LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6889 NOTE PREPARED: Dec 23, 2024
BILL NUMBER: HB 1654 BILL AMENDED:
SUBJECT: Legalization of Cannabis.
FIRST AUTHOR: Rep. Payne BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: The bill legalizes the sale and use of cannabis by a person at least 18 years of age.
It requires the Indiana Department of Health to establish a program to issue a medical cannabis identification
card to a patient whose physician has recommended cannabis to treat a medical condition. It also permits the
sale of cannabis to a person less than 18 years of age if the person has been issued a medical cannabis
identification card, and exempts purchases by a medical cannabis cardholder from sales tax.
The bill makes conforming amendments.
Effective Date: July 1, 2025.
Explanation of State Expenditures: Summary - The IDOH may have a one-time charge of about $1.2 M
to establish a medical cannabis identification card program and complete the related ongoing workload. The
overall impact of the bill on the number of offenders committed to Department of Correction (DOC) facilities
for felony violations is potentially minor as it removes marijuana from the list of controlled substances
(eliminating offenses for paraphernalia, possession, and dealing), and changes the impairment standards for
operating while intoxicated (OWI) offenses.
Sales Tax Collections: 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.
Indiana Department of Health (IDOH): The IDOH will have increased workload and cost to develop rules
and issue photo identification cards. As an example, the Bureau of Motor Vehicles had a one-time
expenditure of $1.2 M to issue a new type of license with photo.
Penalty Provisions: The bill removes marijuana from the list of Schedule I controlled substances and from
HB 1654 1 paraphernalia, possession, and dealing offenses. Hash oil and hashish are still included in those offenses. It
changes the defined term from “marijuana” to “cannabis.” The overall impact of the bill on the number of
offenders committed to DOC facilities is potentially minor since number of offenders committed to DOC
facilities for marijuana dealing and possession each year averaged only 27 individuals between FY 2020 and
FY 2024. The majority of cases where a marijuana charge is listed as the maximum convicted charge are
disposed as misdemeanors.
Explanation of State Revenues: Summary - Revenue to the state General Fund could increase by between
$29.3 M and $64.2 M in the first full year of sales. However, state General Fund and Common School Fund
revenue from court fees, infraction judgements, and criminal fines may have an overall decrease of $9.5 M
per year, primarily due to the reduction in monetary penalties from marijuana conviction.
Additional Information -
Retail Sales Taxes: Significant revenue from Sales Tax on cannabis could potentially be collected beginning
in FY 2026. The 7% state Sales Tax would apply to sales of cannabis, with an exemption for cannabis
purchased by a medical cannabis cardholder. The Sales Tax revenue increase could be approximately $29.3
M to $64.2 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. 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%).
Controlled Substance Excise Tax (CSET) Repeal: CSET collections are $4,253 per year on average between
FY 2021 and FY 2024, and the revenue is deposited in the Controlled Substance Tax Fund. The tax is
collected on the delivery, possession, or manufacture of controlled substances in violation of state or federal
law, and the money in the CSET Fund is used to cover administrative and enforcement costs of the
Department of State Revenue.
Penalty Provisions: The bill could potentially reduce revenue to the state General Fund (from court fees and
infraction judgments), the Common School Fund (from criminal fines), and various other state and local drug
programs (for drug-related fees). The bill removes marijuana from paraphernalia, posession, and dealing
offenses and requires a minimum concentration of THC in a person’s blood for the person to be violation
of operating a vehicle, motorboat, or other equipment while under the influence of THC. Hash oil, hashish,
and salvia remain part of possession and dealing offenses.
These provisions will lower the number of these charges, but not necessarily the number of cases. The
majority of cases listing a marijuana offense include multiple other higher level charges. Therefore, many
of these cases may still exist and be disposed for other offenses. The following linked document describes
the fees and distribution of the revenue: Court fees imposed in criminal, juvenile, and civil violation cases.
[The Class A misdemeanor (furnishing cannabis to minor) and a Class B misdemeanor (possession of
cannabis by a minor) established by the bill reflect current penalties for knowingly or intentionally
encouraging or causing a minor to commit a deliquent act and for possession of marijuana by any person.
It is unknown whether the legalization of marijuana would impact the number of these charges. The bill also
establishes a defense if the minor has been issued a valid medical cannabis identification card.]
Explanation of Local Expenditures: Marijuana Eradication Program: The bill eliminates the Marijuana
HB 1654 2 Eradication Program, which is operated by county weed control boards to eliminate and destroy wild
marijuana plants. In FY 2023, Decatur County reported $7,494 in expenditures from the fund and
Washington County reported $210 of expense.
Penalty Provisions: Removing marijuana from certain offenses and adding the requirement regarding a
minimum THC concentration in a person’s blood for operating a vehicle while intoxicated offenses could
reduce local jail populations. The bill could also reduce costs to counties for public defense expenses and
the pre- and post-trial jail confinement for persons who are charged with marijuana offenses, as well as
reduce the supervisory burden on community corrections agencies and probation departments. However,
cases that currently include these offenses may also include other offenses which may still be prosecuted.
Explanation of Local Revenues: Marijuana Eradication Fees: The bill eliminates the Marijuana
Eradication fee, an optional fee that may be imposed by the court. The fee is deposited in the county court
user fee fund and transferred by the county fiscal body to the Marijuana Eradication fund. Six counties,
Decatur, Delaware, Jasper, Pike, Spencer, and Washington reported revenues to the funds ranging from $50
to $22,990.
Penalty Provisions: Local governments could receive less revenue from court fees and fees for drug-related
convictions if there are fewer criminal prosecutions. The following linked document describes the fees and
distribution of the revenue: Court fees imposed in criminal, juvenile, and civil violation cases.
State Agencies Affected: Indiana Department of Health, Indiana Department of Revenue, Department of
Correction.
Local Agencies Affected: Trial courts, local law enforcement agencies.
Information Sources: U.S. Substance Abuse and Mental Health Services Administration;
National Survey on Drug Use and Health, December 2020;
Budget data for Indiana Gaming Commission and Alcohol and Tobacco Commission;
U.S. Census Bureau, Annual Estimates of the Resident Population by Single Year of Age and Sex; Indiana
Trial Court Fee Manual;
Odyssey Case Management System maintained by the Indiana Supreme Court, Office of Judicial
Administration;
Indiana Judicial Service Report: Judicial Year in Review-
https://www.in.gov/courts/iocs/statistics/trial-probation;
https://www.in.gov/courts/iocs/files/pubs-trial-court-courtmgmt-expungement-detailed.pdf;
2024 Indiana Weighted Caseload Study;
State program websites and contacts available from LSA upon request.Indiana Supreme Court, Indiana Trial
Court Fee Manual, Gateway for Local Government.
Fiscal Analyst: Karen Rossen, 317-234-2106; Qian Li, 317-232-967; Heather Puletz, 317-234-9484.
HB 1654 3