Committee weighs cultivator fee changes, limited showcase-event pilot and excise-tax routing for cannabis regulation fund

The Senate Economic Development, Housing & General Affairs Committee reviewed committee amendment draft 1.2 to the cannabis portion of the bill, discussing three principal areas: a proposed rebalancing of cultivator license fees (raising indoor fees and lowering outdoor fees), a time-limited showcase-event permit pilot to allow regulated sales outside retail premises, and a change to how cannabis excise-tax revenue is routed between the Cannabis Regulation Fund and the general fund for future fiscal years.

Committee staff described the fee proposal as a revenue-neutral effort to reflect relative productivity and operating differences between indoor and outdoor cultivation. James Pepper, chair of the Cannabis Control Board, told the committee the change was a "crude" attempt to reflect the higher effective productivity of indoor operations and that the proposed mix would be slightly revenue positive in the board's estimate. "The directive to me was, to find a revenue neutral proposal that incorporates the kind of relative profitability between the indoors and outdoor cultivators," Pepper said.

Several cultivators and retailers told the committee the proposed split did not rest on a sufficiently detailed economic analysis. Joshua Decatur, who said his firm operates mixed cultivation, said overhead and profitability are more complex than a simple harvest-count ratio. "Indoor cultivation is definitely more overhead, but it is more productive," he told the committee; other witnesses said outdoor production can have lower cost-per-pound and more variable cash flow. Several members asked that the proposal be sent to Senate Finance for a fuller review and for indoor and outdoor cultivators to testify to economic data before fee changes are finalized.

The amendment would also create an 18-month showcase-event permit pilot, authorizing up to five events during the pilot period (July 1, 2025 through the end of 2026 in the draft). Licensed retailers in good standing could apply to host events at access-controlled locations for up to 24 hours; events would not permit on-site consumption and would require local approval, security plans, insurance and product-sale tracking. The permit application fee in the draft is $250, split 50/50 between the host municipality and the cannabis regulation fund. Committee counsel summarized key application requirements including geographic distribution, coordination with at least three licensed cultivators, and security and product-sale plans.

The committee also discussed routing of excise-tax revenue. Counsel Kirby Keaton summarized recent budget changes: for fiscal year 2026 the budget directs excise-tax receipts to the general fund with 30% to a substance-misuse prevention special fund; the committee draft would, beginning in fiscal year 2027, route 70% of the cannabis excise tax to the Cannabis Regulation Fund and 30% to the prevention fund, restoring a structure that funds board operations from regulatory receipts while dedicating a fixed share to prevention. Joint Fiscal staff estimated that the proposed cultivator fee change would be roughly revenue neutral (about $44,000 net in the staff estimate) in the context of approximately $1.1 million in cultivator license revenue.

Members and witnesses also discussed the Land Access and Opportunity Board (LAOB) request for a portion of any revenue above forecast to support equity and community reinvestment programs. Committee members asked for more precise forecast and fiscal modeling before finalizing any diversion of excise tax revenues; counsel said the amendment in committee would make any LAOB payment contingent on revenue above forecast rather than a fixed percentage.

No final votes were taken in committee. The chair and staff agreed to circulate revised language and to invite additional testimony from indoor and outdoor cultivators, retailers, and Cannabis Control Board staff before referring fee changes to Senate Finance and before final committee action.

Why it matters: The measures would reshape the regulated cannabis market in Vermont: rebalanced fees could change cultivator economics, showcase events could broaden retail access and market pathways for producers, and changing excise-tax routing would adjust how regulator operations are paid and how much excise revenue is available for general fund priorities and prevention programs.

Speakers quoted or cited in this report: James Pepper, Chair, Cannabis Control Board (fee rationale and revenue-neutral instruction). Joshua Decatur (indoor/mixed cultivator) (industry impact concerns). Michelle (committee staff) and Kirby Keaton (Legislative counsel) (explanations of amendment and excise-tax construct).

Discussion vs. decision Discussion points: cultivator fee redistribution (indoor vs. outdoor), design and limits of showcase-event pilot, routing of excise-tax revenue and potential LAOB allocation, and administrative capability of the Cannabis Control Board to manage new permits. Directions: staff to circulate draft language incorporating suggested edits; Senate Economic Development to invite indoor and outdoor cultivators and additional stakeholders to testify on economics and administrative feasibility prior to sending fee changes to Senate Finance. Decisions: none taken in the session.

Authorities referenced: the committee cited the board's existing regulatory authority and budget constructs in the state budget; several witnesses referred to prior legislative budget actions that set temporary fund routing and to the reported appellate decision Reyes v. Waple's Mobile Home Park as a procedural example in other contexts.

Proper names referenced: Cannabis Control Board; AppFolio (screening platform referenced elsewhere in meeting); Land Access and Opportunity Board (LAOB); Champlain Housing Trust; H.169; Reyes v. Waple's Mobile Home Park.

Clarifying details extracted from the record: proposed cultivator fee changes would lower outdoor cultivator fees (example: tier 1 outdoor from $750 to $375 in committee draft) and raise several indoor cultivator fees (indoor fees were roughly doubled in the draft presented); product registration would be biannual with $50/year equivalent; showcase event pilot limited to five events over 18 months with $250 application fee split between municipality and regulation fund; fiscal modeling by Joint Fiscal estimated the cultivator-fee proposal was roughly revenue neutral (~+$44,000 in staff estimate).