California: Governor Gavin Newsom’s Budget Allocates Half a Billion in Cannabis Tax Revenue

In California, COVID-19 has delayed the rollout of three major efforts that will transform the country’s largest legal cannabis market. 

The first effort is to consolidate cannabis licensing—currently overseen by the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health —under a single new entity called the Department of Cannabis Control. The second and third efforts are the launches of two groundbreaking cannabis programs: OCal and appellations

Now, Governor Gavin Newsom’s 2021-22 budget sheds some light on what’s next for these efforts, as well as for other aspects of the state’s cannabis industry. 

The budget’s cannabis section opens with a renewal of Newsom’s call for consolidation, which was first included in the budget that Newsom unveiled in January 2020. The latest budget “includes $153.8 million Cannabis Control Fund to reflect the consolidation of the functions and positions of” the aforementioned current cannabis licensing entities “into a new stand-alone Department of Cannabis Control within the Business, Consumer Services, and Housing Agency on July 1, 2021.” This will involve the transfer of 598 existing positions, and the creation of 23 new ones.

In an email sent to stakeholders on Friday, following the release of the budget, the Department of Food and Agriculture noted that it “will retain the Cannabis Appellations Program.” Further, the Department noted that the “OCal Programs, which will establish standards for cannabis comparable to the National Organic Program, will also be retained within CDFA and the California Department of Public Health (CDPH) and will continue to benefit from their existing expertise.”

Both programs are the first of their kind for cannabis in the U.S. In the wine industry, appellations are the reason why, for example, only a product from Champagne can be called Champagne. Now, cannabis products from a particular region in the state, such as Humboldt, or cultivated in a particular manner, will be able to be branded accordingly, and the program is likely to provide a blueprint for other states. OCal is another first-of-its kind program, as the US Department of Agriculture’s “organic” designation remains unavailable to cannabis farmers so long as cannabis remains federally illegal. 

Both programs, set to launch at the start of this month, were delayed by COVID-19. New launch dates have yet to be set. 

“Due to the COVID-19 pandemic, the California Department of Food and Agriculture extended the comment periods on the OCal Program and the Cannabis Appellations Program to allow the cannabis industry more time to review and provide comments on our draft regulations. We still plan to implement both programs this year, although precise dates have not yet been determined,” Rebecca Forée, a spokesperson for the Department, told Cannabis Wire.

The 2021-22 budget also allocates more than half a billion in cannabis tax revenue.    

Cannabis-related allocations from the Cannabis Tax Fund include:

• “Education, prevention, and treatment of youth substance use disorders and school retention”: $265.9 million

• “Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation”: $88.6 million

• “Public safety-related activities”: $88.6 million

The budget also calls for “permanent funding authority from the Cannabis Tax Fund for the local equity grant program,” in the amount of $15.5 million “ongoing,” in order to “help expand the work of facilitating greeted equity in business ownership and employment in the cannabis market.”

Cannabis tax revenue is also allocated in the budget for non-cannabis programs. For example, the budget includes $44 million “ongoing Cannabis Funds for 4,500 more child care vouchers.” The budget also includes $12.7 million for the Natural Resources Agency for a program that supports “youth access to natural and cultural resources with a focus on low-income and disadvantaged communities.”

The budget is expected to be revised by May and enacted this summer.

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