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.
New York And Connecticut Governors Talk Marijuana Legalization On Fishing Trip
The governors of New York and Connecticut went fishing and talked about marijuana legalization on Tuesday.
The conversation comes after lawmakers in both states were unable to pass legalization legislation before their respective sessions’ ends this year, despite having the support of New York Gov. Andrew Cuomo (D) and Connecticut Gov. Ned Lamont (D).
“We talked about policy issues like the marijuana issue, which is obviously also relevant to contiguous states,” Cuomo said at a press conference following the fishing trip. “What Connecticut does on marijuana is relevant to New York, what New York does is relevant to Connecticut so we talked about that and a lot of issues. So we had fun.”
Watch Cuomo’s marijuana comments at about 5:00 into the video below:
Cuomo had described legalization as a top legislative priority for 2019 and included it in his state budget proposal. But after months of negotiations with lawmakers, the plan fell through, due in part to disagreements about how to allocate tax revenue and whether to allow individual jurisdictions to opt out of allowing cannabis businesses.
The governor did sign legislation in July that expands the state’s marijuana decriminalization policy and provides a pathway for expungements of past marijuana convictions.
Over in Connecticut, Lamont campaigned on legalization during his election bid last year and described it as one of his administration’s “priorities” after he took office. But as with neighboring New York, the legislature failed to advance a legalization bill beside multiple successful committee votes and hearings throughout the year.
The specifics of what the governors talked about during their fishing expedition on Lake Ontario aren’t clear, but both are presumably gearing up for another round of legislative efforts marijuana over the coming year and could take lessons from each other as reform talks continue.
Another East Coast state, New Jersey, has also struggled to move legalization legislation forward, with lawmakers saying that the issue should be taken up by voters in 2020 rather than pushed through the legislature, though there has been discussion lately about another try at moving a bill before year’s end. Gov. Phil Murphy (D) did sign a decriminalization and expungements bill in May, however.
Photo courtesy of CBS 6.
GOP Congressman Will Meet Attorney General To Discuss Expanding Marijuana Research
Rep. Matt Gaetz (R-FL) said on Monday that he will soon be speaking with the U.S. attorney general about expanding marijuana research.
The congressman, a close ally of President Trump, is a vocal proponent of medical cannabis and has argued that the federal drug scheduling system is hampering research into the plant’s therapeutic potential.
“I will be meeting with Attorney General Bill Barr in the coming weeks to discuss the Department of Justice’s approach to unlocking more research grants so that we can have American innovation applied to our health care in a way that can get people off of some of these devastating opioids and painkillers, and on to a more natural product,” he said following a radio town hall event.
Even under the framework of prohibition, the Justice Department is able to promote research by, for example, approving additional marijuana manufacturers—something the Drug Enforcement Administration (DEA) said it would do three years ago.
Barr has voiced support for expanding the number of federally authorized cannabis manufacturers.
“I think we’re going to move forward on it,” the attorney general said in April. “I think it’s very important to get those additional suppliers.”
Earlier this year, Gaetz joined congressional colleagues in leading a letter addressed to Barr and the head of DEA expressing frustration that the Justice Department has declined to take action despite its pledges. The lawmakers implored DEA to “do whatever you can to speed up and improve the research application process.”
Gaetz also introduced legislation that would force DEA to approve additional facilities to produce research-grade cannabis. A version filed last year cleared the Judiciary Committee in a voice vote, and he reintroduced the bill in January but it has not yet been acted upon.
Listen to Gaetz’s new cannabis comments, about 1:20 into the audio below:
DEA is facing two lawsuits regarding its approach to marijuana, including one that concerns the lack of diversity of research-grade cannabis since only one manufacture is currently authorized. The agency was ordered to respond to the suit by August 28.
Separately, a group of patients and advocates sued DEA over marijuana’s Schedule I status under the Controlled Substances Act, with a federal court directing the agency to “promptly” consider reclassifying cannabis.
Gaetz also spoke about the need to more broadly reform cannabis laws during the Monday remarks.
“The federal government listing marijuana as a Schedule I drug impairs financial transactions, it impairs research and it stops us from being able to unlock cures for some of America’s most vulnerable people,” the congressman said, adding that he’s a cosponsor of legislation that would deschedule marijuana that was introduced by Judiciary Chairman Jerry Nadler (D-NY).
Gaetz, who is also a member of the Judiciary Committee, said he is requesting that the panel hold a hearing on cannabis legislation. That’d mark the second such meeting after a Judiciary subcommittee convened last month to discuss paths to ending federal prohibition.
The congressman’s staff wasn’t able to provide Marijuana Moment with additional details regarding the meeting with Barr.
Photo courtesy of Meredith Geddings.
Elizabeth Warren’s Criminal Justice Plan Involves Legalizing Marijuana And Safe Injection Sites
Legalizing marijuana, granting clemency to people convicted of drug offenses and investing in harm reduction programs such as safe injection sites are part of a criminal justice reform plan that Sen. Elizabeth Warren (D-MA) released on Tuesday.
The 2020 Democratic presidential candidate stressed that the war on drugs has been carried out in a racially discriminatory manner, writing that it’s unfair that “a kid with an ounce of pot can get thrown in jail, while a bank executive who launders money for a drug cartel can get a bonus. It’s long past time for us to reform our system.”
“This failure [of the drug war] has been particularly harmful for communities of color, and we need a new approach,” she said. “It starts with legalizing marijuana and erasing past convictions, and then eliminating the remaining disparity between crack and powder cocaine sentencing.”
What’s more, the drug war “has criminalized addiction, ripped apart families—and largely failed to curb drug use” when a more effective system would treat addiction as a public health issue.
Next, we have to rethink what we choose to criminalize. That starts with repealing the 1994 crime bill—the bulk of which needs to go—and legalizing marijuana. Overcriminalization has filled prisons and devastated communities—and it's time for it to end.
— Elizabeth Warren (@ewarren) August 20, 2019
That includes diverting people who’ve been convicted of non-violent drug offenses to treatment programs and providing evidence-based resources for people suffering from addiction. For example, Warren’s plan calls for safe injection sites where people can use illicit drugs under the supervision of medical professionals who can help prevent fatal overdoses and get people into treatment. She also said needle exchange programs and expanding access to buprenorphine would reduce the opioid crisis.
“Instead of locking up people for nonviolent marijuana crimes, I’ve proposed putting pharmaceutical executives on the hook to report suspicious orders for controlled substances that damage the lives of millions.”
She also called for the abolition of certain mandatory minimum sentences and said that “people who struggle with addiction should not be incarcerated because of their disease.”
“Mass incarceration has not reduced addiction rates or overdose deaths, because substance abuse disorder is a public health problem — and it’s long past time to treat it that way,” the plan says. “We know that diversion programs are both more humane and a better investment than incarceration — for every dollar we invest in treatment programs, we can save $12 in future crime and health care costs.”
“And rather than incarcerating individuals with substance abuse disorders, we should expand options that divert them into programs that provide real treatment.”
Like Sens. Bernie Sanders (I-VT), Cory Booker (D-NJ) and South Bend, Indiana Mayor Pete Buttigieg, Warren’s criminal justice reform proposal also mentions executive actions she could unilaterally take.
Specifically, she wrote that the Justice Department should not hold authority to make clemency recommendations and it should instead be left up to an independent clemency board so that those eligible for a pardons and commutations are more quickly identified.
The president can grant clemency and pardons herself. I'll empower a clemency board to make recommendations directly to the White House, identifying broad classes of potentially-deserving individuals for review, such as those serving mandatory minimums that should be abolished.
— Elizabeth Warren (@ewarren) August 20, 2019
“I’ll direct the board to identify broad classes of potentially-deserving individuals for review, including those who would have benefited from retroactivity under the First Step Act, individuals who are jailed under outdated or discriminatory drug laws, or those serving mandatory minimums that should be abolished,” she said.
The plan’s unveiling comes two days after Sanders released his criminal justice reform proposal, which also called for marijuana legalization and the implementation of harm reduction policies such as safe consumption facilities.
Buttigieg’s plan stands out from his fellow Democratic candidates in at least one regard: the mayor said drug possession should broadly be decriminalized.
Warren also released a separate plan for Indian tribes last week that involves protecting tribal cannabis programs from federal intervention.
Photo courtesy of Edward Kimmel.