Pubdate: Tue, 02 Jun 2015
Source: Seattle Times (WA)
Copyright: 2015 The Seattle Times Company
Contact:  http://seattletimes.nwsource.com/
Details: http://www.mapinc.org/media/409

STATE CAN'T GAMBLE WITH MONEY NOT IN THE BANK

DON'T envy Steve Lerch.

He is the state official tasked with estimating how much tax revenue 
Washington's grand experiment with legal marijuana will yield. As 
Lerch says, decades of sales- and property-tax data inform his 
predictive algorithms, but when it comes to legal pot, he has only a 
few quarters of history.

Nonetheless, the state Economic and Revenue Forecast Council's latest 
estimates predict the state will yield an eye-popping $1.1 billion - 
yes, billion - in marijuana tax revenue over the next four years.

That number, as Lerch says, should be viewed with a great amount of 
"uncertainty." No state has tried to estimate marijuana revenue over 
four years, as Washington's budget rules require. Yet Senate 
budgetwriters assume every penny will come in. The House budget also 
takes a rosy view, but with slight differences. If either of these 
predictions don't come true, Washington could face a deficit in two years.

That uncertainty should force state budget writers to pause and act 
conservatively.

Partisan politics in Olympia are ripe over this projected pot 
windfall. Republicans don't want to raise new taxes for the 2015-17 
budget and they're leaning heavily on marijuana revenues, in addition 
to increased tax revenue from other sources as the economy recovers. 
Democrats do want to raise new taxes and are trying to poke holes in 
Lerch's forecast to make their case.

In Colorado, Washington's twin in legalization, state leaders 
optimistically expected $150 million in marijuana revenues the first 
year. The actual amount available turned out to be $58 million.

Colorado now predicts $180 million in marijuana revenue in the next 
two years. Washington, which has much larger marijuana tax rates and 
an unregulated medical-marijuana market that is now being reined in, 
predicts more than double that - $374 million.

Tim Hoover of the Colorado Fiscal Institute has some advice: 
"Everyone needs to calm down, and they need to expect the unexpected. 
You're in a brave new territory."

Washington's marijuana revenues this year are coming in higher than 
expected. But the state should expect the unexpected because its 
marijuana market is going through big structural changes that could go wrong.

The state's unregulated, untaxed medical-marijuana dispensaries will 
slowly be folded into the regulated, taxed recreational market over 
the next year. To yield the $1.1 billion, the heaviest users - who 
consume an estimated 70 percent of the supply - would have to 
seamlessly shift from medical to recreational stores and pay far 
higher taxes than they're paying now. That's a big if.

Washington's fiscal estimates also do not fully account for 
competition from Oregon, where stores with a tax rate at least 
two-thirds lower than Washington's will soon be opening. That should 
be a concern because stores on the Oregon border have been big 
earners for the state.

Lawmakers must step back from these political games and acknowledge 
the uncertainty of a budget built on marijuana. It should be taxed 
and regulated - the alternative is a corrosive black market.

But legalization is still a work in progress. Listen to Lerch's 
caution. The money is not yet in the bank.
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MAP posted-by: Jay Bergstrom