The California Legislative Analyst’s Office is the state’s nonpartisan fiscal and policy adviser. It issued a paper on Tuesday, February 14, 2017 expressing doubt whether implementation of Proposition 64 will be self-funding in the early stages, or turn out a drain on the treasury.
What follows is a summary of the most relevant points, including opinions expressed by Los Angeles Times and our own thoughts. Here is a link to the official document if you would like to study the long and detailed report.
- We currently have two official approaches towards regulating marijuana in California. These are (a) the Medical Cannabis Regulation and Safety Act of 2015, and (b) Proposition 64 of 2016 for Legalized Nonmedical Cannabis.
- Few doubt the eventual logic of combining the legislation as Gov. Jerry Brown suggests. However many are beginning to question whether there is time to do so before Proposition 64’s deadline of December 30, 2017 runs out.
- The State Legislative Analyst’s Office is urging cash flow restraint. While it agrees with Gov. Jerry Brown, is believes there is ‘significant uncertainty regarding the resource needs for departments to regulate and tax medical and nonmedical cannabis.’
- Its two main concerns are whether the Trump Administration will clamp down on the industry as it legally may do, and how many marijuana businesses will emerge, register, and contribute to their administrative cost by paying taxes. The Catch 22 is that merging the two systems will delay this benefit.
- According to Los Angeles Times, “the State Board of Equalization estimates there will be 1,700 dispensaries and retailers paying taxes, while the Department of Consumer Affairs, which will oversee the businesses, expects 6,000 pot shops, based on experience in Colorado.’
- In the light of this, the California Legislative Analyst’s Office reticence to support borrowing large sums of money becomes understandable. At this stage, we do not even know whether a method to license and tax sales will be in position on January 1, 2018 per proposition 64.
This puts us in the unfortunate position of being between a rock and a hard place. Do we put the cart before the horse, trust the industry will come to the party, and give the Department of Consumer Affairs the money it needs for the job?
Or should we do what the California Legislative Analyst’s Office suggests. It wants the state to borrow only what it needs to fund the 2017 / 2018 program. Its rationale is requirements in subsequent years might be less.