After 7 years Alaska’s cannabis industry slows

Part 1 of the series on Alaska's cannabis industry.
Published: Apr. 20, 2023 at 7:47 PM AKDT
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FAIRBANKS, Alaska (KTVF) - Legalized by voters in 2014, Alaska’s recreational cannabis industry has flourished since the first operations began. But in recent years, the industry’s boom has fizzled out.

Alaska has a long history with cannabis. Prior to legalization, Alaska spent 40 years in political debates regarding the people’s access to cannabis. In 1975 the Alaska Supreme Court heard the case of Ravin v. State and ruled that the state constitution protected the right to possess and use small amount of cannabis based on the right to privacy, which is Article 22 in the state’s Declaration of Rights. After the case was decided the state decriminalized cannabis.

25 years later, the voters re-criminalized cannabis. Shortly thereafter, in 1998, the voters of Alaska decriminalized medical cannabis. This allowed the state to set up a medical marijuana I.D. system and organize a legal process for doctors to prescribe medical marijuana. Again in the early 2000′s, legal challenges came up and the debate continued until 2014.

The first licenses were available in 2016 and after operations began, the industry saw a boom.

Within the first few years of operations, Alaska’s cannabis industry employed over 1,500 people and paid millions of dollars in taxes. Adding to the rapid growth, the amount of acquired licenses was “more than doubling every year,” said Karinne Wielbold, an economist with the Alaska Department of Labor and Workforce Development.

During this time the industry expanded from the more populace areas such as Anchorage and Fairbanks. Leading businesses in the industry began to expand statewide. “It’s really cool for us to see our product get distributed statewide and we’re not even the biggest company there is,” said Keenan Hollister, owner of Pakalolo Supply Company. His business which began in Fairbanks, expanded operations to Anchorage and currently distributes statewide.

When the Covid-19 pandemic hit Alaska, the state’s cannabis industry faced hardship similar to other industries. While the industry saw a short period of decline, economists are unsure what the root cause was. Wiebold explained there was more disposable income overall, but income was less predictable, tourism had dropped and there were less out of state workers doing seasonal work. She also noted however that tourism likely wasn’t a big factor. “When you look at states that are legal with adjacent states that are not, you can kind of get some of that market demand coming from other places,” said Wiebold. However, Alaska doesn’t experience that and cannabis is already legal in Canada, Alaska’s only bordering neighbor.

Once the market saw a rebound, the growth slowed but the numbers remained relatively significant. Data from 2021 shows that the industry paid $48.3 million in wages and $28.9 million in taxes. While those numbers are certainly significant for the industry, they are less impressive for the state. “It was something less than 1 percent,” of the total tax revenue, said Wiebold.

While the tax collection is small compared to oil and other taxes, the biggest concern is the state is seeing a plateau in tax collections from cannabis. “I feel that we are reaching the peak of the demand for legal marijuana at its current price point,” said Brandon Emmett, owner of Good Titrations and co-chair of the Marijuana Task Force. Emmett said that he thinks prices are still high enough where a black market is able to take up a significant quantity of the product demand.

Other business owners had different sentiments about the plateau in the industry. “This is still an industry in its infancy,” said Hollister. He added that most of the businesses are still less than five years old. Dan Peters, the owner of GoodSinse, said that he thinks the industry is simply seeing unsuccessful business close down and the successful operations are holding.

As of 2022, there were 459 active licenses in Alaska.