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CEPC Statement on Governor’s May Revise for 2022-23 Budget

Updated: May 16, 2022

On May 13, the Governor released his May revision to the 2022-23 state budget. The proposal

included the following proposals related to the state cannabis tax structure and increasing retail

access across the state:

Tax proposal

  • Set the cultivation tax rate to zero beginning July 1, 2022 (rather than being based on weight)

  • Shifting the point of collection and remittance for excise tax from distribution to retail on January 1, 2023. Excise tax would remain at a rate of 15%.

  • Inclusion of $670 million annually for three years to backfill funding that would have come from the cultivation tax and gone towards funding for youth education/intervention/treatment, environmental restoration, and state and local law enforcement programs. Includes the authority for the state to increase the excise tax rate from 15% through 2024-25 if tax revenues fall below the baseline backfill proposed.

  • Will include strengthening tax enforcement policies to increase tax compliance and collection and reduce unfair competition.

Retail access expansion

  • $20.5 million one-time funds to establish a cannabis local jurisdiction retail access grant program. The grants would go to localities to implement new licensing programs.

  • Funding would be awarded based on the number of permits issued and also population size.

Since the passage of Proposition 64, lawmakers have touted equity as one of the priorities in

the regulation of the adult use cannabis market. However, progress in the implementation of

equitable cannabis policies has been sluggish and quite limited. The Governor’s May revision

only furthers our concern that California is not moving in the right direction when it comes to

individuals and communities disproportionately impacted by the War on Drugs.

If California is serious about achieving equity in the cannabis industry, then it must uplift small

equity businesses. It must provide them with opportunities to better compete with larger

businesses funded by entities not disadvantaged by cannabis criminalization. To do so, the

Administration and Legislature needs to institute tax relief specific to bona fide equity operators

so that they are on a level playing field with non-equity operators.

There are pieces of the May revise proposal that we believe are important, including the

elimination of the cultivation tax and the proposal to incentivize expansion of retail access for

consumers across the state. However, without the inclusion of tax relief for equity businesses,

we believe this proposal will ultimately uplift only large non-equity corporations and will lead to

the elimination of equity operators throughout the state.

CEPC will continue to work with the Administration for inclusion of equity-specific tax relief. To

join us in these efforts, please contact us if you would like to sign on to our letter demanding

support specific to cannabis equity businesses in the May Revise.

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