The revenue from a 50-cent tax on tobacco products in California, which supports health and early-education programs for young children, has been declining in recent years — from a high of roughly $600 million down to about $440 million.
But now, thanks to Proposition 64 — officially known as the Control, Regulate and Tax Adult Use of Marijuana Act — those who administer and advocate for those early-childhood programs are hopeful about the potential for replacing lost tobacco revenue.
Marijuana sales in California, which some predict could be the biggest market for recreational marijuana in the country, are expected to generate more than $1 billion in tax revenue annually. The law, which took effect in January, states that a proportion must be spent on youth education, prevention and early intervention programs.
“When we read that initiative, we see early-childhood services front and center,” says Moira Kenney, executive director of the First 5 Association of California, which provides support to the state’s 58 independent First 5 commissions. “Prevention is an incredibly important part of what we do.”
‘Radically different’ perceptions
Including California, nine states and Washington D.C. have legalized recreational — or adult use — of marijuana. And most of them are dedicating or planning to allocate a portion of the tax revenue to education or programs that benefit children and youth.
For example, in Colorado, one of the first two states to legalize recreational use in 2012, the first $40 million in excise taxes on wholesale sales annually go to the state’s Building Excellent Schools Today (BEST) program, a competitive grant program providing funds to district and charter schools for construction and renovation of facilities.
Since fiscal year 2015, 110 Colorado schools have received funds from marijuana revenue through a BEST grant. Revenue from a separate 15% retail sales tax supports early literacy, school health, bullying prevention and dropout prevention programs.
In Nevada, sales taxes on wholesale and retail marijuana flow to schools through the state’s Distributive School Account — it’s school funding formula — instead of to special programs. In Oregon, revenue from recreational marijuana also provides basic funding for schools for expenses such as textbooks and teachers’ salaries.
In Washington, which legalized recreational use the same year as Colorado, more than half of the revenue is dedicated toward public health programs, such as expanding Medicaid and preventing substance abuse programs. But a Republican lawmaker proposed last year that all of the sales revenue — more than $700 million a year — go toward education.
In a News Tribune article, Washington state senator Ann Rivers said that while she opposed the ballot measure legalizing recreational marijuana, she thinks that now the funds should be used to revamp the way the state pays for schools. The state has been in contempt for not complying with a state Supreme Court ruling to fully fund schools. Gov. Jay Inslee signed a new school finance law last summer, but the plan increases property taxes and doesn’t include marijuana sales revenue.
Marijuana sales in Massachusetts and Vermont are expected to begin this summer, but in Maine, there are no regulations in place for buying or selling marijuana. And in D.C., there are no dispensaries, but consumers can purchase a “gift” — like a t-shirt, or some freshly baked cookies — that come with an eighth of an ounce of marijuana on the side.
Jacob Rowberry, an associate with the Denver-based Marijuana Policy Group, says it is hard to predict just how much the industry will grow, and, therefore, how much schools or other youth-serving programs will benefit. While sales have increased year after year in Colorado, that initial growth is partially due to the conversion of black market sales moving “into regulated channels,” he says. “At some point we’ll start to see some of that plateauing.”
In fact, in Alaska, where voters decided in 2014 to legalize the industry, sales have been dropping in recent months.
Rowberry adds that East Coast states that are still debating regulatory policies over taxes and fees, should be able to learn from those on the West Coast with more experience.
Even with the potential for new tax revenue, however, many are still opposed to legalization. In Colorado, there are counties, particularly in the eastern, more conservative part of the state, that still don’t allow dispensaries. “From one state to the next, how it is perceived … is radically different,” Rowberry says.
In California, says Wesley Smith, executive director of the Association of California School Administrators (ACSA), school leaders are thinking more about the messages the new law sends to students than getting a portion of the sales tax revenue. He adds he has “heard our members expressing concerns about the negative impact on their students, the impact on employees, and the district’s role regarding each.”
Recreational marijuana use is now legal in nine states and D.C., sales in East Coast states have not yet begun
Most of the West Coast states are devoting some of the revenue to education or programs for children and youth.
Kenney, with the First 5 Association, however, says because of this new revenue source, there is the potential to finally bring “to scale” programs intended to improve the well-being of children and families, such as home visiting, preschool quality enhancements, and efforts to strengthen young children’s resilience.
First 5, the result of a 1998 ballot measure led by actor and director Rob Reiner — then called Proposition 10 — created a statewide First 5 Commission and 58 independent county commissions. But because one goal of the measure was to “put tobacco companies out of business,” Kenney says, leaders have been thinking since the beginning about how to sustain the services to families and program providers.
Some models for using the funds already exist in counties where voters approved additional taxes on marijuana cultivation or manufacturing. In Santa Cruz County, on the central coast, a cannabis business tax will help fund home-visiting programs and improvements in child-care facilities and quality. And in Humboldt County, near Oregon, tax revenue is going toward parent education programs, playgroups and early-childhood mental health consultation.
In other counties, however, declining tobacco revenue has meant some commissions have cut staff and others have pulled back on specific programs, Kenney adds. With at least a year before the tax revenue becomes available, however, she says there is now time to coordinate with school districts and other agencies also serving youth. She says it makes sense to take a comprehensive approach to drug prevention among parents with young children and “not silo at-risk youth over here.”
“This is a real opportunity for California to think in the way few states have,” Kenney says. “It’s interesting to see stakeholders in youth services and the after-school world be willing to have these conversations across age spans.”
Laura Preston, a legislative advocate with ACSA, agrees that conversations are taking place in Sacramento about how the tax revenue should be spent. Some, she says, want the funds earmarked for school nurses, mental health services and counselors, while others think local school districts should have the flexibility to decide how to spend it. The organization is gathering feedback from members to get a better idea of how they would like to direct the funds.
While marijuana sales could generate $1 billion in new tax revenues, California will be losing other income. The recently passed federal tax law, which puts a $10,000 cap on deductions taxpayers can take on state and local property, income or sales taxes, is also expected to mean less funding for schools, Preston says.
“I can imagine our members are going to want the funds in their general fund,” Preston says. “But I don’t know yet. It’s all such new territory for everyone.”