CA: Gov. Brown’s Budget Increases Cannabis Tax Revenue Estimates Despite Disappointing First Quarter

Photo Credit: Katy Murphy

Despite disappointing first-quarter cannabis tax revenue numbers, Gov. Jerry Brown’s revised state budget proposal actually increases the amount of money California is expected to make from the first six months of legal marijuana and allocates $133 million to regulate the massive industry.

In his January draft budget, Brown predicted California would take in $175 million in cannabis cultivation and retail taxes by June 30. In his May budget revision released Friday morning, Brown upgraded that anticipated tax revenue to $185 million.

The new budget does slightly reduce the marijuana tax earnings expected in 2018-19 fiscal year, dropping the estimate from $643 million to a revised $630 million.

California Finance Director Michael Cohen said during a press conference Friday in Sacramento that there’s a lot of uncertainty surrounding cannabis revenue projections. But he said the estimates for a substantial increase in taxes in coming months is based largely on what happened in states like Colorado and Washington after they launched recreational sales in 2014.

“It’s going to show a ramp-up,” Cohen said. “So it’s not surprising that the revenues to date are starting small.”

The revised budget also allocates another $133.3 million in the coming year for cannabis-related activities, including processing licenses, enforcement, laboratory services, information technology, quality assurance and environmental protection. Those costs are funded by tax revenues, business licensing fees and another general fund loan of up to $59 million.

California launched legal recreational marijuana sales and began licensing all other industry businesses for the first time on Jan. 1 under rules set up by Proposition 64, approved by 57 percent of voters in November 2016. Advocates and economists predicted then that the state would take in around $1 billion each year in marijuana tax revenue once the regulated market was fully up and running.