This post was written as the special session convened on Monday, March 29. The final bill, House Bill 2, underwent minor changes through the process before passing both chambers Wednesday. This post will be updated to reflect final changes as amendments are published. Significant parts of the bill relating to licensing, timelines and legal structures did not change.
At noon Monday, legislators will return to Santa Fe for a special session to finish the job of legalizing cannabis in New Mexico. After getting close but not quite done in the regular 2021 session, Governor Michelle Lujan Grisham issued the call and worked with legislators in both parties to craft a bill to do it.
Legalization advocates have pushed forward various legalization bills for years and the governor herself established a cannabis legalization working group, which I chaired, in 2019. In 2021, legislators in both chambers introduced 5 different bills but the one by State Representatives Javier Martinez and Andrea Romero, introduced as House Bill 12, carried the day but time ran out.
The special session bill is based largely on that HB12, with a few tweaks. One important difference: this bill is limited to just the plan for legalization. Social equity provisions including things like expungement for previous marijuana convictions, will move forward under a different bill.
Democrats are betting that they can get a few Republican votes for legalization without the social justice components. They also bet they can pass the social justice bill with the votes of the few Democrats who may not support legalization.
The governor and advocates have been clear that both bills must more forward and pass together in order to create an effective, equitable system. It is still possible that both will undergo some amendments through the special session but the big pieces are set. So how will legalization work? Let’s take a look.
When Will Sales Begin?
The legislation requires the new Cannabis Control Division to issue final rules for licensing and operating cannabis businesses no later than January 1, 2022.
Sales can begin anytime after that, but no later than April 1, 2022.
Who Can Buy Cannabis and Where Can They Smoke?
Anyone 21 years of age or older can buy cannabis (see below for limits) but you cannot smoke just anywhere. Local governments can create “cannabis consumption areas” to allow outdoor consumption, if they choose.
If you smoke in public outside of a designated area, you’ll have to pay a $50 civil (not criminal) fine.
How Much Can a Customer Buy and Keep?
A customer 21 or over can buy and keep:
- up to 2 ounces of cannabis,
- up to 16 grams of extract, and
- 800 mg of edible cannabis,
in their personal residence or on their person.
Can I Grow My Own At Home?
Yes! Anyone over 21 years old can grow up to six plants at home, provided they are out of public view and not accessible to children or nosy neighbors.
If you grow your own, you can’t sell, barter or otherwise give it away. That is still a crime and it will earn you a misdemeanor conviction if you get caught.
How Much Is The Tax?
The state will add a 12 percent excise tax to all cannabis sales. This is in addition to regular sales tax (average 8 percent statewide). That means New Mexico will have an effective tax rate of about 20 percent. Tax proceeds are split between the state and local governments.
Medical cannabis products will be tax-exempt.
Editor’s note: A House committee amended the legislation to increase the state excise tax by 1% each year until 2026. This will raise the tax rate over time.
Can My Employer Prohibit Cannabis Use?
Just like alcohol, employers can still restrict your use of cannabis, even off duty. Employers can enact zero-tolerance policies and drug testing to enforce it if they choose. More reasonable employers will enact policies prohibiting use during work hours and taking action against you if you show up intoxicated or high.
A New Cannabis Control Division & Public Advisory Board Will Oversee The Industry
Cannabis will be overseen by a new director of the new Cannabis Control Division housed under the State’s Regulation and Licensing Department. The division will issue licenses and conduct oversight of cannabis businesses.
The medical cannabis program’s licensing and oversight functions will also operate under this new division. (DOH will continue to maintain the qualified patient registry).
No later than September 1, 2021 the State will establish a “cannabis regulatory advisory committee” to advise the division on rules for the industry. The committee includes representatives from:
- The chief public defender;
- A district attorney;
- A county sheriff;
- Cannabis policy advocate;
- Organized labor representative;
- A qualified medical cannabis patient;
- A state or local agency;
- A tribal nation or pueblo;
- A public health professional;
- An expert on regulating adult-use products;
- A cannabis scientist;
- An environmental scientist;
- A small business expert;
- A water expert;
- A cannabis industry professional;
- One other member appointed by the superintendent of RLD.
An additional committee will be formed at the Department of Health to study the health impacts of cannabis legalization.
What About Social Equity?
The legislation recognizes that the failed war on drugs disproportionately impacted communities of color. It requires the State to :
- Enact procedures that promote and encourage full participation in the cannabis industry governed by the Cannabis Regulation Act by representatives of communities that have been disproportionately harmed by rates of arrest through the enforcement of cannabis prohibitions in law and policy, rural communities likely to be impacted by cannabis production and agricultural producers from economically disadvantaged communities;
- Enact procedures that promote and encourage racial, ethnic, gender and geographic diversity and New Mexico residency among license applicants, licensees and cannabis industry employees;
- Enact rules for a certification process to identify cannabis products for consumers from integrated cannabis microbusinesses or cannabis producer microbusinesses or owned by representatives of communities that have been disproportionately harmed by rates of arrest through the enforcement of cannabis prohibitions in law and policy and underserved communities that include tribal, acequia, land grant-merced and other rural historic communities;
- Work to help rural communities enter the cannabis industry through agriculture or other parts of the industry.
A separate bill, Senate Bill 2, contained provisions for automatic expungement of old cannabis convictions. Read more here.
What If I Want To Work In The Industry?
The law requires the state to establish training standards for workers who will work with cannabis. Those rules must be in place no later than January 1, 2022.
Anyone 21 years or older can work in the industry, if they obtain a license from the state.
Medical Cannabis Program Will Stay, With Important Safeguards
The Medical Cannabis Program’s management will move to the new cannabis control division while the Department of Health will maintain the qualified patient registry.
The law protects the medical cannabis program and requires the state to protect supply for patients. Throughout all of 2021, the State will work with patients and the medical cannabis program to establish rules to “reserve” products for patients, qualified caregivers and reciprocal patients.
The law specifically gives the state the ability to require all licensed adult-use producers to
- Set aside up to 10 percent of products each month for patients if there is a shortage, or
- Require licensees to produce a specific quota (up to 25 percent of crop size) of mature plants for medical products.
Cannabis “Microbusinesses” Will Help Small Producers Get Started
Under the bill, new “integrated microbusinesses” can grow, manufacture and sell cannabis products at one location using up to 200 plants at a time. These microbusinesses will likely be boutique shops with specialty products, or limited products serving small communities. With lower costs to set up, advocates assume these will be inviting to small business entrepreneurs who want to convert an existing small business to cannabis or start a new one with lower upfront costs.
Microbusinesses can begin applying on September 1, 2021 alongside existing medical cannabis producers who want to add or convert to adult-use licenses.
Who Can Get a Regular License and How Much Can They Grow?
Existing non-profit medical producers, new producers (growers) and new microbusinesses (see above) can begin applying for licenses in September of 2021. All other licenses can begin applying in January of 2022.
Once the state determines that an application is complete, the state must issue or deny the license within 90 days.
The State will issue final licensing rules no later than January 1, 2022. But those rules cannot limit the number of licenses or locations a licensee can operate unless the new cannabis advisory committee determines that “market equilibrium is deficient” or there is an “inadequate supply of cannabis.” Then the superintendent of RLD can issue a temporary moratoria on new licenses.
In other words, anyone who qualifies for a license can get one but the state can pause applications is there is too much cannabis to go around.
The state will enact plant limits on licensees. Those will be determined each January.
Cannabis licensees can also obtain hemp licenses, allowing them to create and sell products for both markets.
Persons who have been convicted of cannabis crimes are not prohibited from getting licenses, but some convictions for fraud and giving controlled substances to minors are disqualifying.
Tribal governments are also welcome to enter agreements with the state to facilitate tribal cannabis businesses.
How Much Will a New License Cost?
Getting into cannabis is not cheap. Licenses fees for fully vertically integrated businesses to serve both medical and adult-use markets top out at $125,000 per year for adult-use licenses. Medical-cannabis-only licenses get a 50 percent discount.
Once you are licensed, you have to pay up to $50 per plant (unless you operate a microbusiness).
Can My City or County Ban Cannabis Operations?
No. No local government would be allowed to prohibit legal cannabis activity; but, they can enact local zoning rules to limit the number of retailers and distance them from schools and daycares.
How Do We Protect Public Health and Safety?
All cannabis products must be tested for safety and THC levels and all products will have a very visible warning label approved by the state.
Advertising of cannabis products are not allowed to persons or media outlets serving persons under the age of 21. Ads are not allowed on billboards or other public media visible within 300 feet of a school, daycare center or church. They also can’t use cartoon characters or imagery appealing to children.