A Massachusetts legislative committee held a virtual hearing on Tuesday to get input from members and stakeholders about a bill that would establish a state-level coronavirus relief program for marijuana businesses and other companies that are left out of federal aid.
The proposal, which was discussed by the Joint Committee on Community Development and Small Businesses, would address that unique problem that the cannabis industry in particular is facing during the pandemic. These businesses—as well as those that work indirectly with the marijuana market—are specifically prevented from receiving congressionally authorized aid due to ongoing prohibition.
The problem is especially pronounced in Massachusetts, where medical cannabis dispensaries are allowed to operate as essential services but recreational shops have been temporarily shuttered. Witnesses from the industry testified that the state could help their businesses stay afloat and prevent layoffs if they approve the bill, which would establish a state-level Paycheck Protection Program (PPP).
The legislation is being sponsored by the committee’s chair, Sen. Diana DiZoglio (D).
Watch the hearing below:
Mitzi Hollenbeck, a partner at Citrin Cooperman who founded the firm’s cannabis advisory services practice, told the committee that the cannabis market already faces a “huge economic burden” because of ongoing federal prohibition, which prevents these businesses from taking tax deductions that are available to other industries, for example.
“We’ve seen lots of the issues at the federal level that I think Massachusetts has a great opportunity to get correct in this version of the bill,” she said.
“The creation of a Massachusetts PPP loan for cannabis businesses like mine would be a momentous step in the right direction to remedy the inequity that legal, tax-paying cannabis-related businesses like mine are facing during the COVID-19 crisis,” Beth Waterfall, executive director of the cannabis events company ELEVATE Northeast, said in written testimony.
Angela Brown, CEO of the Massachusetts-based recreational marijuana company T. Bear Inc., told lawmakers that her business was forced to shut down one day before it was set to launch its first sales.
“We were forced to furlough our entire team, lock the building and walk away. All I can do now is wait with no income and no revenue,” she said. “And while I wait, I still pay my rent, my lenders, my utilities and my health insurance for my furloughed employees.”
“All small business owners are dealing with these issues. The bills and debt continue to mount as the shutdown prolongs,” she added. “But the difference is that cannabis companies don’t even have access to this economic relief.”
Brian Moran, an executive at the cannabis retailer Garden Remedies, said the company “not only lost the vast majority of our revenues when the state-mandated essential services order was enacted in late March but the lifeline extended to help small businesses across our country survive during this pandemic has not been extended to us.”
“This has resulted in a perfect storm for our industry that has caused massive problems,” he said.
“Massachusetts’s cannabis industry is intentionally organized by law to promote equity. Massachusetts was the first state to pass explicit equity measures in the adult-use cannabis industry for farmers, veterans, women, minorities and those disproportionately harmed by drug laws,” Shaleen Title, who serves as a member of the Massachusetts Cannabis Control Commission, said in written testimony.
“The lack of federal PPP support puts the fragile progress we have made over the past three years at risk,” she continued. “The harm is likely to fall more sharply on the very small businesses, workers, families, and communities that our state’s cannabis equity measures are intended to protect.”
Title later told Marijuana Moment that based on the hearing, “it was clear that there are many small businesses, including cannabis businesses, that are not eligible for federal aid even though they pay taxes and employ people and are trying to survive just like the businesses that are receiving loans and grants.”
“They didn’t cause this crisis; their businesses have been shut down through no fault of theirs. We shouldn’t be picking winners and losers,” she said. “Standing up for those being left behind is exactly what public officials should be doing right now. I commend Senator DiZoglio and the other sponsors of the bill for looking out for them.”
A vote on the proposal hasn’t yet been scheduled, but the chairwoman said at the close of the hearing that the matter will be taken up again “in the near future.”
“Our small businesses are in crisis, as you well know. They not only face a one-size-fits-all attempt at relief by the federal government, which doesn’t take into account the unique commercial makeup and different recovery timelines of individual states,” DiZoglio said. “It’s up to the Commonwealth to close the gaps for all of our small businesses and to provide equitable relief in the absence of that relief from the federal government.”
“We must be realistic and we must adapt as our states faces significant financial constraints in the foreseeable future,” she said.
Under the proposal, a public agency would be tasked with developing regulations for the state service within 30 days of the bill’s enactment. Cannabis businesses aren’t explicitly mentioned in the text of the legislation, but they are a standout example of an industry that is specifically excluded from federal relief and would qualify for benefits through the proposed Massachusetts program.
The federal Small Business Administration (SBA) confirmed last month that the marijuana industry isn’t eligible for its relief program, prompting advocates, lawmakers and stakeholders to press for reforming eligibility requirements as part of future stimulus packages.
While a bill was introduced to that end in Congress—and members of both the House and Senate have sent letters urging leadership to include such language in COVID-19 legislation—it remains to be seen whether the proposed policy change will be enacted.
To that end, a coalition of industry associations sent a letter to state officials last month, imploring them to set up independent relief programs like the one currently being considered in Massachusetts.
Beside passing legislation to extend benefits at the federal level, or providing relief through a state-level system, there is another option identified by a group of cannabis associations and credit unions last week. The coalition is asking Congress to issue pandemic relief block grants to states so they can decide on their own how to allocate the funds.