Pot Shock: Cannabis Revenue Falls Far Below Expectations

The underperformance of California’s legal marijuana market has ripped a hole in the state budget, according to documents released Thursday. Gov. Gavin Newsom’s administration now says it expects $223 million less in cannabis tax revenue through June 2020 compared to projections from just four months ago.

Newsom is blaming local governments that have been resistant to commercial pot in their communities.

“We knew [some counties and cities] would be stubborn in providing access and providing retail locations and that would take even longer than some other states, and that’s exactly what’s happening,” the governor said.

But consumers also know they can avoid cannabis taxes by continuing to rely on black market sources. The state too has been sluggish in the licensing process.

Not long ago, California was projecting $1 billion in revenue from the legal market. State excise taxes are expected to produce $288 million this year and $359 million next year, which is $67 million and $156 million less than expected.

Local prohibitions on marijuana and declining revenue are among the main impetuses behind new state rules allowing cannabis deliveries even in jurisdictions in which they aren’t welcome. That policy has sparked a legal challenge from cities and counties against the state.