Ready or Not

Adult cannabis sales kick off in New Mexico with hiccups and optimism

March 30, 2022

7:04 AM

Anson Stevens-Bollen

Slowing down is more typically associated with the conventional wisdom on cannabis use than speeding up, yet New Mexico’s unfolding cannabis industry has for the last year been on a fast track.

Gov. Michelle Lujan Grisham signed the Cannabis Regulation Act last April, a legal prescription for broadening the state’s medical program into adult use, or what are commonly referred to as “recreational sales.” The law allows for regulation of an unlimited number of producers, retailers and other new industry businesses, including transitioning former medical-only producers to the wider market.

And the newly established Cannabis Control Division had just under a year to roll it all out—an optimistic timeline that has led to hasty rulemaking on topics from plant counts to safety testing, delays for financial help promised to small startups and other hiccups.

Division Director Kristen Thomson started her job seven months after the law passed, in November. While there’s been a lot of focus on developing rules during the run-up to the first day of new sales, Thomson says the landscape will change significantly.

courtesy photo

Cannabis Control Division Director Kristen Thomson.

“There was an existing industry, obviously in medical, and we believe that the industry on April 1 will probably look a lot like the industry now,” she tells SFR in an interview one week before adult-use sales were set to begin, “but what is more exciting is what it looks like nine months from now or seven months from now when those microbusinesses start to get up and running, have the funding, have those craft plants that are in the ground right now being a part of the makeup.”

The Legislature declined to grant the division’s $6.5 million funding request this year, instead awarding $5.5 million. And that’s compared to an estimate during the legislative session that pegged annual recurring costs at about $7.6 million. So while early hopes of a bigger team have been dashed for now, Thomson says there’s enough money. A rapid-hire event in mid-March netted 10 new workers who are filling all of the authorized positions.

“While our full budget was not granted we do believe that we have the appropriate amount of staffing, at least at the outset of regulation, to have a responsible program up and running through the next few months,” she says. “That takes care of the vacancies for right now. And obviously as regulation rolls out we will be able to better assess our needs moving forward.”

Tax revenue from sales will also factor into future funding plans, with estimates of about $15.5 million in combined excise and gross receipts revenue growing to about $68 million in fiscal year 2024 for local and state governments. Lawmakers have been reluctant to earmark projected revenue but have discussed how it can support education for users as well as operating the division.

Ben Lewinger, head of the New Mexico Cannabis Chamber of Commerce, says the division is still understaffed.

“I don’t blame the CCD,” Lewinger tells SFR. “Undoing prohibition is really hard and we’ve pushed what could be an overly aggressive timeline, in hindsight. There are lots of stories of people who have everything ready and can’t participate in the industry yet.”

One example is how the state law made provisions to encourage equity by lowering fees for small businesses dubbed microproducers, but plant-count limits for those new license holders limit profitability and a pool of state money available for loans wasn’t set up until early this year.

Jacob White, head of cultivation with R. Greenleaf, says his company is ready for the transition to adult use even as it withholds at least 20% of product for existing medical patients. He’s doubtful about widely circulated theories that the state’s producers will run out of cannabis under a crush of new customers. White’s business has been selling wholesale to dispensaries all over the state since 2012 and recently opened a Santa Fe storefront.

“Will we sell out? That would be a great problem to have, but I know that we will be ensuring that our medical patients don’t pay that price,” White says. “It’s going to be a really interesting month in April to see what happens on the demand side.”

Moving from regulation by the Department of Health to the Cannabis Control Division (as part of the Regulation and Licensing Department) already benefits producers, he says, and he’s optimistic about evolution.

“What we have now is a good start,” White says. “It’s easy to say, ‘This isn’t right. They could have done better,’ but with the timeline they were given, I think they have done a pretty good job of putting rules together and I think they have been pretty clear they will be working with the industry to perfect over time.”

As Lewinger notes, however, many who hoped to be in on the ground floor aren’t there yet. The division has approved 239 new licenses since it began accepting applications in the fall. New applications arrive daily, she says, and more than 269 are pending approval while businesses obtain missing pieces such as background checks and water rights documents.

Was the rollout timeline too aggressive?

“It needed to be aggressive,” White tells SFR. “We have recognized that this should be legal—cannabis—and keeping it illegal longer is not necessarily a great approach. We are going to figure it out. The safeguards that are put in place are good and they will improve. I am glad it was not less time…I think if we took more time, would there have been an ability to make some adjustments that would have been better for the industry? Possibly. But there was a goal put in place and so it seems like the RLD has met it.”

artdirector@sfreporter.com

Read more of the Cannabis Guide: