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In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis. The state levies two excise taxes on cannabis: a retail excise tax and a cultivation tax.

May Revision Estimates. The Governor’s May Revision estimated that 2018-19 revenue would be $288 million and that 2019-20 revenue would be $359 million.

Third Quarter of 2018-19: $78 Million. The administration currently estimates that retail excise tax revenue was $61 million and cultivation tax revenue was $17 million in the third quarter of 2018-19 (January through March).

Fiscal Year to Date: $218 Million. The administration’s combined estimates for the first three quarters of 2018-19 are $171 million of retail excise tax revenue and $47 million of cultivation tax revenue.

Current LAO Revenue Projections. Based on the latest revenue data, our best estimate of 2018-19 cannabis tax revenue is $307 million—$19 million above the administration’s May Revision estimate.

Revenue Allocations. Proposition 64 allocates revenue to various categories of activities. Three of these categories receive funding amounts that depend crucially on the amount of tax revenue: (1) the Youth Education, Prevention, Early Intervention and Treatment Account; (2) the Environmental Restoration and Protection Account; and (3) the State and Local Government Law Enforcement Account. The amount disbursed to each of these accounts in 2019-20 will depend on 2018-19 revenues. The Figure below displays the projected amounts going to each fund under the Governor’s May Revision, along with updated amounts based on our current revenue estimates.


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