Just 5% of Michigan cannabis business owners are Black, Latino. Panel wants to increase diversity.

Sarah Lehr

| Lansing State Journal

LANSING — Black and Latino business owners make up just 5% of those licensed by the state in Michigan’s lucrative adult-use cannabis industry, recent data shows, and a task force has released recommendations to counter that lack of representation, including raising taxes on marijuana to fund programming.

Black people account for 3.8% of those with state recreational cannabis business licenses, a state survey found, despite making up 14% of Michigan’s population.

And people identifying as Latino or Hispanic comprise 1.5% of licensees but 5% of Michiganders, according to data collected by state regulators in December.

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The dearth of diversity is concerning since people of color have been targeted unevenly by the enforcement of marijuana-related crimes, said Anquenette Sarfoh, a cannabis business owner and a member of Michigan’s Marijuana Regulatory Agency’s Racial Equity Advisory Workgroup. Sarfoh has also served as a board member for the Michigan Cannabis Industry Association, an industry lobbying group.

State regulators have attempted to remedy inequality in the cannabis industry by offering discounts on recreational licensing fees to applicants that quality for a social equity program.

The fee reductions range from 10% to 40% and can be stacked to combine multiple discounts for applicants that meet criteria including being a registered medical marijuana caregiver, having a prior marijuana conviction or living a community deemed to have been impacted disproportionately by marijuana-related enforcement.

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A provision in Michigan’s Constitution bans considering race in public employment or contracting and the social equity criteria don’t explicitly mention race.

That ban was a “limitation” in attempting to remedy underrepresentation in the cannabis industry, Sarfoh said.

“We were tasked with trying to resolve an issue that was pretty much based on racial profiling,” Sarfoh said. “The Black and brown community was overpoliced according to Michigan’s and the FBI’s own records.”

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Black and Latino people make up nearly 60% of people in state prison and close to 80% of people in federal prison for drug offenses, according to data from the Bureau of Justice Statistics.

Sarfoh called the work group’s “a good start” toward countering barriers to minorities in the Michigan marijuana industry. People of color tend to have less generational wealth than white people, and the costs to enter the cannabis industry typically include thousands in licensing fees plus hundreds of thousands or millions to purchase real estate, equipment, merchandise, insurance and security.

Some of the work group’s proposals will require changes to state law. Others could be implemented if regulatory officials revise rules. The recommendations include:

  • Create a business accelerator program where applicants that qualify for Michigan’s social equity program can partner with large companies to access financing. Social equity participants would complete business and regulatory training before eventually gaining a larger stake in the business’ equity.
  • Create a crowdfunding platform called the Michigan Marijuana Marketplace where applicants in communities considered to have been targeted by disproportionate marijuana enforcement can seek financing from Michigan-based investors.
  • Require large-scale businesses seeking license renewal to submit a plan showing how they’ve purchased supplies from “geographically disadvantaged” businesses.
  • Allow licensees known as microbusinesses to grow, process and sell up to 300 plants on site instead of just 150 plants. Additionally, the rules would change by allowing the microbusiness to use outside processors and by allowing the business to buy mature plants from outside sources. The work group argued the changes would make it less costly to open a microbusiness since businesses could save on processing equipment and that allowing more plants would insulate the licensees from the risks of crop failure. The microbusiness model was intended to allow licensees with less capital to operate on a smaller scale, Sarfoh said.

The report also suggested reinstating a 3% excise tax on medical marijuana, which was repealed in 2016, as well as imposing a new 1.5% tax on transactions between recreational license holders. Revenue from those taxes would fund initiatives including a social equity capital investment program and marijuana research. Local government entities, including cities, sheriff’s offices and school districts, where marijuana businesses are located would also get a cut of the revenue.

Sarfoh called the tax increases the “least popular” aspects of the report and suggested the tax proposals are unlikely to be implemented.

The racial equity work group released its final recommendations this week, but the state is seeking applicants who will sit on another committee tasked with continuing to study diversity in the cannabis industry.

Contact reporter Sarah Lehr at [email protected] Follow her on Twitter @SarahGLehr.

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