Prop 64 has been the law for a full year now. What lies ahead for California cannabis?
After a full year of adult-use legalization, many still see cannabis as a criminal crop – a perception strengthened by its perpetual Schedule 1 status – that should be banned or regulated to a few specific blocks. Even in the Bay Area, a region that plays a vital role in the legalization storyline, civic leaders and voters have jumped at the chance to tax a new vice.
We are lucky to live in a state, in fact the only state, that can claim decades worth of private experience with cannabis. Granted, the multi-billion dollar industry growing in front of us is an entirely new organism, but we still benefit from the infrastructure and lessons we’ve amassed since 1996 (on the legal timeline).
Unfortunately, that appreciation is not a commonality amongst all Californians. In fairness, however, there are aspects to cannabis legalization that California is getting right.
On the restorative justice front, Alameda/Oakland Democratic Assemblymember Rob Bonta’s AB 1793 created a simpler pathway to remove or reduce cannabis-related offenses on Californians records. While Prop 64 contained provisions that retroactively reduced or eliminated many cannabis law violations, it still required individuals to petition the government themselves. Bonta’s newly-enacted bill makes this process automatic for a potential 220,000 cases with past marijuana convictions.
Bonta is also behind the recently introduced bill that would eliminate the state’s $148 per pound cultivation tax and reduce the state’s 15% excise tax on retail sales to 11% until 2022. This would be a boon to the industry, and is a necessary step to combat the thriving black market and support our state’s legacy cannabis businesses.
Federally, Oakland’s own Congresswoman Barbara Lee was named co-chair of the Congressional Cannabis Caucus. Even notorious California hold-out U.S. Senator Kamala Harris jumped on the cannabis bandwagon and called for federal action to help the industry thrive.
Oakland may be ahead of the curve but it’s not alone.
Alameda, San Francisco, and Sonoma counties have each reduced or dismissed Proposition 64-eligible convictions without requiring individuals to initiate the process. State Senator Scott Wiener of San Francisco has re-introduced Senate Bill 34, allowing compassionate care programs to facilitate donations from a licensed retailer, thereby allowing them to restart this service without facing the prohibitive costs.
On the business side, there are currently four citywide equity programs – in Los Angeles, Oakland, Sacramento, and San Francisco – to ensure those individuals who have been disproportionately impacted by the War on Drugs receive a percentage of the local cannabis business permits. Although the programs are backlogged due to the glacial pace of bureaucracy, Sacramento responded by passing the California Cannabis Equity Act, which will allow equity programs to apply for disbursements from a $10 million state fund meant to support those programs.
Despite these desperately needed changes, our state’s leaders have determined that the best way to handle such a delicate industry – one balancing federal prohibition, historic inequities, financial hurdles, advertising restrictions, and more – is to regulate and tax it to a halt. Smaller operations struggle to finance compliance with new (and shifting) codes. Excessive local and state taxes empower a thriving black market that affects state budget forecasts.
At least the disillusioned bureaucracy knows it can only blame itself.
As if that wasn’t already a business’s worst nightmare, well-funded corporate competitors are taking advantage of a loophole left in cannabis legislation that allows growers to “stack” licenses. The state can’t issue large cultivation licenses (larger than one acre) until 2023 but in the cities and counties where stacking is permitted it’s effectively underway. On top of these man-crafted obstacles, it’s next to impossible for small farmers to access business loans from banks due to federal law. Given the prohibitive costs we’ve built into California’s market, small-to-medium sized cannabis operations have few other options than illicit activity. (Not to mention it’s the only way to get product out-of-state.)
Luckily, local and state governments understand their role in this environment and are extending the olive branch where they can.
San Francisco waived a previous end-of-2018 deadline for several of its medical marijuana establishments that failed to obtain temporary adult-use permits by the state’s deadline. However, keep a close eye on how San Francisco’s City Hall spends the revenue from the November cannabis tax, Prop D. Although allocated to the General Fund, District 10 Supervisor Shamann Walton has called for the funds to be at least partially invested back into the City’s cannabis community, with priority given to the Cannabis Equity Program.
To be frank, this is the only way the funds should be used.
Diversity and inclusion are critical issues in every sector but building equity into the wealth creation opportunities provided by cannabis is paramount to the industry’s success. Currently, we are not succeeding. Governor Gavin Newsom has reportedly expected the cannabis market would take five to seven years to settle, but still lays the blame at local governments feet for an industry exporting 85–90 percent of its crop illegally.
With California’s cannabis regulations finalized and in effect, will we see the Governor’s projected $514 million in cannabis excise tax revenue? Will Sacramento and local governments listen to the industry and alleviate its financial burden? Will the federal government at least allow cannabis businesses to bank?
We shall see but it’s worth celebrating that the people of California took on a gargantuan task – transitioning the world’s largest cannabis market to adult-use – and saw each other through the first 12 months of this new(ish) frontier. We should be optimistic the learning curve will be smaller than Newsom projects.
But, if not, at least we can light up at the end of the day. Not every state can say that.
Kyle Borland, co-founder of Ounce Strategy, is a storyteller and strategist at the intersections of cannabis, branding & communications, justice, and urbanism. Read more at his website kgborland.com. #ShareTheWeight