Pennsylvania should strongly consider regulating and taxing marijuana to shore up its budget problems, according to state Auditor General Eugene DePasquale.
Such a move, he said, could bring $200 million in new revenue for a state that faces a budget gap of up to $3 billion.
"The regulation and taxation of the marijuana train has rumbled out of the station, and it is time to add a stop in the commonwealth of Pennsylvania," DePasquale said Monday during a news conference at the state capitol in Harrisburg.
Pennsylvania last year became the 24th state to approve medicinal use of marijuana.
"Other states are already taking advantage of the opportunity for massive job creation and savings from reduced arrests and criminal prosecutions," said DePasquale. "In addition, it would generate hundreds of millions of dollars each year that could help tackle Pennsylvania's budget problems."
Budget imbalance and an unfunded pension liability estimated at roughly $70 billion have triggered several bond-rating downgrades to Pennsylvania the past three years. Municipal Market Analytics rated Illinois, Pennsylvania and Michigan among the top five states for negative rating activity in 2016, accounting for nearly 30% of the downgrade actions.
"The state doesn't have a spending problem, it has a revenue problem," said DePasquale. "If I told you that the budget negotiators from the legislature and the governor's office this June were to have $200 million of found money that does not harm one other state program or one other state tax, would they throw that way out the window or would they find a way to utilize it?"
S&P Global Ratings and Fitch Ratings assign AA-minus ratings to Pennsylvania GOs with outlooks of negative and stable, respectively. Moody's Investors Service rates them Aa3 with a negative outlook.
Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington have all regulated and taxed marijuana in recent years. Washington, D.C., has legalized marijuana, but does not yet have retail sales. Other states are considering regulating and taxing marijuana, including Delaware, New Jersey and Maryland.
Uncertainty hovers, meanwhile, about Washington's plans to enforce federal marijuana laws and undo a 2013 policy allowing states to set their own parameters. On Tuesday, Massachusetts Treasurer Deborah
According to DePasquale, Colorado, with less than half the population of Pennsylvania, brought in $129 million in tax revenue last year on $1 billion in marijuana sales.
DePasquale said Pennsylvania has already benefited by some cities decriminalizing marijuana.
In Philadelphia, marijuana arrests went from 2,843 in 2014 to 969 in 2016. Based on a recent study, Rand Corp. estimated the cost for each marijuana arrest and prosecution at roughly $2,200. Using those figures, that's a savings of more than $4.1 million in one Pennsylvania city, he said.
Last year, York, Dauphin, Chester, Delaware, Bucks and Montgomery counties each had more arrests for small amounts of marijuana than Philadelphia. Those counties had between 800 and 1,400 arrests in 2015.
"Obviously, regulation and taxation of marijuana is not something that should be entered into lightly," DePasquale said.
"Should Pennsylvania join the growing number of states benefiting financially and socially from the taxation and regulation of marijuana; there are many things to consider, including details about age limits, regulatory oversight, licensing, grow policies, sale and use locations, and possession limitations.
