For a third year in a row, governor Josh Shapiro has proposed legalizing adult use cannabis. The move could have significant social justice impacts— like expunging criminal records and allowing re-sentencing petitions for those still serving time on marijuana charges.

Yet, recent conversations about cannabis have zeroed in on the revenue potential of a new cash crop. During his budget address, Governor Josh Shapiro spoke on how Ohio and New York are profiting from sin taxes on their recreational cannabis sales.

Legalizing adult use cannabis, for many Pennsylvania lawmakers, goes hand in hand with regulating a new retail market.

A new retail market means new revenue sources; which the state needs in the face of looming budget deficits in the coming years.

Governor Josh Shapiro proposed a $51.4 billion budget for the 2025/26 fiscal year. This is a $3.5 billion spending increase from last year’s finalized budget, and its $4.5 billion more than what the state is projected to make in revenue ($47 billion). Pennsylvania has enough savings to cover the difference, but that savings will dry up in the next 2-3 years.

Shapiro’s projected revenue for this year assumes the legislature legalizes adult use cannabis and gets over $530 million from the new law. The Shapiro administration has not released official legislative language for an adult-use cannabis bill at this time.

Differences remain over social justice, safety, and health factors on the policy issue;

“There are still a lot of people opposed to legalizing cannabis,” Sen. Dan Laughlin (R-Erie) said, the lead supporter of legalization in the Senate Republicans. 

For Laughlin, reminding colleagues of how Pennsylvania’s already existing medical marijuana market works puts full legalization in perspective.

“We have a thriving medical program already, where it’s literally $50 to get a medical card. Then you can go into a dispensary and buy any product you want already. So its defacto already legal. We’re just trying to tidy the paper work up."

Because cannabis is being accessed for assumed medical purposes right now, products do not have any additional taxes. If fully legalized and being used recreationally, additional taxes could be levied.

Laughlin said other Republican senators are still tepid in support, and that if the Governor wants to see progress on the issue, he will have to be more involved.

“So far his support has just been press releases and Facebook posts. I need to see him at the table, actually helping Senator Street and I get this done,” Laughlin said.

Senior staff in the Shapiro administration have said they do plan to release a bill. Cannabis advocates are hopeful the revenue pressure will result in progress from all ends.

For lawmakers who are on board with legalizing adult-use cannabis, there are still differences over how to regulate the retail market. These range from how businesses can qualify to sell cannabis products to how much to tax those products, to how to spend new revenue dollars.

“I want it to be a small business friendly bill,” Laughlin said in a recent sit down interview. "I don't want the entrance fee to get into this to be $1,000,000.”

Starting a cannabis business is costly—states make licenses rare and expensive. Rep. Rick Krajewski (D-Philadelphia) says its still being illegal at the federal level limits access to government loans and grants for small businesses.

From a social justice stand point, lawmakers in other states have set aside licenses for applicants from communities most impacted by marijuana criminalization.

Krajewski says the tactic has failed.

“There is an overemphasis on the idea that social equity will be done through the retail market,” Krajewski said. "The reality is we haven’t seen that pan out in any states that legalized cannabis."

The representative says private equity investors will partner with someone who qualifies for social equity licenses, then eventually buy out their assets. Or larger companies will wait for social equity license holders to fail in the costly industry, then buy the license from the original holder.

Shapiro’s budget estimates getting over $500 million in revenue from license fees alone.

Another contention point in how to set up the retail market is if there should be a state store model, similar to the liquor store model the state has currently. A bill in the House proposes a hybrid model of allowing private ownership of cannabis production, but only state ownership of storefronts that sell the product.

Most Republicans are not in favor of a state run model.

Apart from potential revenue in business licenses, Shapiro’s budget also estimates $27 million in revenue from a 20% tax on cannabis products.

“I think he’s being a little generous with the numbers, might be a fair way to say that. And his tax rate he’s proposing on this is way too high,” Laughlin said. “We have to find that happy medium where you don’t tax it so high that all it does is help the black market."

If lawmakers can agree on how to set up a retail market and how much to tax a retail market… they’ll have to decide how to spend the money. Sometimes new revenue will be assigned to specific programs and initiatives as opposed to going straight into the state’s general fund. 

"That is money that can… impact communities that have been criminalized from marijuana criminalization— whether that’s investing in workforce development, whether that’s assisting in outreach programs to help people apply for criminal record expungement or re-sentencing petitions,” Krajewski said. “Investing in education, affordable housing, substance abuse treatment— there’s so many ways to put that money back into communities most impacted."