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

BISMARCK, N.D. -- North Dakota lawmakers on Friday struggled to pin down the full financial impact of legalizing recreational marijuana, a factor voters will see when they decide a ballot measure on the issue this November.

Key in the discussion between a top legislative panel, the state's top tax official and the leader of the ballot initiative were what sales tax revenue to estimate and what the full costs of legalization would be, such as social impacts and items state agencies expect to request but the measure doesn't require. Voters will see the financial estimates on their ballots.

Lawmakers looked to state Tax Commissioner Brian Kroshus, who said the sales tax revenue “does become speculative," but offered an estimate of $7.281 million every two years based on a 5% sales tax rate.

North Dakota budgets on a two-year basis. The measure doesn't set a tax rate. That would be up to the Legislature.

Measure leader Steve Bakken presented his group's estimates for tax revenue, based on data from six other states extrapolated for North Dakota. He cited annual estimates of $19.46 million as an average and $7.65 million as a low.

Ultimately, the panel approved estimates of $10.3 million in revenue, $8.3 million in expenditures and an “undetermined amount” of other costs related to “behavioral health and social impacts.” The revenue estimate includes Kroshus' number.

Some expenditures drew lawmakers' scrutiny, such as a one-time $4 million estimated by the state Highway Patrol for oral fluid screening devices to be purchased in the next two-year budget period.

Highway Patrol Maj. Tom Iverson said the agency would anticipate requesting the devices because of an expectation that officers would encounter marijuana usage more often on the roadway, 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 fiscal note." At one point, Republican Rep. Ben Koppelman said, “It feels like we're packing this to be negative, and I'm not a proponent of this, but we need to be fair.”

Republican Sen. Jerry Klein pointed out that people have likely made up their mind on the measure already, and that revenue 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.

Additionally, the panel approved an estimated $3.15 billion two-year cost for the state should voters pass a measure to do away with local property taxes based on assessed value. The measure would require the state to come up with replacement revenue for local governments.