California Marijuana Tax Revenue Nears $4 Billion, But Growth Has Stalled, State Analysts Say

California has taken in nearly $4 billion in marijuana tax revenue since the state’s adult-use market launched in 2018, the Department of Tax and Fee Administration (CDTFA) reported on Thursday. But figures over the past year and a half are “flat,” legislative analysts reported.

For the first quarter of 2022, the state saw about $294 million in cannabis revenue generated from the excise, cultivation and sales tax on marijuana.

While that’s lower than what California collected in the fourth fiscal quarter of 2021, when it received roughly $317 million in cannabis tax dollars, it’s also the case that figures are routinely updated after initial publication due to “amended and late returns and other tax return adjustments,” CDTFA said.

Marijuana tax policy in the Golden State has been a focal point of attention for stakeholders, regulators and even the governor in recent months.

For example, Gov. Gavin Newsom (D) unveiled an updated budget proposal earlier this month that calls for the elimination of the state's marijuana cultivation tax and revised cannabis tax revenue allocations.

The May revised budget would take steps intended to combat the illicit market and make the legal industry more competitive, in large part by zeroing out the cultivation tax that marijuana businesses currently incur.

As the state Legislative Analyst’s Office (LAO) pointed out in its own update on Thursday, Newsom’s proposal also calls for the establishment of monetary thresholds for cannabis tax-funded programs and setting aside any excess revenue.

With such weak growth, unclear if "excess revenues" contemplated in Gov's May Revision cannabis proposal will materialize in 2021-22. [2/2]

— California Economy & Taxes (@LAOEconTax) May 26, 2022

LAO characterized the state’s marijuana tax intake as “flat” over the past year and a half, stating that while California’s cannabis revenue grew “very rapidly through the first quarter of the 2020-21 fiscal year,” it has “not grown at all” since then.

With that said, the non-partisan agency said that it’s “unclear” whether the state will see excess revenue under the governor’s plan in the 2021-2022 fiscal year.

California collected about $817 million in adult-use marijuana tax revenue during the last fiscal year. That represented 55 percent more cannabis earnings for state coffers than was generated in the 2020-2021 period.

Meanwhile, state officials launched a new resource on Thursday, providing people with an interactive map showing where marijuana businesses are permitted—and where they are blocked from opening—throughout the state.

The tool draws attention to the fact that more than half of the state's cities and counties do not allow any type of cannabis licensees to operate in their area, which advocates say is a problem that has allowed the illicit market to thrive despite voter-approved legalization.

The map from the Department of Cannabis Control (DCC) doesn't identify where to find dispensaries that are open, per se (though the agency does have a separate online resource where consumers can find individual licenses businesses). But it does break down how many cities in a given county allow retailers, distributors, manufacturers, cultivators and testing facilities.

Newsom’s revised budget also calls for the creation of a one-time "cannabis local jurisdiction retail access grant program" to support the development and implementation of local retail licensing efforts. The $20.5 million for that program would come out of the state general fund. Localities that license equity applicants could receive additional funding.

The governor said this month that the goal of the initiative is "addressing the persistent issue that is exactly what we anticipated would be a persistent issue—and that's dealing with the black market, going after the illegal growers and the illegal operators."

California officials also announced in January that the state had awarded $100 million in funding to help develop local marijuana markets, in part by getting cannabis businesses fully licensed.

DCC distributed the funds to 17 cities and counties where there are a disproportionate number of provisional marijuana licenses, rather than full-year licenses. The department first announced that applications for the Local Jurisdiction Assistance Grant Program had opened in October.

Also last year, the state said it was awarding about $29 million in grants to 58 nonprofit organizations, with the intent of righting the wrongs of the war on drugs. The funding is being provided through the California Community Reinvestment Grants (CalCRG) program.

Grants are being awarded to qualifying nonprofits to support programs aimed at providing job placement, mental health treatment, substance misuse treatment and legal services for disproportionately impacted communities. The program was first announced in April 2020, and applications for those grants were initially opened in September 2020.

Officials with the California Department of Fish and Wildlife also said last year that they were soliciting concept proposals for a cannabis tax-funded program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts.

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