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California’s Governor Gavin Newsom Allocates Half a Billion in Cannabis Tax Revenue

The current pandemic has delayed many things across the country including major efforts in California to transform the cannabis market. However, Governor Gavin Newsom’s budget for 2021-2022 opens the door to revisit these efforts and with the hope that they will be officially set for the coming year.

The budget includes $153.8 million to consolidate cannabis licensing over to a single new department called The Department of Cannabis Control to reside within the Business, Consumer Services, and Housing Agency as of July 1, 2021. This was previously overseen by the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health. The consolidation would involve the transfer of 598 existing positions and create 23 new ones.

Two additional programs that were introduced but not yet implemented include OCal and Cannabis Appellations. These programs were designed to expand the cannabis market commercially within California and funding has now been set to come from cannabis tax revenue.

  • OCal will focus on establishing standards for cannabis products that are comparable to the National Organic Program.
  • Cannabis Appellations will focus on categorizing cannabis products from a particular region in the state to be cultivated in a specific manner, therefore, allowing the seller to brand them accordingly- much like champagne only being from the Champagne region of France.

Going forward, the Department of Food and Agriculture will manage the Cannabis Appellations program while the California Department of Public Health (CDPH) will oversee the OCal program.

Both programs were set to launch in 2020 but were delayed due to COVID. The budget does mention them starting in 2021 but no specific dates have been set yet.

Additionally, the 2021-22 budget allocates cannabis-related tax revenue to the following:

  • $256.9 million towards education, prevention, and treatment of youth substance use disorders and school retention
  • $88.6 million towards remediation, clean-up, and enforcement of environmental impacts that were created by illegal cannabis cultivation
  • $88.6 million towards public safety-related measures

Cannabis tax revenue will also be funding the Cannabis Equity Grants Program. This program was created by the Governor’s Office of Business and Economic Development and the California Bureau of Cannabis Control on December 1, 2020. It will offer grants, low-interest loans, and additional assistance for the cannabis industry in eligible local jurisdictions.

The budget also includes allocations for non-cannabis related items such as $44 million towards childcare funding, and $12.7 million for the Natural Resources Agency to assist with a program that supports youth access to natural and cultural resources.

The budget awaits approval in May.  If all is approved, it is expected to be enacted in the summer of 2021.

Need expert help keeping up with rapidly changing compliance and regulations?

Payroll Systems has partnered with financial institutions to offer our full suite of payroll and HR services to the cannabis industry, including direct deposit, electronic tax payments, and tax filing.

Contact Payroll Systems to see how you can leverage our easily scalable solutions—from paperless new employee onboarding, paperless benefit enrollment, timekeeping systems with companion mobile app, physical clocks, and customized job costing and labor distribution reporting.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.