October 10, 2011
Pursuant to Elections
Code Section 9005, we have reviewed the proposed statutory initiative
related to the use, possession, and sale of marijuana
(A.G. File No. 11‑0039).
Background
Federal Law. Federal laws
classify marijuana as an illegal substance and provide criminal
penalties for various activities relating to its use. These laws are
enforced by federal agencies that may act independently or in
cooperation with state and local law enforcement agencies.
State Law and Proposition 215.
Under current state law, the possession, cultivation, or distribution of
marijuana generally is illegal in California. Penalties for
marijuana-related activities vary depending on the offense. For example,
possession of less than one ounce of marijuana is an infraction
punishable by a fine, while selling marijuana is a felony and may result
in a jail or prison sentence.
In November 1996,
voters approved Proposition 215, which legalized the cultivation and
possession of marijuana in California for medical purposes under state
law. The U.S. Supreme Court ruled in 2005, however, that federal
authorities could continue under federal law to prosecute California
patients and providers engaged in the cultivation and use of marijuana
for medical purposes. Despite having this authority, the U.S. Department
of Justice’s (DOJ’s) current policy (announced in a June 29, 2011 memo
from the department to its attorneys) is to not prosecute individual
marijuana patients and caregivers who act in compliance with state
medical marijuana laws. However, the department stated that it would
continue to prosecute “commercial” medical marijuana activities.
Moreover, in an earlier October 13, 2010 letter to the U.S. Drug
Enforcement Agency, the U.S. Attorney General stated that the U.S. DOJ
would continue to enforce federal laws prohibiting marijuana activities
related to recreational use, even if such activities are permitted under
state law.
Proposal
This measure changes
state law to (1) legalize the possession, cultivation, and sale of
marijuana by individuals age 21 or older, and (2) apply certain existing
taxes and regulations regarding the production and sale of wine to
marijuana. Despite these changes to state law, activities related to the
use of marijuana would continue to be prohibited under federal law.
These federal prohibitions could still be enforced by federal agencies.
State Legalization of
Marijuana-Related Activities. Under the measure, persons age 21
or older could legally possess, sell, transport, process, and cultivate
marijuana under state law. It also removes references to marijuana from
statutes that regulate controlled substances. However, as discussed
further below, the production and cultivation of specified amounts of
marijuana for commercial purposes would be subject to regulation by the
state and local governments. Although the measure would generally
legalize marijuana, it would remain unlawful under this measure for
individuals to operate a motor vehicle while under the impairment of
marijuana or to smoke marijuana in public non-smoking areas. The measure
also states that it does not repeal or modify any existing medical
marijuana provisions authorized by Proposition 215.
The measure directs
state and local officials and employees not to cooperate with the
federal government in the eradication of marijuana or the seizure or
forfeiture of property as part of marijuana enforcement efforts. In
addition, it directs the state Attorney General and the state Department
of Public Health to petition the Congress, the U.S. Department of Health
and Human Services, and other federal agencies within 30 days of its
enactment to remove marijuana from its current classification as a
Schedule I drug under the federal Controlled Substances Act. If the
Congress were to grant this petition, marijuana would no longer be a
controlled substance under federal law.
Regulation and Taxation of
Commercial Marijuana Activities. The measure would allow
commercial marijuana production and sales, including the establishment
of marijuana farming and commercial establishments that served or sold
marijuana, subject to certain limitations. Specifically, under the
measure, the cultivation and production of more than six outdoor
marijuana plants or 12 indoor plants per adult per year would be subject
to regulations established by the Department of Alcohol Beverage Control
(ABC). The measure directs ABC to adopt regulations and procedures for
the commercial marijuana industry by February 1, 2013 that are based on
existing regulations for the farming, distribution, retail sale, and
wholesale transactions of agricultural crops and products and modeled
after those imposed on the wine industry. According to the measure, if
ABC does not adopt such regulations by that date, the department shall
use the existing regulations for wine and beer by replacing the words
wine, beer, and alcohol with marijuana. In addition, the measure states
that existing state taxes similar to those for the wine industry would
be applied to marijuana. However, no regulations, taxes, or fees could
be imposed for marijuana which were more severe or restrictive than
those for the wine industry.
It is not entirely
clear how these provisions would be implemented if the measure were
adopted. For example, the specific taxes on marijuana would have to be
determined by the Legislature.
The most likely outcome is that various existing state and local taxes
now applied to the wine industry in California would be applied to
commercial marijuana activities. For example, companies that grew and
sold marijuana would likely have to pay taxes on their business profits,
and sales of marijuana would probably be subject to state and local
sales and use taxes. It is less clear whether an excise tax—such as the
20 cents per gallon levy now imposed on wine paid by manufacturers, wine
growers, and importers—would apply to marijuana, and, if so, at what
rate.
Authorization
of Fines.
This measure changes the penalties for various marijuana-related
offenses as follows:
·
Possession. Under current
law, it is a misdemeanor crime punishable by up to six months in jail,
up to a $500 fine, or both, for any person to possess more than one
ounce of marijuana. Currently, it is also an infraction punishable by a
fine of up to $100 for any person to possess one ounce or less of
marijuana. As noted earlier, this measure would make it legal for a
person age 21 or older to possess marijuana. However, under the measure,
it would be an infraction punishable by a fine of up to $2,500 for
persons under age 21 to possess more than one ounce of marijuana and an
infraction punishable by a fine of up to $100 for persons under age 21
possessing one ounce or less of marijuana.
·
Sale and Distribution.
Under current law, selling marijuana is a felony
subject to imprisonment in jail or prison for a period of two to
four years. This measure
would make it legal for persons age 21 or older to sell marijuana.
However, the measure provides that the sale of marijuana by or to any
individual under 21 years of age would be subject to a fine of up to
$2,500. The measure also specifies that distribution of marijuana by or
to persons under age 21 is subject to this same penalty. This would
likewise be the penalty for any sale of marijuana (including sales
involving only adults) or commercial activity related to marijuana if it
was not done in accordance with state regulation of these activities.
·
Other Marijuana-Related
Activities. Under current law, it is a felony subject to two to
four years imprisonment in prison or jail to cultivate, gift, store,
share, or transport marijuana. This measure makes it legal for persons
age 21 or older to engage in such marijuana related activities, but
would make it an infraction subject to a fine of up to $2,500 for
individuals under age 21 to cultivate any amount of marijuana. This
would likewise be the penalty for persons under age 21 for possessing,
gifting, storing, sharing, or transporting more than one ounce of
marijuana.
Fiscal Effects
As
noted above, it is unclear how some of the provisions in the measure
regarding marijuana regulation and taxation would be implemented. In
addition, the U.S. DOJ’s announcement that it would continue to enforce
federal prohibitions on non-medical marijuana-related activities could
have the effect of impeding the activities permitted by this measure
under state law. Thus, the potential revenue and expenditure impacts of
this measure described below are subject to considerable uncertainty.
Reduction in State and Local
Correctional Costs. The measure could result in savings to the
state and local governments by reducing the number of marijuana
offenders incarcerated in state prisons and county jails, as well as the
number placed under county probation or state parole supervision. These
savings could reach several tens of millions of dollars annually. County
jail beds that would no longer be needed for marijuana offenders might
be used for other criminals who are now being released early because of
a lack of jail space.
Reduction in Court and Law
Enforcement Costs. The measure would result in a reduction in
state and local costs for enforcement of marijuana-related offenses and
the handling of related criminal cases in the court system. The state
and local governments may decide to redirect existing resources to other
law enforcement and court activities.
Other Fiscal Effects on State
and Local Programs. The measure could also have fiscal effects
on various other state and local programs. For example, the measure
could result in an increase in the consumption of marijuana, potentially
resulting in an unknown increase in the number of individuals seeking
publicly funded substance abuse treatment and other medical services.
This measure could also potentially reduce both the costs and offsetting
revenues of the state’s Medical Marijuana Program, a patient registry
that identifies those individuals eligible under state law to legally
purchase and consume marijuana for medical purposes. In addition, the
measure could result in additional costs in the low tens of millions of
dollars annually for ABC to establish and enforce regulations for the
commercial marijuana industry. However, it is likely that these costs
would be offset by licensing fees levied on marijuana businesses.
Effects on State and Local
Revenues. The state and local governments would receive
additional revenues from taxes and fees from marijuana-related
activities allowed under this measure. For instance, state and local
governments would receive increased sales tax revenues from the sale of
marijuana. In addition, businesses and individuals producing and selling
marijuana would pay individual and business taxes. To the extent that
this business activity pulled in spending from persons in other states,
the measure also would result in a net increase in taxable economic
activity in the state. However, the potential new revenues from
marijuana-related economic activity could partially be offset by
declines in other economic activity as consumers spend less on other
consumer products and/or invest less. The magnitude of the net increase
in economic activity is unknown and would depend considerably on the
extent to which the federal government enforces its laws against
marijuana in California. To the extent that a commercial marijuana
industry further develops in the state as a result of this measure,
however, our best estimate is that the state and local governments could
eventually collect hundreds of millions of dollars annually in net
additional revenues.
Shift in Sources of
Fine Revenue. The measure would result in an unknown
reduction in state and local revenues due to the elimination of fines
established in current law for marijuana criminal offenders. However,
the loss of these fine revenues could be wholly or partially offset by
the generation of new fines imposed on violators of certain provisions
of this measure.
Summary of Fiscal Effects
We estimate that this
measure would have the following major fiscal effects:
·
The fiscal effects of this measure are
subject to considerable uncertainty depending on: (1) the extent to
which the federal government continues to enforce federal marijuana laws
and (2) the specific taxes applied to marijuana.
·
Savings of potentially several tens of
millions of dollars annually to state and local governments on the costs
of incarcerating and supervising certain marijuana offenders.
·
Potentially hundreds of millions of
dollars in net additional tax revenues related to the production and
sale of marijuana products.
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