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Out of Control Policy Blog Archives: 12.16.12–12.22.12

[Op-Ed] Legislature has the Chance to Set a Standard on 64

Yesterday, Leonard Gilroy and I co-authored an op-ed published in The Colorado Springs Gazette for the Independence Institute (a Denver-based free market think tank) entitled, "Legislature has the chance to set a standard on 64." The piece specifically explores implementation of Amendment 64 to the Colorado state constitution. It begins:

Last month Colorado voters resoundingly passed Amendment 64 into the state constitution, legalizing both recreational marijuana and industrial hemp. So far, realizing the will of the voters is on track, but implementation risks threaten to undermine the intentions behind Amendment 64. Policy makers are contending with thriving black markets and gray markets (goods or services that while legal, are still traded outside of any tax or regulatory regime), so it is in their best interests to get this right—even if they didn’t support the initiative in the first place.

The piece goes on to explore challenges at the federal level, and potential solutions to those challenges. However, issues of federal preemption need to be considered in their proper context while state and local policy makers move forward with implementation. The piece continues:

Amendment 64 allows possession and transfer without remuneration of up to one ounce of marijuana, and home cultivation of up to six marijuana plants for adults over 21. It also calls for Colorado policy makers to adopt laws taxing and regulating marijuana, a critical step towards creating a legal, commercial market. But a failure of the legislature to follow through could work to perpetuate prohibition-enabled black and gray market operations.

The best way for policy makers to avoid this scenario would be to swiftly establish the tax and regulatory components of the new system, so marijuana is regulated akin to alcohol. Unlike alcohol, though, the policies must be clear and effective on both sides of the cash register...

We go on to explain that Colorado's regulatory regime for alcohol is not the ideal model, for several reasons. We then highlight issues that will likely impact consumers. Looming excise tax increases pose a threat to implementation efforts as well. The piece concludes:

Black and gray market operators have proven resilient throughout the so-called “War on Drugs,” while policy makers obstinately continue ineffective prohibition that squanders countless dollars and ruins lives. Instead, the people of Colorado tasked policy makers with adopting more sophisticated drug policy by legalizing recreational marijuana and industrial hemp. While early signals are encouraging, implementation risk looms large, and voters are watching.

Read the whole piece online here.

For more of Reason Foundation's work on Amendment 64, see here and here; and watch my appearance on Devil's Advocate with Jon Caldara on Colorado Public Television alongside Joe Megysey here.

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Federal Aid Program for Transportation Disasters Needs Major Changes

Hurricane Sandy has exposed problems with the Federal Emergency Relief Program. While critical infrastructure damaged by storms needs to be quickly replaced, the current national program lacks fiscal restaint, checks to make sure the funding is related to emergencies, and a systematic approach. 

First a little history: The highway emergency relief program was first authorized in 1956. As part of the Moving Ahead for Progress (MAP-21) bill, the latest reauthorization of the program dedicates $100 million per year from the highway trust fund. Since $100 million is not sufficient for major disasters, MAP-21 authorizes additional funds on a “such sums as may be necessary” basis. Before Hurricane Katrina this funding came from the highway trust fund. However, with trust fund balances decreasing, in 2005 Congress designated the General fund as the source of future supplementary funding. These funds are typically provided in annual or emergency supplemental appropriations. Funds expended in in the first 180 days for emergency repairs to restore essential traffic, to minimize the extent of damage or to protect the remaining facilities are reimbursed 100% by the federal government. Permanent repairs, which are intended to restore damaged bridges and roads to pre-disaster conditions and capabilities, receive the same 80-90% share as they would receive as a federal-aid highway facility.

Transit facilities have a similar program authorized in MAP-21 that covers most Capital and some Operating costs. There is no dedicated money; all funding comes from the general fund. While the federal share is supposed to be 80%; the DOT Secretary may waive the local match. 

Since emergency funds are authorized on a “such sums as may be necessary” basis, the program often receives substantially more funding than is budgeted in any given year. In February 2007, the Government Accountability Office released a report that expressed concerns about the budgetary implications of increased ER spending. As the ER program is mostly funded by general fund revenues when the…

[N]ation faces a pending fiscal crisis, raising concerns about future use of the general fund and the financial sustainability of the ER program ... ER funds are not intended to replace other federal-aid, state, or local funds to increase capacity, correct non disaster-related deficiencies, or make other improvements. However, contributing to future financial sustainability concerns is the fact that the scope of eligible activities funded by the ER program has expanded in recent years with congressional or FHWA waivers of eligibility criteria or changes in definitions. As a result, some projects have been funded that go beyond repairing or restoring highways to pre-disaster conditions ... [such as] projects that grew in scope and cost to address environmental and community concerns.... Congress has also directed that in some cases the program fully fund projects rather than requiring a state match. 

The report noted that from 1990 to 2005, 86% of ER program funds were made through supplemental appropriations. This further complicated budgeting and led to project backlogs as states waited for Congressional action on this supplemental appropriations legislation. The nation faces an even bigger fiscal crisis in 2013 yet the emergency appropriations process continues unchanged. If the Senate approves President Obama’s $60.4 billion in Sandy requested-aid, the annual appropriations will be only .00016% of the total or less than 1/1000 of 1%. The $60.4 billion is more money than the budgets for the departments of Interior, Labor, Treasury, and Transportation combined. Clearly, this is not good budget policy. 

And then there is the money in the relief bill that has nothing to do with Hurricane Sandy. Unrelated items include $2 million to repair roof damage at the Smithsonian buildings in DC that pre-dates the storm; $4 million to repair sand berms and dunes at the Kennedy Space Center some 1,000 miles away from the storm; $41 million for clean up and repairs at eight military based along the center’s path including Guantanamo Bay, Cuba. The FBI wants $4 million to replace office equipment and furniture while the Customs and Border Protection wants $2.4 million to replace “destroyed or damaged vehicles, including mobile X-Ray machines. The Small Business Administration is seeking $50 million for Women’s Business Development Centers among other priorities. One federal official’s quote is priceless. In defending some of the spending to ABC news he said, “On the federal items, we know what the damage is because we are the federal government.” 

The budget request also repeats an Obama Administration pattern of funding substantial improvements to infrastructure rather than sufficient repairs in an emergency budget request. Emergency appropriations are intended to repair conditions to pre-existing status not make improvements. The $13 billion requested for mitigation projects to prepare for future storms should be a part of future annual budgets not an emergency appropriation. Similar to its efforts to make the Gulf of Mexico cleaner than it was prior to the Deepwater Horizon oil disaster, the government is using an emergency process to make non-emergency repairs. Checked by Republicans on regular spending, the White House is trying to find projects already rejected by Congress. 

Further, while there has been a great deal of research into planning for disasters, there has been little research or discussion into how to distribute emergency transportation funding. The 2007 GAO report recommended tightening the eligible criteria for funding, rescinding unused emergency funding, and improving communication between DOT offices and local governments. While FHWA has slightly improved its communications, criteria for emergency transportation funding has been loosened not tightened. Most decision makers glanced at the GAO report, threw it in a drawer, and did not think about it again. 

There are questions as to the government’s role in disaster funding. Should the federal government distribute funding to state DOTs or another entity? Should states match a larger percentage of the total federal funding? What transit agency should receive emergency federal funding-- an MPO, a regional transit board, or the transit operator? Should Davis-Bacon and other federal stipulations that increase the cost of repairs be in effect during emergencies? 

Further, should states receive federal funds even though they have refused to use state funds to fix pre-existing problems? New Jersey, New York, and Connecticut were warned that they would suffer major damage from a hurricane if they did not have an adequate plan for coastal protection. Rather than fix the problem, state leaders decided to punt the problem to the federal government and hope that their good luck would continue. It didn’t. Natural disasters are major tragedies that incur enormous property damage and often tragic loss of life. Due to the emotional nature of the tragedy, there has never been a comprehensive fact-based study that examines how to best solve this problem. Politicians have been very good at lobbying for funding but a complete failure at studying whether the current system is the most-effective way to repair critical infrastructure. 

Despite substantial political pressure to do something, Congress should not pass an emergency-funding bill unless three key problem-areas are resolved. First, all non-emergency funding should be eliminated from the bill. This includes future remediation efforts. Protection of critical infrastructure is important but states need to contribute a substantial part of their own resources to such efforts. Second, future transportation bills need to devote a realistic amount of funding to emergency relief. The current lack of sustainable funds for disaster relief leads to unsustainable emergency appropriations. This process lacks planning and fiscal discipline and substantially increases the federal debt. Third, Congress and the White House should commission an outside group of transportation experts to study the most efficient way to distribute transportation resources in emergencies. Upon receipt of this report, Congress and the White House should amend current laws to make disaster relief less political. Hurricane Sandy has highlighted the problems with emergency transportation relief. We need to fix this problem to avoid both physical and financial disaster.

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NCIA Panel Asks, 'Amendment 64: What's Next for the Feds?'

(NCIA Event) Amendment 64: What's Next for the Feds?

Last night I attended a panel event hosted by the National Cannabis Industry Association (NCIA) entitled, "Amendment 64: What's Next for the Feds?" in Denver, Colorado. According to their website, NCIA is, "the only trade association in the U.S. that works to advance the interests of cannabis-related businesses on the national level." The panelists (pictured above, from left to right) included:

  • Steve Fox, director of public affairs for NCIA and co-founder of SAFER (Safer Alternative For Enjoyable Recreation);
  • Troy Eid, former U.S. Attorney appointed by President George W. Bush; and
  • Christian Sederberg, founding member of Vicente Sederberg, LLC and member of Colorado Governor John Hickenlooper's Amendment 64 Task Force.

The panel was moderated by NCIA deputy director Betty Aldworth (pictured above, standing on the far right) who was also the spokesperson and advocacy director for the Yes on 64 campaign. 

So far, the federal government has not given a clear indication of what actions to expect, and this event reinforced that uncertainty.

Steve Fox's comments were optimistic, citing support from members of both the House and the Senate at the federal level. He also emphasized that federal guidance would help both Colorado and Washington move forward. Fox notably warned that while rescheduling of marijuana is worthwhile, in his opinion, it is also "not a panacea" to issues facing the cannabis industry.

Troy Eid's comments were staid, emphasizing that the federal government's enforcement of marijuana prohibition is unlikely to change because only two states are in conflict with federal law. He warned of "under the radar" strategies that fall short of litigation, but would be disruptive for producers, retailers and consumers. He suggested the federal government would not communicate its approach clearly or ahead of time, instead likely opting for opaque pronouncements and continued action. Eid did note that, politically, "there's a world of difference," after Amendment 64 and Initiative 502 passed in Colorado and Washington respectively, which he expects will have an impact.

Christian Sederberg's comments were pragmatic, both recognizing the risk that federal intervention poses and underscoring the need to keep that risk in context. Sederberg reiterated several points he raised in Governor Hickenlooper's first Amendment 64 Task Force meeting (which I wrote about here). Most notably, he explained that the debate over federal preemption of state laws should focus on, "(the) legitimate concerns of the federal government," e.g. public health issues and diversion to minors and/or neighboring states. 

A variety of other issues were discussed over the course of the event, such as banking restrictions and ways for NCIA members to engage the community. Overall, this was a thought provoking discussion that indicates the cannabis industry is seriously engaged in the ongoing policy debate, not just focused electoral victories.

For more of Reason Foundation's work on Amendment 64, see here and here, and watch my appearance on Devil's Advocate with Jon Caldara on Colorado Public Television alongside Joe Megysey here.


Follow Harris Kenny on Twitter @harriskenny.

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Amendment 64 Task Force Concludes First Meeting

Amendment 64 Task Force, First Meeting

Last month, Colorado voters passed Amendment 64 to the state constitution, essentially legalizing marijuana in Colorado. (For more on this, see Reason’s work here, here and here.) Several weeks later, Governor John Hickenlooper announced the formation of a task force to hammer out specific implementation concerns.Yesterday, the 24-member task force (pictured on the right) met for the first time in an unassuming room at the Department of Revenue’s office building in Golden, Colorado.

After introductory remarks, Jack Finlaw, the Governor’s Chief Legal Counsel and co-chair of the marijuana task force, framed the task force’s duties and set the tone for the meeting saying: 

“Pursuant to the Governor’s executive order establishing the task force, he’s asked that we have a real focus on identifying the legal and the policy issues that are necessary to tackle, to implement Amendment 64. We’re not here to revisit the merits of Amendment 64, we’re not here to have a discussion as to whether or not legalizing marijuana in general, or if legalizing marijuana in the way Amendment 64 has done, is the right thing to do. We know it was put on the ballot, the voters approved it, so our job is to find ways to efficiently and effectively implement it.” 

Barbara Brohl, task force co-chair and executive director of Colorado’s Department of Revenue, explained the important administrative and technical matters that lay ahead. Brohl continued by outlining the five working groups that will be responsible for assisting the task force in its duties. The five working groups (with examples of their likely discussion topics) are listed below:

  • Regulatory Framework
    • Legislative construction (like medical marijuana, liquor or a hybrid?)
    • Blending medical marijuana and recreational marijuana
    • Rule making processes
  • Criminal Law Issues
    • Required changes to existing criminal statutes and impact on prosecution
    • Defining impairment, specifically in the case of motor vehicle use
    • Traffic stops and probable cause
  • Local Authority and Control
    • Role of local government in the regulatory model
    • Local government’s authority to opt out
    • Clarifying mandates and sources of revenue for state and local bodies
  • Tax Funding and Civil Law Issues
    • Collection and revenue generation, and constitutionality of the tax mandate
    • Fee structure to support regulatory enforcement
    • Impact on employment in the public and private sector
  • Consumer Safety and Social Issues
    • Substance abuse and prevention, including outreach to minors
    • Restrictions on advertising
    • Products standards and labeling

Task force members went on to discuss and submit a range of additional concerns they have, with the assistance of a facilitator brought in for the meeting. Finally, there was a period for public comment giving an opportunity for laypeople, cannabis industry participants and medical marijuana patients, among others, to speak. 

Click here for a full-length audio recording of the meeting, approximately two hours and ten minutes.


Follow Harris Kenny on Twitter @harriskenny.

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