Legislature(2025 - 2026)ADAMS 519
04/30/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| HB91 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 57 | TELECONFERENCED | |
| + | HB 91 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
HOUSE BILL NO. 91
"An Act relating to the lawful operation of retail
marijuana stores; relating to marijuana cultivation;
relating to the registration of marijuana
establishments; relating to marijuana taxes; relating
to the duties of the Department of Revenue; and
providing for an effective date."
4:52:40 PM
Co-Chair Foster asked members to hold questions until after
the presentation.
REPRESENTATIVE ASHLEY CARRICK, SPONSOR, introduced the
bill.
4:53:55 PM
AT EASE
4:54:16 PM
RECONVENED
Representative Carrick introduced the bill. She remarked
that the bill may look familiar to some committee members.
The legislation was a reiteration of similar legislation
passed in the House by a 36 to 3 margin in the prior year.
She stated that 10 members of the House Finance Committee
had previously voted in favor of the bill. She explained
that HB 91 stemmed from challenges in the budding marijuana
industry. In 2014, Alaska Voters legalized recreational
marijuana. After initial growth, the industry has seen
stagnation, which had once again opened the door to black
and gray market activity. In 2022, Governor Dunleavy
convened the Advisory Taskforce on Recreational Marijuana,
and its number one recommendation was tax reform in
addition to various policy reforms. The legislation
included both tax reform and policy changes that will
support the industry, making it more sustainable and
allowed it to flourish for years to come and close the door
on the black market. She shared the following facts about
the marijuana industry:
In FY 24 the Marijuana industry brought in $27.2
Million in revenue. It was the sole source of
revenue for the following funds:
o $13.5 million to the Recidivism Reduction Fund
o $6.7 million to the Marijuana Education and
Treatment Fund
• Nearly $48.3 million in wages (2022)
475 Active Licenses (Feb 2025)
• 5828 Marijuana Handler Permits (Feb 2025)
• Required for anyone involved in marijuana commerce.
Representative Carrick believed that action must be taken
to stabilize and grow the industry. She added that in the
prior committee, The House State Affairs Committee changed
the designation of 25 percent of the funds for revenue to
be designated to the Public Education Fund versus the prior
designation to UGF.
4:57:23 PM
AT EASE
5:09:43 PM
RECONVENED
Co-Chair Foster noted that the committee was currently
receiving a presentation on HB 91.
Representative Carrick wrapped up her opening and prepared
remarks. She emphasized that the state must act
"expeditiously to stabilize the marijuana industry" and the
state revenue from the industry. She asked her staff to
provide a brief presentation.
STUART RELAY, STAFF, REPRESENTATIVE ASHLEY CARRICK,
provided a PowerPoint presentation titled "HB 91 Marijuana
Tax Reform" (copy on file). He began on slide 2 titled
Recent History of Marijuana Policy in Alaska
• In 2014 Alaska voters legalized recreational
marijuana.
• In 2022 Governor Mike Dunleavy established the
Advisory Taskforce on Recreational Marijuana and
its final report was published in January 2023.
• In 2024 the House passed HB 119 which included
many of the taskforce's recommendations, but that
bill did not pass the Senate before the end of the
33rd Legislature.
• HB 91 has a nearly identical tax structure to HB 119
and picks up the conversation about marijuana tax
reform where it left off last year.
Mr. Relay elaborated that the prior bill had a 7 percent
sales tax amended from 6 percent on the House floor and HB
91 had a 6 percent sales tax. He moved to taskforce
recommendations on slide 3 titled Taskforce
Recommendations included in HB 91
Recommendation 1
Reduce excise tax to 25% of current rate. Repeal the
excise tax after a transition period and implement a
sales tax.
Recommendation 10
Allow for product transfers between all license types.
Recommendation 11
Biannual licenses.
Mr. Relay delineated that Sections 1 and 10 of the bill
reflected recommendation 10 that allowed "upstream sales"
selling unsold or unused product back to producers to be
disposed of safely and reused in other products. He added
that Sections 3 through 9 related to recommendation 11
regarding biannual licensing. He explained that it allowed
marijuana retail facilities to obtain two-year licenses. He
turned to slide 4 titled "Marijuana Revenue in Alaska, FY
24
$27.2 million total
$13.5 million DGF (50 percent)
Recidivism Reduction Fund
$6.7 million DGF (25 percent)
Marijuana Education and Treatment Fund
$6.9 million UGF (25 percent)
Public Education Fund
5:13:46 PM
Mr. Relay advanced to slide 5 titled "Marijuana Tax Reform
in HB 91
• Provides immediate tax relief by reducing the excise
tax from $50 per ounce, to $12.50 per ounce on
marijuana (Sec 11, effective Jul 1, 2025)
• Repeals the excise tax (Sec 18, effective Jan 1,
2026)
• Establishes a 6% Sales Tax on all Marijuana Sales
(Sec 13, effective Jan 1, 2026)
Mr. Relay pointed out that the bill aligned with the first
recommendation on the task force of providing immediate tax
relief.
5:14:28 PM
Mr. Relay discussed slide 6 Marijuana Policy Changes in HB
91
• Allow "upstream sales" so that marijuana stores can
sell products back to producers (Sec 1,10).
Taskforce recommendation 10.
• Require a tracking number for each crop of
marijuana rather than each individual plant (Sec 2).
All other agricultural products are tracked per crop.
• Biannual licenses for marijuana establishments
(Sec 3-9). Taskforce recommendation 11.
• Quarterly statements, tax payments (Sec 14).
• Requires DOR to establish at least one tax
collection facility in each of the four judicial
districts (Fairbanks, Juneau, Nome, and Anchorage)
(Sec 16).
Mr. Relay explained that the change from monthly to
quarterly tax payments eased the burden on producers who
had to physically deliver their payments in cash. He noted
that a collection box already existed in Anchorage.
5:15:52 PM
Mr. Relay advanced to slide 7 titled "Differences between
HB 91 (Ver. A) and SB 73 (Ver. G):
• SB 73 by Senator Claman is another marijuana
tax reform bill.
• Only includes biannual licenses, does not
include the other policy reforms to support the
industry outlined in HB 91.
• SB 73 lowers the excise tax to $12 per ounce.
• SB 73 does not recoup lost revenue from excise
tax cut, leading to approximately $14 million in
lost revenue.
Co-Chair Foster held questions and OPENED invited
testimony.
BAILEY STUART, CHAIR, MARIJUANA CONTROL BOARD (via
teleconference), relayed that the board reviewed the bill
and appreciated the sponsor's efforts to address the issues
and understood the need for thoughtful consideration of
taxation for the industry. However, due to concerns over
implementing a statewide sales tax at 6 percent and the
broader implications that may arise, the board did not
fully support the bill. She expressed concern over the
issue of "double taxation." She indicated that the products
on the market were already subject to an excise tax and
would also be taxed under the proposed statewide sales tax.
She felt that it could result in an unintended financial
burden. She furthered that the board recognized the need
for a value based tax structure especially to prepare for
interstate commerce. However, the board wanted to see
further safeguards and attention to a thoughtful approach.
The board was committed to continuing the conversation once
the industry had relief, lessening immediate pressure of
implementing a statewide sales tax and allowing for a "more
thorough and considered discussion." She emphasized that
the board was in strong support of immediate tax relief and
a long-term solution. She commented that marijuana
legalization sparked economic growth in the agriculture
sector and would continue if the market instability was
addressed. The current excise tax model posed a challenge
with the future possibility of interstate commerce. She
noted that products from out-of-state may entirely avoid
taxation. Currently, the marijuana industry was fighting
three fronts with the most urgent issue being the
"punitive" flat tax structure of $50 per pound totaling
$800 per pound, resulting in an effective tax rate
approaching 50 percent. She delineated that the legal
market was forced to compete with two illicit markets: one
operated illegally, and the other existed in a "gray area"
involving hemp products. The issue made it difficult for
the legal market to remain viable when held to strict
regulations and high taxation while unregulated operators
continued without oversight or prosecution.
5:20:25 PM
Ms. Stuart continued providing remarks. She spoke to a
concern that was discussed in a prior hearing regarding how
the legal market could compete with the illicit market. She
declared that currently, legal market prices were unable to
match the illicit market prices. She delineated that the
illegal market stayed stagnant for decades with 3.5 grams
costing $40.00 until the legal industry entered the market
inducing competition. The board's top priority was to make
the legal market the preferred choice through ensured
safety, transparency, and compliance. She described the
cost of the legal market, which she considered investments
in public health, safety, and trust. She felt these value
factors should be considered in the legal market besides
the price. She related that while the legal market
businesses were closing the illegal market was thriving. In
2024, the Department of Public Safety (DPS) seized 360
pounds of illegal marijuana which increased significantly
from 2023, underscoring the importance of tax reforms to
support the legal industry. The seizures occurred
incidentally and not through targeted enforcement. She
acknowledged the state's deficit and the effect of lowering
the excise tax and acknowledged the reduction in state
revenue was approximately $9.6 million. The board shared
the concern but believed the tax designations could be
revisited.
5:22:59 PM
Ms. Stuart continued providing prepared remarks. She
informed the committee that Ballot Measure 2 did not
require 50 percent of the excise tax be designated to the
Recidivism Reduction Fund. The provision was included in SB
91 [Omnibus Crim Law & Procedure; Corrections, Chapter 36
SLA 16, 07/11/2016] which was subsequently repealed. She
relayed that the 2024 Alaska Criminal Justice Data Analyst
Commission report, showed that recidivism had continued to
rise since the implantation of the excise tax. She added
that in the prior year, the industry overpaid the renewal
fee to fund the AMCO office by $1.8 million. The excess
funding was returned to UGF. She suggested that the excess
could provide an opportunity to adjust current designated
funding to offset the impact of a tax reduction while
still supporting critical state functions. She felt that
the issue extended beyond personal beliefs over marijuana
use. She stressed that the issue was "fundamentally about
public health and safety and ensuring tax revenue was
collected and reinvested in the economy from the "only
homegrown" state industry. She reiterated a few differences
between the illicit and legal marijuana industry. She
addressed Section 2 of the bill that proposed placing batch
tagging requirements in statute. She noted that over the
prior year the board had carefully revised plant tagging
regulations to balance public health, safety, and
enforcement needs. The board already had statutory
authority to implement batch tagging regulations. She
shared that in the prior year the board transitioned from
clone tagging to batch tagging and raised the tagging
threshold from 8 inches to 18 inches. However, the board
learned that moving to full batch tagging would
significantly increase costs; charging cultivators per
plant versus per tag, more than doubling the state's annual
subscription hosting fees. She understood that a revised
fiscal note showed the increased fees incorporated into the
bill. She concluded that the board was motivated to return
year after year to address excise tax reform for the reason
that if interstate commerce was allowed, the excise tax
would only apply to Alaska businesses causing a significant
disadvantage. She urged the committee to address the excise
tax and eliminate batch tagging from the bill and leave it
to the regulatory process.
5:26:29 PM
Co-Chair Foster moved to review the fiscal notes. He asked
if Ms. Stuart could submit her written comments. Ms. Stuart
replied affirmatively. She would provide them to the
committee.
KEVIN RICHARD, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL
OFFICE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), reviewed the new fiscal
impact note for the Department of Commerce, Community and
Economic Development (DCCED) allocated to AMCO, dated April
29, 2025. He explained that the fiscal note reflected the
marijuana licensing registration fees shift from annually
to biennially and also included $10 thousand for regulatory
changes. In addition, the legislation changed from single
plant tagging to batch plant tagging at a cost of $250
thousand.
5:29:15 PM
KEVIN WORLEY, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF CORRECTIONS (via teleconference), discussed the new
fiscal impact note (change in revenues) for the Department
of Corrections (DOC) allocated to Community Residential
Centers (CRC). He indicated that the bill impacted
community residential centers and halfway houses due to
reduced revenues resulting in lower dollar amounts
appropriated to DOC from the Recidivism Fund. Without
replacement funding, these efforts would be severely
impacted, if not eliminated. He pointed out that
Undesignated General Funds (UGF) replacement funding would
be necessary to offset a $2,573 million loss of recidivism
reduction funds in FY 2026. The same amount was necessary
as backfill in FY 2027 and lost revenue ranged from $2.222
million in FY 2028 to $1.758 million in 2013.
5:33:03 PM
TRACY DOMPELING, DIRECTOR, DIVISION OF BEHAVIORAL HEALTH,
DEPARTMENT OF HEALTH (via teleconference), reviewed the new
fiscal impact note for the Department of Health (DOH)
allocated to the Behavioral Health Administration dated
April 7, 2025. She delineated that the reductions from lost
marijuana tax revenue went to support several grants within
DOH from the Recidivism Fund and the Marijuana Education
Tax Fund grants. She listed the specific grants that would
be impacted. Additional general fund appropriations would
be necessary to maintain the grants. The second new fiscal
impact note allocated to Behavioral Health Treatment and
Recovery Grants identified the reductions of Designated
General Funds (DGF) from the Recidivism Fund and the
Marijuana Education Tax Fund and the accompanying general
fund dollars needed to replace the lost funds for grant
programs.
5:35:01 PM
HEATHER ROGERS, ADMINISTRATIVE SERVICES DIRECTOR, DIVISION
OF PUBLIC HEALTH, DEPARTMENT OF HEALTH (via
teleconference), highlighted the new fiscal impact note
dated April 7, 2025, for the Division of Public Health, DOH
allocated to Chronic Disease Prevention and Health
Promotion. She indicated that the Marijuana Education Fund
that supported the Youth Services Grant Program would be
reduced, and the department was requesting replacement of
the revenue loss with general funds.
5:36:11 PM
DIANNA THORNTON, ADMINISTRATIVE SERVICES DIRECTOR,
DEPARTMENT OF PUBLIC SAFETY (via teleconference), addressed
the new fiscal impact note for the Department of Public
Safety (DPS) allocated to the Council on Domestic Violence
and Sexual Assault (CDVSA) dated April 7, 2025. She related
that the department received the spring forecast showing
the reduction in the Recidivism Reduction Fund which
supported programs within the CDVSA. In FY 26, the lost
revenue amounted to $597,200 thousand and showed reductions
in the outyears until 2031, with a loss of $408 thousand.
The fiscal note requested the funds be replaced with
general funds.
5:37:36 PM
BRANDON SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), reviewed the new fiscal
impact note for the Department of Revenue (DOR) allocated
to the Tax Division dated March 4, 2025. He began by
describing the revenue impact from the bill. The change in
FY 26 had a $9.7 million reduction in revenue due to the
change to the tax rate from $50 per ounce to $12.50 per
ounce. The projected revenue reductions were allocated
between three funds, per the current statute, at the
following percentages: Recidivism Fund 50 percent;
Marijuana Education and Treatment Fund 25 percent; and
Unrestricted General Fund 25 percent. He pointed to page 3
of the fiscal note that contained a chart listing the
change in revenues for each fund. He noted that the
implementation costs were primarily due to the change to a
retail sales tax and would require significant changes to
the Tax Revenue Management System (TRMS) that included
identifying the taxpayers and building a sales tax module.
The department estimated a cost to expedite the rollout of
the module so it would be ready in time at $2 million. The
bill required the department to establish "at least one
facility in each judicial district" or cash depository for
cash tax collection. He briefly described the way the
department would implement the provision and pointed to
further details contained in the fiscal note analysis on
page 3.
5:41:53 PM
Co-Chair Foster moved to committee members' questions.
Co-Chair Foster asked if there was a total amount required
to backfill all the lost UGF. Representative Carrick
replied that she did not know but would follow up.
Representative Tomaszewski referred to [batch tagging
discussion] the per crop amount taxed versus the prior
individual tax per plant. He wondered how many plants were
in a crop and what the tax rate currently was and the
proposed rate per crop. Mr. Relay replied that he did not
have the number on hand, but he would follow up.
Representative Carrick interjected that the issue had been
substantively addressed through regulation. She strongly
encouraged the committee to amend the bill by eliminating
Section 2 that was no longer relevant.
5:44:16 PM
Co-Chair Josephson looked forward to receiving Ms. Stuart's
written testimony. He asked about the number of
dispensaries in Anchorage. Ms. Stuart did not have the
information on hand. She directed the question to the
department. Co-Chair Josephson recalled that the number was
around 75. He asked if the board had considered through
regulation or legislation an equivalent to a DBL licensure.
He wondered why it was important to protect 75 different
licenses in Anchorage. Ms. Stuart answered that the more
retail stores available would help the legal market compete
with the illicit market. There was controversy within the
industry about the number of licenses that there were and
whether the number was sustainable for the state. She
pointed out that the goal was to incentivize the public
health and safety aspect of consuming marijuana. Therefore,
there were no limitations on the number of licenses.
5:46:41 PM
Co-Chair Josephson deduced that if there were half as many
dispensaries they would begin to thrive. He asked for
comment. Ms. Stuart believed a reduction in licenses could
improve the economic situation in the industry.
5:47:22 PM
Representative Hannan asked Ms. Stuart what timeframe was
necessary to avoid a duplicative tax. She thought that
currently it was six months, which was before the excise
tax was lowered and the sales tax was implemented. Ms.
Stuart answered that the sales tax would be implemented on
January 1, 2026, and the excise tax would end
simultaneously. She believed there was data in the state's
tracking system that would narrow what the timeline would
look like. She was unsure of the proper timeline and
suggested researching the data was necessary. A duplicative
tax would impact the products on the market and public
health and safety. Representative Hannan asked if Ms.
Stuart's concern was with the sales tax and excise tax
overlapping. She questioned whether 6 months would be an
adequate time period. Ms. Stuart replied that would be a
good timeline and that Representative Hannan was on the
right path" regarding the timeline.
Representative Hannan directed a question to Mr. Spanos.
She cited the DOR fiscal note and reported that she did not
see the generation of revenue from a sales tax. She asked
where it was accounted for on the fiscal note. Mr. Spanos
replied that the fiscal note was based off DOR's spring
revenue forecast , which included revenue under the current
tax structure at $50 per ounce. The fiscal note anticipated
a decrease due to the sales tax. In FY 2031, the tax would
amount to $6.6 million less than under the current
structure.
5:50:57 PM
Representative Hannan understood the note was based on the
revenue forecast, but it did not reflect what the bill
would do. She asked if DOR could produce a fiscal note that
predicted the amount of sale tax revenue. She understood
there would be loss under the excise tax, but there should
be a gain on sales tax. Mr. Spanos responded that the
department would provide the details. The current fiscal
note showed the net effect of the two taxes. Representative
Hannan understood it was a net effect. She appreciated the
ability to learn the details to make informed decisions.
Representative Carrick interjected that a previous
iteration of the legislation had an implementation date
delayed for 18 months. She informed the committee that she
would be supportive of pushing out the implementation date
to offer more time.
Co-Chair Foster discussed the agenda of future meetings.
HB 91 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB078 ver N Explaination of Changes.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 78 |
| HB 91 DOR Response to HFIN Question 05.01.2025.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 91 |
| HB 91 Public Testimony Rec'd by 05.08.25.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 91 |