Where to allocate weed tax revenues?

Two proposals with competing visions for the tens of millions in taxes that Montana collects annually on the sale of recreational marijuana are still making their way through the Legislature as lawmakers work to set a two-year state budget.

One measure, House Bill 669, would funnel most of the state’s adult-use marijuana tax collections — which are forecast to top $50 million per year — to the General Fund, allowing lawmakers to distribute that money as they see fit on a session-by-session basis, including this one. The other, Senate Bill 442, started as a proposal to divvy taxes between rural road maintenance and Gov. Gianforte’s signature substance use disorder treatment program, but has since been amended to also include statutory allocations for wildlife habitat, state parks and veterans’ programs. Most of SB 442’s statutory allocations would be permanent unless retooled by a future Legislature.

After passing the Senate 49-1 on April 4, the latter proposal was heard by the House Taxation Committee Friday.

In his opening remarks, bill sponsor Sen. Mike Lang, R-Malta, described SB 442 as a “once in a generation bill” that would bridge a gap between agriculture, hunting and access.

He said that, in addition to providing stable funding for county roads and allocating 11% of marijuana tax collections toward treatment for drug abuse, it would create a new fund, the Kelly Flynn Montana Wildlife Habitat Improvement Program and Legacy Act, to “increase the pace and scale of habitat stewardship and restoration treatments across rural Montana.” About one-third of the tax collections would go toward the general fund, he added.

More than 40 people spoke in favor of the bill, most of whom focused their support on the county road or wildlife habitat pieces of the bill. Many described it as a “win-win” measure and thanked Lang for bringing a diverse set of interests together to craft the proposal seeking to distribute revenues from a recently established special fund. (Montana voters passed a ballot initiative in 2020 that legalized adult-use marijuana and laid out a framework to divide the 20% state tax levied on recreational marijuana sales between conservation, veterans, law enforcement and substance use treatment programs.)

Bozeman resident and national hunting personality Randy Newburg referenced the ballot initiative, I-190, in his remarks before the committee.

“When people like myself voted for I-190, it was heavily influenced by the fact that habitat and conservation funding would be part of that,” Newburg said. “This keeps a promise made to Montanans.”

A number of sporting and conservation-related organizations, including the Rocky Mountain Elk Foundation, Wild Montana, Backcountry Hunters and Anglers, Montana Audubon, the Nature Conservancy, Montana Conservation Voters, Helena Hunters and Anglers, the Montana Citizens’ Elk Management Coalition and Montana Wildlife Federation, voiced support for the proposal.

The bill also garnered support from at least three county commissioners and a handful of industry groups. Several said establishing a stable source of funding for county roads will facilitate commerce. Those groups included the Montana Farm Bureau Federation, the Montana Stockgrowers Association, the Montana Petroleum Association, the Montana Electric Cooperatives Association and the Montana Association of oil, gas and coal counties.

The lone opponent who offered testimony Friday was Montana Fish, Wildlife and Parks’ acting director Dustin Tempel, who took issue with a line in the bill that says that the department “shall” adopt rules in accordance with recommendations issued by the Wildlife Habitat Advisory Council. He said it runs counter to current statutes, which specify that federal funds used for the council’s work must remain within the department director’s discretionary authority.

“It’s the department’s policy that anytime we see legislation that could impact the department’s ability to receive federal funding, you will see us in opposition to that,” said Tempel, who later indicated the department would drop its opposition if the “shall” language is dialed down.

Despite broad support from organizations, individuals and businesses — more than 90 nonprofits, associations and businesses endorsed SB 442 in a letter to Gov. Greg Gianforte and the Legislature — the road ahead for the measure could be bumpy.

In a discussion with reporters April 14, House Appropriations Committee Chair Llew Jones, R- Conrad, described SB 442 as a “Christmas tree” style bill that has won support by including tacked-on funding proposals to appease stakeholders who might otherwise oppose it.

Jones said the bill’s statutory appropriation for the marijuana revenue would make it harder for lawmakers to reconsider the allocations as they weigh different funding priorities in future sessions.

“I don’t blame ‘em for doing it. It’s actually a smart way to have a stable source — and remove it out of consideration of the needs of the state,” he said.

The measure could also face opposition from the executive branch. Gianforte has said that funding for programs administered by Montana Fish, Wildlife and Parks, such as Habitat Montana, are adequately funded while other state priorities, such as law enforcement and veteran’s services, could use a boost. His budget accordingly sought to decrease Habitat Montana funding as compared to the 2021 allocation.

While debating the competing measure, HB 669 sponsor, Rep. Bill Mercer, R-Billings, argued that it’s inappropriate and unconstitutional for lawmakers to allow appropriation of state revenue by initiative. The Legislature should be given the opportunity to distribute tax allocations on a session-by-session basis without digging into Montana code to change where special revenue accounts are directed, he said.

“If we send the signal that you can create, by initiative, a new revenue stream and we allow it … that’s a terrible precedent,” Mercer said. “We need to get the money into the General Fund so that when we come back to appropriate money in 2025, we will have a fresh start.”

Rep. Emma Kerr-Carpenter, D-Billings, countered that the funding being contemplated by Mercer’s bill has already been through the legislative rigamarole — vis-a-vis 2021’s House Bill 701 — “and that bill, not the initiative, set up [how] marijuana revenue should be allocated.”

Like SB 442, HB 669 has been changed in the legislative process. The version of the bill that passed through the House with a 62-37 vote included one-time appropriations for FWP, Department of Natural Resources and Conservation, and Department of Military Affairs programs. It’s awaiting a hearing in the Senate Finance and Claims Committee.

The House Taxation Committee did not take executive action on SB 442 April 14.

Eric Dietrich contributed reporting.