Virginia Gov. Glenn Youngkin (R) widely expected to veto a lawmaker-passed plan to legalize retail marijuana sales in the commonwealth, a new fiscal impact statement makes clear that rejecting the proposal would mean missing out on tens of millions of dollars in annual state revenue—including for pre-kindergarten programs, community reinvestment and substance use treatment.
According to the Department of Taxation the annual government revenue will start at $7.3 million by fiscal year 2026. This figure is expected to rise steadily, as the new regulated system gets off the ground. The Department of Taxation projects that by fiscal year 2031 the annual revenue will reach $87.84 millions.
By the end fiscal year 2031, Virginia is expecting to earn nearly $300,000,000 in revenue from retail cannabis.
This income will come from the 8 percent marijuana excise and 1.125 sales taxes imposed by Senator Aaron Rouse (D), and Rep. Paul Krizek.
In a Friday report, the Department of Planning and Budget of New York State published these numbers.
This top-level projection excludes local taxes up to 2.5%. The amount of revenue that municipalities could generate in 2026 depends on the extent to which they implement these taxes. By 2031, this figure is expected to reach $24,09 million.
Most of the money will go towards community reinvestment. In fiscal 2026 the Cannabis Equity Reinvestment Fund will receive approximately $1.92million, and this amount would increase to $46.26million in fiscal 2030.
The money would be used to prevent and treat substance abuse disorders. This would amount to approximately $1.92 in fiscal year 2026 and $19.27 by fiscal year 2031.
The revenue would be used to fund other initiatives, such as pre-kindergarten (starting with $2.56 millions initially but rising to $7.72million annually by fiscal 2031), health programs (320,000 dollars initially and increasing to $3.85million in fiscal 2030) and public health.
As the years progress, so will how revenue is distributed. In fiscal year 2027, 40% of the revenue would be used to fund pre-K. 30% would go towards a reinvestment program, 25% would go for substance abuse disorders, and 5% would fund programs in public health. Then, 10% would be allocated to pre-K. 60% of the money will go towards community reinvestment. 25% to substance abuse disorders.
As for costs, preparing for and administering a regulated retail sales program would cost several million dollars per year—about $9.37 million total in fiscal 2026 and an estimated $9.26 annually after that.
The Cannabis Control Authority, which regulates the adult use retail system, would be funded primarily by licensing fees from marijuana businesses. However, during its first fiscal year, a portion of the funds needed would come from general state fund.
CCA’s new expenses would be 73 additional staff, technology and equipment as well as vehicles and travel.
In the meantime, updating forms and systems within the Department of Taxation would cost an estimated $468.950 in its first year of operations.
State Police on the other hand would have to spend just over $200,000.00 annually in order to hire an additional two staff members for fingerprinting, background checks, and criminal records.
Despite the fiscal impact report indicating that legalizing retail sales could bring Virginia hundreds of millions of dollars in tax revenue over the next several years, the state’s governor is widely expected to veto the lawmaker-passed bills.
Youngkin has vetoed nearly the same proposal in the past legislative session. His office says he will do it again this year.
Christian Martinez, a spokesperson for Virginia Public Media told the media late last year: “I believe you can point out that he’s been clear about that.”
In his veto at that time, Governor McDonnell wrote: “The proposed legalization for retail marijuana in Virginia endangers Virginians’ health and security.”
If the proposal were to become law, it would allow adults 21 and older to purchase up to 2.5 ounces of marijuana from regulated, state-licensed retailers.
Use, possession and limited cultivation of cannabis by adults are already legal in Virginia, the result of a Democrat-led proposal approved by lawmakers in 2021. Republicans took control of both the House and Governor’s offices later that same year. They then blocked any reenactment required of a retail regulatory framework. Illicit stores have been opened to cater for consumer demands, feeding a market estimated at $3 billion.
Here’s what Virginia’s reintroduced marijuana sales legislation, SB 970 and HB 2485, would do:
- Retail sales can begin on May 1, 2026.
- Adults could purchase up 2.5 ounces in one transaction or an amount equivalent to other cannabis products, as determined by the regulators.
- Retail sales of cannabis products would be subject to a tax up to 11.625%. The state would impose a tax on retail sales and usage of 1.125 per cent, in addition to the 8 percent marijuana tax. Local governments can levy a further 2.5 percent.
- Virginia Cannabis Control Authority (VCCA) would regulate and license the industry. His board of directors will have authority over the testing and possession of marijuana, as well as its sale, transportation, distribution and distribution.
- Local governments can ban marijuana establishments if the voters agree to an opt-out vote.
- The locations of marijuana retailers cannot be located within 1,000 feet from another retailer.
- The canopy size would determine how much space is allocated to marijuana. Both indoor and outdoor marijuana cultivation would be allowed, though only growers in lower tiers—with lower limits on canopy size—could grow plants outside. The larger growers will need to keep their plants inside. Indoor cultivation would include secure greenhouses.
- The legislation would only allow direct face-to-face transaction. This legislation will prohibit other channels, including vending machines and drive-throughs. It also bans internet-based platforms, delivery services, etc.
- Existing providers of medical marijuana who enter the adult market can apply for up to five retail outlets, all located at their licensed facility.
- Each package would contain no more than 10 mg of THC.
- A person cannot hold or be awarded more than 5 licenses in total, excluding transporter’s licenses.
- People who are convicted for felonies and crimes with moral turpitude in the past seven year would not be eligible for licensing. The same would apply to employees of sheriffs or police departments that enforce the criminal, traffic, or motor vehicle law of the Commonwealth.
- The equity-focused program will grant licenses for entities that are at least 2/3 owned by and controlled directly by the eligible applicants. This includes people who have had past cannabis convictions or misdemeanors as well as family members, veterans and people who lived in “historically disadvantaged communities” at least 3 out of 5 years. It also applies to people who attended school in these areas, or who were recipients of a Pell Grant or who attended colleges or universities where 30 percent or more of their students qualify.
- In order to be considered a “historically economically challenged community”, a place must have marijuana possession offences that are at least 150 percent higher than the state average from 2009-2019.
- The tax revenue generated by the program will first be used to cover costs associated with administering and enforcing California’s cannabis laws. This would leave 60 percent to support the Cannabis Equity Reinvestment Fund of the state, 25 percent for substance use disorder prevention and treatment, and 10 percent towards pre-K and awareness campaigns.
- The gray market “gifting” (or the sharing of up to 2.5 ounces of marijuana with another adult without monetary compensation) of marijuana in conjunction with another transaction is punishable by a class 2 misdemeanor, and as a class 1 misdemeanor for second or subsequent offenses.
- Other criminal sanctions would also be introduced. For example, knowingly giving or selling marijuana or marijuana-related paraphernalia or cannabis to anyone younger than 21 is a misdemeanor punishable up to 1 year of jail time and/or a fine maximum of $2,500. The same goes for selling cannabis or marijuana to someone who you reasonably believe to be under the influence. A Class 1 misdemeanor would be to promote the sale or distribution of marijuana paraphernalia for people younger than 21.
- A Class 1 misdemeanor would result if you knew that someone younger than 21 was obtaining marijuana for your benefit.
- Under 21s who use or possess marijuana or try to get it would face a $25 civil penalty and be ordered to attend a treatment program for substance abuse disorders.
- The illegal cultivation of marijuana (excluding legal homegrown) would constitute a Class 6-felony punishable with up to 5 years in prison and $2,500.
- The use of volatile solvents or butane in the extraction process would result in a class 1 misdemeanor.
Youngkin must act within 30 days of receiving a new bill. The bill can be signed into law by Youngkin, or it can be vetoed. The lawmakers will meet again on April 2 in order to reconsider overturning any of the vetoes.
Youngkin will not be eligible to run again for office, so advocates are hoping that the person who replaces him is more receptive to legalized sales. The group has noted that some Republican state leaders have shown more support for marijuana reform.
The lawmakers also sent Youngkin a variety of cannabis and drug policy related bills this session. These included measures that would expand the medical cannabis system, remove criminal records from past cannabis-related behavior, protect parents of legal marijuana consumers, and modify sentences for those who are in prison for cannabis offenses.
Yet another bill will take effect without action from the governor: a House joint resolution to re-establish a commission of lawmakers who would study the state’s cannabis system, oversee the implementation of marijuana laws and make recommendations about future legislative changes—what’s seen by some as an indication the legislature is intent on future action around cannabis.
It is hoped that, even if Youngkin rejects the retail measure currently in place, his successor would sign the new version.
A new poll shows that marijuana consumers are more stressed than the general public since Trump took office.