Marijuana Tax Cash Fund

Colorado’s Marijuana Tax Cash Fund is the biggest pool of marijuana-related tax funds in the state. The fund is filled with tax money from the sale of both medicinal and recreational marijuana, and the money is applied to a variety of purposes.

Some of these funds go toward statewide public schools. Some of the tax revenue funds research for therapeutic applications of marijuana. Some of the money is granted to police departments and prevention organizations, among other purposes.

History Behind the Fund

With the passage of Colorado Amendment 64 in 2012, Colorado became the first American state to legalize the possession of small amounts of cannabis for personal use.

It further legalized the regulated sale and distribution of small amounts of cannabis for that purpose. However, sales did not actually begin until 2014.

In 2017, then-Governor John Hickenlooper authorized a budget bill to distribute the funds from the Marijuana Tax Cash Fund. The fiscal year of 2016–2017 saw over $105 million from marijuana taxes, with much of the money being allocated toward schools, public health, and oversight of the state’s cannabis  industry.

In 2017, it was a good year for marijuana sales in the state. Figures were up by 30 percent in the first few months of that year, accounting for $235 million.

The budget signed by Hickenlooper earmarked $15.3 million in tax revenue from cannabis sales to pay for permanent housing and re-housing assistance for people with behavioral health needs, and for people who are unhoused or at risk of becoming unhoused. The funds are intended to keep vulnerable people out of the criminal justice system, and to increase access to resources and services that can help them out of the cycle of homelessness.

An additional $7.1 million was directed to cutting down on incarceration policies that target mentally ill people, instead creating more opportunities where they could find appropriate health care and public health services.

Colorado’s Department of Education was also in line to receive $9.7 million from marijuana taxes, with the intention of creating a grant program that would pay for 150 health care workers to provide “education, universal screening, referral and care coordination” to high school students who have substance abuse and mental health needs.

Hickenlooper’s budget bill would finally set aside $500,000 over the next couple of years to create a pilot program that would send trained nurses and physician assistants to two counties that had been devastated by the opioid epidemic.

A Billion-Dollar Burgeoning Industry

Since sales began, the tax revenue collected on those sales has passed $1 billion in what the Colorado Sun called a “burgeoning industry.” Governor Jared Polis boasted that the local cannabis industry was creating jobs and funding programs that targeted youth consumption of marijuana, protecting public health, and even investing in the construction projects of public schools.

A billion dollars is a lot of money, and the question of how that money is spent is one of the most frequently asked questions of the Colorado Department of Revenue. The state places a 15 percent excise tax on the product when a cultivation facility sends it to a store; then a further 15 percent is placed on retail purchases when they pay at the counter.

One of the conditions for Colorado Amendment 64 was that the Marijuana Tax Cash Fund would have to be used for health care, education, and substance abuse prevention and treatment, with state lawmakers having the final say on where the funds would go. A third of the fund’s money would be undesignated, allowing state lawmakers some leeway in deciding where it is applied.

Where Does the Marijuana Money Go?

“Where does all the marijuana money go?” asked Colorado Public Radio. One of the answers is that Colorado’s tax rate on recreational marijuana increased to 15 percent in 2017, an increase of 5 percent. It was the first such increase since cannabis was legalized.

The 2017 change also saw a state sales tax of 2.9 percent that is applied only to medical marijuana. Cannabis set aside for prescribed medicinal uses does not get the excise tax before it reaches suppliers, which is why medical marijuana cardholders pay less for their product.

Overall, all cannabis sales, whether recreational or medical, are subject to local taxes.

Where the taxes are collected can determine what the tax revenue is used for. The city of Aurora has used its marijuana tax money to build a center where unhoused people can go during the day. Construction of the Aurora Day Center is part of Aurora’s investment in addressing homelessness, which is funded by the residents of the city who buy marijuana within its jurisdiction.

Pueblo, on the other hand, has used its takings of the marijuana tax to fund scholarships. In 2018, for example, $634,000 was allocated to 563 students.

Other cities and districts have imposed limits on the taxes that can be levied on local sales. Adam County, for example, was using revenue from their marijuana taxes to fund scholarships for underprivileged students. Then, local courts found that the voter-approved taxes that were earmarked for three specific cities in the county to use for this purpose was unconstitutional. The case ultimately made its way to the Colorado Supreme Court, which ruled that the three cities (Commerce City, Northglenn, and Aurora) wouldn’t have to return their tax revenue to Adams County, and then directed the legislature to write a new law that specifically addressed “the statutory ambiguity that parties in the Adams County case were straining to interpret.”

How Colorado Spent Its Billions

In “How Colorado Spent Its $1 Billion In Weed Money,” Vice magazine broke down the distribution of the wealth from the state’s Marijuana Tax Cash Fund. Colorado has over 60 programs and grants that deal with mental health, public health, education, welfare, and more.

Over 16 percent of the budget from the fund has gone to education initiatives, including school construction projects, youth literacy programs, and anti-bullying drives. Lawmakers even allocated $25 million to help school districts establish all-day kindergarten programs.

Charter schools are promised 12.5 percent of the marijuana tax funding, and they are allowed to submit requests for a share of the pot.

In total, says Vice, the Marijuana Tax Cash Fund budget has contributed to local affairs, human services, the environment, and public health the most. Helping get to that point were the 2.9 percent sales tax on medical marijuana, the 15 percent special sales tax on retail purchases at dispensaries, and the 15 percent excise tax that is imposed every time a dispensary receives the merchandise from a production facility. And that is before local taxes are imposed, which can be as high as 10 percent.

The Downside

However, there is a downside to the tax revenue, says Vice. The other side of the coin is that all the layers of taxation placed on cannabis sales can compel low-income marijuana users to go to the black market, where the products are often cut with other drugs. Despite hopes that regulating marijuana would gut the black market, this doesn’t always happen, as the state of California found out the hard way.

Notwithstanding any positive outcomes from the use of Colorado’s Marijuana Tax Cash Fund, there still remains a great deal of suspicion as to how that money is used. Different groups all want a slice of the pie, and they react with skepticism when they receive less than they wanted or when another entity receives their own share. And some groups have ethical reservations when it comes to using money raised from marijuana taxes.

Education and the Opioid Crisis

Responding to complaints that the fund is “a piggy bank” that can be “raided” by anyone when funding is needed, lawmakers and budget writers are looking at changing how the tax revenue is appropriated. Imposing new guardrails will cut down on the 14 preferred uses of marijuana money that Colorado state law started out with, and it will focus on just two priorities: education and the opioid epidemic.

Spending the marijuana tax revenue on education was always part of Colorado’s plan with Amendment 64. Vice explains that this wasn’t explicitly spelled out in the constitutional amendment, which only offered direction on how some of the money was to be spent. The ambiguity was what led to the controversy in Adam County’s disbursement of their cannabis tax.

When it comes to opioids, lawmakers in Colorado always intended on using the marijuana tax revenue to turn the tide against the spate of opioid overdoses and deaths in their state. The idea was to use the money to fund and expand drug treatment programs and educational outreach, and to provide grants to law enforcement and emergency services.

When cannabis was first legalized in Colorado, the idea was to ensure that marijuana use was controlled, but opioid deaths spiraled to such an extent that the focus has shifted almost entirely. Legislative sessions in the Colorado legislature have prioritized redirecting funds to opioid containment programs and schools. As much as $28 million in marijuana cash funds have been explicitly approved for use in either education or opioid abuse programs.

Examples include a pilot program for opioid victims in Pueblo and Routt counties, and school nurse grants and programs for physical and special education.

Long-Term Problems With Allocations

Some have expressed concerns that the new spending priorities mean that other budgets will have to be cut. Promises were made that the marijuana revenue would pay for transportation infrastructure, and there is now debate over whether this will come to pass.

Furthermore, budget writers are aware that Colorado cannot always depend on marijuana money to fund these programs. Explosive growth is usually followed by a long period of leveling. As other states start selling their own marijuana, the tax revenue might still fall short of the public’s expectations.

Whatever funding needs Colorado has cannot always be solved by tapping into the Marijuana Tax Cash Fund. Despite the significant boost the state’s coffers have received from cannabis, schools remain underfunded by nearly $600 million.

The executive director of Great Education Colorado, an advocacy group for public health funding, commented that “a myth has taken hold in Colorado that marijuana taxes have solved Colorado’s school funding crisis.” That myth has been in place from the moment Colorado Amendment 64 passed, she said, but “nothing could be further from the truth.”

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