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Should Rural Cannabis Growers Qualify for Social Equity?

Over the last year, there has been much discussion in California legislative policy circles surrounding the question, "Should rural farmers from the Emerald Triangle qualify for social equity programs?" Some equity advocates have actively lobbied the state in an attempt to narrow the definition of who qualifies for social equity programs, with the specific intent of excluding Rural farmers.

The current economic and social relationship between cultivators in the northwestern, rural region of California and cannabis retailers in urban centers has not been accounted for in the state's 6 years of legal cannabis regulation. These two demographics share an economic and legal history in California's cannabis market that dates back farther than the Compassionate Use Act of 1996 (Prop 215).

The survivors of urban cannabis prohibition know that the Emerald Triangle is the central supply location for buyers who would become sellers in their demand-oriented markets: urban centers both in and out of California. Some would even move to the rural areas to grow cannabis and vertically integrate their business model.

The Emerald Triangle still is not devoid of problems such as disproportionate arrest rates. Even while the area possesses a low Black population rate, according to a recent report developed by the ACLU, Black people are at least 62 percent more likely to be arrested than White people in Trinity County, 50 percent more likely to be arrested in Alpine County, 6.4 percent more likely in Shasta County, and 5 percent more likely in Humboldt County. The report calculates arrest rate disparities from recorded cannabis-related arrests in 2018.

Currently, only a small number of urban retail operations come directly from the illicit market. Studies demonstrate that most of the illegal economic activity in the cannabis industry resides within cultivation operations, and of that activity, 60 percent happens in rural Northern California.

With that said, there are disparities between the number of permitted cultivation operators in northern counties, particularly Humboldt, and equity retail and delivery licenses in urban cities.

For example, as of December 2021, Humboldt County reported having 1,320 cultivation businesses that have an Approved Permit or Interim Permit to engage in Cannabis Activity, with another 879 awaiting approval. Researchers at Cal Poly Humboldt estimated that this represents a market capture of roughly 5 percent of Humboldt County's legacy market.

The City of Oakland's September 2021 Cannabis Regulatory Commission Meeting Agenda report shows 119 Equity-operated Delivery Licenses with only three (3) recorded Equity-operated Retail Dispensaries. As of May 2022, the City of Sacramento's Office of Cannabis Management reported having issued 28 Business Operating Permits to Cannabis Equity Entrepreneurs out of 269 total issued permits (10.4 percent). Nine (9) are delivery operators, and one (1) resides with a retail-only operator.

The laws of supply and demand are continuing to guide the development of the cannabis industry. It is incumbent upon policymakers and advocates to propose policies that allow for equitable and streamlined approaches for current illicit market operators - primarily cultivators - to be provided an opportunity to become compliant with California Law with a reprieve from law enforcement.

California's commercial cannabis market and the research necessary to influence its governance are still developing, yet policy and regulatory decisions are being made before the availability of that data. The deeper history of cannabis consumption, application, and advocacy has not yet been explored. The Federal Scheduling of cannabis resulted in the loss of much of this history since advocates and researchers did not have the chance to write it properly with the facts embedded in it. A deeper analysis of the data, history, and relationships between rural and urban areas, their populations, and their relationship to cannabis prohibition is due.

The passage of Proposition 209 in 1996 has placed proverbial handcuffs on policymakers and advocates to be effective in producing legislative outcomes along the lines of Race, Gender, Nationality, etc. California is an interesting case study for social equity because urban cities do not have a constant demographic makeup, and since we cannot legally use race and gender as defining characteristics and the racial makeup of urban cities significantly differs, lawmakers have the difficult task to broadly define "disproportionate" and therefore, "social equity." A demographic which may have been disproportionately impacted in one city may not be the same impacted demographic in another. If we are using our personal opinions to influence policy and not data-driven studies or Social Equity Assessments, can we truly say that we are being selfless and altruistic in striving to achieve an equitable cannabis market?

According to the California Department of Tax and Fee Administration (CDTFA), the State of California generated over $1.3 billion in tax revenue from the Cannabis Industry in 2021. Yet, equity advocates and small farmers, who both represent less than four (4) percent of the funding received from these taxes, have not worked together to increase this percentage for both of our communities.

The Department of Finance's California Cannabis Tax Fund (3314) reflects spending to Local Equity Programs (SB 1294) only amounting to approximately 2 percent of yearly expenditures. This figure clearly does not reflect the state's prioritization of developing an equitable cannabis market. The lack of prioritization in developing these resources is why this divisive dialogue is being construed.

In conclusion, the solution is not to exclude rural Farmers from Social Equity programs but to call on California cannabis regulators and lawmakers to provide more incentives and assistance for equity operators throughout the state to enter the regulated market. The onerous is on all of us.

CEPC Deputy Director Khalil Ferguson

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