Update: Failure Of Mass Social Equity Fund So Far Makes National News

There’s still not a dollar in the state’s Cannabis Social Equity Trust Fund, and there’s not as much coming as predicted

Update (6/25/2023): Since we first reported this news on June 16 under the headline “Cannabis Social Equity Advisors Discuss Funding Delay, Get Disappointing News,” the story has been picked up by some larger local non-cannabis news outlets as well as a few national weed sites—from the Boston Business Journal, to NBC 10 Boston, to MJ Biz Daily, and Green Market Report, which ran the sub-headline, “Money for the fund was collected, but never transferred into the fund itself.” It has the makings of a major story for sure—that’s why we wrote it two weeks ago. Now we’ll see if this latest round of negative attention spurs the state to do something about the situation.

In order to understand why some members of the Massachusetts Cannabis Social Equity Advisory Board (CSEAB) were outraged to learn on Friday afternoon that a fund established to help disadvantaged applicants will yield tens of millions of dollars less than expected, it is helpful to recap the long and bumpy road up to this point.

Even with hundreds of new cannabis business licenses being approved at different stages every month, and with assistance set up to lift communities that have been rocked by the war on drugs, many entrepreneurs meeting the state’s criteria for special programs are failing to launch.

In breaking down Cannabis Control Commission data during an April meeting, Executive Director Shawn Collins emphasized the difficulty that many provisional licensees have in trying to actually open, specifically noting the problem of securing funding: “There are a lot of hoops and hurdles that one must jump through. … And compliance is not cheap.” 

There are currently more than 600 Social Equity, Economic Equity, and Disadvantaged Business Enterprise applicants in the provisional phases of licensing. In 2022, this group got what seemed like promising news, when a state Cannabis Social Equity Advisory Board was established by the Legislature “to advise the Executive Office of Economic Development (EOED) as EOED administers the Cannabis Social Equity Trust Fund.”

The legislation also created the CSEAB to “advise the Executive Office of Economic Development on the development of regulations, administration, and reporting of the Cannabis Social Equity Trust Fund,” which “was established to encourage the full participation in the state’s regulated marijuana industry of entrepreneurs from communities that have been disproportionately harmed by marijuana prohibition and enforcement.”

If that sounds like a labyrinthine bureaucracy, that’s probably because it is. It’s been nearly a year since then-Gov. Charlie Baker set the fund in motion, and stakeholders are still waiting for the faucet to flow. The statute calls for 15% of recreational pot taxes from the commonwealth’s Marijuana Regulation Fund to go into the trust fund; with the state doing more than $100 million a month in adult-use sales, that could be a whole lot of assistance.

For their Friday afternoon meeting, members of the CSEAB were joined by Martha Kwasnik, general counsel at Massachusetts Executive Office for Administration and Finance, who attempted to explain that the logjam is the result of problematic language in the law which has apparently prevented the state from being able to transfer money from the Marijuana Regulation Fund to the Cannabis Social Equity Trust Fund. “We’re trying to make sure we can work within the confines of the language,” she said.

But wait, it gets worse and more ridiculous. Kwasnik also dropped the bombshell that rather than the tens of millions expected to move into the pot from 2022 sales, the starting balance of the fund will only likely be $2 million to $4 million. Apparently it’s not as simple as calculating 15% of the Marijuana Regulation Fund, which for FY 2022, when the state collected $156,669,255, would be more than $20 million.

There is no bank account yet, and there hasn’t been a transfer, so technically there’s no fund just yet though. All of which upset a number of board members. Chris Fevry, a prospective license holder himself, asked how much there would have been if the transfer function was set up correctly in the first place. There was no clear answer. Phil Smith, another cannabis entrepreneur, asked, “Who dropped the ball?” He and Fevry were also dismayed by the state’s reluctance to inform CSEAB members if they will be allowed to apply to the fund.

“I feel like we are being cut out of all of this,” Smith said. “It’s not funny and it’s not a game. We need a direct answer.”

For the rest of the meeting, members began to discuss trust fund specifics, such as eligibility requirements, permitted uses of funds, and selection criteria. Other considerations included having funds be directed to businesses and municipalities rather than individuals, and capping the amount of money that can be spent on administration.

As for the transfer logjam, Rory O’Hanlon, the deputy chief of staff at Executive Office of Housing and Economic Development, assured, “This is an issue that is isolated to FY 2023. … We are working with [Administration and Finance] and they are working with the legislature … to make sure this doesn’t happen in FY24.”

Kwasnik said stakeholders should work to get the language changed sooner than later, so that lawmakers can process and hopefully act on the issue. In the meantime, regarding the couple million they reportedly have designated, the check is in the mail. Kwasnik said that it should be available in October.

“I feel extremely handicapped here with this $2 to $4 million,” board member Aaron Goines said. “Just the beginning stages [of administering the trust] can probably eat up a majority of this fund.”