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 6267 NOTE PREPARED: Dec 18, 2023
BILL NUMBER: SB 107 BILL AMENDED:
SUBJECT: Cannabis Regulation.
FIRST AUTHOR: Sen. Niezgodski BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
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, 2024.
Explanation of State Expenditures: Summary - The bill could increase state costs by between $893,500
and $1.1 M in FY 2025 and between $493,500 and $663,500 in FY 2026 for the Cannabis Commission
(commission), the advisory committee, and the Department of State Revenue (DOR). The bill will have an
indeterminate impact on the number of commitments to the Department of Corrections (DOC) for felony
violations by adding new offenses, removing substances from the definitions of certain marijuana crimes,
and adding defenses to operating while intoxicated (OWI) offenses.
Additional Information - Marijuana is federally classified as a Schedule I controlled drug with no medically
indicated uses. Although 14 states have comprehensive medical marijuana programs and 24 states have
combined adult and medical use regulatory programs, future federal responses to state initiatives is unknown.
Cannabis Commission and Advisory Committee: In the initial years, the commission could incur annual state
expenditures between $480,000 and $650,000 to establish and operate the commission. After an
indeterminate implementation period, the commissions’s total costs will depend on the number of employees
needed to regulate cannabis as prescribed in the bill. The costs may be at least partially offset with fees
established by the commission. The cost of the advisory committee will depend on the budget established
by the Legislative Council. Recently, budgets for committees of similar size are estimated at $13,500 per
interim.
SB 107 1 The cost range was estimated using relevant staff positions in other state regulatory agencies and divisions
of state agencies with regulatory functions. The administrative costs are based on the Indiana Gaming
Commission’s overhead costs and estimated costs for new equipment. Total regulatory expenses are
determined by overall enforcement activities of the agency, the number of regulated entities, the complexity
of items to be regulated, and the number of facilities to be inspected. Ultimately, the number of regulated
entities under this bill may increase over time leading to increased expenditures by the commission in future
years.
The bill establishes a Cannabis Commission that may function similar to the Alcohol and Tobacco
Commission in regulating production and sale of cannabis. 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 and other fees. The commission is
comprised of four commissioners and an executive director who is a nonvoting member. 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 commission’s 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.
Cannabis Excise Tax: Implementing the Cannabis Excise Tax would require additional workload and
expenditures for the DOR outside of the agency’s routine administrative functions. The DOR’s workload and
expenses would also increase to administer the Sales Tax exemption for cannabis purchased by veterans. The
DOR would need to update computer software and create forms, guidance, and processes to implement the
bill’s tax provisions. [The DOR reports that the software-related costs to implement the Electronic Cigarette
Tax and Closed System Cartridge Tax were approximately $400,000.]
The DOR will experience additional costs and workload to implement the provisions outlined in the bill. The
additional funds and resources required could be supplied through existing staff and 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 overall impact of the changes in the bill on the number of offenders committed to
DOC facilities is potentially minor. While the number of offenders who may be committed to a DOC facility
as a result of the new felony offenses established in the bill is indeterminate, the number of offenders
committed to DOC facilities for marijuana dealing and possession each year is relatively small.
The bill adds several new felony offenses:
•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; and
•Knowingly, recklessly, or intentionally providing cannabis to a person under 21 years old resulting
in serious bodily injury or death, a Level 6 felony.
This bill removes marijuana, hash oil, and hashish from dealing, possessing, and paraphernalia offenses for
SB 107 2 which the criminal penalties are a Class A or Class B misdemeanor, a Class A infraction, or a Level 6 felony.
[Salvia remains an element of these crimes.] The bill could result in a minor reduction in the DOC offender
population with 26 offenders a year on average committed to a DOC facility between FY 2019 and FY 2023.
There were no commitments to DOC for possession of paraphernalia since FY 2018.
Commitments to DOC by Fiscal Year for
Marijuana Offenses
20192020202120222023
Possession20 2 1 0 4
Dealing 25 19 15 17 25
Total 45 21 16 17 29
The defenses to operating while intoxicated (OWI) and operating a motorboat intoxicated will have a little
impact on the number of people committed to a DOC facility. There are few OWI felony cases in which
persons have been convicted and sentenced for OWI causing either serious bodily injury or death in which
a controlled substance or a metabolite has been found in the person’s blood. There were a total of 17
offenders committed to the DOC for a Schedule I or II controlled substance in the blood between 2019 and
2023. [The record does not indicate which among the 250 Schedule I and II controlled substances were found
in the blood.]
The following table shows the sentencing ranges for Level 5 and 6 felonies.
MinimumAdvisoryMaximum
Level 51 years 3 years 6 years
Level 66 months 1 year30 months
The average expenditure to house an adult offender was $28,110 annually, or $76.96 daily, in FY 2023. (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 $4,456 annually, or
$12.21 daily, per prisoner. The marginal cost estimates are based on contractual agreements with food and
medical vendors and projections based on prior years for clothing and hygiene.
Explanation of State Revenues: Summary - Revenue to the state General Fund is estimated to increase
between $83.4 M and $163 M from Sales and Excise Taxes. Other state funds could increase between
$491,400 and $15.8 M, primarily due to permit fees. The addition of new offenses and defenses, as well as
decriminalization of marijuana, hash oil, and hashish in existing offenses, may reduce overall court fee
revenue and will have an indeterminate overall impact on the state General Fund and the Common School
Fund.
Additional Information -
Excise and Sales Taxes: Significant revenue from the Cannabis Excise Tax and Sales Tax could potentially
be collected beginning in FY 2025. 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.
SB 107 3
Estimated Revenue Upon Full Implementation
(in millions)
Revenue SourceLow EstimateHigh Estimate
Excise Tax $49.3 96.1
Sales Tax 34.5 67.3
Total $83.8 $163.4
All revenue from the Cannabis Excise Tax will be deposited in the Cannabis Regulation Fund. Sales Tax
revenue is deposited in the state General Fund (99.838%), Commuter Rail Service Fund (0.131%), and
Industrial Rail Service Fund (0.031%).
The bill establishes the Cannabis Excise Tax at a rate of 10% of the retail price of cannabis. The excise tax
revenue could potentially generate an estimated $49.3 M to $96.1 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 sales of cannabis. The sales tax
revenue increase could be approximately $34.5 M to $67.3 M in the first full year of sales.
The estimated potential sales revenue is based on retail sales of cannabis and revenue collections in states
that have implemented programs permitting and taxing both medical cannabis and adult-use cannabis,
adjusted for marijuana use percentage and population in each state and estimated cross-border sales. 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 2027, and the first full year of
collections may be FY 2028.
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. New programs such as Michigan or
Illinois received between $0.5 M and $1.3 M from active licenses. The Indiana Alcohol and Tobacco
Commission, a mature program, received an average $15.8 M from alcohol beverage permits between FY
2018 and FY 2022. The application and license fees reviewed included growers, processors, dispensaries,
and testing laboratories, transportation providers, as well as identification cards for patients and caregivers.
Individuals will be allowed to grow cannabis for personal use without permit fees. Nonrefundable
applications are required in an amount determined by the commission. Cannabis organization permit fees are
listed in the following table.
SB 107 4 Fee Type Permit Fee (refundable)
Integrated Permits $1 M
Grower Based on cannabis canopy square
footage, ranging from $30,00 to
$200,000
Processor $10,000
Transport Carrier $5,000
Retailer (269 allowed) $1,000
Cannabis grower permittees may have a license revoked or not renewed, and a civil penalty imposed of 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. 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 potential state General Fund revenue loss from court fees due to the
decriminalization of certain marijuana offenses is estimate to be $332,000 and for the State User Fee Fund
is $64,480. The estimated loss is based on 2023 data of 358 felony convictions and 2,854 misdemeanor
convictions for marijuana possession or dealing.
State General Fund Revenue Loss Estimates
Trial Courts
City and
Town Courts Total
Court Fees $61,404 $162,822 $224,226
Other Fees $24,854 $83,878 $108,732
Total $86,258 $246,700 $332,958
If fewer persons are found guilty of felonies and misdemeanors, revenue to the Common School Fund from
fines will be reduced by a maximum of $9.5 M. The table below shows the maximum potential loss based
on average convictions from FY 2019 to FY 2023 and assuming the maximum monetary penalty was given
in every case. The impact on OWI convictions due to changes in metabolite levels was not included in the
estimate.
SB 107 5 Maximum Revenue Loss from Marijuana Offense Convictions
Criminal Penalty
Average
Annual
Convictions
Maximum
Monetary
Penalty Total
Felony 369 $10,000 $ 3.7 M
Class A
Misdemeanor
659 5,000 3.3 M
Class B
Misdemeanor
2,475 1,000 2.5 M
Total 3,503 --- $9.5 M
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; and possession of mislabeled 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; and
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 infractions 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; and 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.
Cannabis Regulation Fund: The bill creates the Cannabis Regulation Fund to receive taxes, 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. Prosecuting attorneys in counties
with cannabis retail facilities and cities, towns, or counties with cannabis facilities will receive 15% each.
The commission may charge credit cards users for processing fees.
Explanation of Local Expenditures: Public Questions: Counties may hold public 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
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
SB 107 6 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 dealing
or 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 is estimated to be $51,000.
State Agencies Affected: Department of State Revenue; Department of Correction.
Local Agencies Affected: Courts with criminal jurisdiction; prosecuting attorneys.
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; U.S. Census Bureau, Annual Estimates of the Resident Population by Single Year of Age
and Sex; Indiana Supreme Court Abstracts of Judgment.
Fiscal Analyst: Karen Rossen, 317-234-2106, Qian Li, 317-232-9671, Mark Goodpaster, 317-232-9852.
SB 107 7