Pot Money May Be Nice, But It Can’t Save Colorado’s Budget

Jul 17, 2017

Three years after legalizing recreational marijuana sales in Colorado, lawmakers are turning to pot to fill some gaps in the budget. That's why lawmakers voted to increase a special use tax on recreational marijuana sales from 10% to 15% in 2017. But while the money can be a salve for some of Colorado's problems, it doesn't, and can't, solve them all.

Taxes from recreational marijuana brought in just over $100 million dollars last year. It's largely spent in areas explicitly approved by voters, such as school construction, where the first $40 million dollars collected from the excise tax goes. The rest is allocated to various other issues, such as social programs, law enforcement and public health outreach.

While it may sound like a lot of money, it just isn't enough to solve all of Colorado's budget woes.

"If you're trying to solve a $9 billion issue with your roads, a $1 billion issue with our K-12 system, marijuana can't do that by itself," said Democratic Rep. Jonathan Singer of Longmont, one of the writers of the marijuana tax code. "And that's probably one of the most dangerous parts of what the marijuana tax actually did is it gave people the sense that they could get all the services that they needed without actually having to maybe sacrifice a little bit more of their own hard earned dollars."

Singer added that it's still a remarkable opportunity.

But not all of the money has an explicit allocation, leaving lawmakers with a small amount of money up for debate. Gov. John Hickenlooper proposed spending  $15 million to help the chronically homeless.

Even though almost all of that money stayed in the budget, many Republicans, including Senate President Kevin Grantham of Canyon City, opposed it. 

"I'm not sure what the nexus is exactly between homelessness and the approved rationale for spending this money," he said. "I think there's a stretch. Bottom line."

However it does make sense for Cathy Alderman with the Colorado Coalition for the Homeless. Her group hopes to apply for a marijuana-funded grant to house people in need of a transitional place to live after leaving the hospital.

"They basically get discharged back into homelessness without the ability to care for their health care issue," she said. "A lot of people are entering homelessness because of rising rents. In Colorado that's due to a real affordable housing crisis. So I think a use of the marijuana tax funds for housing is actually really logical."

For much of the additional money collected from pot taxes, the question becomes how related is it to the purposes defined by voters.

"It's when you get really far afield that I think people are going to question it," said Christian Sederberg, an attorney who focuses on marijuana policy. "But at the same time, I would say the most important take away for me this year at the legislative session was we were a central part of the budget discussion. Instead of sort of being this, 'Ooh well, there's the marijuana money.'"

In the final budget negotiations, Sederberg said everything becomes a hard decision and marijuana taxes can continue to play a critical role. But lawmakers are cautious about using a potentially volatile funding source.

"We increased the special sales tax up to 15%," said Grantham. "How is that going to effect sales? Are we going to price ourselves out of the market? Or are we creating more of a grey market and black market situation here in Colorado and we won't see any taxes from that.? We have a lot of unknowns ahead of us and we, as always, have to continue to tread carefully."

With more states like California, Massachusetts and Nevada legalizing recreational marijuana, those connected to the industry say Colorado, the first to legalize, will need to focus on innovation to stay competitive. 

Capitol Coverage is a collaborative public policy reporting project, providing news and analysis to communities across Colorado for more than a decade. Fifteen public radio stations participate in Capitol Coverage from throughout Colorado.