Cannabis Leaders Say California's Recreational Pot Market Faltering

Tourists Laura Torgerson and Ryan Sheehan, visiting from Arizona, smell cannabis buds at the Green Pearl Organics dispensary on the first day of legal recreational marijuana sales in California, Jan. 1, 2018, in Desert Hot Springs, California. (ROBYN BECK/AFP/Getty Images)

Leaders in the cannabis industry say California’s recreational marijuana market is not working. On Thursday, a group of them sent Gov. Gavin Newsom's administration a list of recommendations on how to fix it.

The final recommendations — obtained by KQED — call for, among other things, simplifying the permitting process, including appointing a cannabis director to the governor's office to coordinate state policy.

Taxes are another issue. They can reach as high as 40 percent in some parts of California. The industry group suggests reforming the cannabis tax structure and offering tax deductions and incentives.

And getting a license can be prohibitively expensive for some cannabis businesses. The industry group recommends developing a loan program to help cover the cost of licenses.

Hezekiah Allen, with Emerald Grown, a federation of cannabis cooperatives, was part of the group that made the recommendations. He said that, so far, state and local governments have mostly failed at implementing legal pot.

“Less than 10 percent of the businesses have licenses. The market is in recession. Sales are actually contracted year to year from previous years," said Allen. "No metric is indicating that legal cannabis is working in California."

According to Allen, part of the problem is that not enough local jurisdictions are permitting cannabis operations. The industry group said more than 60 percent of cities and counties don't permit marijuana businesses. An estimated 20 million Californians don't have convenient access to legal cannabis. Among the recommendations is one to create incentives for more cities and counties to permit cannabis businesses and to offer grants and technical assistance to those that do.

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The group is also recommending the state prioritize which illegal cannabis businesses it cracks down on.

They suggest the state focus on "those operators who undermine legalization and present significant public health, safety or environmental risks” — for instance, large illegal marijuana operations on public lands that contaminate the environment — rather than small, unpermitted growers.

Allen said the growers he represents want the state to spend more on supporting the legal market rather than going after people who are trying to comply with the law.

"These are not the criminals. These are small family businesses. They need help," said Allen.

According to Allen, news that Gov. Newsom is going to send in National Guard troops to help combat illegal grows in Northern California has upset small growers who feel like they’re already being kept out of the legal market.

He said they called the move a "slap in the face," and that small unpermitted growers are worried they'll be unfairly lumped together with large illegal operations that damage public lands.

"Sending the National Guard out to Northern California to go do something with cannabis is very different than prioritizing public lands, egregious environmental, worker abuse. You know, there are crimes that happen alongside unregulated cannabis cultivation which absolutely need to be a focus of more priority."

Along with its recommendations, the group suggests the state spend $400 million over the next three years to help "jump-start a robust legal cannabis market in California."

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