- FTI focuses on economic impact.
- Retail, medical, and adult-use sales examined.
- Report projects sales under three scenarios - low, base, and high case.
A new economic report on adult-use cannabis in Pennsylvania projects?$2.1 billion in sales and more than 30,000 jobs created in Year One of legalization.
FTI Consulting, a global business advisory firm, conducted and compiled the report detailing prospective adult-use cannabis market in Pennsylvania. The economic data?was released at a virtual press conference hosted by ResponsiblePA, a newly formed coalition with the goal to help support the legalization of adult-use cannabis in 2024.
“Within FTI’s consulting segment is its economic impacts group that answers, ‘what if’ questions and economic impact on public policy,” FTI Consulting Director Brendan Casey said in a conference call. Casey added that FTI is one of the first major U.S-based business advisory firms?to establish a cannabis-specific practice.
“ResponsiblePA engaged FTI to conduct economic impact analysis of the potential adult-use cannabis market in Pennsylvania,” said Casey. “What we did was we modeled three scenarios based on the historical relationship between retail, medical, and adult-use sales in?other states.”
The economic report by FTI Consulting projects adult-use sales under three scenarios - low, base, and high case.?First-year predictions project base creating a?$2.1 billion adult-use market,?the low case creates $1.7 billion, and the?high case?creates?$2.8 billion.
FTI Consulting also forecasts the creation of more than?30,000?jobs in year one at the base case level. In the base case, legalization of cannabis for adult use in Pennsylvania would add?$4.2 billion in economic output and $2.6 billion in state GDP.
FTI’s report varies from the previous economic data released by the state of Pennsylvania’s independent fiscal office in that FTI uses the IMPLAN model to project the economic impacts in Pennsylvania under each scenario. IMPLAN is?an economic input-output model of some 550 sectors for the state of Pennsylvania and accounts for the supply chain impacts of cannabis legalization.?
According to the FTI report, adult use cannabis market in Pennsylvania has the potential for significant economic impacts and tax revenues for the state. FTI’s analysis shows that the adult use cannabis market in Pennsylvania would support between 26,250 and 44,500 jobs within the first full year of a legal adult use market, with the base case adult use market supporting an estimated 33,350 jobs in the state.?
Under the base case, legalization of cannabis for adult use would generate $126 million in new state sales taxes and $212 million in state wholesale cannabis excise taxes. Nearly two-thirds of the jobs supported by the adult use market would be direct cannabis jobs, with the remaining third supported indirectly or through induced spending.
FTI collected retail medical and adult use sales data from Arizona, Illinois, Massachusetts, and New Jersey from public data sources and calculated the medical-to-adult use multiplier in each state’s first full year of adult use sales. Similarities between Arizona, Illinois, and Pennsylvania’s regulatory environments led to the base case. Given Pennsylvania’s 2023 retail medical sales of $1.2 billion, the base case adult use market was projected at $2.1 billion. Assuming a 33% retail margin, this represents nearly $700 million in retail marginal revenue and $1.4 billion in wholesale sales.?
A $2.1 billion adult use market would support an estimated 33,350 jobs in Pennsylvania. Over 22,000 would be directly supported by the cannabis sector. Some 4,400 would be supported in the cannabis supply chain. About 6,700 jobs would be induced by spending those whose jobs are supported directly or indirectly. Direct S&L taxes are estimated at $420 million, with an additional $40 million in indirect S&L taxes and $70 million in induced S&L taxes. Pennsylvania’s GDP, or gross regional product, would increase by over $4.2 billion.?
?Pennsylvania’s 6% sales tax would generate approximately $126 million in new state taxes on retail sales of cannabis. A 15% wholesale cannabis excise tax would generate?$212 million in new state taxes on wholesale sales. An additional $195 million in S&L tax revenues could be collected as sales, corporate, income, property, and other taxes.
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