The NJ Assembly Oversight Committee held a hearing on the New Jersey cannabis market on the 3rd anniversary of the adult use legalization referendum implementation bill signing.
“One person don’t know it all,” Committee Chair Reginald Adkins (D-Union) said.
They were very curious about the grant program, medical cannabis patients, and the nature of the New Jersey cannabis market and products.
Several grants went to companies not majority owned by local New Jersey residents. But local ownership was not a qualification to receive one.
NJEDA Reviews Grant Program
“It’s a huge economic opportunity, some $2 billion of economic opportunity,” NJ Economic Development Authority (NJEDA) CEO Tim Sullivan said.
He noted they want to help small businesses, women owners, and those hurt by the War on Drugs. Sullivan added the challenges of it being illegal at the federal level.
“Banks don’t touch it. There are large, well-capitalized international companies that are in this space that would like nothing more than to have this space for themselves,” he declared.
“It’s one of a handful of what we think of as new industries that we think of as part of Governor Murphy’s economic diversification strategy,” Sullivan added.
He said the Joint Ventures program was launched last year as an experimental or pilot program of $12 million, which supported 48 winners.
“Eight of those 48 are now open. Of the 48… 24 are minority-owned. Twenty are women-owned,” Sullivan said.
New Jersey Cannabis Grant Program Details
Seed equity is their second program. Since it will only help Social Equity applicants, more of it should only go to companies locally owned.
“I like the name,” Adkins joked.
“I was told I can’t make any bad jokes,” Sullivan replied to laughter.
“We want to make sure we’re helping folks get… general technical small business support,” he added. “We want to make sure folks who got awards open.”
“Walk us through step by step how to be part of the program,” Adkins said.
“It’s a grant program. We got really strong applications. We don’t have the money to support everyone,” Sullivan noted.
They promoted it a lot, which led to intense competition.
NJEDA Managing Director Jenell Johnson explained the extensive qualifications. She added they’re working with Oaksterdam University to provide technical assistance.
Adkins was curious about the mentorship aspect and measures of success.
“We’re gathering lots of data. They’re milestone-based. We didn’t give them the full money upfront,” Sullivan said. “Did they get open? Will they be open 2, 3 years afterward? Small businesses fail.”
“20 to 30 long-term open would be a huge win,” he added.
In their zeal to bet on winning horses, it seems they favored horses that weren’t so needy.
NJ Cannabis Grant Award Process Reviewed
“What percentage of those apps were awarded funds?” Assemblyman Cody Miller (D-Gloucester) asked.
Sullivan said 111 applicants applied for about 48 grants. The second program had 160 companies apply for 48 grants.
“What states do we look at from an economic development standpoint?” Vice Chair Roy Freiman (D-Somerset) asked.
He noted they studied New York, California, and Colorado.
“We have the biggest grant announced. The biggest per recipient. There are a lot of costs. Getting someone 80 percent of the way doesn’t help much,” Sullivan argued.
“How do we know New Jersey is smoking it in terms of success in economic development?” Freiman asked to laughter.
Sullivan noted the announcement that 100 dispensaries were open was a sign of success.
He noted the need to open specifically small businesses owned by minorities, those hurt by the War on Drugs, and those in the LGBT community.
“What does a success story look like?” Adkins asked.
Nightjar, he alleged, was family owned. But they admitted to Heady NJ they’re not majority New Jersey resident-owned. They opened recently in Bloomfield as a women-owned dispensary supporting home grow legalization.
“They’re starting to sprout,” Sullivan joked.
Freiman gestured like he was rolling a joint to laughter.
“What does a success story as a state look like?” Adkins asked.
“It’s realizing the projections of a couple billion dollars of economic impact,” Sullivan argued. “It’s a growing industry. Have to get it right in terms of diversity and inclusion.”
NJ Cannabis Regulatory Commission (NJCRC) Testifies
“It’s three years since the act CREAMMA was signed into law. It’s 3 years since we changed course on cannabis legalization,” NJ Cannabis Regulatory Commission (NJCRC) Executive Director Jeff Brown declared.
He noted the end of new marijuana possession charges in New Jersey.
“We’re making progress. We’re watching a new economy grow. A lot of this work began at the beginning of Governor Murphy’s administration,” Brown noted.
He noted they examined the medical marijuana program and sought to expand it.
Initially, it generated $29 million in sales with about 17,000 patients in 2017. By 2022, it peaked with $226 million in sales and 135,000 medical cannabis patients.
“We’ve been building an agency from the ground up. We focused on establishing a diverse industry,” Brown noted about the NJCRC.
He said they adopted New Jersey cannabis market regulations six months after the law passed in 2021. The legal adult use New Jersey cannabis market opened at 10 dispensaries in April 2023.
The legal New Jersey cannabis dispensary opening pace had become so quick Brown couldn’t say if there were 103 or 104 dispensaries open when the NJCRC’s announcement said 102 dispensaries were open last week.
“We’re halfway to meeting that 2-billion-dollar mark,” he claimed.
Overall sales of New Jersey cannabis in the medical and adult use markets combined have passed $2 billion overall.
Brown cited the efforts of daring entrepreneurs who have put in money, blood, sweat, and tears to grow small companies as creating the industry.
NJ Cannabis License Ownership Numbers
“I am proud of the efforts we’ve taken to make sure this industry is as diverse as possible,” he exclaimed.
Brown noted the need to help social equity applicants who got caught and punished.
He said 35 percent of the New Jersey cannabis companies that have the annual license needed to open are majority minority-owned. Forty percent are women or disabled veteran-owned.
Unfortunately, he had no data on local ownership, which was not a benchmark in the law.
“I do see several obstacles,” Brown added.
The obstacles are securing money, land, and town approval.
Brown noted the NJ Business Action Center (BAC) is launching a technical program to help license seekers.
“It took a long time to get this up and going,” he admitted. “We’ve processed over 2500 license applications.”
Brown claimed 209 annual license holders are operating. There have been 450 conversions to an annual license needed to open.
“We’re working to approve new products as efficiently as possible,” he said.
NJCRC Office of Diversity and Inclusion (ODI) Director Wesley McWhite III explained it initially had a longer name. He explained their mission is to increase equity. Underground leaders or legacy to legal is something they’re trying to work on with the BAC.
Corporate responsibility was another issue he cited they’re concerned with. An “equity scorecard” is coming soon.
Seventeen percent of annuals are Social Equity owned when they checked in December. Seventy-one percent are diversely owned McWhite alleged.
“New Jersey is beating national women… and minority industry standards,” he said. “We’re doing everything we can to lower the barriers to entry.”
He admitted getting a loan and land issues are very difficult.
NJ Cannabis License Application Process Examined
“Wow, very good,” Adkins said. “Can you forecast 2024, and is there a backlog of apps?”
“This is the year we hit a billion in sales. Last year, we were just shy of 800 million,” Brown exclaimed.
“As far as applications, there’s not necessarily a backlog. As long as you meet the requirements… you move through the process,” he added.
About 300 New Jersey cannabis license applications have received cure letters requiring resubmitted information. But they have not done so.
Brown said McWhite is working on outreach to them.
The New Jersey cannabis conditional license application review takes 90 days, and the annual review takes six months.
“Have there been increases in adverse events? Hospitalizations?” Adkins asked.
“There’s more cannabis available whether that’s from the legal market or hemp,” Brown noted.
He said they work hard on product complaints to ensure safety.
There has been no recall of legal products in adult use cannabis market in New Jersey yet.
NJ Medical Cannabis Program Concerns
Freiman asked about how New Jersey medical cannabis sales were doing.
“We’re about a hundred million dollars down,” Brown conceded.
He said they’re trying to make it easier to become a patient. They reduced enrollment fees to $10.
“In about a week, we’ll be rolling free digital cards,” Brown added. “It is still a vibrant market. It’s still higher enrolment than in 2017.”
“What is the advance of when they purchase it? Is there a significant advantage?” Freiman asked.
“There’s sales tax. There’s no social equity fee. Medical products are generally priced lower,” Brown explained. “Patients get treated first. There’s parking spaces for patients.”
“There’s a real need for the medical community. It seems patients are out there. Perhaps we need to see what other states are doing,” Freiman said. “New Jersey should look at homegrown? How do you feel?”
“Our patient enrollment has gone down to 135,000 to 85,000, which is common elsewhere,” Brown noted.
In Illinois, Massachusetts, and New Mexico, digital ID cards helped enrollment numbers.
“The number one issue is the cost of doctor visits. They’re charging cash out of pocket. It’s an issue out of CRC’s purview. We do see a lot of physicians… only accepting cash and not accepting insurance,” Brown explained.
“With home grow, that’s not in our purview. I would certainly encourage the legislature to look at it. We certainly hear about it from people all the time,” Brown noted.
He added New York, Connecticut, and Massachusetts allow it.
“I would certainly encourage you to look at it,” Brown said.
“I understand,” Freiman said. It’s a quality-of-life issue. I want to make sure we’re serving them.”
NJ Cannabis Prices Questioned
“Do you foresee a cost reduction? How do we compare New Jersey with other states?” Adkins asked.
“It’s higher,” Brown said. “We’re consistent with where Massachusetts was.”
“Getting more businesses into the market in the supply side of cultivation and manufacturing takes more time to get operational,” he admitted.
Brown said it takes six months to a year for a dispensary to open versus a full year or two to three years to open.
“2024 will be the year we see new producers and manufacturers come online,” he declared. “We’ve already beginning to see prices fall.”
Brown admitted the price is high but claimed they will fall as they have in mature cannabis markets.
New Jersey Cannabis Market Review
“We’re flying this plane. We’re not building it,” noted lobbyist and cannabis advocate Bill Caruso said about the market.
He noted opting out of the medical cannabis program is popular due to the red tape that exists partially due to federal cannabis prohibition.
Caruso noted a law had to be passed so that the NJEDA could help companies with money. He noted the legislature did not micromanage. The legislature also tried to help companies with tax issues and expense deductions.
“Your friends at the federal government… have actually started to jump in this game. We are likely going to see rescheduling sometime before the election. That’s the rumor,” he noted.
Federal Cannabis Legalization and NJ Pharma Discussed
A lot of cannabis advocates nationwide fear that federal rescheduling would favor large corporations at the expense of small businesses. The situation is murky at best.
“It’s also going to help our medical community and research community. New Jersey is a pharma state. With manufacturing and medical research and some of the finest institutions… we have the ability to be developing new cannabis-derived medicines,” Caruso argued.
He explained more towns are allowing licensed New Jersey cannabis companies. Some just want dispensaries. Others will allow manufacturing but not dispensaries. Other towns have federal prohibition concerns and complications.
“No one is opposed to home grow, to patients growing their own medicine. We can keep this simple. Six plants or less. It is an unkept promise to patients. The industry, big, small, in the middle, they don’t care. This is not their competition,” he added. “We are depriving them of their well-being. Six plants don’t both anybody.”
Caruso said he is against Delta 8 THC hemp products that are widely available due to a federal loophole but are not regulated. Few of the hemp products that get you high are based in Jersey.
Finally, a UFCW union leader explained their role in helping New Jersey cannabis workers get good jobs and benefits. They want Project Labor Agreements (PLAs) to be used to create unionized construction jobs in the building of companies.
“We’ve heard affordability, education, we’ve heard access to capital. We heard about labor agreements. Thank you very much,” Adkins said.
Commissioner Krista Nash was in the audience along with other NJCRC staffers who did not testify.
