How Connecticut is using cannabis tax revenue to promote social justice

Connecticut became the 19th state to legalize adult-use cannabis in July 2021, with sales starting in May 2023. Since then, the state has collected over $22 million from the marijuana tax, which is divided into three categories:

• A 6.35% sales tax
• A 3% municipal tax for the city or town where the sale occurs
• A 10.75% THC tax based on the potency of the product

Most of the tax revenue goes to the Social Equity and Innovation Fund, which aims to make a difference in communities impacted most by the war on drugs.

What is the Social Equity and Innovation Fund?

The Social Equity and Innovation Fund is a special fund created by the cannabis legalization law to support programs and initiatives that address the historical and ongoing harms of cannabis prohibition and criminalization.

The fund receives 60% of the marijuana tax revenue in the first year, and will gradually increase to 75% by 2026. The remaining revenue is allocated to the Prevention and Recovery Services Fund (25%) and the General Fund (15%).

The fund is overseen by the Social Equity Council, a 15-member body appointed by the governor and legislative leaders, with representation from various sectors and communities.

The council is responsible for developing criteria and regulations for social equity applicants, who can access benefits such as reduced licensing fees, technical assistance, and access to capital when applying for cannabis business licenses.

The council also distributes grants to organizations and programs that serve the disproportionately impacted areas (DIAs), which are defined as census tracts that have high rates of poverty and drug-related arrests, convictions, and incarceration.

How is the fund making an impact?

In its first year, the fund has distributed $6 million to six grant-making organizations in the DIAs of New Haven, Hartford, Waterbury, Bridgeport, Stamford, and New London. These organizations then awarded the money to dozens of local groups and projects that focus on areas such as:

• Education and workforce development
• Health and wellness
• Criminal justice reform and reentry services
• Arts and culture
• Community engagement and empowerment

Some examples of the funded projects are:

• The Huneebee Project, which uses beekeeping as a vehicle for trauma healing and job skills training for youth in New Haven
• The Fatherhood Initiative, which helps fathers reconnect with their families and access resources after incarceration in Hartford
• The Sober House Recovery Services, which provides housing and support for people recovering from substance abuse in Waterbury
• The Bridgeport Innovation Center, which offers co-working space and mentorship for entrepreneurs and innovators in Bridgeport
• The Stamford Peace Youth Foundation, which promotes academic and athletic excellence for youth in Stamford
• The New London Community and Campus Coalition, which fosters collaboration and communication among community stakeholders and institutions in New London

According to Ginne-Rae Clay, the executive director of the Social Equity Council, the fund is not only providing financial support, but also creating a network of partners and allies who share a common vision and mission.

“We wanted to make sure the communities and individuals that have been impacted by the war on drugs receive a benefit,” Clay said.

What are the next steps for the fund?

The fund is expected to grow significantly in the coming years, as more cannabis businesses enter the market and more consumers purchase legal products. The council estimates that the fund will receive over $215 million per year by 2026.

The council plans to use the additional revenue to expand the grant program to more DIAs across the state, as well as to support other initiatives such as:

• Research and data collection on the impacts of cannabis legalization and social equity
• Advocacy and policy development on issues related to cannabis and social justice
• Education and awareness campaigns on the benefits and risks of cannabis use and the opportunities and challenges of the cannabis industry
• Evaluation and assessment of the effectiveness and outcomes of the fund and its grantees

The council also hopes to engage more stakeholders and solicit more feedback from the public on how to best use the fund and achieve its goals.

“We are really excited about the potential of this fund and the impact it can have on our state and our communities,” Clay said.