The federal government would save money if a bipartisan bill to give marijuana businesses access to banks is approved, according to a report released by the Congressional Budget Office (CBO) on Friday.
The legislation, which cleared the House Financial Services Committee in a bipartisan vote of 45 to 15 in March, would change federal law to protect financial institutions that service the cannabis industry from being penalized by regulators. That reform would set off a chain of events, beginning with a likely increase in the number of banks accepting deposits from those businesses, CBO reasoned.
Assuming the bill takes effect near the end of the 2019 fiscal year, the office estimates that starting in 2022, banks would see a $1.2 billion increase in deposits, and credit union deposits would grow by $200 million. By 2029, the amounts “would rise to $2.1 billion and $350 million, respectively.”
Because those deposits would have to be insured through the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), the CBO took into account the possibility that individual financial institutions will fail, and the estimated cost of resolving those failures is $5 million.
That said, those direct spending costs would be “offset by assessments levied on insured financial institutions,” which would amount to about $9 million.
“As a result, CBO estimates, H.R. 1595 would decrease net direct spending by $4 million over the 2019-2029 period,” the office reported.
Rep. Ed Perlmutter (D-CO), the bill’s chief sponsor, told Marijuana Moment that its enactment would have benefits beyond fiscal savings.
“Getting cash off our streets and making our communities safer will come at no cost to the federal government and actually save money while providing a much-needed long-term banking solution for legitimate marijuana businesses across the country,” he said.
“This CBO score should only increase the significant momentum in Congress behind passing the SAFE Banking Act,” Neal Levine, CEO of the Cannabis Trade Federation, told Marijuana Moment. “It is now apparent that we can help diminish a serious threat to public safety at no net cost to the federal government. We look forward to the bill passing through the House and hope the Senate will follow suit.”
There are some implementation costs to take into account, CBO says. The administrative costs are estimated to be $3 million. But the FDIC and NCUA are able to charge premiums on the financial institutions they regulate to cover much of those costs. The total net administrative costs would, therefore, be about $1 million.
The Federal Reserve would also have to spend funds to implement the bill, and that would reduce remittances to the Treasury Department. Those remittances are considered revenue, which is expected to decrease by about $1 million if the legislation is implemented.
Then there are costs related to other provisions of the bill. Financial regulators would have to update and issue new guidance, which would “cost less than $500,000 over the 2019-2024 period.”
The legislation also requires the Government Accountability Office to study barriers to entry in the marijuana industry and to financial services for minority- and women-owned cannabis businesses. The costs are estimated to be less than $500,000 annually from 2020 to 2024.
The CBO also estimated that enacting the legislation “would not increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2030.”
The CBO outlined “several noteworthy areas of uncertainty” that could change the calculus.
1. New guidance from federal financial regulators could be more or less stringent than existing guidance implemented under the Obama administration, which could impact the amount of deposits banks and credit unions will receive.
2. Data on cannabis-related deposits is currently “limited,” as federal restrictions have forced marijuana businesses to operate on a largely cash basis. That means CBO’s estimates on the amount of deposits financial institutions will see could end up being “greater or smaller.”
3. If those estimates do end up being different, costs associated with the bank and credit union insurance funds “could be higher or lower depending on the amount of premium collections and capital deposits and on changes in the resolution costs for financial institutions.”
Sahar Ayinehsazian, an associate attorney at Vicente Sederberg LLP who specializes in cannabis banking, told Marijuana Moment that most of the figures lined up with her expectations. However, given that many marijuana businesses have gravitated toward credit unions rather than banks, she said the estimate increase in deposits to those financial institutions may well end up being larger.
“Looking at the chances of this legislation passing from an economic standpoint, I think [the CBO score is] good news,” she said.
Other advocates agreed that the CBO estimate should help efforts to advance the bill.
“For years, cannabis advocates have been preaching the net benefits SAFE Banking would have on consumers, patients, financial institutions, regulators and taxpayers. This CBO cost estimate confirms that,” Michael Correia, director of government relations for the National Cannabis Industry Association, told Marijuana Moment. “The increase of insured deposits, coming from the added certainty this legislation brings, far outweighs the minor administrative costs to implement this bill.”
The House marijuana banking bill currently has 184 cosponsors, and a companion Senate version has 30 lawmakers signed on. The committee of jurisdiction in the upper chamber has not yet set a hearing or a vote, but pressure is increasing.
Banking associations from all 50 states urged the Senate to take up the legislation earlier this week. Other organizations that have called for a resolution to the cannabis banking dilemma include the National Association of Attorneys General, which has endorsed the bill, and the National Association of State Treasurers, representing state treasurers and finance officials, which adopted a resolution last week in favor of the legislation’s passage.
Want 4 million more reasons why members of Congress should support the #SAFEBankingAct, which would allow cannabis businesses to access the banking system in the 33 states where it’s legal? @USCBO says the legislation will save taxpayers $4M over 10 years.
— American Bankers Association (@ABABankers) May 24, 2019
The new analysis is just the third time that the CBO, which is mandated to score bills that pass full committees, has issued a report on the economic impact of standalone cannabis legislation. The agency scored two marijuana research bills that cleared committees last year.
This story was updated to include comment from Perlmutter and Correia.
Congress Votes To Block Feds From Enforcing Marijuana Laws In Legal States
The House of Representatives approved a far-reaching measure on Thursday to prevent the Department of Justice from interfering with state marijuana laws, including those allowing recreational use, cultivation and sales.
The amendment, which also shields cannabis laws in Washington, D.C. and U.S. territories, is now attached to a large-scale appropriations bill to fund parts of the federal government for Fiscal Year 2020.
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Watch Live: Congressional Committee Discusses Medical Marijuana And Military Veterans
A congressional committee held a hearing on four bills that concern veterans and medical marijuana on Thursday.
The House Veterans’ Affairs Committee discussed one piece of legislation that would allow doctors at the U.S. Department of Veterans Affairs (VA) to issue medical cannabis recommendations in states where it’s legal. That bill was introduced by Rep. Earl Blumenauer (D-OR).
The panel also took up a bill sponsored by Rep. Lou Correa (D-CA) that would require VA to conduct clinical trials on the therapeutic potential of cannabis in the treatment of conditions such as post-traumatic stress disorder and chronic pain.
“The men and women that I meet back home vouch for the therapeutic benefits of medical cannabis and support further research into the issue,” Correa said in testimony prepared for the hearing. “The legislation provides a framework for that research to ensure a scientifically-sound study on the issue.”
“Cannabis must be objectively researched. Period,” Rep. Mark Takano (D-CA), chair of the committee, said in support of the legislation. “Medicinal cannabis may have the potential to manage chronic pain better than opioids and treat PTSD.”
Rep. Phil Roe (R-TN), ranking member on the committee, agreed that VA should be studying the therapeutic potential of cannabis for veterans but complained that the proposed bill is excessively prescriptive. The congressman, who introduced a similar piece of legislation in January, said lawmakers shouldn’t “be telling the scientists how to design their studies.”
Other legislation that came up for consideration was a bill from Rep. Seth Moulton (D-MA), a 2020 presidential candidate, that would provide training on medical cannabis for VA health practitioners.
Finally, the committee heard testimony on another Moulton proposal that would require VA to conduct a survey to “measure cannabis use by veterans.”
Watch the hearing below:
Witnesses who testified before the committee include Adrian Atizado, deputy national legislative director of Disabled American Veterans (DAV), Travis Horr, director of government affairs with Iraq and Afghanistan Veterans of America (IAVA) and Carlos Fuentes, director of national legislative service for Veterans of Foreign Wars (VFW).
The VFW representative said the organization supports all but one of the cannabis bills. While the group agrees with the intent of allowing VA doctors to recommend cannabis, it “believe it is unacceptable for VA providers to recommend a treatment that they are unable to provide veterans and force patients to pay for the full cost of such care.”
"VA must expand research on the efficacy of non-traditional alternatives to opioids, such as medicinal cannabis and other holistic approaches. " #VFWTestimony
— VFW National HQ (@VFWHQ) June 20, 2019
DAV voiced support for legislation requiring VA to study medical cannabis and also to survey veterans on their marijuana usage.
“DAV supports @DeptVetAffairs research on conditions related to military service and effective treatments to help #veterans recover, rehabilitate and improve the overall quality of their lives…many veterans report the use of medicinal #cannabis for these purposes is beneficial.” pic.twitter.com/29C9WCw0Di
— DAV National HQ (@DAVHQ) June 20, 2019
And IAVA came out in strong support for the research bill. In testimony, the group said that “without research done by VA surrounding cannabis, veterans will not have conclusive answers to ways cannabis might aide their health needs. This is unacceptable.”
“VA houses some of the most innovative and best-in-class research this country has to offer. It should not be shutting its doors on a potentially effective treatment option because of politics and stigma,” the group said. “Our nation’s veterans deserve better.”
Larry Mole, chief consultant of population health services at the federal Veterans Health Administration, testified that VA opposes all four of the cannabis bills.
He expressed concerns that VA doctors would be penalized if they recommend medical cannabis, that the research requirement would be excessively onerous and that VA is already studying marijuana, that VA doctors already have access to training materials on the subject and that the proposed anonymous survey would require veterans to disclose information that could make them identifiable.
“The legislation would prescriptively define how the surveys would be conducted, but it does not provide the purpose, goals, or objectives for the surveys,” he said. “We have significant concerns that veterans will not want to participate, despite the survey being anonymous.”
Several committee members pressed Mole on VA’s current research efforts, noting the widespread support among veterans to study the medicinal benefits of marijuana.
Rep. Mike Levin (D-CA) said that he meets with veteran constituents each week and asked the VA representative, “[w]hat am I to tell them when they ask when is this [research] actually going to happen?”
“When is this research going to occur? When is the VA going to listen to the 92 percent of veterans across all political stripes and ideologies that want to see this done?” he said.
Mole pointed to the single ongoing VA clinical trial that just recently recruited its first participant focusing on the benefits of CBD for post-traumatic stress disorder. He encouraged Levin to tell his constituents to look up the study and apply to participate if they were interested.
Rep. Andy Barr (R-KY) characterized the VA’s study as “a baby steps approach” to the issue given that CBD alone isn’t representative of the products that veterans are using in the commercial market.
After the House Veterans’ Affairs Subcommittee on Health held a hearing on several of the cannabis proposals in April, the full committee was set to vote on two marijuana measures last month. That hearing was cancelled, however.
Blumenauer is also pursuing cannabis reform for veterans through a different vehicle: an appropriations bill that’s being debated on the House floor this and next week. He introduced an amendment that would prohibit VA from “interfering with a veteran’s participation in a state medical cannabis program, denying a veteran who participates in a state medical cannabis program from being denied VA services, and interfering with the ability of VA health care providers to recommend participation in state medical cannabis programs.”
This was the second congressional committee hearing on marijuana-related issues this week. On Wednesday, the House Small Business Committee met to discuss challenges and opportunities for entrepreneurs in the emerging cannabis industry.
This story has been updated to include additional testimony from witnesses.
House Passes Amendments Stripping DEA Funding And Pushing FDA To Regulate CBD
Two drug policy amendments cleared the House of Representatives on Thursday, building on reform victories in the chamber the day before.
One measure addresses funding for the Drug Enforcement Administration (DEA) and the other would direct the Food and Drug Administration (FDA) to establish regulations for adding CBD to foods and dietary supplements.
The first amendment, introduced by Rep. Alexandria Ocasio-Cortez (D-NY), would transfer $5 million from the DEA to an opioid treatment program. It passed without opposition on a voice vote and is now be attached to the House version of a large-scale spending bill, but it remains to be seen how the Senate will set funding levels for the agency in its own version of the funding legislation.
“I offer this amendment because ending the war on drugs has to mean changing our priorities in order to keep all communities safe and healthy,” Ocasio-Cortez said. “The best way we do that is by offering people the help and support they need before arrest and criminalization should be considered in the first place.”
She added that the DEA is still receiving $2.36 billion in funding, which is $90 million higher than was appropriated for the last fiscal year. It’s also about $78 million higher than President Trump requested in his budget.
Rep. Jose Serrano (D-NY), the chairman of an appropriations subcommittee that handles Justice Department funding, rose in support of the amendment, stating that opioids “are a serious threat to the health and wellbeing of our communities, and we must do everything we can to combat this epidemic.”
Michael Collins, director of national affairs for the Drug Policy Alliance, told Marijuana Moment that the successful vote “should send a message to the DEA—it’s not business as usual anymore.”
“We want to end the drug war and we will fight for it. We will drain you dollar-by-dollar, cent-by-cent, if that’s what it takes,” he said.
Rep. Robert Aderholt (R-AL) claimed time designated for the opposition on the floor but said he supports the amendment. The congressman did note, however, that funding for opioid abuse prevention grants has increased by 360 percent since 2017 and that “we want to work with both sides to make sure we have the appropriate funds necessary to make sure we fight this opioid addiction that has taken over so many parts of the country.”
In closing, Ocasio-Cortez said “just as the epidemic is exploding so should our commitment to address this problem.”
“We have overfunded one agency and we should move that to make sure that we are getting people the care they need,” she said.
Dan Riffle, senior counsel and policy advisor in Ocasio-Cortez’s office told Marijuana Moment that the amendment is “a good start, but it’s not enough.”
“Every dollar we waste trying and failing to reduce supply is a dollar that should be spent on treatment and demand reduction,” he said.
This is the second drug policy amendment the freshman congresswoman has introduced that’s been brought to the House floor. However, her earlier proposal, which was meant to lift barriers to research for psychedelic substances such as psilocybin and MDMA, was rejected when it came up for a vote as part of separate appropriations legislation last week.
The FDA amendment, introduced by Rep. Jerry McNerney (D-CA), was approved as part of an en bloc voice vote combining other relatively noncontroversial measures and it did not receive debate on the floor. The measure aims to resolve a problem that the FDA has repeatedly raised since hemp and its derivatives were federally legalized under the 2018 Farm Bill.
Because CBD exists as an FDA-approved drug and has never been allowed in the food supply before, the agency’s former commissioner said Congress may have to pass separate legislation to provide for its lawful marketing.
The amendment’s description directs FDA to “undertake a process to make lawful a safe level for conventional foods and dietary supplements containing cannabidiol (CBD) so long as the products are compliant with all other FDA rules and regulations.”
Two other drug policy amendments were debated in the chamber on Wednesday. A measure that would block the Justice Department from using its funds to intervene in state marijuana laws was approved on a voice vote but still needs to pass in a recorded vote; another that extends similar protections to tribal cannabis programs passed without a request for a recorded vote.
This story was updated to include comment from Riffle.
Photo courtesy of Philip Steffan.