Debate sparks over who should control spending of marijuana money as taxes pour into state coffers

By Caven Wade UM LEGISLATIVE NEWS SERVICE

In 2020, the state of Montana joined a pack of 20 other states and the District of Columbia when it legalized recreational marijuana. Montana voters passed ballot Initiative 190 on a thin margin of 57% for and 43% against. 

The legalization came with a brand new pipeline of tax money and now that the money is starting to flow, a debate is building in the Capitol over how that money should be used and who should be controlling it. Just like alcohol or tobacco and nicotine products, recreational marijuana has a tax of 20% and medicinal marijuana sits at 4%. The current total this year from marijuana sales sits at about $50 million that the state can use. 

As the 2023 Montana Legislature careens into its final month, agencies, programs and lawmakers are fighting over this new pot of money, with some saying they believe their programs or causes have a right to the money based on the “will of the people,” as former Republican state-legislator-turned-cannabis-advocate Dave Lewis puts it.   

The initiative was originally stamped with a “road map” of where the money from the tax would be going: $6 million per year for addiction treatment services, 20% of revenues to conservation, 4% of revenues, up to $650,000 each, to state parks, trails, recreational facilities, and wildlife protection, $200,000 to veterans services and improving veterans’ cemeteries, $300,000 to the purchase of drug detection dogs, $150,000 for police training and remaining amount to the general fund, essentially the state’s checkbook.

The only problem is that in the Montana Constitution, ballot initiatives don’t have the ability to appropriate money. The Constitution states that right is reserved for the Legislature.

“The folks, they’re true believers, and they wanted that money, so they made the argument from the beginning that well, ‘the people meant that,’” Lewis said. “Well, the people couldn’t mean that because it’s unconstitutional. The people cannot appropriate.”

Lewis served in the Montana Legislature in both the Senate and the House from 2001-2015. He also worked as the state budget director, most recently under former Gov. Marc Raicicot from 1993-2000. He also ran for lieutenant governor with gubernatorial candidate Bob Brown in 2004. After his time in the Legislature, Lewis turned his attention to advocating for legal cannabis and he was a supporter of I-190 in the 2019 Legislative session. He said the additional money generated through the revenue tax was most likely what swayed enough voters to push it into law.

Lewis said while the initiative might look like a prescription for where the marijuana tax money should go, it’s not that simple when it comes to the Legislature actually allocating the funds. He said the money aspect was misinterpreted by voters and was actually laid out as just a possible way to spend the money, to show voters what the additional cash could be used on.

“They agreed that they would list a menu of options if the tax passed, but it was not an appropriation,” Lewis said. “I remember being on conference calls with conservation groups that wanted that money appropriated and I argued vehemently that ‘no you can not do that.’ You can simply lay it out as one of the options if the tax passes, but the Legislature is the only people who can pass the appropriation.”

In the early 1900s, there was no language in the Montana Constitution that allowed for initiatives to be included on the ballot.

“The progressives wanted to get in the Constitution the ability to do initiatives and a lot of the corporate interests fought it very hard on the basis that it would affect their taxes,” Lewis said. 

The Anaconda Copper Company didn’t want voters to be able to raise taxes through initiatives that have appropriations attached to them. A compromise was made that led to the Legislature having the ability to create initiatives, but only if there was no appropriation attached to it.

That means that the revenue created by I-190 is fair game in the Legislature and this session, several bills are working their way through the process that would allocate the money very differently than the original “menu list” in the initiative, including: 

• House Bill 462, sponsored by Rep. Marta Bertoglio, R-Montana City, which would send most of the tax money to addictions recovery, corrections and law enforcement programs.

• House Bill 669, by Rep. Bill Mercer, R-Billings, which would give $6 million to the Healing and Ending Addiction through Recovery and Treatment, or HEART fund, which aims to fund addiction and behavioral health treat programs in the state,  but then send the remaining revenue tax to the general fund. The bill would completely eliminate any payments to the state special revenue accounts.

• Senate Bill 442, by Sen. Mike Lang, R-Malta, which would allocate the money to county and city road construction and maintenance, in hopes of creating greater access to privately-held property opened up for hunting access through the Block Management Program and to public lands.

HB 462 and 669 are still awaiting hearings in the House Appropriations Committee. SB 442 passed a second reading vote on the Senate floor, but was referred back to the Senate Finance and Claims Committee.

Mercer said his HB 669 is to make sure that there is proper appropriation and oversight when it comes to the marijuana tax money, whereas other bills and the road map laid out in the initiative would automatically send that money over to programs with no real Legislative oversight.

“I fear that when you begin to essentially earmark dollars for special revenue accounts they really evade review on an ongoing basis,” Mercer said.

However, HB 669 would remove around $8.3 million expected for the Fish, Wildlife and Parks Habitat program as well as $1.6 million that would go to state parks, trails, and recreation. The bill increases the revenue that would go into the general fund by about $14 million per year, all the way up to $15 million in 2027.

If the bill is passed, the general fund would gain $41.6 million in 2024 from the tax revenue and up to an additional $46.6 million in 2027. 

Mercer said HB 669 is very similar to HB 462, but it differs in the fact that no money would be sent to special revenue accounts across the state.

“That revenue should go to the general fund, appropriations, finance and claims, and the Legislature as a whole should determine how it wishes to spend that money,” Mercer said.

In Mercer’s opening remarks during the bill’s hearing on Feb. 23, he touched on the constitutionality of not being able to appropriate money through initiatives. He said several opponents would use the original numbers in the ballot initiative to justify having a right to the tax revenue, but that the legislature needs to send a message that they will not violate the Constitution to accommodate them.

The Anaconda Sportsman Club and the Montana Wildlife Federation were heavy opponents to both HB 669 and HB 462. They had multiple representatives present to argue against both bills and claim that the benefits of funding conservation across the state far outweigh opening it up to a general appropriation process.

Chris Marshawn, a representative for the two organizations, went to both hearings to speak in opposition of the bills.

“I understand, and I think the public understood, as the developers of the initiative understood, that they could not appropriate the money,” Marshawn said. “But, what the public was clearly trying to send the message to was that we felt we had programs that through the general funding of the budget, and through fundings that specifically go through license fees to FWP, was not sufficiently meeting the needs of Montana.” 

Marshawn said the funding deficits in those conservation and habitat programs are well documented and many Montanans know about them. He said the marijuana tax revenue was supposed to be a vehicle to help conservation entities finally fund their programs adequately, but legislators are already trying to take it away.

Lewis said these bills most likely won’t be passed until very late into the session so that every lawmaker can get a full view of spending possibilities of the marijuana revenue tax.

“It’s a growing industry that is only going to earn more year in and year out. It’s here to stay and it will be really interesting to see how all this money is sorted through, and where it goes in the future,” Lewis said.

Caven Wade is a student reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Montana Newspaper Association and the Greater Montana Foundation. He can be reached at caven.wade@umontana.edu.