Marijuana tax projections falling short
Tax Revenue from the Colorado Marijuana Industry
(Years are listed in fiscal years)
Preliminary 2013-14 Forecast 2014-15 Forecast 2015-16 Forecast 2016-17
Total taxes on marijuana $30M $47.7M $47.9M $48.9M
15 percent education tax $4M $11.2 M $11.7M $12.3M
10 percent special sales tax
split between local and state $11.5M $19.3M $18.7M $18.6M
Total Proposition AA taxes $15.5M $30.5M $30.4M $30.9M
Source: Sept. 2014 Economic and Revenue Forecast by the Colorado Legislative Council Staff
EAGLE COUNTY —Eagle County Schools Superintendent Jason Glass says that people come up to him all the time with the impression that the schools are receiving a windfall from the marijuana retail shops that seem to be popping up like weeds. He has to tell them — Eagle County hasn’t received any money from Proposition AA, in which Colorado voters approved an excise tax on retail marijuana that would go toward public schools.
“Many come up to me assuming we’re rolling in cash because of marijuana taxes, and that’s just not the case,” said Glass.
Marijuana taxes have been slowly trickling into to state coffers, steadily increasing each quarter. A forecast by the Colorado Legislative Council staff predicts that the current fiscal year will bring in $30 million in total taxes. The report estimates that the 2014-2015 fiscal year will bring in close to $48 million. That’s about $20 million less that the state had originally projected. That’s not to say that some areas are seeing booming sales.
The town of Eagle passed a $5 local fee on every transaction, capping the revenues from the fee at $50,000.
Dieneka Manzanares, at Sweet Leaf in Eagle, recently reported that the shop has already hit their voter-approved revenue ceiling. The plan is to reinstate the fee Jan. 1.
EDUCATION Revenues fall short
While general sales might be going well, taxes meant to fund education projects are trickling in. As part of Proposition AA, a portion of marijuana tax revenues go to fund capital projects in public schools — specifically, a 15 percent excise tax on first sale of unprocessed retail marijuana. When the law was passed, it was estimated that the tax could bring in up to $40 million per year for schools. For 2013-2014, in which sale of recreational marijuana only became legal halfway through the year, the tax brought in $4 million. Next fiscal year, the first full year of sales, the state estimates it will bring in $11 million for schools and stay relatively static for the following few years. Also, the state legislature recently allocated $2.5 million in marijuana taxes to hire more health professionals in schools.
As the state’s revenue forecast points out, the marijuana market is still maturing, and the forecasts are based on a few months of data. Legislation took time to put in place, and many stores are just opening their doors.
The problem is, Glass said, that many people don’t understand how those tax funds are allocated. They doesn’t go toward operating expenses such as teacher salaries or supplies, but they go into the Department of Education’s program to fund capital projects. School districts can then apply for a Building Excellent Schools Today grant through a competitive process.
“The last capital construction project we had was Eagle County Charter School, but that was before this money was available,” said Glass. “Plus, even if we were to have the full $40 million, that’s not a great deal of money. To put it into perspective, that’s about what it would cost to build a big middle school.”
Schools missed out on some potential revenue when the Colorado Department of Revenue gave a one-time tax break to medical marijuana businesses transferring stock to retail stores.
That’s translated to millions of dollars lost for schools, and Kathy Gebhardt, a member of the BEST grant board and executive director of nonprofit Children’s Voices, is part of the group trying to end that tax break.
“They did that at the beginning because there wasn’t much supply at first (for retail shops,)” said Gebhardt. “However, you’d think there would be a sunset provision on that. We’re working now to try and close that loophole.”
Sin taxes revisited
This year, voters were asked to consider another so-called “sin tax” in the form of Amendment 68, which would have allowed Colorado race tracks to provide casino gambling, with a portion of tax revenues going to K-12 schools. The amendment failed, with 70.5 percent of voters against.
Proponents of the amendment said the measure would bring $100 million a year to Colorado schools, but some education groups were skeptical of the claim.
Glass, who openly admits that he is not a fan of such taxes, said that the backers of Amendment 68 and the retail marijuana initiative tapped into the general understanding that Colorado schools are underfunded. Still, he said that for all the buzz the initiatives create, he doesn’t think it’s the right way to be funding education.
‘Never Pan Out’
“These issues are supposed to create a windfall for schools, and historically they never pan out to the level,” he said. “Going forward, it’s hard to say how much (marijuana taxes) will eventually bring it, but it may take years or decades to get to $40 million. My professional opinion is that it’s the wrong approach. It’s a sad commentary on our state that we have to rely to these gimmicks to fund education.”
Gebhardt worries that voters and legislators are now under the impression that the education funding problem is “fixed.”
“Yes, we got some money. The last grant round, we got to fix some boilers and roofs, but legislators are still using that $40 million number,” she said. “People believe that the facilities problem in Colorado have been fixed by this and it hasn’t.”
Assistant Managing Editor Melanie Wong can be reached at 970-748-2927 and at firstname.lastname@example.org. Follow her on Twitter @mwongvail.