Did you know EdGlenToday.com is free for you thanks to our awesome advertisers? We noticed you're using an ad block software. Help us spread the word and give our sponsors some exposure by disabling your ad blocking service for Riverbender.com.
As Illinois officials work to finalize the regulations for the state's recreational cannabis market, analysts have offered up some words of caution for budgeting revenue from the emerging industry.
The Pew Charitable Trusts released a research paper, “Forecasts Hazy for State Marijuana Revenue,” as a warning to states looking to follow in the steps of the five that have collected a year of revenue from legalized recreational cannabis.
The main message was that no one knows how much money recreational cannabis sales will bring in.
“Given how unpredictable recreational marijuana is as a revenue source, states should adopt prudent policies for budgeting collections,” it read.
Click here for summary
In a call with reporters, Alexandria Zhang, a research officer with Pew, warned that states should not rely on marijuana revenue to fund vital projects, largely due to the extraordinary fluctuations in collections year-over-year. Rather, states should use the funds similar to other “sin taxes” and treat it as a budgetary supplement.
“Forecasting challenges and a lack of data have made legalized recreational marijuana a highly-unpredictable revenue source,” she said. “States should not assume that revenue from legalized recreational marijuana will be reliable in the long-term.”
Washington state collected $420 million in fiscal year 2018 while Alaska brought in $2 million in its first year of recreational sales.
Tourist sales, tax structures and local prohibitions on sales all contribute to the challenges in projecting recreational cannabis revenue, Zhang said.
Sponsors of the cannabis legislation in Illinois estimated that it could generate $57 million in the current fiscal year, half of which would see actual sales occurring after January. Gov. J.B. Pritzker’s office estimated $170 million in revenue for the same year, expecting license sales to account for some one-time revenue.
As a hedge against unexpected shortfalls, some states have not relied on the tax revenue until it was in hand, Zhang said. She noted that Nevada kept its annual revenue in an account to spend the following year.
Ten states have legalized recreational marijuana and five states have collected at least one year of revenue from recreational sales.