Financial Recovery Post-COVID
by Mayor Stephen DiNatale of Fitchburg
As we enter into the fall season, the state has seen the coronavirus test positivity rate fluctuating around 2%. Although this number is promising in that the Commonwealth has not seen drastic spikes in test rates, it is a signal that we all must proceed with caution as we enter into the winter months. By the same token, it is imperative that we review the economic effects of the shutdown and how it has impacted budgets at the municipal and state level.
The challenging work of assessing line items for cost-saving measures within the city budget reinforces the critical role that revenue streams play at the state level and in our community. Cannabis has provided a relatively new source of revenue. Municipalities that host adult-use cannabis operators, like Fitchburg, have benefited from the revenue these businesses produce, a new growth opportunity that has proven helpful when settling municipal budgets across the Commonwealth. Without this source of funding, cuts to budgets could have been much deeper, equating to less services for constituents. For this reason, it is crucial that this new funding source continues to operate to not only provide revenue, but also maintain its workforce.
Since the introduction of adult-use cannabis retail in November 2018, the industry has been a catalyst for growing state and local tax revenues, generating $93 million in taxes until the late March shutdown. Of this, $15 million went directly to the local communities that have embraced legalized cannabis, along with $10 million in host community agreement fees.
While it’s difficult to pin down exactly how much tax revenue was lost during this time due to the drastic behavioral changes of social distancing, data published by the Cannabis Control Commission indicates that the last full week of adult-use cannabis sales, prior to the shutdown, yielded $15.5 million in sales while the first week post-shutdown yielded $13.5 million. Those sales are subject to a state sales tax (6.25 percent), state excise tax (10.75 percent), and a local tax to the municipality (3 percent).
If those numbers sound appealing to you, you are not alone. In April, New Mexico Governor Michelle Lynn Lujan Grisham expressed regret and sadness over the absence of legalized adult-use cannabis and the millions of dollars it would have brought to her state budget. This revelation speaks to what I and many of my peers across the Commonwealth have recognized: cannabis sales benefit our communities.
Back in May, I, along with several of my mayoral colleagues, wrote to the Reopening Advisory Board to make this very point. In addition to preparing a rigorous protocol for safely resuming business, the industry’s record of compliance with Massachusetts oversight agencies gave us the confidence that they could operate as effectively as any other industry authorized to be open. Since the reopening on Memorial Day, adult-use cannabis businesses have shown they are up to the task.
The capability to operate without undermining public health should be the most critical component of assessing whether a business should be authorized to be open. We recognize that this must be the priority in a health crisis, especially if cases of COVID-19 begin to rise with the gradual re-opening of the economy. As Mayor of Fitchburg, I am grateful to once again have that revenue stream to curtail further cuts. Given the cannabis industry’s track record of safety and their contributions to Massachusetts, they have proven themselves to be essential to the recovery efforts.