LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 7063 NOTE PREPARED: Jan 8, 2022
BILL NUMBER: HB 1311 BILL AMENDED:
SUBJECT: Cannabis Legalization.
FIRST AUTHOR: Rep. Ziemke BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
XFEDERAL
Summary of Legislation: The bill establishes a procedure for the lawful production and sale of cannabis
in Indiana. It makes conforming amendments.
Effective Date: July 1, 2022.
Explanation of State Expenditures: Summary - Cannabis Commission: In the initial years, the bill is
estimated to increase annual state General Fund expenditures between $608,000 and $850,000 for the
Cannabis Commission. After an indeterminate implementation period, the commission’s total costs may be
similar to the Alcohol and Tobacco Commission (ATC) with $10 M annual expenditures. The commission’s
expenditures will depend on the number of employees needed to regulate cannabis with support personnel,
a prosecutor’s office, and enforcement officers. The costs will be offset with fees and penalties established
by the commission. The bill also makes an appropriation to the commission from the General Fund for the
implementation and administration of the bill’s provisions.
The commission will operate a statewide monitoring system through a service provider selected by bid to
track sales, seeds, and third party inventory data. [The system expense may be offset with plant tag purchases
or other fees.]
Cannabis Excise Tax: Implementing the Cannabis Excise Tax would require additional workload and
expenditures for the Department of State Revenue (DOR) outside of the agency’s routine administrative
functions. The DOR would need to update computer software and create forms, guidance, and processes to
implement the bill’s provisions regarding the new tax. The bill also requires the DOR to adopt rules to
implement the tax. The additional funds and resources required could be supplied through existing staff and
HB 1311 1 resources currently being used in another program or with new appropriations. Ultimately, the source of
funds and resources required to satisfy the requirements of this bill will depend on legislative and
administrative actions.
Penalty Provisions: The net effect of criminal offenses created or eliminated by this bill would have little
to no effect on the Department of Correction (DOC) offender population. Five or fewer persons have been
sentenced to DOC for possessing marijuana in any given year between FY 2017 and FY 2021. Persons
convicted and sentenced for felony possession of marijuana would either be sentenced for a misdemeanor
or not be sentenced at all.
Marijuana is federally classified as a Schedule I controlled drug with no medically indicated uses. Although
17 states have comprehensive medical marijuana programs and 19 states have combined adult and medical
use regulatory programs, future federal responses to state initiatives is unknown.
Additional Information - Cannabis Commission: The Cannabis Commission is comprised of five
commissioners appointed by the Governor and approved by the Legislature and an executive director. Each
commissioner is entitled to salary per diem and reimbursement of traveling and other expenses. The
commissioners must execute surety bonds of $10,000 and an oath of office. The commission may employ
all necessary employees, determine their duties, and fix their salaries with the approval of the State Budget
Agency.
The agency expenditure estimate is based on the Alcohol and Tobacco Commission (ATC), which has five
commissioners, an executive secretary, and average annual expenditures for administration and internal
services of about $608,000 between FY 2015 and FY 2020. The general counsel and lieutenants, captains,
and corporals of the excise police have combined average of $200,000 in salary expense. [Internal services
include databases, software, human resources services, and telephone expenses. Commissioner and executive
personnel salaries are not included in these expenses. Additionally, the ATC has 10 executive and
commission staff, 21 support and accounting staff, and 85 excise police with total salary and benefits expense
of $8.5 M.]
Cannabis Commission Prosecutor and Superintendent of Enforcement Officers: The prosecutor may hire
clerical staff with the consent of the commission to carry out duties concerning prosecution of cannabis law
violations and to assist local prosecutors with cannabis law violation investigations and prosecutions. The
prosecutor must execute a $5,000 surety bond and may administer oaths of office. The superintendent of
enforcement officers will have 10 years in active law enforcement and at least 5 years in law enforcement
management. Enforcement officers will execute surety bonds of $1,000.
Penalty Provisions: This bill removes the following offenses:
• Dealing in marijuana, hash oil, or hashish as Class A misdemeanors and as Level 5 and 6 felonies.
• Possessing marijuana, hash oil, or hashish as Class A and B misdemeanors and as Level 6 felonies.
• Paraphernalia related offenses as Class A infractions, Class A misdemeanors, and Level 6 felonies.
It adds the following new felonies:
• Dealing in mislabeled low THC hemp extract, a Level 5 felony.
• Knowingly or intentionally growing or selling cannabis without a permit, a Level 6 felony.
• Retail sales violations, a Level 6 felony.
• Knowingly, recklessly, or intentionally providing cannabis to a person under 21 years old resulting
in serious bodily injury or death, a Level 6 felony.
HB 1311 2 The average expenditure to house an adult offender was $24,506 annually, or $67 daily, in FY 2021. (This
does not include the cost of new construction.) If offenders can be housed in existing facilities with no
additional staff, the marginal cost for medical care, food, and clothing is approximately $4,333 annually, or
$11.67 daily, per prisoner. These marginal cost estimates are based on contractual agreements with food and
medical vendors and projections based on prior years for clothing and hygiene. The estimated average cost
of housing a juvenile in a state juvenile facility was $133,799, or $366.32 daily, in FY 2021. The marginal
cost for juvenile facilities was $4,891 annually or $13.40 daily.
Explanation of State Revenues: Summary - Excise and Sales Taxes: Significant amounts of revenue from
the Cannabis Excise Tax and Sales Tax could potentially be collected when legal retail sales begin. However,
the timing of revenue collections will depend on the length of time necessary to implement the cannabis
regulatory program. The following table summarizes the estimated revenue that could be collected when the
program is fully implemented.
Revenue Source Fund
Estimated Revenue upon
Full Implementation
Cannabis Excise Tax Cannabis Regulation Fund $14.5 M to $36.7 M
Sales Tax General Fund $10.1 M to $25.7 M
Total $24.6 M to $62.4 M
All revenue from the Cannabis Excise Tax will be deposited in the Cannabis Regulation Fund. Sales Tax
revenue is deposited in the General Fund (99.838%), Commuter Rail Service Fund (0.131%), and Industrial
Rail Service Fund (0.031%).
Cannabis Regulation Fund: The bill creates the Cannabis Regulation Fund to receive fees and penalty
revenue. Money remaining in the fund at the end of the year is distributed among state and local entities. If
money remains in the fund at the end of the year, the State Police will receive 25% of the remaining funds,
and the Department of Health will receive 25% to distribute to the Division of Mental Health and Addiction
(in the Family and Social Services Administration) and 20% to provide a youth cannabis abuse prevention
and education program in consultation with the Department of Education. The commission will allow use
of credit cards to pay fees and may charge processing fees of its permittees.
Surety Bond: A permit applicant must post a $15,000 surety bond payable to the state, and the commission
may recover between $250 and $500 for violations, or up to the full amount for failure to pay taxes or fees.
Penalty Provisions: The estimated loss to the state General Fund from removing marijuana, hash oil, and
hashish from the list of illegal drugs would range between $146,000 and $173,000. New penalty revenue may
result from the addition of misdemeanors and infractions. Additionally, a court may impose a fine of $1,000
to $25,000 for failing to remediate a public nuisance.
Additional Information - Excise and Sales Taxes: The bill establishes the Cannabis Excise Tax at a rate of
10% of the retail price of cannabis. This tax could potentially generate an estimated $14.5 M to $36.7 M in
the first full year of regulated cannabis sales. Before the cannabis program is fully implemented, a lesser but
potentially significant amount of revenue could be collected. The 7% state Sales Tax would also apply to
HB 1311 3 sales of cannabis. The revenue increase could be approximately $10.1 M to $25.7 M in the first full year of
sales.
The estimated potential tax revenue is based on retail sales of cannabis and revenue collections in states that
have implemented similar programs, adjusted for tax rate, population, and prevalence of cannabis use. The
estimate also assumes that retailers in Indiana will make fewer sales to non-residents than dispensaries and
retailers in other states. A review of 21 states found that the average time to implement a medical marijuana
program is 29 months. If Indiana’s implementation time is similar, revenue collection may begin in FY 2025,
and the first full year of collections may be FY 2026.
Permits, Fees, and Fines: Permit fees and civil penalties imposed by the commission will increase revenue
to the Cannabis Regulation Fund by a potentially significant amount. The bill creates permits for growers,
processors, retailers, safety compliance facilities, carriers and transporters, and up to nine integrated
permittees that combine grower, processor, and retailer permits. [Once permits are established, fee and fine
revenue may be similar to the ATC. In FY 2021, the ATC had $17 M in alcoholic beverage and tobacco
permit fee revenue and $470,890 in fine revenue.]
Individuals will be allowed to grow cannabis for personal use without permit fees. Commercial growers will
pay permit fees based on the surface area utilized to grow cannabis plants, with fees ranging from $15,000
to $100,000. Growers permits with a surface area greater than 15,000 square feet are limited to four. The bill
is silent on the permit fees for other types of permits and plant tags established in the bill. There may be no
more than 269 retail permits statewide, and within a county the number may not exceed 1 per 25,000
residents. One business may not hold more than 25% of all issued permits.
Cannabis grower permittees may be have a license revoked or not renewed and a civil penalty imposed up
to $2,500 for violation of a permit requirement, permit term or condition, or a rule related to the growing of
cannabis. Additionally, the commission may assess a civil penalty for violations of the law by any permittee
up to $50,000.
Penalty Provisions: The bill adds the following misdemeanors and infractions:
• Class A misdemeanors for transporting cannabis in an unidentified vehicle; providing cannabis to
a person less than 21 years old with a prior conviction; permittees who violate sections; knowing or
intentionally possessing marijuana, hash oil, hashish, or salvia falsely identified as low THC hemp
extract.
• Class B misdemeanors for providing cannabis to a person less than 21 years old; allowing or
enabling a person less than 21 years old to use cannabis with a prior conviction or adjudication;
knowingly and intentionally employing a person under 21 years old.
• Class A infraction for county vendors spending money to promote a public question.
• Class C infraction for allowing or enabling a person less than 21 years old to use cannabis;
knowingly or intentionally aiding, inducing, or causing a person less than 21 years old to unlawfully
possess cannabis; a person under 21 years old entering the premises of a cannabis retailer; a
permittee allowing or a parent, guardian, trustee, or other person with custody of a child under 18
years old taking a child to a cannabis retailer or other location where cannabis is sold.
Explanation of Local Expenditures: Counties may hold questions on permitting cannabis retailers within
the county either during a regular primary or general election or through a special election.
Penalty Provisions: These provisions would likely reduce the costs to counties for public defense expenses
HB 1311 4 and the pre and post trial jail confinement for persons who are charged with possessing or dealing marijuana
as either misdemeanors or felonies. The bill would also reduce the supervisory burden on community
corrections agencies and probation departments.
For persons who were sentenced for marijuana possession as a Level 6 felony, about 85% were confined in
a county jail pretrial. In addition, 48% of these persons were confined in a county jail after trial for an
average of 121 days, and 86% were supervised by a community corrections agency, a probation department,
or both. No similar information was available about persons convicted and sentenced for marijuana
possession as a misdemeanor.
Explanation of Local Revenues: Cannabis Regulation Fund: The bill will distribute 15% of money
remaining in the Cannabis Regulation Fund at the end of the year to county prosecuting attorneys where retail
facilities are allowed and 15% to cities, towns, and counties that have cannabis growing, processing, or retail
facilities.
Penalty Provisions: Revenue loss from removing marijuana, hash oil, and hashish from the list of illegal
drugs would range between $63,000 and $95,000.
State Agencies Affected: Department of Correction
Local Agencies Affected: Courts with criminal jurisdiction; prosecuting attorneys; county sheriffs
Information Sources: State program websites and contacts available from LSA upon request. U.S.
Substance Abuse and Mental Health Services Administration, National Survey on Drug Use and Health,
December 2020.
Fiscal Analyst: Karen Rossen, 317-234-2106, Lauren Tanselle, 317-232-9586, Mark Goodpaster,
317-232-9852.
HB 1311 5