Ohio Legislative Snafu Freezes $20 Million Aimed At Cannabis-Friendly Cities

CLEVELAND, Ohio – Recreational marijuana sales have generated $55 million in taxes since sales began a year ago, but the Ohio cities that host the dispensaries still haven’t gotten a dime of it.

While municipalities that host dispensaries were initially promised 36% of those tax dollars, or roughly $20 million, they’ve been waiting for state lawmakers to sort through a legal issue that has held up the funds. Instead, state legislators kicked the can down the road, Cleveland.Com reports.

“They’ve been trying to play games with this the whole time,” said Kent Scarrett, director of the Ohio Municipal League, an organization that represents municipal governments.

The tax issue starts with Issue 2, the ballot-initiative in November 2023 where voters chose to legalize the sale of recreational marijuana. That law included a 10% excise tax on weed sales that would be divided between combatting substance abuse, a “social equity and jobs fund” and the municipalities that hosted dispensaries.

But Issue 2 had a defect; it lacked appropriations, or the legal language that allows the state government to send dollars to city governments. So, when recreational marijuana sales started in August 2024, the tax dollars went into a state bank account instead of local governments.

The final budget appears, on face value, to side with local governments, and it earmarks 36% of marijuana tax dollars for municipalities and 64% for the state’s general fund.

But once again, lawmakers didn’t include appropriations, the legal language they need to send the money to cities. Scarrett said local governments are again waiting for a fix.

“The legislators continue to not implement Issue 2 the way voters supported,” Scarrett said.

Ohio’s Office of Budget and Management confirmed that no money will be sent to local governments until those appropriations are made.

The state’s general fund, however, can start receiving funds immediately. Though state legislators have not decided how to spend the money.

House Finance Committee Chair Brian Stewart, in an interview with Gongwer, acknowledged that there is a defect in the state law when it comes to marijuana taxes.

He said lawmakers chose to codify the 36% for municipalities, while planning to come back after legislators’ summer recess to iron out the issue.

Issue 2 allowed local officials to choose whether to allow marijuana sales in their borders, or they could ban it entirely.

Scarrett said those extra tax dollars were an incentive for municipalities to say yes. Now these dispensaries are open, but local governments aren’t seeing the benefit.

During the state budgeting process lawmakers pitched changing how marijuana taxes were distributed. Some lawmakers wanted to reduce the amount that municipalities receive. Gov. Mike DeWine wanted to redirect the money entirely to other needs, like local jails and police training.