In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis. The state levies two excise taxes on cannabis: a retail excise tax and a cultivation tax.
January Budget Assumptions. The Governor’s January budget proposal assumed that 2019-20 cannabis tax revenue would be $479 million and that 2020-21 revenue would be $550 million.
Second Quarter of 2019-20: $108 Million. The administration currently estimates that retail excise tax revenue was $84 million and cultivation tax revenue was $24 million in the second quarter of 2019-20 (October through December).
Revenue Growth Flat. Last quarter’s $108 million total is very close to the current estimate for the prior quarter ($107 million). This slow quarter-to-quarter growth stands in contrast to the longer-term trend of very strong growth in cannabis revenues. For example, despite the recent slowdown, last quarter’s total is 46 percent higher than the second quarter of 2018-19.
2019-20 Revenue Scenarios. If revenue over the next two quarters grew at the same pace as it did in calendar year 2019, the 2019-20 total would be $465 million. If, instead, revenue grew as slowly as it did this past quarter, 2019-20 revenue would be roughly $434 million. In either scenario, 2019-20 revenue would be somewhat lower than the administration assumed in January.