Ohio marijuana law changes stall in Statehouse. Cities are paying the price

Ohio cities with marijuana dispensaries won’t receive tax money until lawmakers agree on changes to Issue 2, which voters approved in 2023

• Ohio is withholding tax revenue from cities with marijuana dispensaries until state lawmakers agree on cannabis and hemp regulations.
• Local governments express frustration over the withheld funds, while state officials claim they lack the constitutional authority to release the money without a specific appropriation.
• The debate over marijuana and hemp regulation will continue in the fall.

Ohio will continue to withhold money from cities with marijuana dispensaries after Republican efforts to change cannabis and hemp laws came up empty.

The two-year budget approved by the House and Senate maintains current funding for municipalities, which is 36% of the tax revenue from adult-use cannabis sales. But lawmakers won’t release that money until they reach an agreement on rules for marijuana and intoxicating hemp products.

Republicans hoped to have a deal on marijuana before the Legislature’s summer break, but it didn’t happen − punting the issue to later this year. Local leaders say that puts them in the difficult spot of trying to fund services without money they were promised.

“What they’re saying is if we can take your lunch money, we will,” said David Kubicki, chairman of Columbia Township Trustees.

Ohio lawmakers reach impasse on marijuana, hemp

As approved by voters in 2023, Issue 2 divides marijuana revenue between local communities, a social equity program, substance use research and administrative costs. The budget keeps local funding in place and directs the rest to Ohio’s general bank account.

Republicans pledged early on to dismantle the social equity program, which aimed to diversify the industry and right the wrongs of cannabis prohibition. State regulators have allowed the program to languish amid uncertainty about its future.

But that’s not the only part of Issue 2 lawmakers want to change.

The House and Senate spent months negotiating over Senate Bill 56, which would revise Issue 2 and govern gray market cannabis such as delta-8. The latest version regulates the gifting of home-grown cannabis, allows up to 400 dispensaries and permits smoking only at private residences and outdoor concert venues.

“We need to specify that they can have more dispensaries, for example, rather than a tightly locked number,” Rep. Jamie Callender, R-Concord, said. “The only way we’re going to drive the price down to be more competitive with other states is to have more dispensaries.”

Senate Bill 56 would also set rules for THC beverages and require intoxicating hemp products to be sold in dispensaries. Gov. Mike DeWine has repeatedly called on lawmakers to address delta-8, saying a loophole in federal law makes it easy for children to buy untested products.

Rep. Brian Stewart, R-Ashville, said there were too many differences among Republicans to reach a compromise before the end of June. Hemp became a major sticking point: Some lawmakers want to put it in dispensaries, while others believe the plan would hurt legitimate businesses selling CBD products.

“If we want to truly protect consumers and make sure these products are safe, we want to make sure we have a legitimate market for them rather than having them go elsewhere,” Rep. Tex Fischer, R-Boardman, said.

What’s next for local marijuana money in Ohio?

Another hang-up: How much money local governments should get.

An earlier version of the budget distributed 20% of the marijuana to cities for just five years. Stewart said Republicans couldn’t agree on a funding level and will resume that debate in the fall.

In the meantime, state officials say they can’t give money to locals because Issue 2 didn’t include a way to spend it. The Ohio Constitution requires an appropriation to release money from the state treasury.

The cannabis industry disagrees.

“It is our belief that Issue 2 was clear about the money going to local communities,” said David Bowling, executive director for the Ohio Cannabis Coalition. “Our members pride themselves in being good community partners in the areas where they live, work and do business. The Host Community Fund is a critical piece of that partnership.”

State government reporter Haley BeMiller can be reached at hbemiller@gannett.com or @haleybemiller on X.