Cannabis Control Board outlines budget shortfall, market trends and retail siting pause

The Cannabis Control Board told the Vermont House Appropriations Committee on Jan. 17 that it is not seeking a Budget Adjustment Act appropriation but that the agency expects a persistent shortfall between fee revenue and its operating budget.

"We do not have a BAA ask or request, but to hear about our budget," James Pepper, chair of the Cannabis Control Board, told the committee. Pepper and Executive Director Olga Fitch briefed members on revenue sources, license counts and market trends influencing the fund that supports board operations.

The board’s operating budget for fiscal 2025 is just over $6 million, Pepper said; fee and administrative-penalty revenue and license fees together are projected at about $2.8 million for FY25. In FY24, board fees were roughly $2.25 million and the 14% excise tax on retail cannabis sales produced about $17.4 million in FY24, with taxable sales estimated near $125 million the same year. The board said a 6% retail sales tax is fully earmarked for the Agency of Education and is not available to the board.

Why it matters: the cannabis regulation fund is the board’s primary financing source. The board said its budget has been deliberately set with lower license fees to encourage broad market participation by smaller operators, which increases compliance and oversight costs. That model creates reliance on general fund transfers and excise-tax flows when fee revenue does not cover operating expenses.

Board officials described market and regulatory factors affecting revenues. Pepper said the board has 601 active licensees across seven license types, including product manufacturers, cultivators, wholesalers and retailers, plus specialty “integrated” licenses for pre-legalization dispensaries and a newer propagation (nursery/seedling) license. Retail licensing has been temporarily paused at the board’s request while it drafts rules intended to reduce retail clustering in a few municipalities.

"We have 14 retail operations in Burlington. We have 0 in South Burlington, 0 in Williston because those towns have not opted in for retail sales," Pepper said. The board said draft siting rules scale retail availability by municipality population (for example, towns of 4,000 population presumptively could have two shops; towns of 6,000 could have three), and the pause is meant to avoid exacerbating concentrated retail clusters while those rules are finalized.

Committee members asked about price and licensing trends in neighboring jurisdictions. Pepper and Fitch noted that New York and Massachusetts expanded retail access and that cross‑border competition and falling retail prices in adjacent markets can depress excise-tax receipts for Vermont. The board referenced a Joint Fiscal Office consensus forecast indicating an 8% increase in cannabis revenue between FY25 and FY26, with revenues leveling in later years.

Regulatory limits and litigation risks also could affect the budget, board officials said. Fitch told the committee an active lawsuit challenging advertising restrictions poses an uncertain cost; the board has procedures for preapproval of advertisements but said a court outcome or rule change could flip how advertising is reviewed and increase enforcement or administrative work.

The board also described federal constraints: because cannabis is a Schedule I controlled substance under federal law, other state agencies with federal responsibilities generally will not undertake on-site regulatory work, Pepper said, which keeps regulatory responsibility centralized within the Cannabis Control Board.

Committee takeaways and next steps: members thanked the board for the extra $3 million provided in the current budget adjustment and asked the board to return for additional discussion, including a follow-up on medical dispensaries and the board’s enforcement workload. Pepper said the board will follow up on items not covered in the brief session and that staff will continue to engage with the committee as rulemaking and revenue forecasting proceed.

The board’s presentation and committee questions ran until the committee moved to its next witnesses later in the session.