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As New York races to open up its adult cannabis market, its governor has proposed what social equity advocates call a bold and innovative way to get a truly diverse pool of applicants into the new marijuana industry.
In her inaugural State of the State address on January 5, Governor Kathy Hochul proposed a $200 million social equity fund in the state’s $216.3 billion fiscal year budget, which has yet to be drawn up as the state missed Friday’s deadline. New York lawmakers are expected to meet again Monday in Albany.
The $200 million fund that will be backed by state and private dollars is intended to help entrepreneurs of color and other underrepresented groups get into business.
While the idea is sparse in detail, Hochul and his supporters say the fund is to get capital to those who need it most, as the cost of applying is a real barrier to entry.
It has led some attorneys representing smaller marijuana operators and wealthy investors to ask: Why not a social equity fund in New Jersey?
Jeff Brown, executive director of the state Cannabis Regulatory Commission, said he found the New York idea “interesting” but couldn’t point to a similar big-money proposal to ensure diversity and inclusion in New York’s nascent industry. Sweater.
“The CRC built fairness and inclusion into every part of the rules we wrote for the recreational cannabis market and we know that funding is an additional piece to ensure the market is accessible,” Brown said in an email to NJ Cannabis. Insider. “We have been working with other state agencies to identify access to capital, workforce development assistance and business development resources for aspiring entrepreneurs and look forward to new initiatives in the future.”
The CRC last week approved conditional licenses for 68 growers and manufacturers as a social equity measure to give smaller operations a piece of what is expected to be a multibillion-dollar industry alongside multi-state operators and wealthy investors.
“These are the first companies to step up in the state of New Jersey,” Brown said at the meeting. “I can’t stress that enough.”
That action was overshadowed by the board’s unexpected delay in approving applications from eight medical marijuana dispensaries to also sell recreational weed this spring, prompting Senate President Nicholas Scutari, D-Union, to announce that would hold oversight hearings on the performance of the CRC. The 68 smaller operators are not expected to be in a position to sell weed until late fall at the earliest.
At the meeting, Brown also noted that the New Jersey Economic Development Authority is working to help ensure a diverse pool of applicants.
“Furthermore, we hope that municipal leaders, property owners and others who stand to benefit from a thriving cannabis market will choose to invest in new businesses without putting financial obstacles in the way of entrepreneurs,” said Brown.
The governor’s office acknowledged that there was no social equity reserve similar to New York’s proposal in Gov. Phil Murphy’s proposed $48.9 billion budget, which would go into effect on July 1.
“Our administration has always striven to remove barriers to entry for the recreational cannabis market for adult use, through low fees, priority review of license applications for micro-enterprises, impact zone businesses, and social equity businesses, and the option to apply for a conditional license,” Murphy’s spokesman, Michael Zhadanovsky, told NJ Cannabis Insider.
“The Governor and the CRC are committed to working with advocates and stakeholders to ensure a marketplace that works for everyone. The administration is always open to hearing new ideas for fairness in the market,” added Zhadandovsky.
Murphy has said that minor marijuana convictions caused irreparable damage to the Black and Latino communities, whose members were sent to jail for the nation’s failed War on Drugs. The governor said that the main purpose of legalizing cannabis and selling it in a legitimate market is to fund restorative justice programs.
After signing the cannabis bill last year, Murphy touted that New Jersey’s cannabis market would be one of the most inclusive in the country, welcoming everyone from family-owned operations to the largest businesses, and giving preference to businesses owned by minorities and women. .
The New York equity fund received a mixed response from those closely watching New Jersey’s yet-to-open adult market.
“We’re not an apples-to-apples comparison when it comes to funding mechanisms,” said attorney Beau Huch, a former senior aide to state Sen. Declan O’Scanlon, R-Monmouth, who worked on the cannabis bills. medicinal and recreational. . “Is the $200 million that New York has set aside from its general fund? It’s a loan? I don’t really know the answer to that question, but I know New Jersey is broke.”
“We don’t have any money to give away and that would be a chore here, even if we did,” Huch added.
Edmund DeVeaux, president of the New Jersey CannaBusiness Association trade group, said it can’t be all about money to ensure the success of minority- and women-owned cannabis businesses.
“In our evolving regulatory and legislative arenas, the state has provided not only prioritization for communities most affected by unequal treatment under the law, but those with prior cannabis convictions and small business startups also have access to various forms of assistance. through state sources such as the Economic Development Authority, Business Action Center, and the New Jersey Re-entry Corporation,” DeVeaux said in an email to NJ Cannabis Insider.
“There has to be a recognition that future and current participants in the cannabis industry may have to hone certain skills to be successful in the long term.”
But some in the Garden State say applicants need the financial assistance earlier in the application process.
New York expects to start issuing licenses to sell recreational cannabis for adult use sometime next year. Hochul’s $200 million social equity fund would be backed by state and private dollars to provide capital and seed support for disadvantaged applicants.
Hochul plans to allocate $50 million, money that New York would advance before collecting it from cannabis license fees and taxes, and seek the rest from private investors.
A private partner would administer the fund that could provide grants and loans to eligible businesses, which would include those owned by women or minorities, disabled veterans and people from communities that endured heavy weed law enforcement. Details are still in process.
If that money is approved, New York can use some of it to help open cannabis businesses, including securing retail leases and furniture stores.
Nadir Pearson of Clifton would love to see New Jersey embrace this idea. The 25-year-old black businessman said he could use the financial aid while applying for a conditional manufacturing license. Pearson said that so far he has spent $13,000 on attorneys to review his conditional application. He expects another $35,000 in fees to convert to an annual license.
On top of that, Pearson is spending tens of thousands of dollars on a down payment on a 16,000-square-foot warehouse in South Jersey. He got the site in February, but with continued delays in launching New Jersey’s adult recreation market, Pearson said he’s paying $10,000 a month in rent for a property that still isn’t generating any income.
“The legislators should be a little more aware of the economic impact that they are going to have when they establish these statutes.” Pearson said. “There is a strong disconnect between understanding the real business of cannabis and the intent of these laws.”
Like many entrepreneurs, Pearson has drawn on personal funds, family and friends to get his foot in the door. Her mother, Onika Perez, and another business partner, Hope Wiseman, a Maryland cannabis operator, are listed as majority owners on the application for one of the women-owned business licenses. She has a minority stake.
“Finding ways to alleviate some of these financial burdens should be a priority…wherever the state feels it may be best suited to provide financial assistance, it should do so,” Pearson said.
“If true fairness was the starting point that we wanted to build this industry on, then you need to take a hard look at it.”
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Suzette Parmley can be reached firstname.lastname@example.org or follow her on Twitter: @SuzParmley