February 13, 2020
In December the Civic Federation explored how Illinois, its local governments and other states tax recreational cannabis. In this post we will look at how those cannabis tax revenues will be spent by the State of Illinois and compare those priorities to other states.
The Illinois Department of Revenue projects the State will collect $57 million in FY2020 from cannabis taxes and licensing fees and $140.5 million from taxes alone in FY2021, which starts July 1, 2020. But how will those revenues be spent? The legislation that legalized adult use recreational cannabis and subsequent trailer bills specifically outline how the State’s cannabis tax proceeds will go to pay for regulation and various programs. These allocations do not apply to local government cannabis tax revenues.
First, the proceeds of the cannabis taxes go to defray the administrative costs of the State agencies responsible for administering the program. Taxes and fees from cannabis are to be deposited into a new Cannabis Regulation Fund, which then pays these costs. The State agencies and offices that will receive funding from Cannabis Regulation Fund for direct and indirect costs associated with the implementation, administration, and enforcement of the Cannabis Regulation and Tax Act include:
- Governor’s Office for the Cannabis Regulation Oversight Officer (sometimes known as the “Cannabis Czar”) and its staff and activities;
- Department of Revenue
- Department of State Police
- Department of Financial and Professional Regulation;
- Department of Agriculture;
- Department of Public Health;
- Department of Commerce and Economic Opportunity; and
- Illinois Criminal Justice Information Authority.
Next, a monthly transfer of funds appropriated to defray costs incurred to facilitate petitions for expungement of minor cannabis offenses will be made to the Cannabis Expungement Fund for:
- State courts;
- Illinois Attorney General;
- State’s Attorneys;
- Civil legal aid; and
- Department of State Police.
After the above allocations are made, any remaining funds will be distributed as follows:
- 2% to the Drug Treatment Fund for the Department of Human Services to develop a drug, tobacco and alcohol public education campaign and analyze the public health impacts of legalizing the recreational use of cannabis;
- 8% to the Local Government Distributive Fund to fund crime prevention programs, training, and enforcement and prevention efforts related to the illegal cannabis market and driving under the influence of cannabis;
- 25% to the Criminal Justice Information Projects Fund for the Restore, Reinvest, and Renew Program to provide grants and assistance to communities harmed by discriminatory drug laws;
- 20% to the Department of Human Services Community Services Fund to address substance abuse and prevention and mental health concerns;
- 10% to the Budget Stabilization Fund; and
- 35%, or any remaining balance, to the General Revenue Fund.
Other states that have legal recreational cannabis have allocated revenue in different ways. The following chart is compiled from reports released by the Pew Charitable Trusts, the Citizens Research Council in Michigan and Civic Federation research and shows how those states distribute cannabis tax revenue. Information about Illinois’ distribution was added by the Civic Federation.
|
State Cannabis Tax Revenue Distributions as of 2019 |
|
State |
Distribution |
|
Alaska* |
- 100% to General Fund
|
|
California† |
- Revenue first to reimburse state agencies for regulatory and administrative costs not covered by license fees - Specific allocations as follows:
-Remaining revenues allocated as follows:
|
|
Colorado‡ |
- Retail marijuana excise tax revenue:
- Special sales tax:
|
|
Illinois☺ |
- Revenue first to administrative costs and expungement facilitation costs - Remaining revenues distributed as follows:
|
|
Maine§ |
- 50% to fund public health and safety awareness and education programs - 50% to fund law enforcement training programs relating to adult use marijuana |
|
Massachusettsǁ |
- Excise tax and licensing fees to the Marijuana Revenue Fund
- Sales tax revenue distributed following conventional sales tax allocation rules |
|
Michigan# |
- Revenue first to cover costs of implementation, administration and enforcement - Remaining revenue to:
|
|
Nevada** |
- Excise tax first to cover administrative costs - Remaining revenue to:
- Retail tax to the State Distributive School Account (before July 1, 2019 to the rainy day fund) |
|
Oregon†† |
- 40% to education - 20% for mental health treatment or alcohol and drug abuse prevention and treatment - 15% for state law enforcement - 10% to cities - 10% to counties - 5% to Oregon Health Authority for substance abuse prevention, early intervention and treatment |
|
Washington‡‡ |
- 49% to health programs including Medicaid, substance abuse prevention and community health centers - 41% to General Fund for education and other state services - 10% to cities and counties |
Note: Maine, Vermont and the District of Columbia have legalized recreational marijuana but do not have active markets. Vermont also has not decided on tax rates.
* https://www.ktva.com/story/39609294/marijuana-money-how-the-state-is-spending-its-cannabis-cash
† https://lao.ca.gov/handouts/crimjust/2017/Proposition-64-Revenues-021617.pdf
‡ https://www.colorado.gov/pacific/revenue/disposition-marijuana-tax-revenue
☺ http://ilga.gov/legislation/publicacts/101/101-0027.htm
§ http://legislature.maine.gov/statutes/28-B/title28-Bsec1101.html
ǁ https://malegislature.gov/laws/sessionlaws/acts/2017/chapter55
# https://crcmich.org/publications/proposal-1_marijuana-legalization
** https://tax.nv.gov/uploadedFiles/taxnvgov/Content/TaxLibrary/FY19%20Annual%20Report%20-Final.pdf
†† https://www.oregon.gov/DOR/press/Documents/marijuana_fact_sheet.pdf
‡‡ https://lcb.wa.gov/sites/default/files/publications/annual_report/2019-annual-report-final2.pdf