Exclusive: What Happened to the Funding for LA’s Cannabis Social Equity Program?

    It was mid-morning on March 15 when around 25 activists and city officials gathered in the media room on the fourth floor of Los Angeles City Hall. They convened to discuss the LA Department of Cannabis Regulation (DCR)’s Social Equity Program, which was created to ensure that people most impacted by the War on Drugs are not left out of southern California’s ever-growing marijuana industry.

    The diverse group at the meeting ranged from DCR’s executive director, Cat Packer, to former NBA player Al Harrington, who founded his own cannabis company. And then there was the City Council president’s assistant chief deputy who, by the end of the meeting, would reignite ongoing concerns regarding the lack of funding for and transparency around the city’s Social Equity Program. His name is Andrew Westall.

    Filter spoke with two people who attended the meeting, both of whom said that Westall informed the group that $10 million allegedly set aside for Social Equity had instead, recently, gone towards the Los Angeles Police Department’s sworn overtime.

    “That really got people upset,” Yvette McDowell, chair of the Diversity And Inclusion/Social Equity Committee for the California Cannabis Industry Association, told Filter. “It was a shocking moment!”

    After the meeting, McDowell approached Westall, saying something along the lines of, “$10 million to law enforcement? That’s just not right.” Westall responded, according to McDowell, that the activists who were upset about the status of Social Equity funding, “only want to sometimes show up. Why have most of them never been in my office?”

    McDowell didn’t know what to say. People were fighting for this—after all, she is one of them.

    “There are issues where city officials will only respond when there is a microphone in their face,” said McDowell. “This is one of them.”


    What’s Up With Social Equity?

    LA’s Social Equity Program was made possible by Measure M, a local ordinance authorizing the city to regulate a recreational cannabis market after California won statewide legalization through Prop. 64 in November 2016.

    LA voters passed Measure M in March 2017, with 80 percent support. The ordinance in effect created city-specific pathways for licensing that also had recommendations for the City Council to consider “Historical issues of social equity and social justice related to the commercialization of cannabis.”

    [In October 2018, activists launched a campaign to send postcards to Mayor Eric Garcetti and council members urging them to take action and fulfill the promises of Measure M. In January 2019, letters were delivered directly to their offices.]


    “When we passed Prop. 64, we sat with the Council President and other stakeholders to talk about how we could use cannabis legalization as a venue for building black and brown wealth in this city and beginning to really repair from the War on Drugs which really targeted those communities,” commented Lynne Lyman, former California state director of the Drug Policy Alliance (DPA), at a City Council meeting on March 8, 2019. “After a thousand licenses have been given out, and two years of this office in creation, we don’t have a Social Equity Program yet.”

    Making licenses available to people who are low-income, reside in a “Disproportionately Impacted Area,” and have an arrest or conviction for a marijuana offense is a key part of the vision for Social Equity. But 200 storefront retail licenses remain unallocated—and the DCR is still unprepared to support applicants who “by definition, have been disproportionately excluded from the economic and professional resources that are essential to navigating a licensing process and launching a successful business,” as Packer underscored in her recommendations made to the Rules, Elections, and Intergovernmental Relations Committee on February 8, 2019.

    Elsewhere in that report, Packer urged the city to ensure that the Social Equity Program is  “fully-established before most of the opportunities to participate in the storefront retail licensing process are gone.”  

    On March 8, the council passed an ordinance that set the Social Equity Program back, limiting the number of licenses it can issue in a given period of time.

    Felicia Carbajal, executive director of the Social Impact Center and an activist who organized the recent protests at SXSW, told Filter by phone that “the various stakeholders that helped champion the Social Equity Program, like myself, feel offended by the affront we feel is occurring. There are a lot of things that are just wrong with this entire equation.”


    Where’s the Money?

    Westall’s claim set off alarm bells for activists. Was money supposedly dedicated to promoting social justice–money that still hasn’t fully materialized–actually being put towards law enforcement, an instrument of the War on Drugs?

    Cannabis journalist Amanda Chicago Lewis spread Westall’s claims to Twitter after getting word from an anonymous activist present at the meeting.

    Other prominent drug policy reform advocates shared the tweet with commentary of their own.

    But activists with sources inside city hall were unable to verify the claims. Armondo Gudiño, of DPA’s LA office, and Lyman both could not lock down clear answers.  

    Writing to an activist in a March 20 email obtained by Filter, Sharon Tso, LA’s chief legislative analyst (CLA), confirmed that the funding transfer claimed by Westall is possible, though “a future Council and Mayoral action would be required to allocate these monies [to LAPD sworn overtime] if and when they materialize.”

    On March 4, the Budget and Finance Committee had recommended that $5 million be taken from an account solely filled with cannabis business tax revenue and transferred to the LAPD to pay for sworn overtime. On March 14, Mayor Garcetti signed and adopted the committee report.

    This came when LA’s Fiscal Year 2018-2019 adopted budget had already allocated $118 million for the Los Angeles Police Department’s sworn overtime; the LAPD later overspent by $20.68 million

    When asked by Filter why cannabis revenue was being put towards policy overtime, Claudia Aguilar, senior administrative analyst II in the office of the City Administrative Officer (CAO), explained that some policing of illicit cannabis operations is carried out through LAPD sworn overtime. “Apparently, it takes a lot of personnel to bust these [illicit] pot houses,” she said. And these “extra patrols” and other associated operations use overtime instead of new hires.

    At publication time, the LAPD has not responded to Filter’s request for comment.

    The funds that LAPD sworn overtime drew from had resided in an account titled “Various Programs and Services—Contingent Revenue,” which is housed within the Unappropriated Budget—basically the place where extra, non-guaranteed money is housed until collected, at which point it can be distributed to the accounts specified in the annual budget, as Aguilar described to Filter.

    Potential recipients of Unappropriated Budget funds were first recommended for the 18-19 Fiscal Year in a May 18, 2018 committee meeting. In that meeting’s report, a new budget line was addedappropriating $10 million to “Cannabis Enforcement, Police Sworn Overtime and other programs and services,” which were to be pulled from “additional anticipated Business Tax receipts from cannabis sales.”

    Now that $5 million has been transferred to the LAPD, as Aguilar confirmed, $4.75 million remains in the fund. That means $250,000 has been withdrawn for something else.

    As it turns out, that something else was the Social Equity Program. On November 9, 2018, Packer initially requested $2 million to fund DCR’s Social Equity Fee Deferral Program, which would help in “removing and reducing barriers to entry and facilitating business opportunities for those who otherwise do not have access due to lack of capital, business expertise, or criminal history.”

    But later that month, the Rules Committee and the Counsel approved $250,000—not $2 million—to assist with the Social Equity Program. Filter has been unable to confirm exactly when, for what reason, and by whom this decision was made.

    Aguilar recalls that the CAO’s office recommended that the Counsel “not appropriate any money until [they] were sure that the revenue would be realized.” She added, “I cannot comment as to whether the [Rules] Committee shared our concern.”  

    Around when Packer requested funds for the Social Equity Fee Deferral Program, cannabis business tax receipts had been projected to fall $2 million below the expected amount.

    “Since then, the City has revised the revenue projections,” Aguilar pointed out, “and some funding from this contingent revenue has been transferred to the Police Department.”

    “Most of us are not okay with these funds going into a giant well without any checks and balance.”

    Returning to the Westall’s original claim and the ensuing frenzy of concern amongst cannabis activists, the LAPD did in fact take from a fund that also contributed to the under-resourced Social Equity Program. But the claim that sworn overtime was being directly bankrolled by Social Equity is not substantiated.

    Some organizers take issue with the fact that departments other than DCR can pull from cannabis business tax revenue. “Most of us are not okay with these funds going into a giant well without any checks and balances,” said Carbajal, “especially without being able to figure out where all those resources are being allocated.”

    This lack of transparency, for Carbajal, further entrenches “distrust of the government” shared by “the majority of people who do qualify for Social Equity—as communities who have been harmed by the War on Drugs, who have been either lied to, or misguided, or the biggest one: not even educated.”

    “What needs to happen: People need to go search through those records,” asserted McDowell. “How many different promises were made? And specifically, what were the promises made?”


    “Save Social Equity!”

    Nick Pacheco, a retired councilman and former chair of the Council’s Budget Committee, emphasized in a call with Filter something that other activists might not agree with: The fact that cannabis business tax revenue went to LAPD overtime is not the problem to argue over. Rather, it’s that Social Equity doesn’t even make it into the DCR budget as its own, distinct item.

    “The budget is a tool. It’s not set in stone,” Pacheco repeated throughout the conversation.

    Given this flexible nature of a budget, Pacheco urges the mayor to set aside 25 percent of any cannabis revenue for Social Equity. Per his recommendations, the funds should be “revolving”—meaning that whatever is left over at the end of a Fiscal Year cannot be redirected to other programs, and instead must accumulate for the purpose of Social Equity.

    Separately, an informal activist coalition made up of nonprofit leaders, industry association members and political organizers—including Carbajal, Lyman, and McDowell—is calling on Mayor Eric Garcetti and other city officials to fully fund the Social Equity Program and other related operations to the tune of $7.7 million.


    [Demands made by Equity First Alliance in a January 19, 2019 letter to Mayor Garcetti.]


    “Stop making [the budget] more flowery,” urged Pacheco, referring to the continued city budget add-ons, none of which actually account for Social Equity. “Before you can make it better, you need to do it. You said you would do it, so do what you promised you would do.”

    As far as Carbajal is concerned, “The Social Equity [Program] is just a concept right now.”

    This, in part, is because DCR is unprepared to roll out Social Equity, Aguilar explained to Filter. According to her, the department has not onboarded the necessary people to provide the promised services.

    Aguilar is aware of this because she is currently reviewing Packer’s Request for Proposal (RFP) to solicit contractors who would be “assisting Social Equity applicants navigate both the City’s rules and regulations for cannabis operations and their business in general.” No dollar amount is listed in the RFP; that will be decided during the budgeting process.

    “We know the rest of the world is watching.”

    Carbajal and Pacheco both point out that there is money that could be dedicated to Social Equity. On March 1, the LA Comptroller released a report projecting cannabis business tax revenue to top off at $40 million by the end of the Fiscal Year—that’s $20 million more in projected revenue than the Mayor’s estimate in the proposed budget.

    Additionally, on November 16, 2018, the Rules Committee recommended a $3 million annual amount to fund the Social Equity Program for three years. Yet the Budget Committee has failed to schedule the report into its agendas. Aguilera suggested that the report could be heard in April, though that has yet to be confirmed.

    Pacheco believes activists should not be “playing by the city’s terms,” particularly referring to the funds that Westall claimed went to LAPD sworn overtime—funds which Pacheco considers “to be crumbs.”

    Carbajal is disappointed that the city is not prioritizing the people whom Social Equity would purportedly support: Angelenos who “have given not just their freedom, but also their lives” because of the War on Drugs.

    In Los Angeles, one of the world’s largest urban cannabis markets, Carbajal said, “we know the rest of the world is watching.”

    The mayor will release his proposed budget for Fiscal Year 2019-2020 on April 20.  

    Photograph by Davide Laffe, published with permission from The Social Impact Center

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