The governor of California has announced his first draft for the 2020-21 budget plan and it outlines some big changes for the state’s cannabis industry. There are huge changes proposed within the governor’s budget and the first major change is the combination of three offices of cannabis regulation into one single department. The Bureau of Cannabis control that oversees distributors, testing labs and retailers; the Department of Food and Agriculture that oversees cultivators; and the Department of Public Health that oversees product information will all be merged into the Department of Cannabis Control by the month of July in 2021. This is a big change to the industry that will provide the ability for cannabis businesses to easily contact one regulation entity instead of three.
Another portion of the budget plan, supported by the nonpartisan Legislative Analyst’s Office back in a report released in December, wants to change the method of tax collection. As it is currently in California, taxes are collected by distributors and then paid to the state. The new change within the budget plan would instead have retailers responsible for tax collection. There is also the plan to increase the tax on cannabis by 15% in order to increase the tax revenue collected by the state by almost $100 million and provide for more funding for causes that were outlined in the legalization measure, Proposition 64, which was passed in 2016. This fiscal year the state collected $447 million and will now expect to collect tax revenue of $550 million in 2020-2021.
Taxes collected for 2020-2021 will go towards child care, youth substance disorder treatment, school retention, environmental cleanup from illegal cannabis cultivation, and public safety activities. The bulk of tax revenue used on these separate avenues, roughly $200 million, will go to the youth substance disorder treatment programs and school retention. Both environmental cleanup from illegal cannabis cultivation and public safety activities will get $66.6 million in tax revenue and child care will get $60.3 million.
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