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California Cannabis after 1 Year

January 18, 2019

California was the first state to legalize medical marijuana with Prop 215 in 1996, which gave people suffering from cancer and other diseases the "legal right to obtain or grow, and use marijuana for medical purposes when recommended by a doctor." California did not regulate cannabis production for medical marijuana extensively, but federal drug laws continue to classify marijuana with heroin, imposing a minimum five-year prison sentence on growers of more than 100 plants and prohibiting marijuana from moving legally across state lines.

There has been little federal enforcement of anti-cannabis laws in states where marijuana is legal, but federal agents enforce laws that prohibit marijuana from moving across state lines.

California voters approved Proposition 64 in November 2016 to legalize recreational marijuana January 1, 2018. An estimated 13.5 million pounds of marijuana were produced in California in 2016, including 11 million pounds or over 80 percent that was produced illegally and sold outside the state.

Most marijuana is produced outdoors on plots of one-fourth acre or less. Outdoor farms produce an average 250 to 350 pounds a year, for a total of 8.1 million pounds or 60 percent of the state’s total production. The farm price of marijuana was an average $1,400 a pound or a total $11 billion in 2016. Legalization has reduced grower prices to $500 or less a pound.

California had an estimated 50,000 commercial cannabis operations in 2016; at the end of 2018, there were fewer than 2,500 licensed growers, including 1,100 licensed growers in the Emerald Triangle of Humboldt, Mendocino and Trinity counties and another 1,100 along the Central Coast. Santa Barbara county had 800 licensed growers, including some who used license stacking to combine one-acre licenses into farms with five to 10 acres.

Some residents who live near greenhouses that were repurposed from growing flowers to cannabis are complaining of the smell, which some call fresh skunk. In response to complaints, some greenhouses are installing odor-control systems that were designed for garbage dumps. Cannabis growers say that their rural neighbors should be accustomed to agricultural smells.

Recreational marijuana has not led to the predicted $1 billion in additional state tax revenues; California is expected to receive an additional $470 million in 2018-19 from legal sales of $2.5 billion, suggesting that legal marijuana sales in 2018 were below the $3 billion in sales when only medical marijuana was legal. There are many reasons for lower-than-expected sales in 2018, including high state and city fees and the requirement that retail cannabis stores obtain licenses from both the state and local governments. Few city governments have allowed recreational marijuana shops, only 89 of the state’s 482 cities at the end of 2018.

Legal marijuana shops face high taxes that add over 30 percent to prices. For example, in the city of Los Angeles, legal shops charge a 15 percent state excise tax, a 10 percent LA city tax on marijuana, and a 9.5 percent sales tax. Unlicensed delivery services do not pay these taxes. California had fewer than 550 licensed cannabis retailers at the end of 2018, less than the 600 in Oregon, which legalized recreational marijuana in 2014.