Posted by: Josh Lehner | December 29, 2014

2015 Outlook: Measure 91

One of the more interesting and yet unknowable questions in the year ahead is what the impact of Measure 91 will be for Oregon. The basics of the vote itself and the direct implications for Oregonians have been well covered. However, the broader and bigger impact on the state’s economy and public resources are not known. The revenue estimates are fairly modest in size — relative to the size of the state budget — and the track record of such estimates in Colorado and Washington are somewhat mixed. That does not mean the impact won’t be felt, as it will. Bringing a largely illegal activity into the legal marketplace will have many benefits including the tax revenue but also additional jobs that will now have legal protections as employees can be covered under the unemployment insurance system for example, plus new (legal) businesses, operations, the regional impact in places like Southern Oregon and the like. Of course, as with all vices, not every aspect is positive and there are some downside risks associated with legalization, even if the research consensus is that marijuana is a safer alternative than other options.

However, from an economist’s perspective the two most interesting aspects are consumer preferences and potentially problematic market distortions. As for consumer tastes, what is the substitution effect of legal marijuana and how will it impact, say, alcohol and tobacco sales. Are these products purely substitutes? To what degree are they complements? University of Oregon professor Ben Hansen gave a very good and informative presentation at the Oregon Economic Forum a couple months back. Among other items, he discussed how not only are other types of products substitutes for marijuana, but how the various markets for marijuana itself can be substitutes, these include both the medical and recreational markets but also personal cultivation.

Along these lines, one interesting but also potentially troubling development is the differential between Colorado’s medical and recreational marijuana markets, due to different tax structures. In essence, due to higher taxes on recreational marijuana, it is less expensive to buy medical marijuana in Colorado. As such the state has not seen a big switch into the recreational market from medical patients and even seen medical sales increase. However, Colorado has seen a switch from the black market into the legal market (be it medical or recreational). That’s the big win from both an economic and societal point of view, bringing the illegal market into the legal one.

However these market distortions between medical and recreational can be problematic not only in terms of rules, costs and regulations but also in terms of achieving the desired outcomes or goals. Consumers will likely figure out the best option for themselves (below is a hypothetical example using Oregon’s medical application fees and Colorado’s price differentials) however that may not be the best outcome for the state overall. That’s why the work the OLCC is currently undergoing is so important — to figure out what those outcomes should be and how to set up the rules and marketplace to best achieve them.

M91Breakeven

Lastly, one additional tidbit that was somewhat surprising — to me at least — was the overall lack of clear connection between the voting results of Measure 91 and the local medical marijuana population already in the state. Besides the obvious that cultural or societal preferences and ideology has swung significantly in favor of marijuana legalization, regardless of the local medical population, there are a few additional possibilities for these results. One, particularly for a place like Josephine County with a very large OMMP patient population and yet only voted 50-50, could be that the largest medical marijuana market participants did not want to rock the boat, so to speak. They may be relatively content with the existing market and not wanting to shift the landscape for something unknown. Another possibility may be that these two populations aren’t the same. The voting population may be significantly different than the medical marijuana population. Another may be that while OMMP patients are equivalent to about 2 percent of the adult population in Oregon, that may not be a large enough share to influence overall voting patterns. Regardless, these results are interesting to see and the Oregonian has a nice interactive map of voting results across the state, even down to the precinct level in some places.

M91CountyVote

Stay tuned for a few more posts on the 2015 outlook in the coming weeks, plus a new economic recovery scoreboard that tracks progress across a whole host of measures.


Our office has received a number of comments, questions and requests about the impact of Measure 91 in Oregon, so I thought I would write down a few thoughts and concerns from our perspective heading into the new year. To be clear, so far our office has not been involved in the process at all. As with all initial revenue estimates, those are done by the Legislative Revenue Office (plus there were outside estimates as well) and since the Measure 91 revenues do not go to the General Fund (which is largely our focus) we have not been involved at this point.


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