Despite a solid effort, Pennsylvania failed to pass adult-use cannabis legislation in 2024, but the tides may be turning in 2025.
The buzz
Gov. Josh Shapiro told TribLive in December that he would include adult-use cannabis legalization in his 2025 budget, which is set to be released on Feb. 4.
In November, Stephen Caruso, the capitol reporter for Spotlight PA, posted on X: “Talked with House Majority Leader Matt Bradford (D., Montgomery) this afternoon. He said that there is ‘will in the House to move forward’ on marijuana legalization next session. ‘That is a new area that the Senate will be likely having to deal with in the very near future.’”
Supporters aren’t only from the Democrat side of the aisle either. Pennsylvania State Senator Dan Laughlin (R-49), who has been a champion of cannabis reform for years, recently told YourErie.com, “He wants to move forward with a full adult-use bill in a responsible fashion and regulate it so that non-users aren’t impacted.”
Budget shortfall a tipping point
The motivation to revisit full legalization could be purely financial. The Independent Fiscal Office projected that the state’s general fund will deplete its surplus in the fiscal year 2025-2026, resulting in a $3.4 billion deficit. This deficit is anticipated to grow to $6.7 billion by fiscal year 2029, which could be a huge incentive to increase the tax revenues from cannabis sales.
As of Nov. 1, 2024, the state collected $6.7 billion in cannabis tax revenue since the medical program became operational. Sales figures for 2024 have not been released yet, but they are on track to reach more than $1.5 billion. A 5% excise tax could peg those tax receipts at roughly $70 million.
$2 billion market?
As of Nov. 1, 2024, the state reported 32 operational growers/processors and 186 operational dispensaries. According to analysis from Viridian Capital Advisors this week, allowing those medical operators to sell recreational cannabis could quickly ramp up the adult-use program.
Viridian noted that, as a rule of thumb, total sales typically double when a medical market transitions to an adult-use market. If that were the case, Pennsylvania could propel itself into the top 10 markets in the country. And that could be a quick boost to the budget for the state.
Pennsylvania sales per adult have tended to be on the low side at $164 per person, based on calculations from Viridian Capital Advisors. However, that could accelerate with full legalization.
“Still, our projected $2.1 billion first-year sales gain is nothing to be scoffed about, accounting for about 6.6% of total projected 2024 revenues. And an additional 6.6% growth in industry revenues looks pretty good right now,” the firm wrote.
Howdy, neighbor
Another reason Pennsylvania lawmakers may want to get legalization across the finish line: its neighbors. “Folks are going across state borders in order to purchase it and paying taxes to those states. They should be keeping their money right here in Pennsylvania,” Shapiro said.
Pennsylvania has several neighbors with legal adult-use sales, including Delaware, Maryland, New Jersey, New York and Ohio. Its other neighbor, West Virginia, is a medical-only state. This limits the ability of Pennsylvania to get cross-border traffic, Viridian wrote.
“The flip side of this is that PA is likely to recapture most of the spending its residents are now doing in those neighboring adult rec states,” read the report.
The timing could be right for Pennsylvania, and the industry would certainly welcome a new market. Ohio and New York both turned in healthy sales in 2024 and are primed to continue solid growth. Adding the Keystone State would be a boost to many companies.