Pennsylvania Fiscal Office Disagrees With Governor’s Marijuana Legalization Revenue Projections
From toxifillers.com with love
An independent Pennsylvania agency is projecting more tax dollars to be generated from adult-use marijuana sales compared to what the governor’s office has estimated, although it expects significantly less overall revenue from cannabis legalization due to differing views on licensing fees.
In a report released last month, the Independent Fiscal Office (IFO) looked at various components of Gov. Josh Shapiro’s (D) budget proposal, including his call to legalize marijuana and impose a 20 percent excise tax on cannabis products.
Shapiro’s office had boldly projected that the state would see about $536 million in cannabis revenue for the 2025-2026 fiscal year, assuming the legislature enacted the requested reform and implementation started in July.
That already represented a notable increase compared to the governor’s last budget proposal, where he estimated just $14.8 million for the first fiscal year. The legislature ultimately did not follow through on the request reform, however.
But according to IFO’s analysis, Shapiro’s latest projection far overshoots what they say is a more realistic estimate after accounting for the prohibitively costly licensing fees the governor proposed.
The independent economists compared tax policies and purchasing trends for adults in other states to establish a baseline. After it also considered revenue from licensing fees, it came to the conclusion that, in the 2025-2026 fiscal year, Pennsylvania would generate about $142 million in revenue—almost $400 million less than what the governor promoted.
The reason for the disparity is differences in licensing fee revenue estimates. While the governor’s office projected $510 million in revenue from those fees, IFO said that the proposed $25 million fee for existing medical cannabis dispensaries to convert and start serving adult consumers will likely prove too expensive for most businesses. So IFO is only expecting $59 million total from licensing fees in the first fiscal year.
IFO projects more tax revenue from recreational marijuana compared to the Executive Budget, but considerably less from skill games and combined reporting. See: https://t.co/bLN8UlyYSI pic.twitter.com/3A4RKiCJzw
— Independent Fiscal Office (@ind_fisc_office) March 4, 2025
That said, the office noted that its estimate for tax revenue is “considerably higher” than the governor’s: $83 million, compared to $27 million.
“IFO assumes that only four existing medical marijuana dispensaries will remit the $25 million initial fee to expand to the recreational market. The $25 million fee is much higher than other states. Although the fee grants sole access to the recreational market for a limited period of time and allows for vertical integration, recreational dispensaries would be limited to five locations, and its unclear if those advantages would justify the much higher initial fee relative to the $25,000 initial fee for new firms.”
“Assuming that license and fee remittances begin on July 1, 2025, and legal sales of recreational marijuana begin on January 1, 2026, the IFO projects that the proposal could generate $142 million in General Fund revenue for FY 2025-26 and $418 million for FY 2029-30,” it said. “The estimate does not reflect impacts related to increased enforcement, addiction treatment or other potential negative externalities.”
When Shapiro’s budget was released, the $536 million figure raised eyebrows, and there’s also been criticism over the proposed 20 percent excise tax. If the goal is to compete with other state markets and incentivize keeping cannabis revenue in Pennsylvania, some have argued that imposing such a high tax rate could prove counterproductive.
In any case, while there might be contradictory revenue estimates, the more immediate question is whether the legislature will actually move forward with any proposal to enact legalization in the first place this session, much less by July.
Meanwhile, a Republican Pennsylvania senator recently called for the creation of a state “legacy” fund, using tax revenue from adult-use marijuana sales and gaming to make long-term investments in the Commonwealth’s economy.
As the legislature once again debates various cannabis legalization proposals, the senator is making the case that, beyond using any resulting tax revenue to fund day-to-day projects and public services, the state should earmark a portion of those tax dollars for a fund to “provide a sustainable source of prosperity that lasts for generations.”
Pennsylvania House Speaker Joanna McClinton (D) recently said that Democrats are ready to pass a marijuana legalization bill this session, but that the party “will need Republican support” to get the job done—adding that it will be a “heavy lift.”
Another Democratic lawmaker said legislature is “substantially closer” to reaching a deal on marijuana legalization, and an initial vote on a bipartisan cannabis reform bill could come as early as this month.
Polls have shown bipartisan support for legalization among voters, but the reform has consistently stalled in the legislature, owing in large part to GOP opposition. But not all Republican members are against the policy change—and one recently said she felt her party should seize the “opportunity to snatch” the issue from Democrats.
Rep. Rick Krajewski (D)—who announced in December his intent to file a legalization measure alongside House Health Committee Chair Dan Frankel (D)—also recently said the policy would provide for “more responsible usage” of cannabis, compared to the status quo that’s left adults either buying from the illicit market or traveling across state lines to get regulated products.
Separately last month, the Pennsylvania House approved a bill sponsored by Frankel that’s meant to strengthen safety standards and oversight of the state’s medical marijuana program as lawmakers work to advance adult-use legalization.
While Pennsylvania’s medical cannabis program was enacted nearly a decade ago, lawmakers say the measure, which now heads to the Senate, is necessary to improve testing compliance, product audits and lab inspections, among other aspects of the industry.
Meanwhile, Pennsylvania Democratic lawmakers recently introduced a bill that would allow farmers and other small agriculture operators to sell marijuana they cultivate to existing growers and and processors if the state moves to legalize adult-use cannabis.
—
Marijuana Moment is tracking hundreds of cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.
Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.
—
Also, in a video interview released last month, the governor emphasized that the state is “losing out” to others that have already enacted adult-use legalization, while maintaining a policy that’s enriched the illicit market.
“I think it’s an issue of freedom and liberty. I mean, if folks want to smoke, they should be able to do so in a safe and legal way,” he said. “We should shut down the black market—and, by the way, every state around us is doing it. Pennsylvanians are driving to those other states and paying taxes in those other states.”
Pennsylvania’s Republican attorney general recently said he wants to be a “voice for potential public safety risks” of enacting the governor’s proposal—though he said his office would be ready to enforce the new law if lawmakers did vote to pass it.
The state’s agriculture secretary separately told lawmakers that he’s fully confident that his department is in a “really good” position to oversee an adult-use marijuana program if lawmakers act.
Meanwhile, in February, top Pennsylvania police and health officials told lawmakers they are prepared to implement marijuana legalization if the legislature moves forward with the reform—and that they stand ready to work together as the details of legislation to achieve it are crafted.
Amid the growing calls for marijuana legalization in Pennsylvania, a GOP state senator said prohibition has been a “disaster,” and a regulated sales model for cannabis—similar to how alcohol and tobacco are handled—could serve as an effective alternative.
A Republican Pennsylvania senator also recently defended the push to legalize and regulate marijuana, calling it “the most conservative stance” on the issue.
Separately, a recent poll shows that Pennsylvania voters say they favor a model where cannabis is sold by licensed private businesses, rather than through a system of state-run stores as some legislators have promoted.
Hawaii Governor Signs Bill To Speed Marijuana Record Expungements Process
The post Pennsylvania Fiscal Office Disagrees With Governor’s Marijuana Legalization Revenue Projections appeared first on Marijuana Moment.