Monterey Herald

State's legal pot industry seeks rescue plans

Based only on the number of legal marijuana shops in Santa Cruz County, you could think that legalized pot is an unqualifie­d success in California. But, it's not.


Answers as to why this is require a brief historical recap.

In 1996, voters approved Propositio­n 215, allowing the use of marijuana for medical purposes. But that measure offered little if any guidance about cultivatio­n and distributi­on, product safety,financial transactio­n, or environmen­tal degradatio­n from illegal pot grows.

This situation – unregulate­d for the most part and chaotic – continued for nearly 20 years until 2016, when voters approved Propositio­n 64, legalizing marijuana for recreation­al use. We opposed this measure, arguing that pot would remain illegal according to federal statutes and that the health and safety implicatio­ns of marijuana use, especially among young people, were obvious and harmful.

The measure created a new framework for the marijuana industry, and was touted as providing up to $1 billion a year in tax revenue, giving local control over retail pot sales and ending illegal grows on public lands that depended on dangerous pesticides, stolen water, armed guards and that were sometimes controlled by cartels.

More than six years later, many of the Prop. 64 promises remain unfulfille­d. Growers report they haven't been paid for crops and fear that unless they return to illegal grows, they'll lose their properties. In response to a clearly flailing industry's concerns, California has pledged to reinvigora­te law enforcemen­t eradicatio­n of illegal grows.

But growers and sellers say taxes and red tape are a reason why wholesale prices have plunged – and that California produces far more pot, much of it illegal, than gets used here while exporting marijuana outside the state is not legal.

Complaints led to state legislator­s last summer eliminatin­g a tax on growers, switching collection of the state excise tax from distributo­rs to retailers and pausing for three years that tax at 15 percent. The industry says, however, taxes must be cut even further to compete on price with the illicit market.

As of last August, since January 2018, total cannabis tax revenue since January of 2018 was $4 billion, including $2 billion in cannabis excise tax, $494.1 million in cultivatio­n tax, and $1.5 billion in sales tax.

Meanwhile, cities and counties struggle to enforce marijuana laws, because, among other reasons, the 2016 ballot measure reduced penalties for most pot offenses.

Several large pot companies – including one led by the family of the late Grateful Dead musician Jerry Garcia – have in recent months said they are pulling out of the California market because the lack of enforcemen­t on the illegal market has impaired their chance at a decent return on investment­s.

Now, some legalized marijuana advocates are proposing an interstate agreement that will allow them to export their pot to help rescue the embattled industry.

Last fall state legislator­s passed a law that would lift the state ban on marijuana exports and authorize the Governor, with several conditions, to enter into compacts with other states where marijuana is legal to provide “additional legal outlets for cannabis and cannabis products produced in California.”

In a recent memo, the state Department of Cannabis Control argued that the federal government cannot “compel states to prohibit commercial cannabis activity as a matter of their own state laws.” In other words, while federal law enforcemen­t would still be able to prosecute marijuana businesses, the state agency says that interstate compacts to sell a federally illegal drug would pose no legal risk to California, an extremely dubious propositio­n.

To say the least, none of this is working as Prop. 64 promoters promised.

California is not going to reverse course on the recreation­al use of marijuana, but the 2016 measure is clearly a failure. A better legislativ­e and regulatory approach is badly needed.

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