Social equity” is a frequently used term that isn’t always defined the same way. Because I, for one, welcome our new AI overlords, an AI-generated definition posits that “social equity is the principle of fairness and justice in how society allocates resources and opportunities. It aims to ensure that everyone has access to the same outcomes, regardless of their background or circumstances.”
Social equity in cannabis takes into account that the War on Drugs focused its efforts on communities of color, resulting in over policing and disproportionate incarceration of Blacks and POC for producing, distributing and using cannabis. How disproportionate? In 2020, the ACLU published a report reminding us that: “Despite roughly equal usage rates, Blacks are 3.73 times more likely than whites to be arrested for marijuana.”
As numerous states have enacted recreational cannabis programs, many have sought to address this inequity by providing opportunities for members of these marginalized communities to enter the cannabis industry. Last year, the University of Minnesota’s The Gender Policy Report explained that these efforts focus on the “expungement of past cannabis convictions, licensing and employment preferences, and using tax revenue for equity.”
A 2021 white paper by Leafly states that “…while Blacks make up 14% of the U.S. population, only 2% of the licensed cannabis businesses are owned by Blacks.” With the legal cannabis industry in the U.S. valued at $32 billion, changing those numbers is the goal. So how are states, including Oregon, faring with that task?
It’s a mixed bag.
First, the good: Expungements and pardons of cannabis arrests have surpassed 2.5 million, which is great news for at least 2.5 million people. Many states have performed wholesale expungements. (In 2022, former-Oregon Gov. Kate Brown announced plans to expunge over 47,000 cannabis arrests, and forgive over $14 million in fees and fines.)
Not so good? The manner and results of social equity cannabis programs in the licensing of businesses. Last week, The New York Times ran a story that showed just how bad good intentions can end up.
New York’s Cannabis Social Equity Investment Fund started as a plan to “…underwrite the first 150 licensed dispensaries with $50 million of state money and $150 million raised from investors, then pass the cost on to retailers in the form of loans.”
The Legislature approved $50 million in the spring of 2022, but the state missed two deadlines to line up the $150 million from private investors, finally partnering up with private equity firm Chicago Atlantic.
The investment agreement heavily favored Chicago Atlantic, promising them a 15% return on their initial $50 million investment. Per the Times: “The loans to retailers carry a 13% interest rate over 10 years… limiting how much revenue can be spent on costs like rent, payroll and goods for sale. The fund can tack on an unlimited amount of administrative fees, and most licensees are required to pay interest on the full term of the loan even if they pay it off early.”
The fund also required owners to use the services of preselected contractors to build out the dispensaries, leaving owners with little to no say in design or any information as to the design and construction costs. The prices charged were egregiously high — in one case the company building a dispensary subcontracted the work out, then charged six times the amount paid to the subcontractor.
A mere 22 dispensaries have opened through the program, and so many of the owners have spoken of being forced into “debt traps,” as well as defaulting on multi-million dollar loans, that the state’s inspector general’s office has opened an investigation.
Not all programs have been failures. Perhaps the best example is Illinois, which has made nearly $28 million in fully forgivable loans at 4% interest. Other states, such as Minnesota, have been hobbled by “zone flooders or predatory applicants,” forcing the system to restart the licensing application process. In Ohio, lawmakers have proposed legislation to eliminate the social equity component of the voter passed initiative altogether.
Federal efforts to rollback and eliminate DEI programs don’t bode well for social equity in many things. Here’s hoping social equity remains in cannabis, albeit with greater care.
H/T: www.bendsource.com
You can view the whole article at this link Why Is Social Equity in Cannabis Such a Failure?
