Budget proposals from the California legislature and Governor spend cannabis tax money, and up enforcement against illegal operations
Last week, the California Assembly and Senate released budget bills for FY2023-24, including several items being funded by taxes paid by California’s cannabis consumers, including:- $163 million for the Department of Cannabis Control
- $10 million to the CDTFA for the Cannabis Taxes Program
- $3.2 million for the Cannabis Control Appeals Panel
Also included in the identical legislative proposals are:
- $10.7 million to Fish and Wildlife ($5.9 million for biodiversity and $4.8 million for enforcement)
- $10.7 million to Water Resources Control ($7.4 million for water quality and $3.3 million for water rights).
- $1.7 million to the CA Dept. of Food and Agriculture, for marketing and general agricultural activities
- $1.7 million to the The Department of Pesticide Regulation, with another $1 million for local assistance
- $1.6 million for the Employment Development Department
- $600K for the California Dept. of Public Health
- $489K for the Controller
The Controller would be authorized to transfer up to $30 million to the Cannabis Tax Fund to assist with license relief for equity businesses (under Section 2649 of the Business and Professions Code). A Sustainable California Grown Cannabis Pilot Program would be funded to the tune of $8.5 million, but only if there is a budget surplus, which is looking highly unlikely this year.
Another $1.25 million is earmarked for the CDPH from the Industrial Hemp Enrollment and Oversight Fund, with up to $913K of that appropriated to “implement the regulation of industrial hemp products.” Cal NORML issued an alert about psychoactive hemp-derived product last week, and the Governor, upon signing a group of cannabis reform bills last September, said he has “directed the California Department of Public Health to convene subject matter experts to survey current scientific research and policy mechanisms to address the growing emergence of high-potency cannabis and hemp products.”
THE GOVERNOR’S PROPOSAL
In the Governor’s budget proposal, a backfill of $95.4 million would be made available should the cannabis tax revenue fail to bring in $670 million to fund:
- Education, prevention, and treatment of youth substance use disorders and school retention ($401.8 million);
- Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation ($133.9 million);
- Public safety-related activities ($133.9 million)
The percentages of funding to these entities were set in Prop. 64, the voter measure that legalized marijuana for adult use in 2016. The backfill was a compromise reached to end the cannabis cultivation tax last year, after groups receiving cannabis tax funds objected to a tax reduction. Last year’s cannabis trailer bill AB 195 requires that, beginning on May 2025, the state cannabis excise be increased from 15% to as much as 19% to cover the lost revenue from the cultivation tax, if needed.
Among the new cannabis laws that took effect on Jan. 1 is AB 2925 (Cooper), which requires the State Department of Health Care Services, on or before July 10, 2023, to provide to the Legislature a spending report of funds from the Youth Education, Prevention, Early Intervention and Treatment Account paid for by the Cannabis Tax Fund for the 2021–22 and 2022–23 fiscal years, and requires the department, on or before July 10, 2024, and annually thereafter, to provide that spending report for the prior fiscal year.
Enforcement is highlighted in the Governor’s Budget Summary, which mentions the California Unified Cannabis Enforcement Task Force, a partnership among the Office of Emergency Services, Department of Cannabis Control, and the Department of Fish and Wildlife, which “has convened several state, federal and local entities to strengthen enforcement coordination statewide utilizing existing resources.” To “further reinforce enforcement efforts,” the proposed budget includes $1.9 million to establish a Department of Cannabis Control office in Fresno, plus cannabis tax funding for the following:
- Board of State and Community Corrections Grants – $83.9 million
- Water Resources Control Board – $6.4 million, increasing over time to $13.1 million
- Department of Fish and Wildlife – Cannabis Regulatory and Enforcement Program – $3.8 million
For a total of $112 + million in new enforcement funds.
“It’s discouraging that California’s budget proposal, rather than offering tax relief to licensed cannabis businesses that would allow them to compete against illicit providers, proposes instead to spend millions more on enforcement against unlicensed marijuana operations, something that has never been more than an expensive, failed policy,” said Ellen Komp, Deputy Director of California NORML. “While we sympathize with licensed operators who are attempting to compete with unlicensed ones, we would rather see a lowering of the bar to get licensed for smaller operators, and tax relief for all, especially for medical patients.”
MORE ENFORCEMENT, BIGGER CULTIVATION LICENSES ON THE WAY
In October 2022, AG Rob Bonta announced the state CAMP (Campaign Against Marijuana Planting) program seized nearly one million illegally cultivated cannabis plants and more than 200,000 pounds of illegally processed cannabis. This is somewhat less than 2021 CAMP eradication numbers, which have remained relatively flat since 2012. Meanwhile, the DEA announced last June that it seized nearly 5 million plants from California on 2021 as part of its Domestic Cannabis Suppression / Eradication Program, a significant increase from 2020’s figure of 3.7 million plants.
The AG also announced that DOJ will be phasing out CAMP in favor of a year-round multiagency program, EPIC (Eradication and Prevention of Illicit Cannabis), aimed at human trafficking and environmental crimes at illicit cannabis grows. No funding was announced for the EPIC program. The announcement came after a series in the LA Times and national reports on NBC News reported human trafficking and other crimes taking place at large-scale, illicit cannabis cultivation sites in California, and AG Bonta toured the Inland Empire region in a flyover and was interviewed on NBC.
The LA Times, High Times, and others have also published stories about the challenges facing small California cannabis farmers in the wake of legalization. This year, outdoor cannabis cultivators can get licensed for over one acre, something that was written into Prop. 64 anticipating that federal legalization may have taken place by now (it hasn’t). Since cultivators have been permitted to “license stack” up until now, any protections for small growers were negligible up until now anyway.
Nicole Elliott, head of the CA Dept. of Cannabis Control, told the LA Times she believes California’s licensed crop is about 3.6 million pounds, in a state that consumed less than 2 million pounds. Natalynne DeLapp, executive director of the Humboldt County Growers Alliance, told High Times, “Currently, there are 1,775 acres of cannabis licensed by the state, which conservatively produces more than six million pounds of cannabis. CDFA [California Department of Food and Agriculture] has estimated in its Standard Regulatory Impact Analysis in 2017 that California likely consumes 2.5 million pounds of cannabis. Not all cannabis consumed in California is purchased at legal retailers, so a very conservative estimate is that we’re producing twice what the legal market can consume, but in reality it’s probably worse than that.”
PUBLIC PARTICIPATION OPPORTUNITIES
The CA Cannabis Advisory Committee (CAC), which sends recommendations to the DCC for regulations, has two subcommittee meetings this week: The Cultivation Subcommittee will meet on Thurs., Jan. 19 at 9 a.m. and the Public Health and Community Impact Subcommittee will meet on Fri., Jan. 20, also at 9 a.m. The public is invited to attend.
