California’s Illicit Market Crackdown Budget Goes Up In Smoke

In a funding dispute between state lawmakers and California’s Gov. Jerry Brown, the enforcement plan for California’s black market is coming up short.

Last month, Brown unveiled a sweeping enforcement plant to deal with the state’s continuing illicit market, which is currently held afloat easily by out-of-state demand, high taxes within the state and an entry bar too high for long-time providers. Brown’s plan needed $14 million in funding in order to create five teams in the state attorney general’s office to investigate California’s illicit market.

But in California’s current budget plan, which legislators are voting on this week, the $14 million is not included, according to the Los Angeles Times.

So how did Brown’s proposed crackdown funding fall through? Right now, two competing narratives are emerging from the state capitol in Sacramento. According to the Department of Finance spokesman, the legislature simply didn’t approve it.

However, Kevin Liao, a spokesman for Assembly Speaker Anthony Rendon, gave a different version of events in a statement on the matter.

“The Assembly supports these cannabis enforcement units and proposed the units be funded through the General Fund due to concerns they are an ineligible use of Cannabis Tax Fund dollars,” said Liao. “The administration rejected that proposal.”

The California Cannabis Industry Association told the Los Angeles Times they were disappointed by the loss of funding.

“Since the rollout of the state licensing framework earlier this year, CCIA has consistently maintained that additional resources are critically needed to ensure that lawful cannabis businesses can successfully compete in the California marketplace,” said Amy Jenkins, a legislative advocate for CCIA.

Jenkins also told the Times that the state had to do something about the current “barriers to entry” to the legal marijuana industry, including high taxes, regulatory fees and an extreme lack of local authorization, “which are significant impediments to compliance in the regulated marketplace.”

We reached out to the National Cannabis Industry Association for their take on what effective enforcement would look like. For the NCIA, it’s still too early to make any calls on the subject in California.

“I don’t think I can answer that until the state has more time to gather data on the regulated and illicit market after the legal market has been active for a while,” NCIA Media Relations Director Morgan Fox told Cannabis Now. “In general, we should be eschewing any regulations that don’t benefit consumers, providers and public safety, and should be trying to keep licensing fees as low as possible and moving away from arbitrary license caps.”

NORML Executive Director Erik Altieri believes wider access to the market for both consumers and businesses will solve a lot of problems.

“With the implementation of legalization and regulation in California, it only makes sense for the state to shut down unlicensed and illicit operators, as they do with any other industry,” Altieri told Cannabis Now. “However, it likely doesn’t require a $14 million investigation to discover that fair taxation rates, consumer-friendly pricing and easy access to safe and high-quality merchandise will drive customers out of the black market and into state-licensed businesses.”

California is well below initial tax revenue projections for the year. At the time that Brown first brought his new enforcement plan up in mid-May, total legal cannabis revenue had only totaled $36 million for the state coffers. Budget expectations for the first six months of the year were originally expecting $185 million of total pot revenue.

“Cannabis is now a legal and regulated product in California, so it needs to be treated that way,” Marijuana Policy Project Spokesman Mason Tvert told Cannabis Now.

“SWAT teams do not need to go busting down the doors of unlicensed operators, but authorities do need to enforce the rules to ensure the system works. If people were illegally producing whiskey and bootlegging it all over the state, authorities would shut them down as a matter of protecting public health and safety. The situation is not much different with marijuana, except it is a lot more difficult right now during the transition from an illegal to a legal market,” Tvert said. 

TELL US, do you think California should crack down on its illicit businesses?