Plan to legalize cannabis for adult recreational use in Hawaii takes shape

The most comprehensive strategy yet to legalize adult recreational cannabis use in Hawaii is being prepared for state lawmakers ahead of next year’s legislative session starting four months from now.

Over the past several months, a task force dominated by state and county government officials has been shaping pieces of a cannabis legalization plan based on extensive research partly focused on practices and impacts in other states, public testimony and input from stakeholders that include Hawaii’s 6-year-old regulated medical cannabis industry.

The 15-member task force, created by lawmakers in 2021 through a bill that didn’t attract much public attention, is working to produce recommendations including a possible draft bill for establishing a dual legal cannabis system for medical use by patients and recreational use by adults.

State Rep. Ryan Yamane, who led the creation of the Dual Use of Cannabis Task Force, expects that the group’s work product will represent the best chance to legalize adult recreational use of cannabis in Hawaii, where lawmakers have unsuccessfully tried to achieve the goal for years.

“That’s the hope,” he said.

Yamane, chair of the House Committee on Health, Human Services and Homelessness, also acknowledges that producing a “dual use” system that doesn’t wreck the local medical cannabis industry is a tall order.

“It’s a huge challenge he said. “It’s not just as simple as allowing anybody to grow and use. We take this move very seriously.”

Potential pieces of the system could include making medical cannabis dispensaries exclusive sellers of recreational pot for an initial transition period; making the recreational product subject to the same testing standards of medical cannabis; permitting only lower levels of the psychoactive compound THC in the recreational product compared with medical cannabis; and imposing a special excise tax on the recreational product that increases over time.

Other preliminary recommendations in reports produced by four task force committees include making employers treat cannabis like alcohol in the workplace, allowing people who are 21 or older to grow up to 20 plants for personal use with no license requirement, expunging criminal records related to pot use and paying restitution to people convicted of crimes related to pot use.

Members of the task force set up under the state Department of Health include Michele Nakata, who heads the department’s Medical Cannabis Control and Regulation Office, and Jared Redulla, chief investigator for the Narcotics Enforcement Division of the state Department of Public Safety.

Five other state government representatives, including Yamane, also are members along with four county government representatives, two medical cannabis patient advocates, an adult use proponent and Randy Gonce, executive director of the Hawaii Cannabis Industry Association.

Gonce said the group’s work has been “pretty groundbreaking” and is supported by the local medical cannabis industry he represents.

Part of the reason for the industry’s support is relatively light existing use of dispensaries by people with medical needs for cannabis.

Market conditions

One committee report estimated that most registered medical cannabis patients in Hawaii purchase cannabis in the “gray market” instead of from licensed dispensaries because the gray market, which is illegal but tolerated and not subject to regulation or safety standards, offers much lower prices.

The report estimates the value of Hawaii’s current cannabis market at $240 million, and said it could grow by 48% to $354 million by making adult recreational use legal.

Of the estimated $240 million, $50 million, or 21%, was from dispensaries, the committee report said.

Under Hawaii’s medical cannabis program, the state issued licenses to eight companies, which operate 18 dispensaries: eight on Oahu, six on Hawaii island, three on Maui and one on Kauai.

Dispensary prices are 40% to 100% higher than the gray market, according to the report, because of limited competition and costs that include trained staff, retail space, taxes and rigorous product testing.

In addition to high prices and limited access under the program, some patients complain about hindrances that include maintaining program registration and being certified by a medical provider as having at least one of 15 medical conditions that qualify for using the program.

One recommendation by a task force committee is to eliminate the qualifying medical condition requirement.

James Carr, a 72-year-old retired music teacher with a doctorate degree, told the task force in written testimony that he’s participated in Hawaii’s program for about four years and has found it difficult to use because of the costs and bureaucratic requirements.

“I urge full legalization for adult use,” he said.

Gonce said such legalization will expand medical use that helps people who can benefit from it. “The (Hawaii medical cannabis) industry has always seen legalization — adult recreational use — as a positive,” he said.

However, the industry also has been concerned that legalization can hurt their business, which has happened in other states.

According to Gonce, five of the eight companies in Hawaii’s medical cannabis program are enduring operating losses six years into business, while the other three are merely breaking even.

“That’s a really heavy lift,” he said. “It is one of the hardest industries to make a buck.”

The task force has taken an approach that includes protections for the industry such as having it be the sole initial seller of legalized pot until a new regulatory authority can adopt rules and start licensing new cannabis businesses.

The lengths of such transition periods in other states have included four years in Maine, two years in California and seven months in Nevada, according to a committee report.

One key to a dual use system where licensed legal distributors can compete effectively against the gray market is not burdening legal operators with too much regulation and taxes, according to one committee report.

This committee, focused on taxes and chaired by state Tax Director Isaac Choy, recommends that a special excise tax for legal cannabis sales start out at 5% for two years, then increase to 10% for the next two years and then top out at 15%.

Another recommendation is to not apply the tax to medical cannabis sales unless prices decrease by a certain amount before legalization.

The committee estimated that revenue from general and special excise taxes for the state and counties could be between $36 million and $51 million in the fifth year of a dual use system.

Legislature’s work

Yamane said all the research-based information from the task force will allow the Legislature to make the most informed decisions to date over whether to legalize adult recreational use of cannabis in 2023 and potentially establish a system that can be put into practice relatively quickly.

Several past bills to legalize adult use of cannabis haven’t included much in the way of details on how to do it, including a bill that passed the Senate two years ago but failed to receive a hearing in the House of Representatives.

Even Hawaii’s medical cannabis program was the product of relatively empty legislation. State lawmakers first passed a law to allow medical cannabis use in 2000, but it took them another 15 years to pass a subsequent law with details on how the program would operate. That law, enacted in 2015, was the product of a task force.

The Health Department established rules to run the program in 2016, and the first dispensaries opened in 2017.

Hawaii lawmakers in 2019 also decriminalized carrying up to 3 grams of cannabis, making the penalty for such possession a fine of up to $130.

Gonce, like Yamane, thinks 2023 presents the best opportunity yet for Hawaii to join 19 other states, Guam and Washington, D.C., in legalizing adult recreational use of cannabis.

In addition to an expected draft bill, Hawaii might have a new governor who supports legalizing recreational cannabis use by adults over 21, Lt. Gov. Josh Green.

Gov. David Ige, a Democrat, has not been supportive of such a move. Hawaii voters will pick a new governor in November. Green, a doctor, is presumed to have a big advantage in the election as a Democrat facing Republican and former Lt. Gov. and retired Judge James “Duke” Aiona, who opposes legalizing recreational adult cannabis use.

Among registered Hawaii voters, most appear to favor legalizing recreational cannabis to increase tax revenue, based on results from a Honolulu Star- Advertiser Hawaii Poll conducted in July. Of poll respondents, 58% said they supported legalization, while 34% were against it and 8% were undecided.

The task force still has more work ahead, and what final recommendations end up in the report it submits to the Legislature around the end of this year remain to be determined.

The group, which has held listening sessions and five public meetings since April, has five more public meetings scheduled, including one today from noon to 1:30 p.m. at the Hawai‘i State Art Museum in Honolulu.

SCHEDULED MEETINGS

The Dual Use of Cannabis Task Force meetings are from noon to 1:30 p.m. at 230 S. Hotel St. (Hawai‘i State Art Museum conference room) with remote access via Zoom.

>> Today

>> Sept. 26

>> Oct. 3

>> Oct. 31

>> Nov. 28

>> More information online at health.hawaii.gov/medicalcannabis/dual-use.