Cannabis: Locals must not neglect small businesses

Some might find it a small irony that not even the alleviative powers of marijuana are helping with the growing pains of its own industry. No one expected California’s legalization of recreational cannabis, barely two months’ old, to be without plenty of problems.

In a mixed metaphor so often the trait of politicians, state Sen. Mike McGuire noted, “… as I have always said, this is a tall mountain to climb and we are currently building the airplane and flying it at the same time.”

There is no business, no business development, no jobs, no money for schools, roads, hospitals, and public safety in areas without a legal framework that respects prior agreements.

McGuire made his remarks at the first-ever meeting of all the state agencies charged with implementing California’s new cannabis law since Proposition 64 took effect the first of the year. The meeting took place in Ukiah on March 1.

Covering the gathering, reporter Will Houston of The Cannifornian wrote, “McGuire … said that the state’s medical and recreational cannabis market has the potential for job growth, community development and reining in an environmentally destructive and violent black market.But he also said that nothing about the transition to the new era of legalization has been easy for the state, local communities or the industry.”

Let me offer to a new industry a couple of old-fashioned principles

1. The importance of governments to abide by their agreements.
Devastated by the 2015 Butte wildfire, tiny Calaveras County, 45,000-population, saw marijuana harvesting as a revenue stream for rebuilding. “County supervisors embraced legalizing cannabis as a way for the local economy to generate revenue that could help it recover,” reported the Los Angeles Times.

“Not long after, however, anti-pot supervisors … were elected to the five-member board. They had promised to ban cultivation in Calaveras County. In January, they scored a victory with a 3-2 vote ordering growers to cease operations by June. By then, Calaveras had collected $3.7 million in $5,000 registration fees from more than 700 cannabis cultivators … The county has earned nearly $10 million from growers since voters approved a cultivation tax in 2016 … about $3 million of that has gone toward balancing the budget.”

Lesson: There is no business, no business development, no jobs, no money for schools, roads, hospitals, and public safety in areas without a legal framework that respects prior agreements. See: Third World.

2. Don’t let regulations choke the golden goose.
At the Ukiah meeting, Sonoma County Agriculture Commissioner Tony Linegar worried that “… overburdening local regulations may actually be perpetuating the black market and are driving out small farmers in favor of larger, corporate growers,” according to reporter Houston’s account.

In a poll of its small-business owning members conducted last year, the National Federation of Independent Business found “the volume of regulations is the largest problem for 55 percent of small employers compared to 37 percent who are most troubled by a few specific regulations coming from one or twosources. About 28 percent of small employers cite compliance costs as their largest regulatory issuefollowed by 18 percent citing the difficulty of understanding what they must do to comply. Seventeen percent are most burdened by the extra paperwork required.”

Lesson: It’s important for policymakers to remember that regulations do not occur in a vacuum. Local regulations, both city and county, are being complied with at the same time as state and federal ones are. The question government officials should ask themselves is: “Are we the best level of government to be regulating this?” Not, “Should we also regulate this?”

Small business is no small matter. According to the U.S. Small Business Administration, California small businesses are 99.8 percent of all businesses and employ 6.8 million workers, or 49.2 percent of the state’s workforce. Nothing wrong with having a regulatory environment hospitable to large, corporate growers, but a vibrant economy is impossible to achieve without it being equally hospitable to small businesses, which already pay 30 percent more than big businesses do to comply with the same federal regulations, and three times as much to comply with taxes.

Demanding local governments abide by their agreements and keeping regulations to a minimum will ensure everyone benefits from California’s Green Rush.
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Ed’s Note: Don Smith is executive vice president of SMART Cannabis and Next Generation Farming, Inc., a Roseville-based global leader in state-of-the-art agritech, cannabis and advanced organic greenhouse development and farming solutions.