For the last two legislative sessions, New Mexico lawmakers have debated the legalization of cannabis. This ongoing debate comports with the national trend of more states considering legalizing the commercial sale of marijuana, and this trend is only expected to accelerate over the next few years. With states across the country experiencing sharp revenue declines resulting from the pandemic, recession, and state and local government-imposed economic shutdowns that were aimed at reducing the spread of the coronavirus, lawmakers in many states are looking for methods to help fill potentially massive funding gaps. As a result, the potential excise taxes that could be assessed on the sales of legal marijuana will likely become even more alluring to state governments, including New Mexico’s.
Already, 11 states have legalized the commercial sales and regulation of cannabis. The first states to legalize marijuana have demonstrated varying levels of success in both generating public revenues and displacing the black market. Recent surveys by state and federal agencies show that marijuana use among adolescents has fallen since legalization in the markets that have had legal marijuana the longest — Washington and Colorado, where regulated marijuana markets have displaced traditional black market sources.
Colorado’s tax revenue from licensed marijuana sales surpassed $1 billion last year while Washington state collected nearly $400 million in marijuana-related revenue.
Although most early marijuana legalization efforts were driven by ballot measures, legislative bodies have increasingly been willing to consider legalization on their own. Vermont’s legislature legalized possession of small amounts of marijuana in early 2018 and then approved a plan for legal commercial sales just weeks ago. Last year, the Illinois state legislature also legalized possession and regulated sales of marijuana.
It’s unsurprising, then, that New Mexico’s lawmakers have given serious consideration to legalizing marijuana for adult use. In fact, following the 2020 legislative session, Gov. Michelle Lujan Grisham expressed frustration that the legislature did not pass a legalization bill, saying:
Legalized recreational cannabis in New Mexico is inevitable. The people of New Mexico have said they want it. A diversified state economy demands it. Poll after poll has demonstrated that New Mexicans want a 21st-century economy and want cannabis to be part of it: New Mexicans want more chances to stay here and build a career here; we want justice for those convicted of low-level, harmless cannabis-related offenses; we want an industry with firm and clear regulations that will keep our roads and places of business and children safe…We will keep working to get it done. And ultimately we will deliver thousands of careers for New Mexicans in a new and clean and exciting industry, a key new component of a diversifying economy.
The New Mexico legislature’s main proposal for legalization contained some oddities, to be sure. It would have imposed the most strenuous occupational licensing requirements in the world on New Mexico’s cannabis workers and made it unnecessarily difficult to gain and keep employment within the industry.
It also would have required anyone who applies for a cannabis license to sign a labor peace agreement with a union. The U.S. Supreme Court has ruled that state and local governments have no authority to require a labor peace agreement as a condition of business licensure because the National Labor Relations Act gives the federal government exclusive jurisdiction to regulate private-sector labor relations. In recognition of this fact, Michigan recently withdrew its proposed regulations that would have required labor peace agreements.
New Mexico’s marijuana legalization proposal would also have outlawed some very common industry practices and business models. For example, it would have prohibited licensees from entering distribution agreements and banned consignment sales, finders fees, and sole source agreements. It might have prohibited manufacturers from accepting a portion of the yield as payment for processing raw marijuana flowers into oils or extracts—another common industry practice. Restrictions on the ownership of marijuana businesses would also have stood in the way of investment by out-of-state companies.
These shortcomings could be fixed before the state legislature’s next session If corrected, New Mexico could build bipartisan support for a bill that brings marijuana into the safe and legal market, erodes the influence of drug cartels and other dangerous black-market actors, and generates some public revenue for the state.
Reason Foundation has provided a detailed critique of this year’s marijuana legalization proposal in New Mexico, along with a conceptual framework for what effective marijuana regulation should look like. Reason has worked with members of both major political parties for decades to drive sensible marijuana and drug policy reforms across the country and is eager to help New Mexico and other states craft the right regulations to create the conditions for a safe, thriving legal marijuana market.