With New York state on the precipice of legalizing marijuana, a fight is already brewing over how to spend what’s expected to be more than $300 million in annual tax revenue.

At issue is how much of the funds will go to the communities hardest-hit by the U.S. war on drugs. The state is trying to close a $15 billion deficit worsened by the coronavirus pandemic, while rent relief, small business recovery and other economic interests also vie for marijuana tax revenue.

New York Governor Andrew Cuomo in January called for $100 million of the new tax revenue to go into a so-called Cannabis Social Equity Fund over four years, with $50 million annually thereafter. In his budget proposal, he said it would help those harmed by the more than 800,000 arrests over the past decades for marijuana possession—most of whom were people of color. But a more generous proposal that would give half of whatever New York brings in from marijuana taxes to social equity causes has also been circulating for years, setting the state up for a legislative battle later this month.

New York has been hit hard by the war on drugs, particularly Black New Yorkers, who have been arrested for marijuana crimes at around 14 times the rate of White residents from 2000 to 2018, according to data from the New York Civil Liberties Union. Hispanics were 7 times more likely to be arrested for marijuana crimes than White people during that time period, the group said.

National Impact
Lawmakers, community groups, companies and special interests will have to hash out the terms of how New York will treat marijuana tax revenue in what’s become a years-long negotiation over legislation that dates back to 2013 called the Marijuana Regulation and Taxation Act, or MRTA. The MRTA advocates for more money to be sent to minority communities.

Meanwhile, states around the country are watching New York as they face their own budget shortfalls and pressures to address social inequities highlighted by the Black Lives Matter movement. New York’s decisions over how much money flows to social equity causes, and exactly how it gets distributed will have ripple effects nationwide, said Melissa Moore, state director of New York for Drug Policy Alliance, a nonprofit that advocates for legalizing marijuana.

“New York can create a gold standard,” Moore said. “It’s the heart of the country’s financial system, and legalization in New York has a lot of implications for how the rest of the country’s financial system is engaged.”

Fifteen states and Washington D.C. have legalized recreational marijuana for adults, and two-thirds of Americans now live in states where it’s legal to use marijuana. But states still struggle to figure out the best uses for the tax revenue.

So far, youth programs, economic development, substance abuse programs and law enforcement training have been recipients, but many states just funnel the funds into omnibus general accounts or so-called rainy day funds.

Some states have also become mired in controversy and litigation, including Illinois, where state officials overseeing dispensary licensing were sued over diversity requirements. In Los Angeles, there have been delays for minority applicants.

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