California Gov. Gavin Newsom (D) unveiled his annual budget proposal on Friday, and it contains several provisions aimed at simplifying and streamlining regulations for the marijuana industry.
The biggest proposed change concerns the stateâ€™s cannabis licensing system, which Newsom hopes to consolidate into one agencyâ€”the Department of Cannabis Controlâ€”rather than the three that are currently in charge of approving marijuana businesses.
â€śEstablishment of a standalone department with an enforcement arm will centralize and align critical areas to build a successful legal cannabis market, by creating a single point of contact for cannabis licensees and local governments,â€ť the administration said in a summary.
Under the current system, the Bureau of Cannabis Control, the Department of Food and Agriculture and the Department of Public Health each have licensing responsibilities.
Another area that will be of particular interest for stakeholders is the governorâ€™s plan for changes to marijuana taxes. The purpose of the proposed reforms is â€śsimplifying cannabis tax administration by changing the point of collection.â€ť The administration wants to â€śmove the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer.â€ť
Doing so would allow businesses to avoid a requirement to â€śestimate product mark-up and set wholesale tax ratesâ€ť and therefore simplify both the industryâ€™s tax burden as well as the collection process.
Other changes to cannabis taxation may be on the horizon, as the notice states that Newsom will be meeting with stakeholders to discuss other issues such as amending the number of taxes and the tax rate in order to â€śsupport a stronger, safer legal cannabis market.â€ť
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Finally, the governorâ€™s budget describes allocation of tax revenue from marijuana sales
After funding implementation costs and research and actions related to resolving the past harms of prohibition, his office estimates it will have more than $332 million in revenue to distribute to other social services. That will go toward education and prevention for youth substance use disorders and school retention ($199.7 million), clean-up and enforcement efforts connected to environmental damages from illicit marijuana cultivation ($66.6 million) and â€śpublic safety-related activitiesâ€ť ($66.6 million). These allocations were unchanged from the previous year.
Lindsay Robinson, executive director of the California Cannabis Industry Association (CCIA), said in a statement to Marijuana Moment that her group â€śhas been strongly advocating for the streamlining of business operations for cannabis operators for years, and we are finally seeing a budget that reflects an understanding of our challenges, and furthermore provides solutions that will simplify tax collection, ease licensing, and eventually increase access to the regulated market.â€ť
â€śWe support the three licensing authorities operating under the same umbrella, which should increase efficiency and communications, and will assist in minimizing differing interpretations of the regulations,â€ťÂ Robinson said. â€śThis proposal also increases the enforcement authority that will be assumed by the new State Department of Cannabis, which is essential in battling against the illicit market while increasing consumer safety, and a policy that CCIA has advocated and formally requested of the administration in the prior budget.â€ť
The United Cannabis Business Association (UCBA) also released a statement applauding the proposal.
â€śSince legalization, the California cannabis industry and its consumers have struggled to navigate an increasingly complex regulatory landscapeâ€”a situation that contributed to the growth of the illicit market and the current accessibility of untested products, as well as an increased cost of compliance to license holders,â€ť UCBA Board President Jerred Kiloh said.
â€śTodayâ€™s announcement from the Governor marks a turning of the tide and we are encouraged by the efforts outlined to streamline the industryâ€™s regulatory framework and simplify licensing and taxation,â€ť he continued. â€śUCBA looks forward to working closely with the administration to ensure that the intended simplification, especially as we shift the majority of taxation burdens onto retailers alone, does not result in undue burden or complications at the dispensary level and that we keep our eyes on the prizeâ€”a safe, stable and accessible legal cannabis market in the golden state.â€ť
The proposals are not yet final, and the administration is scheduled to post changes based on â€śthe latest economic forecastsâ€ť in May. The final budget is expected to be enacted by lawmakers in the summer.
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