MAY 2019 - Capitol Corner

Governor Newsom state lawmakers a revised budget on Thursday that boosts his already-hefty January proposal to $213.6 billion.

Public schools will reap most of the gains if the Democratic-controlled Legislature rolls with him. Newsom also upped the ante on the housing crisis with a proposed $1 billion more to combat homelessness.

In January, the Governor’s proposed budget was completely silent on cannabis revenues and expenditures.  In his May Revision, this is not the case, regardless of underwhelming revenue projections.

The cannabis excise tax is forecast to generate $288 million in 2018-19 and $359 million in 2019-20, a reduction of $67 million and $156 million, respectively, from the Governor’s Budget forecast. The forecast assumes continued growth of more than 15 percent annually as new businesses continue to enter the marketplace and local jurisdictions adjust to the state’s legal framework. It is important to note that for the near term, revenue estimates will be subject to significant uncertainty because the market has only recently been established.

Proposition 64 specified the allocation of resources in the Cannabis Tax Fund, which are continuously appropriated. Pursuant to Proposition 64, expenditures are prioritized for regulatory and administrative workload necessary to implement, administer and enforce the Cannabis Act, followed by research and activities related to the legalization of cannabis, and the past effects of its criminalization. Once those priorities have been met, the remaining funds are allocated to youth education, prevention, early intervention, and treatment; environmental restoration; and public-safety related activities. The May Revision estimates $198.8 million will be available for these purposes, and allocates them for the first time in 2019-20 as identified below.

Education, prevention, and treatment of youth substance use disorders and school retention—60 percent ($119.3 million):

• $12 million to the Department of Public Health for cannabis surveillance and education activities.

• Remaining 75 percent ($80.5 million) to the Department of Education to subsidize child care for school-aged children of income-eligible families to keep these children occupied and engaged in a safe environment, thus discouraging potential use of cannabis.

 • Remaining 20 percent ($21.5 million) to the Department of Health Care Services for competitive grants to develop and implement new youth programs in the areas of education, prevention and treatment of substance use disorders along with preventing harm from substance use.

• Remaining 5 percent ($5.3 million) to California Natural Resources Agency to support youth community access grants. These grants will fund programs to support youth access to natural or cultural resources, with a focus on low-income and disadvantaged communities. This includes but is not limited to community education and recreational amenities to support youth substance use prevention and early intervention efforts.

Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation—20 percent ($39.8 million):

• Sixty percent ($23.9 million) to the Department of Fish and Wildlife, of which $13.8 million will support clean-up, remediation, and restoration of damage in watersheds affected by illegal cannabis cultivation and $10.1 million to support enforcement activities aimed at preventing further environmental degradation of public lands.

• Forty percent ($15.9 million) to the Department of Parks and Recreation, of which $7.1 million will be used to survey the impacts and identify unknown areas of cannabis cultivation to assist with prioritizing resources for effective enforcement, $5.6 million for remediation and restoration of illegal cultivation activities on state park land, and $3.2 million to make roads and trails accessible for peace officer patrol and program assessment and development.

Public safety-related activities—20 percent ($39.8 million):

 • $2.6 million to the California Highway Patrol for training, research, and policy development related to impaired driving and for administrative support.

• Remaining 30 percent ($11.2 million) to the California Highway Patrol’s impaired driving and traffic safety grant program for non-profits and local governments authorized in Proposition 64.

• Remaining 70 percent ($26.0 million) to the Board of State and Community Corrections for a competitive grant program for local governments that have not banned cannabis cultivation or retail activities that will prioritize various public health and safety programs, including, but not limited to, local partnerships focused on prevention and intervention programs for youth and to support collaborative enforcement efforts aimed at combating illegal cannabis cultivation and sales. The dollar amounts above are subject to change and will be affected by actual cannabis tax receipts for the final two quarters of 2018-19.

The May Revision also includes $15 million Cannabis Tax Fund to provide grants to local governments to assist in the creation and administration of equity programs, and to support equitable access to the regulated market for individuals through financial and technical assistance. The Governor’s Office of Business and Economic Development will administer the grant program on behalf of the Bureau of Cannabis Control.

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