SACRAMENTO: The California Legislature is now considering whether to decrease funding for youth, environmental and local law enforcement programs to avoid required fee and tax increases for the cannabis industry. The decision will slash over $1 billion in funding to communities over the next five years.
“The Legislature has a clear choice – prioritize children, youth and the environment or further subsidize cannabis industry profits”, commented Leticia Aguilar, Executive Director of Native Sister Circle, one of over 275 cannabis tax-funded youth substance abuse prevention programs around the state.
When voters approved the Proposition 64 cannabis legalization initiative in 2016, they earmarked hundreds of millions of dollars each year for youth, environmental and local law enforcement programs from an excise tax on cannabis sales and a tax on cannabis cultivation. The initiative also requires the cannabis industry to pay fees to “fully” pay for the administration of the initiative.
“These cannabis industry-supported proposals will deny childcare for thousands of California’s children, limit funding to keep our kids safe from drugs, and hurt the environment. The Legislature should turn down these damaging proposals,” commented Tona Miranda, from Youth Forward, a Sacramento based nonprofit, speaking on behalf of a statewide group of 102 children’s and environmental organizations.
The legislature is now considering three proposals that will greatly benefit the cannabis industry at the expense of children and the environment. The first proposal would break the deal the legislature approved in 2022 and enshrined in existing law that adjusts the Cannabis Excise Tax this July 1st to 19% to help compensate for lost revenues from the legislature’s repeal of the Cannabis Cultivation Tax. The industry sponsored AB 564 (Haney) would reduce revenues for the youth, environmental and local law enforcement programs by about $180 million each year by repealing this excise tax adjustment. Assemblyman Haney is now trying to insert this measure in the final 2025-26 budget negotiations.
The second proposal, AB 8 (Aguiar Curry), is a complex bill that addresses hemp. Buried in AB 8 is a provision that would allow the excise tax adjustment to go forward this July 1st but repeals the increase effective January 1, 2028.
The third proposal would divert through a budget trailer bill more than $60 million in the budget year that begins July 1st and over $70 million each year thereafter from the youth, environmental and local law enforcement programs to avoid fee increases on the cannabis industry to pay for the administration of the cannabis laws. Proposition 64 requires these costs to be fully paid for by fees on the cannabis industry.
The legislature and governor continue to negotiate the final provisions of the state’s 2025-26 budget that begins this July 1st including the cannabis provisions.
Here are the numbers:
Reduces annual revenues from the Cannabis Excise Tax by $179.5 million according to the California Department of Tax and Fee Administration beginning this July 1st. This directly reduces revenues for youth, environmental, and law enforcement programs created by the voters when they enacted Proposition 64 in 2016 (Adult Use of Marijuana Initiative, Revenue and Taxation Code Section 34019, Subdivision (f)). AB 564 breaks the legislative agreement (AB 195/2022) struck with children’s and youth organizations that would help compensate for the loss of revenues resulting from the legislative repeal of the Proposition 64 Cannabis Cultivation Tax. That agreement requires the Cannabis Excise Tax to be adjusted from 15% to 19% this July 1st, partially replacing lost revenues for the youth, environmental, and local law enforcement programs. Those programs have already lost more than $500 million as a result of the 2022 Cannabis Cultivation Tax repeal. AB 8’s cannabis tax provision will have the same effect, delayed by 2.5 years.
Budget Trailer Bill and Related Budget Change Proposal:
The May Revise budget proposals would divert $61.45 million in the 2025-26 state budget and $73.02 million each year thereafter from Proposition 64’s youth, environment, and local law enforcement programs to subsidize the Department of Cannabis Control (DCC). Voter-enacted Proposition 64 requires DCC’s budget to instead be funded by fees on the cannabis industry (Business and Professions Code Section 26180).
Total Funding Reduction to Youth, Environment, and Local Law Enforcement Programs:
- $61.45 million in the 2025-26 State Budget from the Budget Trailer Bill/BCP
- $73.02 million in the 2026-27 State Budget from the Budget Trailer Bill/BCP
- $179.5 million in reduced revenues annually in the 2025-26 through 2029-2030 fiscal years, inclusive, through AB 564
- Total over 5 years = $1.251 billion from the Budget Trailer Bill/BCP & AB 564
- $493.47 million (2025-26 and 2027-28 fiscal years)
- $252.52 million Each Fiscal Year Thereafter from the Budget Trailer Bill/BCP & AB 564