the compromise reached this month between law enforcement, regulators and medical marijuana advocates.

Specifically, Irwin supported the 3 percent excise tax instead of 8 percent, as well as making certain violations in parts of the bills civil penalties rather than misdemeanors.

HB 4209 also places a $10,000 cap on licenses for the lowest level of commercial growers. That helps resolve concerns Irwin had about caregivers who are growing for up to five patients but would have no legal mechanism for selling their overages to dispensaries, he said.

“Even though we didn’t allow those caregivers in by providing a legal output for overages, we provided them a smaller barrier for entry so if they want to take their caregiver activity to the next level, at least there’s a cap on that so they’re not priced out of it,” Irwin said.

As for prospective dispensary owners, Irwin said it would be up to the state to set up the cost of entry for those if the bills become law. Local units of governments who choose to regulate dispensaries can’t charge more than $5,000 for a licensing fee, he said. It’s uncertain how much it would cost to set up a dispensary within the system.

For concerns about the state setting a cap too high, Irwin noted that the state can’t charge more than the costs for administering the program.

“I can see why those individuals would be concerned, it lines up with my concerns as well,” he said.

Addressing criticism that overly burdensome bills would drive more activity to the black market, Schneider said not everyone will be satisfied with the compromise.

“I think there will always be a cottage industry. To me, I look forward to enjoying the day when these businesses are legitimized,” she said. “I think the majority of business owners I’ve talked to would rather embrace regulation and know what they are doing is legal under a license to do so. I think there’s that fringe element out there who don’t want any regulations.”

Callton added: “The street is not going to dictate this industry as far as I’m concerned. If they want to buy product that is shady and untested — OK, there will be a market for that. But this will create a real industry that pays taxes where medicine is tested.”

Irwin said while the bills aren’t perfect, compromises were made before final House passage that got him back on board.

“A week and a half ago I was really frustrated with the bills,” he said. “All of my frustrations haven’t been evaporated away over the process of compromise, but I do think a number of important compromises were made.”