On Thursday, Governor Newsom released his May Revise, revealing significant cuts in state spending to address the estimated $54.3 billion shortfall created by the coronavirus pandemic.
In the revision, the Governor pauses discussions on cannabis tax reform until the 2021 budget year. As I’ve wrote about in the past, California’s cannabis stakeholders have pushed for a temporary reduction in excise and cultivation taxes in addition to simplifying the process. In an industry that has faced its own challenges as a result of the pandemic, the move to pause negotiations on tax reform will come as a disappointment.
In addition to putting on hold the tax reform discussions, the Governor also pauses his proposal to consolidate the various state agencies that oversee and enforce cannabis regulations. If recent history is any indication of the future, and barring a prolonged pandemic, my guess is that the consolidation will be considered and likely to be approved in 2021. Governor Newsom’s predecessor, Governor Jerry Brown was adept at consolidating state agency and departments and the Legislature has shown a willingness to support these types of efforts.
Not all was doom and gloom in the May Revise. The state’s three main licensing agencies, Bureau of Cannabis Control, Department of Public Health and the Department of Food and Agriculture all receive millions in funding to support enforcement. The proposal ensures that investigators from the Department of Consumer Affairs are transitioned to the Bureau, signaling a commitment by the Administration to continue strong enforcement over the industry.
The California State Legislature will consider the Governor’s proposals in the coming weeks in order to meet the constitutional deadline of passing a budget by June 15. The Governor has until June 30 to sign the budget in order for it to go into effect July 1, 2020.