A new report from Canaccord Genuity analyst Bobby Burleson suggests that budget constraints as a result of COVID-19 impacts could generate faster support for cannabis legalization. Prior to the pandemic, several states were gearing up for ballot initiatives in the 2020 election. Social distancing seemed to cause many to table those efforts. Now only a few states look to be in play in November.
Burleson noted that prior to the pandemic, he had identified 16 states with cannabis initiatives planned for the election. A combination of medical and recreational programs were teeing up for voters. Fast forward to June and limited moves are expected except for New Jersey, Arizona, and New Mexico where legislation looks to continue making progress. South Dakota could pass medical and Louisiana’s governor signed a law expanding its medical program.
COVID Proves Expensive
“COVID-19 is driving a severe budget crisis for states across the country and an analysis by the Center on Budget & Policy Priorities projects an aggregate state budget shortfall of 10% for the current fiscal year (ends June 30) and for the shortfall to grow to 25% for fiscal 2021,” Burleson wrote. Tax revenues for states are forecast to drop by 12%in 38 states. he expects these budget shortfalls will motivate states to pass some form of legalization to generate tax revenues.
He cited Massachusetts as a prime example. It’s the only state in the northeast that has an established and growing recreational program. Demand has been strong and New Yorkers have accounted for as much as 50% of the sales. All of that tax money could be going into New York’s state coffers, but instead, it’s staying in Massachusetts. Michigan is seeing similar results. Demand in the state is also coming from residents in Ohio, Indiana, and Missouri who are driving there to make purchases.
Getting the designation as an essential service and being allowed to remain open during the pandemic further underscores the support for legalization. Despite social distancing, curbside service, and hastily arranged delivery options, dispensaries said that sales remained strong further supporting the demand from state residents.