COLUMBUS, Ohio — Proposed licensing fees for medical marijuana businesses in Ohio would generate more than four times the amount regulators say is needed annually to run the program, according to budget estimates released Friday.
Ohio officials had said fees were set high in part to help cover costs of the program.
The state plans to spend at least $2.5 million a year on the program, according to the Ohio Department of Commerce. The program has already borrowed $1.8 million from state coffers for start-up costs.
But if the state awards all the initial business licenses available, it would collect $10.8 million a year just from license fees for cultivators, processors and dispensaries. Additional fees, including nonrefundable application fees, could generate a couple million more.
Surplus revenue from the program can’t be spent for other purposes such as education or road improvements.
Missy Craddock of the Ohio Medical Marijuana Control Program said the high fees and financial requirements ensure the program attracts serious applicants who can afford to operate for months before turning a profit.
Craddock said it’s difficult to forecast revenue and expenses for the new program and fees could be lowered in the future. She used the Ohio Casino Control Commission, which also set up a new regulatory program funded by fees, as an example. Since Ohio’s casinos opened in 2012, the commission has lowered fees for only one type of license — employee license renewals.
“It’s much easier to reduce fees down the line in the future than it is to increase them,” Craddock told the Medical Marijuana Advisory Committee on Friday. The state plans to begin accepting applications for marijuana grow licenses in June.
Patients, marijuana policy experts and advisory committee members have questioned the fees, which they worry will hike prices for patients and prevent small businesses from entering the industry.
Columbus attorney Ted Bibart, who represents patient interests on the committee, said state officials need to strike a balance between regulatory needs, ensuring businesses have enough capital to operate and patient costs.
“I’m all for the state being properly funded; I’m just not for the patient bearing that weight,” Bibart said.
How much will the state spend?
Ohio’s medical marijuana allows people with one of 21 medical conditions to buy and use marijuana if recommended by a physician. Three state agencies have been hammering out the details of the program such as how to award business licenses and how patients will sign up.
About $5 million has been requested for the program over the next two years in the state budget, but that estimate leaves out several anticipated expenses.
About $1.5 million a year will go toward 17 new employees including enforcement agents at the Ohio Department of Commerce and Ohio State Board of Pharmacy, officials said Friday. The Ohio State Medical Board, which will certify physicians to recommend medical marijuana to patients, plans to absorb any program costs in its existing funding.
The rest is attributed to office expenses: $428,004 for the commerce department and $611,000 for the pharmacy board.
The $2.5 million annual estimate doesn’t include costs for:
- An electronic licensing system to monitor marijuana businesses.
- A seed-to-sale system to track every marijuana plant from the cultivator to sale at a retail dispensary.
- A toll-free hotline for patients, caregivers and health professionals.
- A “closed loop” payment system, similar to a debit or credit card, so businesses and patients don’t have to pay with cash.
- Evaluating applications for cultivators, product processors, testing labs and dispensaries.
“We have a lot of question marks where we don’t know what the costs are going to be,” Craddock said.
If additional funding is needed, the department can go to the Ohio Controlling Board, a legislative budget panel that oversees state spending. That’s how the program got $1.8 million last year to cover initial costs.
Craddock said the budget request also doesn’t take into account increasing the number of dispensaries from 40 to 60, which would generate an additional $1.4 million a year in license fees.
How much revenue will the program generate?
The following license fees have been proposed:
- Cultivators: $200,000 a year for 12 large growers; $20,000 a year for 12 small growers — $2.64 million a year.
- Product processors: $100,000 a year for 40 licenses — $4 million a year.
- Dispensaries: $70,000 a year for 60 licenses — $4.2 million a year.
The program will also keep any application fees from those denied a license: $20,000 from large growers, $2,000 for small growers, $10,000 from processors and $5,000 from dispensaries.
Ohio will being accepting applications to grow medical marijuana in June.
Testing labs, which are limited to state college and university campuses for the first year, would pay a $20,000 annual fee. Businesses would also pay fees to license employees, register strains of marijuana and register products.
Marijuana businesses would pay state taxes like any other Ohio business, but those taxes won’t fund the program.
The fees are among the highest of the 28 states with medical marijuana programs.
Bibart said the fees aren’t out of line for the tightly-regulated industry, but Ohio has the benefit of seeing how programs in other states have worked.
“The goal of this program is what the legislative intent was — to produce the highest quality medicine at the lowest possible cost in order to encourage patient participation and physician participation,” Bibart said.