Pubdate: Thu, 28 Mar 2013 Source: Wall Street Journal (US) Copyright: 2013 Dow Jones & Company, Inc. Contact: http://www.wsj.com/ Details: http://www.mapinc.org/media/487 Author: Nathan Koppel STATE'S POT OVERSIGHT UNDER FIRE As Colorado lawmakers craft rules to govern the newly authorized recreational-pot businesses, a state audit has raised questions about regulatory oversight of the state's existing medical-marijuana industry. A committee of Colorado House and Senate legislators holds its final scheduled meeting Thursday as the legislature seeks to meet a May deadline to finalize laws covering recreational-pot sales, which were approved by state voters last year and are set to go into effect in 2014. The recreational-pot industry is expected to be larger than its medical counterpart. One challenge will be to adequately fund the undertaking. An audit released Tuesday said the Colorado Department of Revenue's Medical Marijuana Enforcement Division, which oversees the state's roughly 1,400 businesses that sell pot for medical use, hasn't generated enough revenue from fees to hire the staff it needs to closely track sales. The agency was forced to lay off a majority of its staff in 2012 owing to revenue shortfalls, a problem compounded by large expenditures on furniture, computers and other items, according to the audit. It noted that the agency blamed declining revenue on a state moratorium on new medical-marijuana businesses from August 2010 to July 2012. The agency receives revenue primarily from application and licensing fees paid by medical-marijuana businesses. Other problems the report cited include the division's recommendation that licenses be granted to applicants who potentially failed to satisfy the state's "good moral character" requirements because they had prior felony arrests or had participated in alcohol and drug-treatment classes. The Medical Marijuana Enforcement Division declined to comment. State Democratic Rep. Dan Pabon, chairman of the joint legislative committee on recreational-pot rules, said the audit underscores the need to adequately fund oversight. Lawmakers, he said, would consider asking voters later this year to approve a special recreational-marijuana sales tax, in addition to the state's normal 2.9% sales levy. "We need to make sure we have the resources to properly protect public safety," Mr. Pabon said. Michael Elliott, executive director of Colorado's Medical Marijuana Industry Group, agrees the state needs to better fund regulation. But it should do so, he said, by charging higher licensing fees to marijuana businesses, not by raising sales taxes, which would be passed to customers through higher prices, spurring more black-market purchases. "We need to transition all black-market sales to legal sales, which is the best way to bring in additional state revenue," Mr. Elliot said. Rachel Gillette, a Colorado attorney who represents medical-marijuana businesses, said that despite failings identified by the audit, the vast majority of marijuana dispensaries strictly comply with state and local rules. "There is self-regulation in the industry," she said. "It is not the Wild West." - --- MAP posted-by: Jay Bergstrom