August 22, 2022
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.
Preliminary Total for Fourth Quarter of 2021-22: $167 Million. The administration currently estimates that retail excise tax revenue was $141 million and cultivation tax revenue was $26 million in the fourth quarter of fiscal year 2021-22 (April through June).
Revenues Declining. As shown in the figure below, state cannabis tax revenues have declined substantially for three consecutive quarters. As a result, revenue in April through June of 2021-22 was 24 percent lower than in April through June of 2020-21.
State Sets Aside “Excess Revenues.” Under Chapter 26 of 2022 (AB 195, Committee on Budget), the state uses 2020-21 cannabis tax revenues to establish a funding target for the programs that receive those revenues. The state will set aside any 2021-22 revenues that exceed the amount needed to hit this funding target. This money then will be available to help the state meet the funding target in later years.
Likely No Excess Revenues In 2021-22. Over the four quarters of 2021-22, total cannabis tax revenues were six percent lower than in 2020-21. Although the calculation described above uses numbers that differ somewhat from these quarterly totals, it currently appears unlikely that 2021-22 yielded any of the excess revenues contemplated in AB 195.