CA Uses Cannabis Tax Revenues for Community Reinvestment. And Cops.

    California is awarding over $50 million to support and invest in communities that suffered the highest marijuana arrest rates before legalization. The funds will go to organizations that directly provide legal services, job training and counseling. But the grants program gets just a small slice of California’s total cannabis tax revenues of well over $1 billion. And despite the state’s language about addressing the harms of the drug war, a bigger chunk of its revenues from legal cannabis will go to law enforcement.

    On May 25, the California Governor’s Office of Business and Economic Development announced it is awarding over $50 million in “Community Reinvestment Grants” to local and community organizations statewide. The recipients include local health departments in Los Angeles and Monterey County, and nonprofits like San Francisco Goodwill and the Los Angeles Conservation Corps. Funded services include job training, like ReIgnite Hope in LA, which trains students in welding; domestic and sexual violence support from the Contra Costa Family Justice Center; and free legal services for people on low incomes from Pro Bono Project in San Jose. Other funded groups provide substance use disorder treatment, support for unhoused people and more.

    California voters approved adult-use cannabis legalization through Proposition 64 in 2016. Under that law, the Community Reinvestment Grants program first awarded $10 million in the 2018-2019 fiscal year, and the total has increased annually, now arriving at the planned maximum of just over $50 million. All recipients must be eligible for charitable donations, and at least 50 percent of grants must go to community or private organizations. Amounts awarded have ranged up to $3 million, and recipients have three years to spend the money.

    There are hard limits to the state’s pursuit of this goal.

    The program’s stated purpose is to support “communities disproportionately affected by past federal and state drug policies, also known as the War on Drugs” and “advance health, wellness, and economic justice.” Its existence is a recognition that justice means using profits generated by legal dispensaries to counter decades of arrests, incarceration and lost income because of the drug war. Yet there are hard limits to the state’s pursuit of this goal.

    In 2022, California lawmakers approved a bill changing how legal cannabis is taxed. It eliminated the cultivation tax, leaving just a 15 percent excise tax on retail purchases. Starting in the 2025-2026 fiscal year the state will review and adjust the excise tax level if it needs to make up lost money from the cultivation tax, but can’t exceed 19 percent. In 2022, the state raised a total of over $1.11 billion in taxes.

    This money must first cover all of the state’s expenses for regulating cannabis, including for the Department of Cannabis Control and other agencies. It also must cover several mandatory efforts to research the effect of legalization—like how it impacts impaired driving, environmental protection and its efficacy as a medical treatment. The Community Reinvestment Grants program is included in these mandatory expenses, now reaching its maximum of $50 million a year.

    The final 20 percent percent goes to state and local law enforcement.

    Then any money that’s left over is split up in a specified way. Sixty percent goes to “Youth Education, Prevention, Early Intervention and Treatment”, to prevent substance use disorder and drug-related harms to children. The next 20 percent goes to “Environmental Restoration and Protection,” which funds state agencies to investigate and address any environmental damage caused by cannabis cultivation or production.

    The final 20 percent percent goes to state and local law enforcement. This money is to be spent on “detecting, testing and enforcing laws against driving under the influence of alcohol and other drugs,” and to “assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with [legalization]”.

    While the total amount law enforcement agencies receive depends on how much money is left, the law guarantees that an annual minimum of $50 million will fund the drug-impaired driving enforcement component alone.

    It’s worth highlighting that while the state promises to divide up cannabis tax money for these different priorities by percentage, it attaches minimum dollar amounts to only some of them. Youth drug treatment and education just gets 60 percent of whatever is left over, however low that falls. But even if tax revenues were to fall far short of expectations one year or regulatory costs were to soar, law enforcement agencies would still get at least $50 million.

    On the other hand, the Community Reinvestment Grants the state is giving out are now also guaranteed to be $50 million each year—but never more than that. So even in a lucrative year for cannabis revenue, the community grants would stay the same. Funding for law enforcement, with its 20 percent cut after expenses, has no limit.

    State allocation of cannabis tax revenues to law enforcement comes in addition to the many Californian cities that have raised money from cannabis, allocated it to their general funds, and then increased police budgets, as Filter has reported.


    Photograph by 401(K) 2012 via Flickr/Creative Commons 2.0

    • Alexander is Filter’s staff writer. He writes about the movement to end the War on Drugs. He grew up in New Jersey and swears it’s actually alright. He’s also a musician hoping to change the world through the power of ledger lines and legislation. Alexander was previously Filter‘s editorial fellow.

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