Gov. Josh Shapiro called for legalizing marijuana, and the state’s need for revenue could help make it a reality

Legalizing recreational marijuana in Pennsylvania has for years seemed like a far-fetched idea that gained little traction in Harrisburg.

But, after Democratic Gov. Josh Shapiro included it in his ambitious $48.3 billion budget proposal this week, state Republican leaders acknowledged how much revenue the state is missing out on by failing to legalize cannabis — and national moves to reschedule the drug could soon come to fruition.

All neighboring states except West Virginia have legalized cannabis. As a result, Shapiro said during Tuesday’s budget address, Pennsylvania is falling behind, and losing out on an industry that could bring in more than $250 million in annual revenue.

“Let’s stop hamstringing ourselves and start competing,” Shapiro said.

While legalizing the drug is a Democratic priority, Republicans control the state Senate and have historically opposed the move. But on Tuesday, GOP leaders suggested they may be willing to consider the proposal ― especially as the state’s spending is projected to exceed revenue in the next fiscal year.

“We also need to understand where the governor is coming from,” said Senate Majority Leader Joe Pittman (R., Indiana).

Shapiro’s budget proposes a 20% tax on legal marijuana, and estimates that an adult-use cannabis industry in the state could bring in $14.8 million in tax revenue in its first year. That estimate increases to $76 million in its second year, $160 million in its third, and $230 million in its fourth, an administration official said.

The budget projects legalization by the start of the next fiscal year on July 1, with licensed shops set to begin sales by Jan. 1. The Pennsylvania Department of Agriculture would regulate the program, which would create “a new potential cash crop for our farmers,” according to the budget pitch.

In his address Tuesday, Shapiro said that any legalization bill should ensure a responsibly taxed and regulated industry.

“Especially in the communities that have been disproportionately harmed by criminalization,” Shapiro said. “And that those who have been convicted for nonviolent possession of small amounts of marijuana have their records expunged.”

The budget also proposes an investment of $5 million in restorative justice initiatives paid for by adult-use cannabis revenue. Another $5 million would go toward operational costs, $2 million toward enforcement, and $500,000 to the cost of administering the program. Remaining revenue would go to the state’s general fund.

Though Pittman noted that Republicans need to understand Shapiro’s perspective, he added that he believes the federal government should decide whether recreational marijuana should be legalized so it is uniformly regulated.

And while there is some interest among Republican members — such as Sen. Dan Laughlin (R., Erie), who is cosponsoring a legalization bill alongside Sen. Sharif Street (D., Philadelphia) — many Republican senators still oppose it, Pittman added.

Those mixed opinions mean legalization is nowhere near certain to happen this budget season. But the need to find more revenue streams may make it more likely.

Currently, government spending is set to outpace revenue starting next fiscal year. Shapiro proposed legalizing marijuana, increasing the state minimum wage, and taxing skill games to raise more revenue for the state.

To get his $48.3 billion spending plan, Shapiro would need to tap into $3 billion of the state’s $14 billion in cash reserves. And his budget office estimates that they’ll need to rely on reserves for the next five years, even with new revenue streams.

While Shapiro’s budget calls for marijuana legalization, it does not endorse any specific legislation. Instead, he asked legislators to “come together and send to my desk a bill that legalizes marijuana.”

Shapiro’s call for legalization, incidentally, came just a day after state lawmakers on the House Health Committee held a hearing on marijuana legalization. Panel members heard from cannabis industry multistate operators, including Trulieve, Cresco Labs, PharmaCann, and INSA Dispensaries.

Stakeholders pointed to Maryland as a model for Pennsylvania, Keystone Newsroom reported. That state launched its legal cannabis market about 90 days after passing legalization legislation — a faster timeline than the six months proposed in Shapiro’s budget. New York, by comparison, legalized marijuana in March 2021, but didn’t have its first recreational sale until December 2022.

Maryland, because it worked so quickly, generated almost twice as much tax revenue as was expected in the first three months of operation, Trulieve government relations director Angela Zaydon said.

Cresco executive vice president John Sullivan, however, said that possession of cannabis should not be legalized before legal sales start, prompting a backlash from advocates, according to Marijuana Moment. A number of states, including New Jersey, decriminalized marijuana possession before launching regulated sales. More than 10,000 people are arrested for marijuana possession in Pennsylvania annually, according to the Lehigh Valley chapter of the National Organization for the Reform of Marijuana Laws.

As the battle for marijuana legalization continues in Pennsylvania, other developments are ongoing at the federal level. This week, for example, rumors that the White House will soon make an announcement regarding the rescheduling of marijuana have gained traction.

Currently, marijuana is classified as a Schedule I substance under the Controlled Substances Act, meaning that it has “no currently accepted medical use and a high potential for abuse,” according to the Drug Enforcement Administration. The U.S. Department of Health and Human Services recently confirmed that it advised the DEA to reschedule cannabis as a Schedule III drug, indicating that it has an accepted medical use and a moderate to low potential for abuse.

That recommendation came following a review prompted by a 2022 request from the Biden administration. And while rumors of an impending DEA announcement have been swirling recently, no timeline has been publicly confirmed.

Rescheduling marijuana, however, would not decriminalize or legalize the drug nationwide. That would be accomplished by “descheduling” the drug, or removing it entirely from the Controlled Substances Act — a move that 12 Senate Democrats, including Sen. John Fetterman (D., Pa.), advocated for in a letter to the DEA last month.

Rescheduling marijuana, the senators’ letter argued, would have “some important policy benefits,” including increasing scientific research on the drug, removing barriers to federal employment for medical marijuana patients, and allowing the Department of Veterans’ Affairs to prescribe the drug. Additionally, rescheduling would allow existing marijuana businesses to take advantage of federal tax deductions they are currently barred from using.

But such a move would “do little to rectify the most severe harms of the current system,” the senators said, as criminal penalties for marijuana are based on “the quantity of marijuana involved, not the drug’s schedule status.” As a result, criminal penalties for recreational and medical use would still exist at the federal level.

“These harms could be remedied only through fully descheduling marijuana,” the letter concluded.