April 7, 2014
DENVER — Citing uncertainty in the marijuana market, Colorado’s governor has ratcheted back his projection on how much tax the newly legal drug could produce.
Democratic Gov. John Hickenlooper planned to present his scaled-back request to lawmakers on Tuesday.
Hickenlooper said in February that medical and recreational pot taxes and fees would produce some $134 million for the fiscal year beginning in July. But Hickenlooper has pared back those expectations by more than $20 million, citing uncertainty in the market.
The governor’s budget director, Henry Sobanet, said Monday that the scaled-back marijuana projection came after analysts set wildly different projections after seeing tax results of Colorado’s first full month of retail recreational marijuana.
Colorado made about $3.5 million from medical and recreation pot taxes and fees in January. Analysts expect that number to rise dramatically as new stores open and a one-time tax waiver on marijuana plants expires.
However, legislative forecasters predicted last month that recreational pot would produce about $65 million in taxes next year, less than half of the governor’s recreational forecast of $125 million.
Sobanet said the governor revised his request “more prudently based on the lower of the two numbers.”
Colorado voters approved the pot taxes last year — 10 percent sales taxes and 15 percent excise taxes in addition to regular sales taxes. The first $40 million from excise taxes has already been designated for school construction; any remaining money will be appropriated by lawmakers.
The governor asked lawmakers not to trim some of his original proposals — including $45.5 million for youth use prevention and $12.4 million for public health.
The biggest reduction is in substance-use disorder treatment, an $8 million proposed reduction from Hickenlooper’s original request.
The governor has also changed his spending proposal to account for a request by state police chiefs to spend more training police officers to spot drug-impaired drivers.
Hickenlooper also now proposes spending about $2.2 million to buy 500 “oral fluid devices” to test the saliva of suspected drugged drivers.
One the legislative budget-writers, Democratic Rep. Jenise May of Aurora, said lawmakers want to play it safe with pot taxes.
Marijuana revenue is not included in the state’s overall $23 billion budget for next fiscal year, a bill still in negotiations. May said the spending of pot taxes will be considered separately.
A top priority for lawmakers will be adequately funding the new Marijuana Enforcement Division, which regulates the pot industry and collects its taxes. The agency’s predecessor — the Medical Marijuana Enforcement Division — was beset by financial problems because it relied on fees and had no ability to dip into other tax sources to pay for enforcement.
May said “making sure that we have enough funds to go forward” is a bigger priority than creating new programs paid for by marijuana.
Lawmakers will also start debating what to do if Colorado’s pot taxes bring in too much money.
Colorado has complicated budgeting constraints that limit state budget growth. Those constitutional restraints could trigger a taxpayer refund — or mandatory lower pot taxes — depending how the improving economy affects Colorado’s tax picture.
“We’re going to be going over the governor’s proposal based on new information and talk about which direction we should go into,” said another budget-writer, Democratic Rep. Crisanta Duran of Denver.
Colorado governor, John Hickenlooper, scales back marijuana tax