Colorado Gov. John Hickenlooper — who opposed marijuana legalization — is bullish about the revenue the legal cannabis industry will bring in for the state, according to a new budget proposal Hickenlooper submitted Wednesday.
In the proposal, Hickenlooper’s budget office says it expects the recreational and medical marijuana industries combined to pump nearly $134 million in tax and fee revenue into state coffers in the fiscal year beginning in July. Extrapolating from those figures, the proposal estimates sales in all marijuana stores to approach $1 billion for that fiscal year. Recreational pot shop sales are estimated to account for more than $600 million of that — a more than 50 percent increase over a previous projection.
However, the analysis also hedges its predictions.
“It is important to note that these amounts are estimates based on a number of assumptions of the new industry,” the proposal states. “… We anticipate that these projections will change monthly as more data is collected and actual revenue could fall short of these projections.”
Still, the tallies are the first state estimates to be released since recreational marijuana sales began in stores on Jan. 1. And they are significantly higher than previous projections. The most comparable prior projection — a fiscal analysis attached to the bill last year that placed special marijuana taxes on the ballot — expected recreational marijuana stores to do about $395 million in sales in the fiscal year beginning in July.
In an e-mail, Hickenlooper’s budget director, Henry Sobanet, said the state now has better figures on the number of marijuana stores open for recreational sales and other factors.
“These estimates take into account things that … we did not know several months ago,” Sobanet wrote.
Mike Elliott, the executive director of the Marijuana Industry Group, agreed that the projections will likely change as new stores open, old stores close and marijuana tourists come and go.
“It’s tough to make these predictions,” Elliott said, “but the idea of this being a billion-dollar industry seems reasonable.”
According to the budget proposal, Hickenlooper’s office expects sales and excise taxes and fees from recreational marijuana stores to bring in $35 million in the current fiscal year and $118 million in the next one for the state. Sales taxes from medical marijuana shops will add another $10 million this fiscal year and next — both increases over the $9 million collected in the last fiscal year — according to the projection.
Voters in November approved heavy taxes on recreational marijuana, and their impact is apparent in the projections. Taxes and fees collected from recreational marijuana stores, which opened in January, are expected to generate in six months more than double the amount brought in by medical marijuana during the entire fiscal year.
By law, the state must put the first $40 million collected from recreational marijuana excise taxes toward school construction. But Hickenlooper’s office expects to have $28 million this fiscal year and $101 million next fiscal year left over to spend on other things.
Colorado’s general fund is expected to collect $9.1 billion overall this fiscal year and $9.7 billion next fiscal year.
As Sobanet points out, though, that does not mean that marijuana taxes will boost the state’s overall budget. Instead, Hickenlooper has proposed using almost all of that money — minus some saved in a reserve fund — to pay for projects designed to mitigate and better understand the consequences of marijuana legalization.
Over the next 18 months, Hickenlooper has proposed spending $45 million on youth marijuana use prevention efforts, $40 million on substance-abuse treatment, $12 million on public-health projects, nearly $2 million on an anti-stoned-driving campaign and another almost $2 million on regulation of marijuana stores. Hickenlooper has also proposed spending money to study trends in drugged driving and to gather intelligence on the “illegal production, sale and distribution of marijuana in Colorado.”
The proposed expenditures are in addition to $29 million already allocated for marijuana-related issues.
“Our administration is committed to the responsible regulation of adult-use marijuana and the effective allocation of resources to protect public safety and health and to prevent underage use,” Hickenlooper wrote in a letter to the legislature’s Joint Budget Committee that accompanied the proposal. “Indeed, we view our top priority as creating an environment where negative impacts on children from marijuana legalization are avoided completely.”
Elliott said the marijuana industry supported the taxes — and agrees with the governor’s plans to use the money to address marijuana-related issued. But Elliott said he hopes the first concern is adequately funding industry regulation.
“We certainly want to make sure there’s enough for the licensing and enforcement division,” Elliott said. “… We want to make this program work.”
John Ingold: 303-954-1068, email@example.com or twitter.com/john_ingold
Marijuana revenue projections
Estimated state revenue for fiscal year 2013-14:
Recreational marijuana: $35.3 million
Medical marijuana: $15.4 million
Estimated state revenue for fiscal year 2014-15:
Recreational marijuana: $117.8 million
Medical marijuana: $15.8 million
Estimated total sales, based on tax projections
Recreational marijuana: $194 million
Medical marijuana: $356.7 million
Recreational marijuana: $612.8 million
Medical marijuana: $344.9 million
Source: Governor’s Office of State Planning and Budgeting and Denver Post calculations