Sales tax revenue, full costs unclear if North Dakota voters legalize recreational marijuana

BISMARCK, ND — North Dakota lawmakers struggled Friday to determine the full financial impact of legalizing recreational marijuana, a factor voters will look at when making a decision voting measure on this topic in November.

The key to the discussion between a high-level legislative panel, the state’s top tax official and the leader of the voting initiative were what the sales tax revenues were to estimate and what the full costs of legalization would be, such as social impacts and items that state agencies expect to request but that the measure does not require. Voters will see the financial estimates on their ballots.

Lawmakers looked to state Tax Commissioner Brian Kroshus, who said sales tax revenues “may become speculative,” but he gave an estimate of $7.281 million every two years based on a 5% sales tax rate.

North Dakota budgets on a biennial basis. The measure does not set a tax rate. That is up to the Legislature.

Measure Leader Steve Bakken presented his group’s estimates for tax revenues, based on data from six other states extrapolated for North Dakota. He cited annual estimates of $19.46 million as the average and $7.65 million as the low.

Ultimately, the panel approved estimates of $10.3 million in revenue, $8.3 million in expenses and an “unspecified amount” of other costs related to “behavioral health and social impact.” The revenue estimate includes Kroshus’s figure.

Some expenses caught the attention of lawmakers, such as a one-time $4 million expenditure estimated by the state police to purchase saliva screening devices over the next two years.

Highway Patrol Maj. Tom Iverson said the agency expected the devices to be requested because officers expected to encounter more marijuana use on the road if the measure were to pass.

The Highway Patrol is testing about a dozen of the devices across the state, Iverson said. The devices are similar to a preliminary breath test for alcohol, he said.

Republican Sen. Kyle Davison called the $4 million “just overkill on the budget.” At one point, Republican Rep. Ben Koppelman said, “It feels like we’re packaging this to be negative, and I’m not advocating that, but we have to be honest.”

Republican Sen. Jerry Klein pointed out that people have likely already made up their minds about the measure, and that income is likely not a factor for them.

Twenty-four states have legalized recreational marijuana, most recently Ohio last year. Other states such as Florida And South Dakota will vote on the issue this fall. North Dakota voters rejected previous measures in 2018 and 2022.

In addition, the panel approved an estimated cost of $3.15 billion to the state over two years, should voters approve a bill. measure to abolish local real estate taxes based on assessed value. The unit of measurement would require the state to generate replacement revenues for local governments.