Cannabis Rollout Hampered by Inexperienced Leadership, N.Y. Report Finds

A startup-like culture at the state cannabis agency has contributed to “confusion, difficulty and delay” in the rollout of the state’s legal market, according to a report set to be released on Friday.

The report by a state task force examining a licensing backlog at the Office of Cannabis Management found that inexperienced agency leadership, constantly changing policies and guidance, and a lack of transparency were among the internal problems hobbling the agency’s ability to issue more licenses and help more businesses open.

The review, which was ordered by Gov. Kathy Hochul in March after she declared the rollout a “disaster,” paints the clearest picture yet of a licensing process that has been criticized as clunky and opaque. It also outlines ways to clear roadblocks that have helped the illicit market steal the advantage the state had intended for small businesses and people who were harmed by the war on drugs.

There are just 122 licensed recreational dispensaries open across the state, while officials say the number of illicit shops in New York City alone has nearly doubled to 2,900. At the end of April, nearly 4,900 applications for retail and craft businesses were still waiting to be reviewed, some from as far back as August 2022.

Jeanette Moy, the commissioner of the Office of General Services, who led the review, said that 90 percent of applicants for cannabis businesses had failed to secure licenses, a staggering figure that she said indicated significant deficiencies in how the agency operated.

“In order to make sure that equity works, policy is important but operations is critical,” she said in an interview. “We have to fix the process. We have to clear the backlog. We need to get these legal cannabis stores up and going.”

The waiting list includes 1,200 business that submitted applications last fall and spent thousands of dollars to secure properties where they intended to set up shop. Regulators promised them an expedited review, but that was impossible because the cannabis agency had the capacity to vet only 75 applications at a time, Ms. Moy said. Regulators also denied an additional 309 applications without telling the applicants, some of whom have waited almost two years for a decision, the report said.

The report recommended doubling the number of staff members devoted to licensing, developing a public dashboard to show the status of licenses and issuing formal denials rather than leaving applicants in limbo.

The Office of Cannabis Management already appears to be implementing some changes based on the review. For the first time, the agency is recommending that its board vote on denying some licenses, with the vote scheduled for Friday. And it has proposed a policy clarifying the review process for applications submitted in the fall.

The report acknowledged that the agency, which was established when recreational cannabis was legalized in 2021, had faced significant challenges beyond its control, such as a tight labor market that has made it difficult to recruit and retain employees. But while regulators worked quickly under difficult circumstances to get the legal market up and running, the report cited the “perceived uniqueness of the agency’s work” as “a significant cultural roadblock to its willingness to adopt processes and systems that have proved successful elsewhere.”

As a result, the state has lost months and millions of dollars that were spent developing several software systems that could have been adapted from other agencies, the report said. One effect of that was delays faced by those who applied for licenses in the fall and needed to determine whether the locations where they planned to open retail dispensaries or craft businesses were suitable.

The report describes how the responsibility for vetting license applicants is spread across four units of the agency, each with its own spreadsheet for tracking applications.

While most other agencies that deal with licensing have a single person assigned to each license, the report said that at least nine staff members touch each cannabis application. But no one is responsible for seeing them through to completion. This leaves applicants without a single point of contact to address concerns or fix deficiencies. Instead, they are directed to general email addresses.

Higher up the ranks, there are eight senior officials who report directly to the executive director, who leads the agency. But the bulk of the agency’s operations, including enforcement and licensing, fall to just two of them.

Ms. Moy said she was confident that implementing the recommendations in the report would help everyone involved in the process, from applicants to regulators.

“Let’s just make sure that we are clear about the work that is happening and we provide that clarity for everyone that is a part of the process,” she said. “It’s a little boring, but it’s super important.”