Vermont Legislature SmartTranscripts:

[Sen. Ann Cummings (Chair)]: So we

[Sen. Thomas Chittenden (Vice Chair)]: are I'll grab the door.

[Sen. Ann Cummings (Chair)]: Are live, and we are going to continue our discussion or rediscussion of cannabis fees, we do have senator Chittenden's proposal on the website, and the cannabis report is also on our website under James Pepper's name. And I'm not sure where the best place to start is. Do you have a preference?

[Sen. Thomas Chittenden (Vice Chair)]: No. But I I just would think James Pepper might be the best approach, I also wanted to overlay a comment that kind of been while we were offline with the door open, is the report that Canada's control board generated, I believe estimated that outdoor growers grow about one fourth as much crop at at most as indoor cultivator. They really sometimes get six times the yield, and if you take that ratio and overlay it to our current fee structure, right now, indoor growers are about twice or twice as much as outdoor growers, but cutting the outdoor growers in half, which is what this amendment would do, would really put in line with what the yields are relative to

[Ted (Joint Fiscal Office)]: what the So

[Sen. Randy Brock (Member)]: I think that's

[Sen. Thomas Chittenden (Vice Chair)]: the strongest argument I've heard yet for this is that this would effectively match what the outdoor cultivation is to what we're seeing the yields be relatively.

[Sen. Ann Cummings (Chair)]: Mister has joined us. So we will take his testimony first is is why he thinks this would be a good idea, and then we'll hear from James, and then we'll hear from Ted. Mr. Bell, welcome. This is the Senate Finance Committee. We just ask introduce yourself, and then the floor is yours.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: Sure. My name is Sam Belavance. I'm the owner of Sunset Lake Cannabis up here in South Hero, Vermont. And yeah, I thank the committee for letting me testify today. I think the proposal of cutting the outdoor fee makes a lot of sense for creating a a more fair and equitable market here in Vermont and happy to answer any questions. Do you want me to get right into it?

[Sen. Ann Cummings (Chair)]: Yeah. Tell us what that how that fee impacts you.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: Yeah. So, you know, right now, I I think there's three main arguments that the the outdoor fee as it stands right now, for me, it's $18,000 a year. It is too high. You know, one, we get one crop per year as an outdoor farmer. So I, you know, might harvest a large amount, you know, we might harvest 1,200 pounds of, you know, smokable cannabis flower. But again, that's once per year versus an indoor, facility that is maybe, it's a lower tier, so they get charged a larger or lower fee. They're gonna be producing maybe 500 pounds every three months. So they're still gonna be producing more volume and having a larger impact on the marketplace, but not paying the same amount of fee we are because we only have that one shot per year. So that's, I think, the the first and foremost argument. Just because an outdoor grow is physically bigger, it does not mean that it's producing more product. And I think what we wanna do is line up these fees where if you're producing the most amount of product that is correlated to the fee structure, not how physically large your location is. I do have two more arguments, and I think this comes mainly from my background. My family has a dairy farm in Alberg in South Hero. I think it's really important for the committee to note there is no USDA backed crop insurance for cannabis. So if we get hit by a storm, let's say another hurricane Irene comes through and goes through the islands, I have no insurance for my crop. And because I'm growing outdoors next to a cornfield, I'm very vulnerable to that. So if there's flooding, if there's a high wind event, know, if this was one of our cornfields, we could use the SDP disaster relief program and get funding from the federal government for that. That just doesn't exist in the cannabis market. So that's a risk that outdoor growers face that if you're indoor in a warehouse, you don't have that risk.

[Sen. Thomas Chittenden (Vice Chair)]: And I think what Vermont could do, you know, we could say, let's create a disaster relief insurance program for these outdoor cannabis farmers. But that would be setting up

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: a whole program. It would probably be very expensive. We'd have to hire state employees to manage it. I think a better approach would say, let's recognize that risk and just bake that into the fee structure. And I think that would be a really, really simple way to address that. Then my last point, before I turn it back over to you folks, I think there are just objectively positive benefits to promoting outdoor cannabis agriculture. From a sustainability standpoint, we are not using kilowatt hours, megawatt hours of electricity to grow these plants. We're just using the sun, and we're using the rain. The only irrigation we've used comes from a well on our farm property, so we're not even tapping into the municipal water supply at all. So it's a very low impact in terms of energy resources. It's also for a rural landscape. You know, we're right near Snow Farm Vineyards. We're near my family's dairy farm. The fact that we're growing outside, we kind of just blend into the landscape of rural Vermont. You know, my cannabis farm is right next to the Allen Home apple orchard, and we've been here for years, and no one has really ever had a problem with it because most people drive by and they see greenhouses, they see rows of trellises. It fits within Vermont's rural landscape. Whereas, you know, I'd say a 20,000, 30,000 square foot, warehouse that's using, you know, massive amounts of electricity and needs huge equipment, that just doesn't fit. It's almost like a data center. It doesn't fit into the landscape of rural Vermont. And I think that's something we need to consider as well. So I'll end there and turn over to the committee for any questions.

[Sen. Ann Cummings (Chair)]: Okay, thank you. Committee, any questions? We may have an amendment.

[Sen. Ruth Hardy (Member)]: I have a question that I'm not sure that you would know the answer to. It might be more for our next witness for peppers, so I'll just say it so you can we just passed a bill that I'm scrolling through as you were talking because you were mentioning the sort of disaster relief, like if a hurricane comes through and you lose your crop. We just passed the farm and forestry security fund bill, which was my bill, and I was scrolling through to see if cannabis farmers are included in it and I think it may be a definitional issue. It's already passed so we can't amend it at this point, but do you have to follow the RAPs, the required agricultural practices?

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: I believe we do. And again, where in Vermont statutes cannabis is agriculture and where it isn't agriculture has been kind of an ongoing issue and certainly a frustration for farmers. Because I think in some some aspects of the statutes, it is and others that aren't isn't. And I would say as someone who's not an attorney, who's just a farmer, it has been confusing

[Sen. Thomas Chittenden (Vice Chair)]: Yeah.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: To figure out what are we qualified for, what exemptions do we get, what do we not get. So, yeah, I would be happy to follow-up with you on that.

[Sen. Randy Brock (Member)]: Okay. Well, I can I can ask,

[Sen. Ruth Hardy (Member)]: James Pepper, but also our attorney? Change It anything about the fees and your arguments for the fees. It's just a question of would you be eligible for this new program that would help in the event of a natural disaster.

[Sen. Randy Brock (Member)]: But thank you. Yep, thanks.

[Sen. Ann Cummings (Chair)]: Okay, any other questions? Okay, I'm not seeing any. Thank you for being willing to show up on very short notice and conduct your meeting in your automobile. Have super truck.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: Yeah. Yeah.

[Sen. Ann Cummings (Chair)]: Just want including members of this group. I think you have done that.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: Thank you.

[Sen. Ann Cummings (Chair)]: And thank you. And if we have any other questions, we'll be back in touch.

[Sam Bellavance (Owner, Sunset Lake Cannabis)]: Thank you very much. Enjoy the rest of your day.

[Sen. Ann Cummings (Chair)]: Cheers. Bye. Bye bye. Okay. James, you are. We are finding out the problems with crossover week, which is you get twenty minutes when you make decisions in twenty minutes. Right. You are prone to make mistakes and miss things. And apparently, this is the kind of amendment that should have been put on in economic development because they had time to go through and look at all the implications to the entire program. They missed it. It was brought to my attention about ten minutes after this committee adjourned for the week, and the bill had been voted out. So we are now back looking at a potential amendment, which I gather economic development has passed, and it is now unofficially here. But Bill is on the floor tomorrow, so we're gonna need to make a decision. So

[James Pepper (Chair, Vermont Cannabis Control Board)]: your thoughts? I will try and help you with that to the extent that I can. For the record, James Pepper, chair of the Cannabis Control Board. I was available, for the testimony this morning in Senate Economic Development. Rationale for this reduction has been, I think, you know, summarized nicely by Senator Chittenden and by Sam Belavance. You know, on the fees, I'm sure you remember, madam chair, the fee setting, we were given a directive to propose a fee structure that would set fees at a rate that would cover our proposed budget. At the time, JFO evaluated that proposal and said, this may or may not cover your budget. It will certainly lead to a less thriving market. This is the terminology they use. This is all the footnotes from this report you posted under my name. Because you said fees so high that they cover the kind of cost of, you know, our rent and our employee salaries, and only a handful very well capitalized multi state operators are gonna be able to enter this market. It was certainly contradicting the intent, which was written into the original cannabis legislation to support small local farmers. So with that knowledge, you looked at ways to maximize fee revenue while also making an accessible market. So you have relatively low fees compared to our neighboring states on the small ends on the thousand square foot or less. And then they are scaled up to make the larger operations much less much more unattractive to these larger multistate operators. And it's been very successful in achieving that intent. I think, you know, we have, I think 400 cultivators out of our five seventy two licensees, and 75% of those are tier one small cultivators, both indoor and outdoor, but they are the smallest of the small. And by the way, you know, our tier 1,000 square feet or less barely registers in any other state that would be considered a micro license. You know, by way of reference, the smallest tier in Massachusetts is 5,000 square feet, tier three, and also one of our largest listed sites. So, you know, last year, Senate Economic Development, this committee, to a lesser extent this committee took a lot of testimony from outdoor cultivators saying exactly what you heard from saying relevance today, which is from a relative profitability standpoint, indoor cultivators just have a much, much higher potential, for profitability compared to their outdoor counterparts. A square foot of canopy outdoors is worth about a quarter of what it's worth indoors, and that's not really even taking into account the higher price that indoor cannabis generally fetches at the wholesale or retail level. It's generally speaking the kind of fine finished flower they could sold as flower as opposed to they kind of put in other cannabis products. So I can in the report, we go into a little bit the difference between the operating expenses between an outdoor and indoor. It's probably not totally relevant for this conversation, but, you know, there was a question that you asked us to examine, and was how do we how do we make adjustments to the fee schedule to better promote small local farmers? And this, you know, reducing the outdoor cultivation fees was the consensus approach amongst the numerous stakeholder engagement that we, you know, events that we held, including just, you know, cultivation roundtables, you know, public meetings, one on one conversations, you know, and just kind of national research. Last one. Yeah.

[Sen. Ruth Hardy (Member)]: Okay. Thank you. This is helpful because I I don't know if you heard I was it seems weird that we did that this is coming to us now after the bill was passed when we last week had a conversation on all of this. So I was like, wait. Where why where is this coming from? But so this report in the table in the back Mhmm. Is where you are those are the fees you're suggesting or recommending that this basically having the outdoor fees and how?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right. So I hate to say that we're recommending you just because Okay. These are policy decisions on how you want them.

[Sen. Ruth Hardy (Member)]: Well, sure. But my recollection

[James Pepper (Chair, Vermont Cannabis Control Board)]: is

[Sen. Ruth Hardy (Member)]: back when we were setting these these fees the first time and I was on the finance committee and you were on Zoom, madam chair. I remember very specifically, Brynn Hair, the former director coming and laying out your recommendations for the fees. Right. So while, yes, it's our job to set the fees, you all made a recommendation to us about what you thought the fees should be, and it wasn't just a fly by night recommendation. So that was my concern is that and that senator Chittenden made it sound like, oh, these were just kind of pulled out of thin air. They were really you all did an analysis for coming up with those fees. And whether or not that was the same analysis you're doing now or for different purposes, that's fine. An analysis change, but they weren't random fees.

[Sen. Thomas Chittenden (Vice Chair)]: That's not the impression I meant to get

[Sen. Ruth Hardy (Member)]: in front me. I just

[Sen. Ann Cummings (Chair)]: No. But but it it it's still been a new market. We made assumptions Yeah. Yeah. Based things on, and now

[Sen. Ruth Hardy (Member)]: we're getting some reality. For sure. That's I that's totally fine. I just wanted to make sure that they were coming from somewhere that there was this was an actual recommendation of the board, and maybe recommendation isn't like, maybe it's too strong, but it's you did analysis and you concluded that this would be a good direction to go.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right. Yes. Yes. The fee setting for cannabis is always a slightly bit arbitrary, I have to say, because a fee is supposed to cover the cost of the service provided, and we've decided, and when it comes to cannabis, not just us, every single other adult in the state has said, you can't do that in this industry. You have to support the cost of regulation through cannabis excise tax, you know, can't be fully offset by the cultivators. Mhmm. It's just it would be too much of a burden. These people are I mean, these folks are already, you know, subject to disproportionate tax treatment at the federal level. Mhmm. Know, banking insurance are extraordinarily expensive for this industry. So I'm trying to just further pile on with, you know, financing the entire cost of the agency from cultivators.

[Sen. Ruth Hardy (Member)]: I totally get that. I totally get it. I mean, I'm I'm supportive of Yeah. Trying to reduce the fees. Just wanna make sure that it was coming. Right. The Because it was a weird it didn't come with the bill. So that's why I was like, what's where why is this happening now?

[James Pepper (Chair, Vermont Cannabis Control Board)]: So so the first the initial setting of fees we were given some pretty strict parameters, try to maximize the program and cover your costs, try to make an accessible market, try to support social equity, try to do X, Y, and Z. A lot of contradicting things. Right, exactly, and so we spent a long time trying to figure out what those price points would be to make this market attractive for the entrepreneurs that existed already in Vermont and form of list market operators we've been trying to attract into the regulated space. We try to find ways to dissuade larger operations, and really give the smallest cultivators the best shot at making them invisible strain. So there was just a lot of, and you know, we of course always look at comparison charts with other states. It's not a of different means. The overall of this result. Right. Those initial recommendations were based upon those factors. This, to the extent that it's a recommendation, we ask the board and this report department to make a recommendation about how fees can be adjusted to better support small global farmers. And our recommendation was, I mean, we made a number of ways of, I don't know how many pages the report is, but one of the one things you could do would be to reduce the fees for natural cultivators. We didn't give you an explicit, like, half recommendation, but this is the same proposal that you looked at last year with a couple of caveats. It doesn't have the kind of pay for that proposal that last year did. And it also eliminates kind of category of next year cultivators, but for the most part, it's in line with the recommendations to produce these for optimal cultivators on the report.

[Sen. Ruth Hardy (Member)]: Okay, so you're supportive of the amendment that was discussed. It's gonna waste money.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah, I always have to, and I say in the report, you know, it's going to further widen that delta between what our operating expenses actually are, and what the fees bring in to the tune and all that, say, what the tune is, but it does further put pressure whenever we go into the appropriations committee or we go into our negotiations with the governor's office about that difference between where our operating expenses are and the spring. But

[Sen. Ann Cummings (Chair)]: Okay.

[James Pepper (Chair, Vermont Cannabis Control Board)]: We're not it's not

[Sen. Ann Cummings (Chair)]: And no one's suggesting raise any fees in here so far.

[James Pepper (Chair, Vermont Cannabis Control Board)]: There's no suggestion of that. I in the report, I say I give you some examples of where you might be able to offset this cost, but that's a lot more controversial than cutting some of the fees.

[Sen. Ann Cummings (Chair)]: It's raising Cutting fees. Never. I

[Sen. Ruth Hardy (Member)]: just wanna if we cut this fee, I want people to remember we're cutting a fee. Hey, guys. Okay.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Feels good.

[Sen. Ann Cummings (Chair)]: Yeah. Press release. We'll have press release tomorrow. Yeah. Finance committee cuts to ease. We haven't done it. That's not I am trying to That's Mister was talking about a $10,000 fee. As close as I can come on the chart in appendix b, I guess that's page 20, is an $8,000 fee

[Sen. Thomas Chittenden (Vice Chair)]: So it's an eight

[Sen. Ann Cummings (Chair)]: tier four.

[Sen. Thomas Chittenden (Vice Chair)]: Well, that is an 18.

[James Pepper (Chair, Vermont Cannabis Control Board)]: I believe he's an outdoor tier five.

[Sen. Ann Cummings (Chair)]: He's in tier five, and it's 18.

[James Pepper (Chair, Vermont Cannabis Control Board)]: 18. Okay. I believe he's I I believe that's true.

[Sen. Scott Beck (Member)]: I can look quickly, but

[James Pepper (Chair, Vermont Cannabis Control Board)]: I I believe that's right.

[Sen. Ann Cummings (Chair)]: It it sounds like if he's Like, he has a good guy's outdoor operation.

[Sen. Scott Beck (Member)]: But

[Sen. Ann Cummings (Chair)]: indoor, definitely their costs are higher, their electric bills got to be astronomical, but they are growing 20 fourseven, $3.65 unless the lights go out, and they haven't for any extended time, so but that's tier five are we talking tier what are you proposing so

[Sen. Thomas Chittenden (Vice Chair)]: if you were to look at the report on the appendix b page 20, I believe the amendment would propose to effectively cut these numbers, the numbers into blue, into half.

[Sen. Ann Cummings (Chair)]: That's outdoor for all outdoor cultivators.

[Sen. Thomas Chittenden (Vice Chair)]: Correct. From tier one through five. And additionally, since I I believe that there aren't any t sixes, it it cuts the t six license.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right. So, again, when we were developing this market structure, these tiers, we really had no idea what the entrepreneurial interest is going to be, and we know we had a fixed demand for cannabis in this team. We had to supply it somehow, and so we actually, you know, decided to have a slightly a few slightly larger tiers, meaning, again, it's all relative. These are even the tier six would be small scale or neighboring states, but we never opened tier six, we never accepted applications for it, and we never intend to, so eliminating that tier, if you're gonna be playing around not playing around, but if you're gonna be amending this section of the statue, might as well just kinda clean up some of the, you know, appendages from the other one.

[Sen. Thomas Chittenden (Vice Chair)]: Why you

[Sen. Ann Cummings (Chair)]: ask to have it passed over

[James Pepper (Chair, Vermont Cannabis Control Board)]: on the floor?

[Sen. Ann Cummings (Chair)]: I mean, if because if we're gonna do it, I would like to do it correctly. I've been hearing about the small outdoor growers. I was thinking that was like tier one and two, but it sounds like we're really looking at all the outdoor growers, some who may well be part of international organizations that control the market from seed to sale. And that that was one of the other considerations. We wanted to make it easier for many of Vermonters who seem to have been growing and have their own market.

[Sen. Thomas Chittenden (Vice Chair)]: Do we have big weed in Vermont? Like, are there big international growers at the T five level? They've been threatened. Because I think big weed would be the T six that we don't study but Big weed. Is that a term big weed? Like big tobacco, big weed?

[Sen. Ruth Hardy (Member)]: I was gonna say, how's he going with that? Yeah.

[Sen. Ann Cummings (Chair)]: Look at me, but I'm not tuned in. So

[Sen. Thomas Chittenden (Vice Chair)]: You just said because I didn't know if that's what you heard the chair say. International growth?

[Sen. Ann Cummings (Chair)]: No. I just in the legislature, as we I think it took six years to pass this bill.

[James Pepper (Chair, Vermont Cannabis Control Board)]: At least.

[Sen. Ann Cummings (Chair)]: That's a long time.

[Sen. Ruth Hardy (Member)]: And

[Sen. Ann Cummings (Chair)]: there was always a balance and a concern, and I think as we went through, some of us were surprised to realize that there was already an underground market here. But

[James Pepper (Chair, Vermont Cannabis Control Board)]: we have.

[Sen. Ann Cummings (Chair)]: Bigger one than I think many of us realize.

[Sen. Thomas Chittenden (Vice Chair)]: Biggest main issue is with the data.

[Sen. Ann Cummings (Chair)]: Yeah. We're trying to find the balance between those traditional small I got an acre in my cornfield and hope the troopers don't fly over guys. And the and the folks that would come in here or already be here that were much better capitalized and able to come up with the expense of doing indoor grows and knowing that in other places that they they could control seed to sale and trying to find that balance. But like many things we were dealing in, we had Colorado at that point. I think Oregon had signed on by the time we finished one or two other states, but it was new, it was illegal, banks wouldn't touch you, and so it we're now we're dealing in the reality that I think most states it's legal. The federal government is talking about maybe something, getting it off schedule one. We're doing a lot of medical marijuana without there having been any really large data driven studies because it's been illegal to do them. So we're kind of coming out of the dark ages and I think we always knew as we went through this adjustments would be necessary, but I think we also want the market to support its own regulation very much the way we expect liquor to support its own regulation and tobacco. So we wanna do this. At the same time, I don't think we ever intended to make it more difficult for the smaller.

[Sen. Thomas Chittenden (Vice Chair)]: I'm relatively ambivalent on this, I think it makes sense to do it, but to your point, Madam Chair, I don't think we need to pass over tomorrow because this could just be considered her third reading on Thursday, so if you don't want to take a position on today, think I that actually aligns with what the appropriations they wanted to consider tomorrow afternoon anyway.

[Sen. Ann Cummings (Chair)]: Okay.

[Sen. Thomas Chittenden (Vice Chair)]: If you don't feel comfortable giving me your name now, it's certainly something we can do tomorrow, then figure out before Thursday.

[Sen. Ann Cummings (Chair)]: I don't. So economic development never took this out.

[Sen. Thomas Chittenden (Vice Chair)]: Did this morning.

[Sen. Ann Cummings (Chair)]: They did this morning, but you've never been in, and no one told us last week that there were issues with this. So I'm trying to figure out what we should do.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Me too. Well, I mean, no, economic development took it in up this morning, I was there this morning, we of course did write this report based upon the conversation last year, so I I what I understand, it was an oversight. Was a discussion with the chair and the majority leader and a few other folks about doing this, and then it just never made it into the bill. So

[Sen. Ann Cummings (Chair)]: Okay. So we had come last week. We could have done this.

[Sen. Thomas Chittenden (Vice Chair)]: I did try to bring it up, but it was the end of that really long day. Yeah. Nobody was having it, so.

[Sen. Randy Brock (Member)]: So this, again, is five members of economic development that are doing this amendment?

[Sen. Thomas Chittenden (Vice Chair)]: Correct. But I will say the sense I have that Southern brought correctly is they wanted to get a sense of the money committee's visibility on. Well,

[Sen. Ann Cummings (Chair)]: I think it says, I don't have a thought of lowering fees, but the fees are supposed to support the operation. And I think that's the question.

[Sen. Scott Beck (Member)]: Well, think since we looked at it last year and where we are today, we've heard a lot more input from people who are in the business, who are growers, and we've seen a lot more information about the effect that the peak schedule has on smaller developers, the Vermonter who is growing things outdoors in a small plot with a small business. And we heard a little of that a year ago, but we've heard much more of that since then.

[Sen. Ann Cummings (Chair)]: Yeah, they've got a deal with beef birds, deer,

[Sen. Scott Beck (Member)]: The tax rate issue with parents Yeah, is what it

[Sen. Ruth Hardy (Member)]: but the chair's point is well taken that who is gonna pay for the operation if the fees aren't paying for the op like, where's that money gonna go?

[Sen. Scott Beck (Member)]: Well, the question was, you know, and then that, as I said, I guess the question for the cover right now, are the fees paying for things now? No. No,

[James Pepper (Chair, Vermont Cannabis Control Board)]: they're not. And we that was a conscious decision. I mean, our fees bring in currently about $2,600,000 and our operating expenses are 7.1. It's a big it's a big gap. Yeah.

[Sen. Scott Beck (Member)]: Now the effect of lowering the fees on the smaller producers, how much of a dollar impact is that in your opinion? Do you think

[James Pepper (Chair, Vermont Cannabis Control Board)]: If the proposal that I have, I'll defer to Ted, but I, you know, just jump to the conclusion, about $100,000

[Sen. Scott Beck (Member)]: So again, it's peanuts in regard to the problem.

[Sen. Ann Cummings (Chair)]: I'm getting to, like, my one grain of sand after one grain of sand. Eventually, you have beach. Mhmm. This but I feel more comfortable if we could raise something, but you're saying that would really put us out of line with surrounding states?

[James Pepper (Chair, Vermont Cannabis Control Board)]: I had suggested in the report, if you need to have a offset, that you could look to the, and if the whole conversation is about relative profitability between these various license types, you could look to the tier four and five indoor cultivators as one place to raise, and you could look towards the retailers. When we presented this draft report at one of our board meetings, they really, both of those groups were really rankled by that. Well, of course they were. Yes. So, but it's in the report, I mean, it made it in the report because, frankly, you know, we have this conversation every single year about this delta between our budget and the fees. And, you know, it's just unless you you really want to drastically change the dynamic of the market, that's going to be a continuing problem.

[Sen. Scott Beck (Member)]: Well, mean, real issue is, for example, you have to raise another $100,000 elsewhere in the market. Where could you raise the money and have the less impact on the individual who is affected by it?

[James Pepper (Chair, Vermont Cannabis Control Board)]: There are some recommendations in the report on that. We currently, there's an inconsistent policy around the state around ACH processing fees. We currently cover that expense at the board. Some agencies do, some agencies don't. We put that as a possible way to generate more revenue. Of course, those fees impact the smallest people, you know, as a, you know, percentage of what their profit is more, and they impact the larger people. So, but it's, mean, we're gonna have to we're in this situation no matter what. I mean, whether you're reducing these fees and further widen the account, we're gonna have to be in the appropriations committees every year explaining why that is the case. Case. You know, it used to be that we were that that difference was covered by the cannabis excise tax, which I thought was somewhat of an elegant solution. It's the way that every single other adult new state operates. Because then the people that are directly benefiting from the regulatory oversight that the board is providing are paying for that oversight, in addition to the producers and manufacturers and retailers. But that that structure changed last year. So now that gap is covered by the general fund directly.

[Sen. Scott Beck (Member)]: And if you go back to or become and try to have a quick and elegant solution that gets the revenue out of the marketplace, out of both the suppliers and the like, it would seem that the larger places could absorb $100,000 much, much easier than the smaller businesses. In terms of waiting to come up with a solution later, what we're hearing is that smaller producers are going out of business because of the cost structure that adversely affects them just a portion of the other. Is that fair?

[James Pepper (Chair, Vermont Cannabis Control Board)]: That that is that is what we're hearing same as you heard during your, you know, all day listening session. In fact, conclusion, and I think one of the

[Sen. Scott Beck (Member)]: things that we said is that we wanted, if we have a market in this product in Vermont, we want Vermonters to be able to profit from that market, and our larger producers that we're talking about, are they Vermonters?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yes. I mean, for the most part, we can't set up a log and disallow I mean,

[Sen. Scott Beck (Member)]: based on your observations and knowledge, they are.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Predominantly. Overwhelmingly, probably not. Okay. I don't see the retailers.

[Sen. Ann Cummings (Chair)]: You got retailer fees in here?

[James Pepper (Chair, Vermont Cannabis Control Board)]: The the recommendation is on The manufacturer license. It's it it is on page six and seven of the report where I explained what the cost of benchmarking our price per square foot Yeah. Of canopy to our neighboring states. Okay. And that would reduce the fees even more dramatic with advance, I believe. And I suggest that, you know, if you needed to make up that money, you could increase retail fees by $1,500 in your tier fours by 4,000, in your tier fives by 11,000, and that would fully cover the cost of benchmarking our price per square foot to other students. Other than my business. But, again, that's what derailed this whole conversation last year. Retail? Was was upping other fees in order to pay for Right. Reduction fees.

[Sen. Ann Cummings (Chair)]: Okay. I have to assume I've got two retail stores a 100 feet apart. Lucky in Montpelier. Two I'm there's two more in a medical. This is a town of 8,000 people, and there are five cannabis outlets. One is at least new at its present location, but the other couple of them have been here for a number of years. It's a commercial center. It's yeah. But that's all I've only got one liquor store and maybe two beer and wine and tobacco. I've got the pharmacy and the actually, now that Rite Aid's gone, I don't have a pharmacy that sells beer, wine, tobacco. So it's the grocery store and maybe Cumberland Farms. So are we are we just looking

[Sen. Ruth Hardy (Member)]: to see whether we're gonna okay or support the amendment? Because then are this is an amendment that you're putting out on the floor tomorrow?

[Sen. Thomas Chittenden (Vice Chair)]: I can wait till third reading till Thursday. So that while you're out of the room, I think, was suggested that maybe we don't vote as a committee on it today. We think some more.

[Sen. Ann Cummings (Chair)]: I would feel better and maybe economic development could look at it in the morning if we could find a way to cover the cost because if we put a $100,000 in over there, it's going to get nailed to the wall if we reduce revenue by a 100,000. So I'd like to see if we couldn't find a way to do that. And Ted's here.

[Sen. Randy Brock (Member)]: Do do we have a pulse on pros, what they're thinking?

[Sen. Thomas Chittenden (Vice Chair)]: I think they're waiting to hear how we that's what I would reflect. I

[Sen. Randy Brock (Member)]: mean, excess tax ex sales tax still goes up. I think that could cover the shortfall of lower fees, right? Now most states do it, you have your fees and then you have your excise tax.

[Sen. Ann Cummings (Chair)]: You wanna raise the excess.

[Sen. Randy Brock (Member)]: Not just as in naturally goes up, I think it's been growing at

[Sen. Ann Cummings (Chair)]: Well, we get more.

[Sen. Randy Brock (Member)]: Not much each

[Sen. Scott Beck (Member)]: year, 10.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Projected, the JFO consensus forecast, I think, has been projected to grow 6% this year, somewhere 6%.

[Sen. Randy Brock (Member)]: So the excise tax get support. Change the stipulation.

[Sen. Ruth Hardy (Member)]: So excise tax. What do you stay?

[Sen. Thomas Chittenden (Vice Chair)]: Ahead. Yeah. So I did read the report. If that was contemplated to cover this with a slight adjustment in the tier four and five indoor growers, as I think you said is in the report, how much more are we talking based on how much they are per retailer? So what would that, not retailer, per grower. So would this be a 10% increase on their current fees to cover the $100,000 shortfall?

[James Pepper (Chair, Vermont Cannabis Control Board)]: I'd have to do a little bit of math. We have one tier four in North, and we have two tier fives. We have three.

[Sen. Thomas Chittenden (Vice Chair)]: No. Gonna

[Sen. Ann Cummings (Chair)]: have any med med today. Sure. Uh-oh. The word is out.

[James Pepper (Chair, Vermont Cannabis Control Board)]: We're not doing the

[Sen. Randy Brock (Member)]: amendment, so we have to

[Sen. Ann Cummings (Chair)]: No, they came in, I said we might have an amendment, the for the senate secretary, so I'm just having us tell them they don't have to Talk. For us for the calendar because we're not getting this out this afternoon. Won't and it's approach making this up at all?

[Sen. Thomas Chittenden (Vice Chair)]: They would like to know the way I've left it is they would like to know where senate finance stands on this, and then I would bring it to them.

[Sen. Ruth Hardy (Member)]: Does Ted have it mean to you? Well, that's what we're waiting.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah. Even with those members, you

[Sen. Thomas Chittenden (Vice Chair)]: have to double. You have to double. It's a pretty large piece already. Okay.

[Sen. Ann Cummings (Chair)]: Ted, what can you tell us?

[Ted (Joint Fiscal Office)]: Deborah and I joined the school office. Concurring with what Chair Pepper said about the estimate of the fees, I would probably round it up to speak to $105,000 The yes. Just general general conversation around it is since it is fee revenue that goes into the regulation funds that supports the board, that would be a $105,000 that's not in the control fund. So either you would have to ask the control boards to do the their work without, you know, with a 100,000 fewer dollars, which I don't think they would like, or you would have to find that revenue somewhere to continue to kind of flood that amount of special fund that's currently in their budget request. So, yes, I think it sounds like there are a bunch considerations on how to potentially find that other revenue, and I'm happy to What's the sales tax and the

[Sen. Randy Brock (Member)]: excise Just give me

[Ted (Joint Fiscal Office)]: some So looking at the consensus revenue forecast, the forecast for FY '27 is $23,600,000 That's sales or That's excise tax. So this is all right in the general fund conversation. We're all referring to the excise tax, and then it increases to $24,300,000 in fiscal year twenty eight, which is an increase of 3.2%. How much is that?

[Sen. Ann Cummings (Chair)]: $80.27.

[Ted (Joint Fiscal Office)]: That is for plus $700,000. You know, you are looking at future rates. So they're bill your appropriators are building their budget based on the contract they have for fiscal year twenty seven, and so the growth in fiscal year twenty eight isn't relevant to really the budgetary conversations that are happening for the upcoming fiscal year. And I would just broadly note that since the excise tax fee is going into general fund versus, you know, whether the excise tax supports the board expenses first versus going into the general fund first and being part of the appropriation process, they're It's kind of a little yeah. I would say they're roughly the same source. Right?

[Sen. Ann Cummings (Chair)]: There There a lot of cloud devices in getting

[Sen. Randy Brock (Member)]: Yes. So yeah. Excess tax goes into the general fund, and then some sort of money goes into this board fund or a special fund. How does money flow to that? Sure. So,

[Ted (Joint Fiscal Office)]: excise tax revenues, right now, are 70% goes to the general fund, 30% goes to the substance misuse prevention special fund. Yep. And of that 70%, it's just the general fund, and then the control board comes forward with their budget request. This is starting in fiscal year twenty seven. In previous years, they're receiving money from the regulation fund, which was excess tax revenues went into the regulation funds. So starting this year, excess tax revenues are starting in this yeah. So they go forward. They make their budget request. And so in the budget request, as chair Pepper mentioned earlier, it's comprised of 2 and a half million dollars in special funds. I'm rounding a bit. It's an exact dollar figure, and that's from these. And then the remainder is general funds, so it's 4 and a half million in general funds. So they're like many other folks in state government. Right? They're putting forward a budget request and having a collection of funds, and part of that is general fund, part of that is special funds. And so there's no direct linkage between the excise tax. Yeah. And the control board right now, but since excise tax goes into the general fund and the control board is receiving general fund, some people make that linkage in their minds, but really, they're

[Sen. Randy Brock (Member)]: It's just fun.

[Ted (Joint Fiscal Office)]: Yeah. It's just in the general pot of water.

[Sen. Ann Cummings (Chair)]: Some street rakers don't like it.

[Sen. Randy Brock (Member)]: So I

[James Pepper (Chair, Vermont Cannabis Control Board)]: was trying to add all those numbers. What's the budget of your board? So,

[Sen. Randy Brock (Member)]: yeah, the stats have like

[James Pepper (Chair, Vermont Cannabis Control Board)]: 25% overhead fee, overhead on our market. Is that we take Right.

[Sen. Randy Brock (Member)]: Based on sales, excess Six general funds.

[James Pepper (Chair, Vermont Cannabis Control Board)]: You know, I know that that number sounds high, especially when we started with two two positions. Yeah. Full time positions. We've done some analysis on how our staffing compares to every other candidates board. And, you know, New Jersey, they've got one FTE for every three licenses that they have. Massachusetts has one for every five. Canadian has one for every seven. We have one for every 20. So we have a

[Sen. Ann Cummings (Chair)]: We're being very efficient. We're very efficient.

[James Pepper (Chair, Vermont Cannabis Control Board)]: That's right.

[Sen. Randy Brock (Member)]: I'm just curious. Whole life cycle of the money. I mean So basically was just gonna say, so basically, it comes down to you going to approach and saying, hey. Finance took a $100 away from us to lower our fees, to make our market more competitive for the outside growers. Can you give

[James Pepper (Chair, Vermont Cannabis Control Board)]: us a $100,100 grand, basically.

[Sen. Ann Cummings (Chair)]: And they're gonna join the long line

[Sen. Randy Brock (Member)]: into the mall. In a sense, maybe it increases excise tax revenues and covers that.

[Sen. Ann Cummings (Chair)]: That's it. We don't know, but he's got to send out his paychecks to Marvel. So

[Sen. Thomas Chittenden (Vice Chair)]: So it's a really great question. One thing that maybe might thread the needle on this is if we did pump this out a year. And I I've heard that we found this before, though I hear some legislators, some administrators don't like it. But if we made the fee drop conditional upon some metric including excise revenues

[Sen. Ruth Hardy (Member)]: I see.

[Sen. Ann Cummings (Chair)]: Yeah. No.

[Sen. Thomas Chittenden (Vice Chair)]: It's been done. It's just not necessarily.

[Sen. Ann Cummings (Chair)]: Yeah. They're doing that out west with they'll do away with the income tax when increased business activity on the promise of no income tax covers the cost. They tend to be neighbors of Texas who doesn't have an income tax. I learned that at Just stay out here. Describing. Mhmm. Because everyone here wants me to raise it. But it's I mean, I think it would be better and more honest if we just raised another fee. And the question is, who's going to be least hurt by raising that fee? Because nobody is going to say, oh, yes, please increase my fees. And anyone is probably at the highest risk. Mean, if you open the fifth or sixth store in Montpelier, you're probably making a difference. Yes. I'd have to question your market analysis, but you may know better than I. But it seems that the people at the most risk are the outside growers, and especially the smaller ones. Mean, we've lost apple orchards because we've had a frosting. You know, we had a drought last year and crops died up. Other years it rains so much, your tractor sinks.

[Sen. Scott Beck (Member)]: Just talked about separately lowering the amount of money that we put in for an increase in tobacco from $1,000 to perhaps $150 for retailers. I don't know how much now represent, but we've already put something in

[Sen. Ann Cummings (Chair)]: Back post the sanction.

[Sen. Ruth Hardy (Member)]: We already lowered a fee.

[Sen. Ann Cummings (Chair)]: Yeah. And

[Sen. Scott Beck (Member)]: I'm not sure exactly what that raises, but that may be the delta right there.

[Sen. Thomas Chittenden (Vice Chair)]: 700 retailers. I don't know time we know this, so how much

[Ted (Joint Fiscal Office)]: But that's lower. Didn't sell much on the street. 100. Yeah.

[Sen. Scott Beck (Member)]: But they're but one of the things I

[Sen. Ann Cummings (Chair)]: think that you said read it to what it is.

[Sen. Scott Beck (Member)]: Yeah. But what we did, though, was what we said said, and we had

[Sen. Randy Brock (Member)]: bill to 100 and

[Sen. Scott Beck (Member)]: proposed lowering it to $150 As I recall, the average seems to be for most of the states that we looked at, the fee is about, the current fee is about $200 to $250 It's that in Delta. If we raise it to the average fee of the other state, you might have enough money to make the difference here.

[Sen. Ruth Hardy (Member)]: Are you talking about raising the tobacco fees to pay for the cannabis fees? There's some iron names to that or something there. I don't know.

[Sen. Scott Beck (Member)]: There's something there.

[Sen. Ruth Hardy (Member)]: Well, what about think raising a fee in the cannabis market to pay for

[Sen. Ann Cummings (Chair)]: the speakings seems not feasible

[Sen. Ruth Hardy (Member)]: given that fees are already as far as I remember high. But what about doing it over a two year period? Like, so that we do We 50,000 this year and 50,000. Exactly. So so that and we sort of bank on the increase in excise tax, you know, and hopefully spur the market.

[Sen. Randy Brock (Member)]: I mean, almost a 100. Yeah.

[Sen. Ruth Hardy (Member)]: Yeah. Exactly. I mean, I I think yeah. Exactly. I think that that your point about the excise tax rate Why would go to get more of the

[Sen. Ann Cummings (Chair)]: excess tax?

[Sen. Ruth Hardy (Member)]: Because you can grow more, I don't know.

[Sen. Randy Brock (Member)]: Well, just the growth

[James Pepper (Chair, Vermont Cannabis Control Board)]: of the bonded health, but also if it's

[Sen. Randy Brock (Member)]: more attainable for cultivators outside.

[Sen. Ann Cummings (Chair)]: Yeah.

[Ted (Joint Fiscal Office)]: Yeah. If I may.

[Sen. Ann Cummings (Chair)]: We've had hemp markets flooded.

[Ted (Joint Fiscal Office)]: I was going to make a comment about excess. We're not entirely sure that additional supply in the market would have an impact FX tax revenue. If you have additional supply and that has a downward pressure on prices, you might actually see the opposite of your intended Sure. Effects. Yeah. One of the

[Sen. Ruth Hardy (Member)]: That's that's fair enough. Do have

[Sen. Ann Cummings (Chair)]: our new plant. Right, Paul? Or potential? Where's Keananda? When all the because they harvest

[James Pepper (Chair, Vermont Cannabis Control Board)]: At the same time.

[Sen. Ann Cummings (Chair)]: At the same time. It's the indoor guys that have a much more controlled. And I gather cannabis doesn't sit around for a year and do well.

[James Pepper (Chair, Vermont Cannabis Control Board)]: It it can.

[Sen. Ann Cummings (Chair)]: It can, but

[James Pepper (Chair, Vermont Cannabis Control Board)]: It can be flash frozen and, you know, maintained as Okay.

[Sen. Ann Cummings (Chair)]: But then it's an expense flash.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right. And then you're paying for even your frozen meat, and don't have

[Sen. Ann Cummings (Chair)]: your problems with it. You are. So if they have to do that, they might as

[Sen. Scott Beck (Member)]: That's frozen bug.

[Sen. Ann Cummings (Chair)]: Popsicle. Popsicle. Yes. Yeah. And I didn't think we were allowed to do candy, but one of the lobbyists brought me back a thing that looked just like wheat beer barrels that he brought down to them with a little more cannabis infused.

[Sen. Ruth Hardy (Member)]: So But senator

[Sen. Thomas Chittenden (Vice Chair)]: Brock is okay with this. I think what I will ask is the economic development is to not introduce this amendment tomorrow to give some more time to think about this so we can ponder if the third reading when you

[Sen. Ann Cummings (Chair)]: Tell them

[Sen. Thomas Chittenden (Vice Chair)]: They go over to come Yeah.

[Sen. Ann Cummings (Chair)]: Tell them we need to raise a $100,000 and talk

[Sen. Ruth Hardy (Member)]: to friends across the hall. Or see about a two year

[James Pepper (Chair, Vermont Cannabis Control Board)]: Of course.

[Sen. Ann Cummings (Chair)]: Of course, we cover our costs across the hall. Listen. They don't care.

[Sen. Randy Brock (Member)]: That's our equal.

[Sen. Ann Cummings (Chair)]: They just don't want a $100,000 hole. And I can tell you right now, they are looking under every barrel they can. It's very tight. Oh, gosh. Anybody who is I didn't feel

[James Pepper (Chair, Vermont Cannabis Control Board)]: that's it. Stop. Stop. Stop.

[Sen. Ann Cummings (Chair)]: Is a dissection upstairs, folks. And there's a chairs meeting.