Ohio Lawmakers’ Plan To Redirect Marijuana Legalization Revenue Could Reduce Economic Efficiency (Op-Ed)

“Changing the use of these funds, though, could potentially have impacts on the economic efficiency of recreational marijuana legalization.”

By Rob Moore, Scioto Analysis

Earlier this month, Ohio became the 24th state to legalize the sale and purchase of marijuana for recreational use. Even before Issue 2 was passed by the voters, leaders in the Ohio General Assembly were signaling their intentions to change the law after its passage.

Unlike Issue 1, which was a constitutional amendment, Issue 2 is an initiated statute.

That means legislators can go back and change the law afterwards. And it seems like they intend to do so.

While some of the public discussion about changes to Issue 2 from the legislature have revolved around public health measures, legislative leaders have focused their attention on the use of tax revenue raised by excise taxes levied on purchase and sale of marijuana for recreational purposes.

Researchers at the Ohio State University Drug Enforcement and Policy Center study estimate hundreds of millions of dollars are likely to be raised by the excise tax.

My firm Scioto Analysis decided last summer to conduct a cost-benefit analysis of recreational marijuana legalization. This lined up perfectly with the discussion around Issue 2. We released the cost-benefit analysis last month, finding the current proposal would likely lead to economic benefits exceeding costs by $260 million.

Legalization of the sale and purchase of marijuana for recreational purposes in Ohio will not be costless. We expect there to be new cases of impaired driving that will likely lead to crashes and even deaths. But the largest impact we expect is productivity. Based on what we have seen in other states that have legalized recreational marijuana, we expect the costs of recreational marijuana to rise to the level of $760 million worth of lost productivity.

These costs, though, will be offset by the benefits of programs funded by excise taxes levied on the industry. In particular, if the Cannabis Social Equity and Jobs Fund and Substance Abuse Addiction Fund authorized by Issue 2 are spent on evidence-based programs, we estimate its benefits to be about $800 million in job training and substance abuse treatment benefits.

Changing the use of these funds, though, could potentially have impacts on the economic efficiency of recreational marijuana legalization.

A big problem with reallocating these funds toward policing from an economic standpoint is that policing is an incredibly understudied public policy area. Very little work has been done to evaluate the economic impacts of policing interventions and less has been done on impacting the economic benefits and costs of investing in jails and prisons as some assembly leaders have suggested.

On the other hand, the current evidence on job training and substance abuse programs suggests benefits on the scale of $6 and $9 respectively for every $1 in costs.

The best evidence from the Washington State Institute for Public Policy suggests deployment of police can have benefits that outweigh costs. Deploying police can lead to reductions in property crime, about to the tune of $5 in benefits for every $1 in costs.

While this is one way to tackle crime, another is to fund general job training programs, which reduces the value of crime relative to regular employment activity.

Training is a different story. The evidence for the economic benefits of new police training is not strong right now. This leads me to conclude that reallocating money currently allocated toward job training and substance abuse treatment toward police and jail construction will likely reduce the economic efficiency of marijuana legalization.

Let us hope that if we are going to reallocate funds going toward effective programs that we will at least put resources toward evaluating these new programs they fund.

Rob Moore is the principal for Scioto Analysis, a public policy analysis firm based in Columbus. Moore has worked as an analyst in the public and nonprofit sectors and has analyzed diverse issue areas such as economic development, environment, education and public health. He holds a master of public policy degree from the University of California Berkeley’s Goldman School of Public Policy and a bachelor of arts degree in philosophy from Denison University.

This story was first published by Ohio Capital Journal.

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Photo courtesy of Philip Steffan.