Convincing the people to quit buying illegal weed
A billion dollars of tax revenue was the promise made by proponents of full legalization of cannabis in this state. However, one year after the situation is not that good. At least, it is not, when it comes to recreational sales.
California’s experiment in recreational weed legalization is tangled up by debates about legalization among cities and that don’t want weed businesses.
California has been the sixth state to start selling recreational weed, but the huge size of the market led to high legal sales predictions.
Alaska, Nevada, Colorado, Washington and Oregon started the way toward recreational marijuana legalization and sale. But the situation in California is not the same.
During the last year, about 2.5 billion dollars of legal weed was sold in the state. It is half a million less than in 2017, when only medical cannabis was legal.
Lynda Hopkins, the woman on the board of supervisors in Sonoma, said recently: “There are definitely days that I think that legalization has been a failure”. Sonoma was the county that began licensing weed businesses and became embroiled in harsh differences about regulations and taxes, plus the unhappy residents who don’t want to have cannabis near their streets.
Convincing the people to vote for legalization was easy. But convincing them to quit buying from the black market is another question.
In some states, such as Colorado, licensed sales of cannabis went up like crazy after legalization. However, in California the situation is completely different because the state produces much more weed that it consumes. California has a remarkable surplus in production. Therefore, a lot of extra marijuana is leaching out all over the country into states where it is legal.
When Tom Adams of BDS Analytics was asked about it, he stated: “The bottom line is that there’s always been a robust illicit market in California — and it’s still there. Regulators ignored that and thought they could go straight into an incredibly strict and high-tax environment.” And high-tax environment means high prices. And when the prices are high, the black market appears.
California Department of Food and Agriculture published a report a year ago, saying the state of California produces about 15.5 million pounds of cannabis but it consumes only 2.5 million pounds. The surplus is enormous and, therefore, it is smuggled to other states where the wholesale price is much higher.
Last December the average price of legal cannabis in California was $1,183 a pound, compared with $3,044 in Illinois, $3,072 in Connecticut and $2,846 in Washington, D.C.
Lt. Gov. Gavin Newsom said in an interview that he estimated that 80 to 90 percent of California production was exported. “It’s a very serious issue, and it’s going to create a dynamic where the black market will likely persist in a very stubborn way.”
Jonathan Rubin, the director of Cannabis Benchmarks says “market forces , low prices and extreme competition , will also force many smaller California marijuana companies out of business.” However, a promise made by proponents of legalization said that small producers would be protected.
Lynda Hopkins said: “The icon for cannabis is going to become the Marlboro Man. In California we’ve done what we always do — regulate, regulate, regulate, which ultimately gives significant advantage to large companies with significant economies of scale.”
Some people may think California’s marijuana growers are old hippies. But the reality is more like the operations of NorCal Cannabis Company of San Francisco. NorCal has turned the subject into a weed production operation where employees wear latex gloves. The company has an Israeli-style irrigation system and a $1 million air filtration system. Forget about old hippies hiding in the forest.
Jigal Patel, the president of the company, said: “This is our coming-out party. It’s waking up and doing what you love without wondering if the man is behind you.”
However, many small producers are being put out of the business. Any cannabis producer needs to submit applications to, at least, five state agencies, and obtain a certificate ensuring they will be able to use a scale.
Lori Ajax, head of California’s Bureau of Cannabis Control, said the cannabis situation for regulators and the industry in 2.018 was rough. Given the circumstances, her office is planning a campaign to convince users to stop buying illegal marijuana. “We have to get more consumers buying from the licensed market” she said.
We must remember that legalization was a way to fight black market. Ms Ajax says California needs to increase enforcement of cannabis scofflaws. “We need to be more aggressive” – she said. But having a bit less than two dozen enforcement officers, Ms Ajax is going to need help from other government agencies.
And the situation could worsen because the surge of applications by cannabis businesses in late 2018. The Bureau of Cannabis Control has issued 2.500 temporary licenses, which is a fraction of the total number of cannabis businesses in California.
More sales could push tax revenue closer to the forecasts on the 2.016 ballot that predicted the revenue could reach up to $1 billion annually.
Last September, Sacramento has collected the same amount of money in cannabis taxes than Colorado, whose population is half the size of Los Angeles County.
Gov. Jerry Brown said recently: “I have not counted on any revenue from marijuana” he said. “Who’s counting on the marijuana revenue? People said that to make it more plausible for voters.”
Ms.Thinks the solution to California’s cannabis surplus will come when cannabis become legal all over the nation. “It would be wonderful if we could sell to other states.” she said.