Pubdate: Thu, 20 Feb 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Author: John Ingold
Page: 1A


Six Priorities for Spending Sales Taxes From Pot*

Colorado Gov. John Hickenlooper, who opposed marijuana legalization,
is bullish about the revenue the legal cannabis industry will bring in
for the state, according to a new budget proposal Hickenlooper
submitted Wednesday.

In the proposal, Hickenlooper's budget office says it expects the
recreational and medical marijuana industries will pump nearly $134
million in tax and fee revenue into state coffers in the fiscal year
beginning in July. Extrapolating from those figures, the proposal
estimates sales in all marijuana stores to approach $1 billion for
that fiscal year. Recreational pot shop sales are estimated to account
for more than $600 million of that - a more than 50 percent increase
over a previous projection.

However, the analysis also hedges its predictions.

"It is important to note that these amounts are estimates based on a
number of assumptions of the new industry," the proposal states. "We
anticipate that these projections will change monthly as more data is
collected and actual revenue could fall short of these

Still, the tallies are the first state estimates to be released since
recreational marijuana sales began in stores Jan. 1. And they are
significantly higher than previous projections. The most comparable
prior projection - a fiscal analysis attached to the bill last year
that placed special marijuana taxes on the ballot-expected
recreational marijuana stores to do about $395 million in sales in the
fiscal year beginning in July.

In an e-mail, Hickenlooper's budget director, Henry Sobanet, said the
state now has better figures on the number of marijuana stores open
for recreational sales and other factors.

"These estimates take into account things that ... we did not know
several months ago," Sobanet wrote.

Mike Elliott, the executive director of the Marijuana Industry Group,
agreed that the projections will probably change as new stores open,
old stores close, and marijuana tourists come and go.

"It's tough to make these predictions," Elliott said, "but the idea of
this being a billion-dollar industry seems reasonable."

According to the budget proposal, Hickenlooper's office expects sales
and excise taxes and fees from recreational marijuana stores to bring
in $35 million in the current fiscal year and $118 million in the next
one for the state.

Sales taxes from medical marijuana shops will add another $10 million
this fiscal year and next-both increases over the $9 million
collected in the past fiscal year - according to the projection.

Voters in November approved heavy taxes on recreational marijuana, and
their impact is apparent in the projections.

Taxes and fees collected from recreational marijuana stores, which
opened in January, are expected to generate in six months more than
double the amount brought in by medical marijuana during the entire
fiscal year.

By law, the state must put the first $40 million collected from
recreational marijuana excise taxes toward school construction. But
Hickenlooper's office expects to have $28 million this fiscal year and
$101 million next fiscal year left over to spend on other things.

Colorado's general fund is expected to collect $9.1 billion overall
this fiscal year and $9.7 billion next fiscal year.

As Sobanet points out, though, that does not mean that marijuana taxes
will boost the state's overall budget. Instead, Hickenlooper has
proposed using almost all of that money - minus some saved in a
reserve fund - to pay for projects designed to mitigate and better
understand the consequences of marijuana legalization.

Over the next 18 months, Hickenlooper has proposed spending $45
million on youth marijuana-use prevention efforts, $40 million on
substance-abuse treatment, $12 million on public health projects,
nearly $2 million on an anti-stoned driving campaign and nearly $2
million on regulation of marijuana stores. Hickenlooper has also
proposed spending money to study trends in drugged driving and to
gather intelligence on the "illegal production, sale and distribution
of marijuana in Colorado."

The proposed expenditures are in addition to $29 million already
allocated for marijuana-related issues.

"Our administration is committed to the responsible regulation of
adult-use marijuana and the effective allocation of resources to
protect public safety and health and to prevent underage use,"
Hickenlooper wrote in a letter to the legislature's Joint Budget
Committee that accompanied the proposal. "Indeed, we view our top
priority as creating an environment where negative impacts on children
from marijuana legalization are avoided completely."

Elliott said the marijuana industry supported the taxes - and agrees
with the governor's plans to use the money to address
marijuana-related issues. But Elliott said he hopes the first concern
is adequately funding industry regulation.

"We certainly want to make sure there's enough for the licensing and
enforcement division," Elliott said. "We want to make this program
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