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Criminalization of cannabis Led to Inequities Now State Revenues Seek to Address

The U.S. criminalization of cannabis (marijuana), starting with the Comprehensive Drug Abuse Prevention and Control Act of 1970, has disproportionately impacted the poor and people of color with higher rates of arrests and incarceration.

While the federal government still categorizes cannabis as a Schedule I drug with “no currently accepted medical use in treatment in the United States,” (U.S. Drug Enforcement Administration) 36 states have enacted laws allowing for the medical use of cannabis, and 17 states, including California, regulate cannabis for adult use. Numerous states, including California, have called on Congress to change or otherwise clarify the legality of cannabis under the Control Act. At the federal level, the 2018 Farm Bill excluded hemp from the definition of marijuana, and to date, the MORE Act, a bill to legalize marijuana, has passed the

U.S. House and was introduced in the U.S. Senate.

State and local jurisdictions in California have moved toward decriminalizing cannabis and releasing people incarcerated for nonviolent crimes, including cannabis. In 2018, California’s Proposition 64, Proposition 47, and AB 1793 not only legalized marijuana but also allowed for resentencing and expungement of criminal records for cannabis-related crimes. Locally, 144 out of 482 California cities allow any kind of cannabis business, and 31 of the state’s 58 counties permit cannabis retail, manufacture, and/or cultivation businesses in unincorporated areas. (See Figure 1) This policy brief provides an overview of the impacts criminalization has had on Californians, including state and local budgets, and what California has done to redress some of the inequities caused by the criminalization of cannabis.

The Criminalization of Cannabis Has Had Disparate Impact on Non white People

Given equal rates of cannabis use, nonwhite people experience arrest and incarceration inequities. One national study concluded: “On average, a Black person is 3.64 times more likely to be arrested for marijuana possession than a white person, even though Black and white people use marijuana at similar rates.” Despite the legalization of cannabis in the state, this trend is also reflected in California, where Black people continue to be overrepresented in felony and misdemeanor marijuana arrests by roughly three (felony) and two times (misdemeanor) their representation in the population. According to California Department of Justice data, Hispanic people in California are also overrepresented in misdemeanor and felony marijuana arrests compared to their representation in the population (See Table 1). Marijuana arrest rates tend to be highest in marijuana-producing California counties such as Mendocino, where the arrest rate for Black people was nearly 10 times higher than the arrest rate for white people in 2016. Notably, overall arrests for marijuana-related offenses have decreased after changes in California law from 70 per 100,000 in 1996 to 48 per 100,000 in 2016, and most counties are closing the Black/white gap in marijuana-related arrests.

The University of California Davis’ Center for Regional Change estimated the cannabis/marijuana booking/arrest rates in four local jurisdictions’ law enforcement areas. Researchers found that a majority of the tracts in their study with the highest arrest/booking rates across jurisdictions were in areas considered severely disadvantaged, using the California Department of Water Resources definition for severely disadvantaged communities as having an annual median household income of less than 60% of the state median household income. Among the areas studied was the Los Angeles County Sherriff Department’s jurisdiction, where from 2012 to 2016 people who had been arrested for marijuana-related charges by the Los Angeles Police Department paid nearly $8 million in nonrefundable bond deposits, deepening the economic disadvantage in already impoverished areas of Los Angeles County.

Since AB 109 became law in 2011 and Proposition 47 was approved by voters in 2014, those convicted of marijuana-related charges will more often serve time in local jails instead of state prisons. As of June 2019, there were 46 offenders in custody in California State prisons who have marijuana-related primary offenses. According to one study, the number of people convicted and jailed in California for marijuana-included charges has steadily decreased from
10,191 in 2010 to 6,537 in 2015. However, Black people continue to be overrepresented in jail for marijuana-only offenses (24%) in proportion to their representation in the population (6%). Latino and white people were underrepresented in comparison to their representation in the population. And, of the 21 counties reporting data, Los Angeles exhibited the most racial disparity in who was jailed for marijuana-only offenses, with Black people cited as, “grossly overrepresented. Only 8% of Los Angeles County residents are black, yet they make up 30% of people jailed for marijuana only offenses in the county.”

California Policy Shifts Turn Cannabis from Cost to Revenue Source

Estimated costs of enforcing U.S. marijuana law prior to 2010 vary depending on the methods used to gather and analyze the data.1 For example, two studies from the same author about different time periods suggest that the total spent by federal, state, and local governments nationwide to enforce cannabis laws was between $7.7 billion and $13.7 billion annually. 2 Ranging wildly also are California estimates from a low of $204 million to a high of $1.87 billion a year for enforcement of marijuana laws prior to major policy shifts in the state. In between these variations are RAND estimates that expenditures for California’s marijuana-related enforcement in 2009 could be roughly $125 million to $139 million for state-related costs (prison, parole, and courts) and roughly $172 million to $187 million for local costs (arrest and
jail), 3 a total of $297 million to $326 million annually.

The State of California today budgets much less money for cannabis enforcement. Data received from the California Legislative Analyst’s Office suggest that California has budgeted in the range of $50 million for cannabis enforcement activities of six departments, an amount funded by a combination of the Cannabis Control Fund, Cannabis Tax Fund, Waste Discharge
Permit Fund, and General Fund as well as federal funds. This is likely a conservative estimate. Assuming the California Department of Corrections still houses the 46 inmates convicted on marijuana offenses described above that would add $3.7 million to the State of California’s costs, or in the range of $53.7 million for state enforcement of cannabis law today. If we use RAND’s middle-ground estimates for past state expenditures that means California’s policy changes on cannabis have potentially saved the state $71.3 million to $85.3 million a year.

While information about all California counties’ and cities’ cannabis-related expenditures is unavailable, one study about local cannabis tax revenue and police budgets noted that all but one of the 28 cities that began collecting cannabis revenues since 2016 place their portions of the $85.3 million in cannabis-related 2019-20 revenue in general funds. On average, 39% of their general funds are spent on policing. Coupled with the finding that many jurisdictions are seeking to direct cannabis revenue to law enforcement, research shows that since Proposition 64 passed: “Eight of the 28 saw their police budgets grow by at least 25%. Overall, the average shift in police budgets for these 28 cities was an increase of 19% over that three-year period.
Ultimately, in just those cities, over $455 million more in general fund dollars was spent on police in 2019-20 than was spent just three years earlier.” (Keddy 2020).

With California cannabis-related policy shifts has also come new tax revenue for California and local jurisdictions. Proposition 64 introduced two new excise taxes on cannabis: cultivation and retail price. This revenue resides in California’s Marijuana Tax Fund, where between $25 million and $52 million is legally mandated annually to research (a portion ending after 11 years), the highway patrol (ending after five years), and grants for communities disproportionately
impacted by past drug laws (increase overtime to $50 million in 2022). Remaining revenue is distributed to youth (60%), environment (20%), and safety and grant programs (20%). From 2018-20, the State collected $1.3 billion from these excise taxes.

Additional sales taxes and licensing fees are also now collected. About $772 million has been collected in State sales tax from 2018-20. Locally, for the 28 cities that were the first to pass recreational cannabis ordinances, budget projections for the 2019-20 budget year include over
$85 million in cannabis revenue. State licensing fees are trickier to estimate because there are currently three agencies responsible for administering different aspects of cannabis licensing: Cal Cannabis (Cultivation), the Bureau of Cannabis Control (dispensary etc.), and the Manufactured Cannabis Safety Branch (manufacturing). We found no official numbers about licensing revenue, but Cal Cannabis publishes its fees, which range from $135 to $8,655 for annual application fees and $1,205 to $77,905 for license and annual renewal fees. There were roughly 2,592 active cultivation licenses as of June 26, 2019. The three executive branch agencies are slated to become one as the Department of Cannabis Contro

California Moves to Redress Inequities

Research suggests the criminalization of cannabis disparately impacted nonwhite people and poor communities in California. As a way to redress inequities, Proposition 64 earmarks between $10 million to $50 million in grants for services such as job placement assistance and substance use disorder treatment in communities impacted by the criminalization of cannabis. The California Cannabis Equity Act of 2018 further seeks to support communities disproportionately impacted by cannabis criminalization by awarding funds to local jurisdictions to support loans or grants to qualified community members’ entry into and operation of legal cannabis businesses. Known as the Cannabis Equity Grants Program, these grants are administered by the Governor’s Office of Business and Economic Development. The latest appropriation for this program is $15 million, which builds on previous awards of $40 million. In 5 2019, SB 595 was signed into law and created a program to defer or waive cannabis-related application, renewal, or licensing based on need. Announced in 2021 is a bill aimed at removing an appropriations limitation to SB 595 and adding a temporary tax credit for cannabis fees paid by a qualified payee.

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