TRENTON — Marijuana legalization advanced in the Legislature Thursday, then hit a wall.

Senate and Assembly committees endorsed marijuana legalization bills – mostly the same, though with a few key differences. The Senate then canceled its Monday voting session where it had planned to approve the final bill.

Advocates for legalization are eager to pass a bill setting up a regulated industry for adult-use recreational marijuana after two-thirds of voters approved a constitutional amendment legalizing it. That amendment takes effect Jan. 1.

Among the differences between the bills are whether to cap the number of marijuana cultivators, workplace protections for employees and how far employers can go with drug testing, and what to do with proceeds from a social equity excise fee that has been added to the plan.

“We now have two bills that are completely not alike,” said state Sen. Paul Sarlo, D-Bergen. “So the negotiations will continue.”

The number of cultivator licenses was originally going to be capped at 28 over the first 18 months. The Assembly increased that to a limit of 37 in the first two years. State Sen. Nicholas Scutari, D-Union, said he introduced the amendment to remove the cap.

“But in order to realize the most amount of product and get the most cost-effective product, meaning the least-priced one, the more you need to produce that’s legally produced,” Scutari said.

In addition to the state sales tax and a 2% tax that municipalities could impose on marijuana businesses, the legislation now proposes a social equity excise fee on cannabis cultivators. Proceeds would fund social justice programs such as educational support, economic development and job training, social support services and legal aid.

“We’ve come up with a very ingenious way to raise funds but to continue to allow the marketplace to grow and be hopefully competitive with the illicit market, which is as the price goes down, the tax generation can go up, and the best way to do that is obviously a simple economy class of supply and demand,” Scutari said.

At first, the excise fee would equal one-third of 1% of the statewide average retail price for an ounce of marijuana. Nine months after the first sale at a new dispensary that doesn’t already exist to sell medical marijuana, the tax could switch to a sliding scale on which it increases as the price drops:

  • Up to $10 per ounce if the average retail price of an ounce of usable cannabis is $350 or more;
  • Up to $30 per ounce if the average retail price of an ounce of usable cannabis is less than $350 but at least $250;
  • Up to $40 per ounce if the average retail price of an ounce of usable cannabis is less than $250 but at least $200;
  • Up to $60 per ounce if the average retail price of an ounce of usable cannabis is less than $200.

Assemblyman John Burzichelli, D-Gloucester, said it’s not known how much the excise fee will raise but that the legislation says if it can’t be properly imposed, supplemental funding will have to be provided from the state’s general budget.

Cannabis advocate Patrick Duff, a Haddon Heights native who has experience in the industry in California and Philadelphia, said the proposed tax rates are prohibitive, such as $60 if the price goes under $200.

“That’s $960 per pound of a plant that you’re putting taxes on. You’re never going to be able to afford to beat the black market or the illicit market as it’s said with that type of a tax applied,” Duff said.

Scutari disagreed.

“New Jersey under this law will have the lowest tax rate in the nation,” Scutari said.

Tahir Johnson said 35% of the revenues from recreational marijuana should go toward programs in communities hit hardest over the years by the prosecution of drug offenses. He was pleased that the legislation was amended was amended to remove license caps, although the change only applies to cultivation licenses.

“By having license caps, we’ve seen in states it makes it more competitive for minority entrepreneurs to have a shot at success in the cannabis industry. So removing those caps will definitely be a step in the right direction,” Johnson said.

Jessica Gonzalez, general counsel for Minorities for Medical Marijuana, said the bill’s approach to supporting microbusinesses as a social-equity effort are insufficient. She says it should include a path that allows them to convert to full-size operations within three years, allow them to sell their licenses and allow them to seek increases in monthly quantity limits twice a year.

“The current requirements for microbusinesses do not provide a financially viable model, and its ownership requirements are in stark contrast with the requirements for state cannabis licensing, deeming their predatory in nature,” Gonzalez said.

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“If the intent was to provide local entrepreneurs access to the cannabis industry, it doesn’t make sense to impose all these onerous requirements that full-scale licenses are impervious to," she said.

Many of the people who testified before the Assembly Appropriations Committee said the bill still doesn’t do enough to promote social equity and access to the new industry.

“This is a great opportunity for the state to help communities that it’s destroyed,” said Alexandria Alcala.

Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at michael.symons@townsquaremedia.com.