California Lawmakers Punt Pot’s Future to Activists

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At least 120 people in Sacramento—eighty members of the State Assembly and forty state senators—no doubt are relieved to see the adult-use cannabis initiative on the California ballot in November.

They all know that by kicking the question over to voters, the state’s elected officials in Sacramento won’t be required to risk political currency on a difficult issue.

The state legislature spent nineteen years avoiding serious questions about how to regulate medical cannabis. Finally, two decades after the passage of Proposition 215, the Assembly and State Senate crafted three bills to establish rules, protocols, and a bureaucracy to manage the industry. Those bills weren’t easy. They required eleventh-hour intervention from the governor’s office, which forced the disparate parties to play nice and finish the job.

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Into this political world of fear, mistrust, special interests, and money comes Prop. 64, the adult-use initiative that would create a new set of cannabis rules while maintaining portions of the regulatory structure from last October’s trio of medical marijuana laws.

The initiative is one of seventeen measures that qualified for the ballot, which will read like an app download’s user agreement. Prop. 64 means California voters will decide whether to remove the pretense of a medical recommendation for legal cannabis purchases by people 21 and older.

The electorate also will consider whether to speed up or eliminate the death penalty, whether to tax cigarettes at $2.87 per pack, whether porn actors should wear condoms on the job, and whether background checks should be required for buying ammo, among other matters.

In other words, deep dives and clear understandings by a majority of voters should not be expected. The adult-use cannabis initiative alone runs sixty-two pages. The language is complex, legalistic and bureaucratic. The recreational cannabis campaign, as with so many others, will be won or lost amid thirty-second media spots and splashy direct mailers, all loaded with varying degrees of truth and accuracy.

On the bright side, ten separate initiatives related to recreational cannabis failed to qualify for the California ballot. Depending on whom you ask, the surviving initiative—Prop. 64—is either good or bad.

Facebook co-founder Sean Parker is staunchly in the “yes” camp. By mid-July, he had written checks worth $1.25 million to support the initiative. Without Parker’s money, the “Control, Regulate and Tax Adult Use of Marijuana Act,” as Prop. 64 is formally called, probably would have ended up like the other ten cannabis proposals that failed to generate enough signatures for ballot consideration.

Parker let his bank account do the talking. As for surrogates, the adult-use proposal is led by an orator of considerable skill, Lt. Gov. Gavin Newsom, who is using the cannabis initiative as a stimulant for his campaign to replace Jerry Brown in the governor’s office in 2018. Newson is also working to have the death penalty abolished. That measure is called Prop. 62, the “Justice That Works Act.” Newsom will have to keep his talking points straight as he travels the state this fall.

But for every Newsom, there’s a politician such as U.S. Sen. Dianne Feinstein, who opposes the adult-use initiative. Feinstein believes the initiative language doesn’t protect children and fails to establish guidelines for driving under the influence of cannabis.

Moreover, Feinstein thinks Prop. 64 undercuts the medical cannabis legislation signed last October by Gov. Brown. And the governor himself may agree. Brown has said little about cannabis, but he’s not a Newsom fan and likely will ignore the discourse over Prop. 64.

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“For every (Gavin) Newsom, there’s a politician such as Dianne Feinstein, who opposes the Adult-Use Initiative.”

It’s doubtful the anti-Prop. 64 contingent will find a singular bankroll to match Parker’s millions, but there is plenty of opposition to the initiative, especially among industry pros who’ve labored hard for legislative remedies to regulate medical cannabis.

Mid-sized and independent craft cultivators fear the initiative will open the gates for big tobacco and global spirits companies to pour into California, wrecking the home-grown, high-quality legacy the product has enjoyed for decades.

Prop. 64 includes language that delays licensing for large-scale operators for five years, which proponents claim is enough time for California legacy growers to establish themselves in a newly legalized adult-use market. Skeptics are doubtful: Prop. 64 encourages vertical integration by allowing multiple licenses, which currently are prohibited.

Another problem is law enforcement. Police chiefs who accepted last year’s legislation think Prop. 64 is a marketing scheme backed by global players. They believe California has enough cannabis available today under the medical protocols, and that adult-use is redundant.

Finally, industry pros have been struggling with local control issues created by last year’s legislation, which requires local permits and state licenses for cannabis-related businesses.

Many in the industry are upset that Prop. 64 maintains the foundation of local control. As long as numerous local communities continue to ban cultivation, transportation, manufacturing and retail sales, large sections of California will remain in the underground economy.

“Adult-use regulation is something the legislature should be working on,” an industry attorney said. “It’s too complex an issue for a voter initiative. Any loopholes or errors in the language would be enshrined in the State Constitution and would be very hard to fix without another initiative. The legislature is where this issues belongs.”

But the legislature is sitting this one out, leaving the heavy lifting to voters.

Tax time

The adult-use initiative includes a 15-percent retail sales tax on cannabis products, plus taxes on flowers and leaves. But that may be only the beginning, as cities and counties seek to cash in on the possibility of legalization.

In Los Angeles County, the board of supervisors created a November ballot initiative that calls for a 10-percent tax on gross receipts for businesses that produce and distribute cannabis. The county board believes it can raise $130 million a year for multiple programs, including subsidized and emergency housing, mental health, and substance abuse. The L.A. County ballot measure requires two-thirds approval, making passage a big challenge.

In Sacramento, legislators and lobbyists are tracking multiple local sales tax bills, which typically add 10 percent to product prices. Ultimately, the industry will be looking at mountains of taxes.

Clean-up legislation

Gov. Brown has signed a complex bill that cleans up several aspects of last year’s legislation. Rushed through the legislative meat grinder, SB 837 allows cultivators and manufacturers to transport product on a wholesale basis without worrying about local permits.

The dense details of SB 837—which also clarifies watershed access and appellation sites and moves testing oversight to the Bureau of Medical Cannabis Regulation—are why anyone trying to follow the rules needs an experienced public policy lawyer.

 

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