California has a cannabis Catch-22

For years, Richard Manning knew what he needed to cope with his physical pain, rage and PTSD — much of which he traced to a career-ending knee injury he suffered while on a domestic security detail with the U.S. Marines. Cannabis may not have been a cure-all, but it was the closest thing he’d ever had to one. Manning, a resident of Elk Grove, California, didn’t have enough money to buy the daily amount of cannabis he needed, but he was able to get it through a network of charitable donors spawned by the Compassionate Use Act, a 1996 California law that allowed marijuana to be used for medical purposes.

How donations help

In the wake of that law’s enactment, growers and distributors began donating part of their cannabis crop to oftentiny nonprofit collectives — and later to dispensaries — which passed it along free to low-income patients.

Using cannabis regularly helped Manning kick prescription opioids and alcohol and get back on his feet, he said.

But the donations he relied on virtually dried up after the 2016 passage of Proposition 64, which legalized marijuana for recreational use in California and began taxing it at every stage of production and distribution — no matter its destination. It treated any cannabis leaving a shop as a sale.

That meant cannabis was taxed the same — at rates that sometimes exceeded 38% — whether it was donated or sold for profit.

When the taxes and heavy regulations that accompanied them took full effect in 2018, the impact on the compassionate care movement was immediate and profound. Manning and others in his situation saw their options dwindle.

Today, “the prices at dispensaries are out of reach if you need daily medicine, and the taxes are about to go up again,” said Manning, 44. “So the black market is where a lot of veterans and low-income people turn.”

The prospect of poor and sick patients being driven underground for cannabis, or losing access to it altogether, was a major impetus behind a new law, SB-34, that will remove the cultivation, retail and excise taxes on cannabis donated through compassionate care programs.

The law, signed by Gov. Gavin Newsom in October, eliminates much of the financial liability cannabis growers and distributors face for giving their products away.

Can network be revived?

As a result, some compassionate care groups that curtailed or halted their charitable ventures in the wake of Proposition 64 are thinking about rekindling them. But even some of those who plan to participate say it’s unclear whether the full network can be revived.

“It’s a little bit hard to see right now,” said Lindsey Friedman, who runs the Shelter Project, a charitable cannabis operation belonging to Inglewood-based Jetty Extracts. “It’s a weird, gray area.”

The original intent of the Compassionate Use Act was to get cannabis to patients battling cancer, AIDS, glaucoma and other illnesses. The high cost of using it regularly was — and still is — a critical factor.

San Francisco’s Sweetleaf Collective was one of the first mom-and-pop nonprofits to collect cannabis donations and distribute them to people in need. It started in 1996, immediately after the passage of the medical marijuana law, delivering cannabis via bicycle to five AIDS patients that year.

In time, dispensaries started donation programs, and large-scale manufacturers of cannabis products jumped in.

“It’s part of the core of our company,” said Friedman, noting that Jetty began employing couriers in 2014 to deliver free cannabis each week to hundreds of cancer patients statewide, regardless of their income. Some other groups did the same.

Helping non-cancer patients

Most non-cancer patients needed a medical card, a doctor’s recommendation or diagnosis and proof of low income to qualify for free cannabis.

The San Francisco Bay Area was a hotbed of such compassion programs, especially in neighborhoods where the bank accounts of HIV and AIDS patients had been decimated by medical costs.

Proposition 64 changed the economics. It once cost Jetty Extract about $10 a patient each month to donate cannabis, Friedman said. After Proposition 64, it cost $100 a patient, which would have saddled Jetty with a monthly tax bill of $50,000 per month for the 500 patients it served at its peak, she said.

So the company closed the Shelter Project in 2018, Friedman said. It reopened in 2019 and now serves about 50 patients a month. Sweetleaf drastically cut its service and had to seek donations to cover taxes on the limited amount of free cannabis it did provide.

Now, with the new law set to take effect in early 2020, some of the midsize and larger players in the compassionate cannabis movement are taking tentative first steps to resuscitate their charitable operations.

Kiernan wants Weed for Warriors to begin partnering directly with small growers, creating a brand — “like Newman’s Own,” he said — that would roll proceeds into cannabis relief for veterans. Jetty Extracts is exploring whether to expand the Shelter Project.

But the era of mom-and-pop nonprofits that kick-started the movement in the 1990s may be over.

“You might be facing $15,000 in licensing fees or more,” said Manning, who formed his own collective so he could donate cannabis to family members and fellow vets, but abandoned it after the passage of Proposition 64. “How are you going to operate like that?”

CONTRIBUTED VIA TNS Veteran Richard Manning says that using cannabis regularly to cope with his physical pain, rage and PTSD helped him kick prescription opioids and alcohol.