Do Cannabis Businesses Increase Municipal Revenue?

Posted November 4, 2025 in Faculty, International Students, PhD Students, Public Administration MPA & EMPA, Public Affairs/Community Development, Publications & Research, Students

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At a national gathering known for shaping how public budgets and policies take form, Prakash Kandel, PhD candidate in Public Affairs/Community Development, and Michael Hayes, Graduate Program Director of the Public Administration (MPA) program, brought New Jersey’s cannabis policy landscape into a broader public finance conversation. The Association for Budgeting and Financial Management conference in Atlanta convenes scholars, government analysts, and public finance leaders from across the country, creating a setting where emerging research can inform ongoing policy discussions. Their presentation examined a central fiscal question related to legalization: how municipal decisions to permit or prohibit cannabis businesses influence local budgets.

Their study focuses on the period after New Jersey voters approved recreational cannabis in 2020 and municipalities made 2021 decisions to either allow or prohibit cannabis businesses. This variation created a natural comparison that Kandel and Hayes analyzed using a differences-in-differences approach with a panel dataset of New Jersey municipalities from 2016 to 2023. They assessed detailed categories, including surplus revenues, special revenue sources, and public safety spending. Early findings indicate modest increases in special revenue sources for municipalities that opted in, with no significant change in overall revenues or expenditures.

These results temper assumptions that legalization produces large fiscal gains for local governments. Prior research points to potential crime-related costs, which makes the limited revenue effects important for policy evaluation. By providing the first empirical look at New Jersey’s short-term local fiscal outcomes, their work offers evidence policymakers can use as they consider future cannabis-related decisions.

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