AB 101 Budget Act of 2023

This bill is part of the 2023 Cannabis Bills section of our ongoing update on California Cannabis Legislation – see the full California Cannabis Law Legislative Update which includes information on cannabis bills from other years.

AB 101 Budget Act of 2023.

This bill would make appropriations for the support of state government for the 2023–24 fiscal year.

This bill would declare that it is to take effect immediately as a Budget Bill.

(See related Senate Bill 101.)

Cannabis and the California Governor’s Proposed 2023-24 State Budget

The California Governor takes the lead in crafting the California state budget by proposing a spending plan for the state each January which is updated and revised in May. This generally guides the budget bill in the California Legislature. Lawmakers must pass the budget bill by June 15 (that deadline does not apply to budget-related bills).

Governor Gavin Newsom released his proposed 2023-24 California state budget on January 10. The January California Budget Proposal forecast that General Fund revenues would be $29.5 billion lower than the 2022 Budget Act projections, and that California faced an estimated budget gap of $22.5 billion in the 2023-24 fiscal year. In the Governor’s May Revision to the Budget Proposal, that estimated budget gap was increased to $31.5 billion.

The Governor’s Budget proposes a plan of funding delays, reductions and pullbacks, fund shifts, trigger reductions, and limited revenue generation and borrowing to address the budget gap.

The cannabis industry continues to be significantly affected by the California Budget. The 2021 Budget Act consolidated state cannabis-regulatory functions into a single Department of Cannabis Control within the Business, Consumer Services, and Housing Agency. The 2022 Budget Act included, among other items, statutory changes to reform cannabis taxes including suspension of the cannabis cultivation tax and moving responsibility for cannabis excise tax remittance from distribution to the point of sale.

As a result of suspension of the cannabis cultivation tax, revenue to the Cannabis Tax Fund has decreased. Also, California state cannabis retail excise tax revenue has declined for six straight quarters. The Governor’s 2023-24 Budget Proposal from January included $95.4 million in the 2023-24 General Fund to backfill the estimated decline in revenues. The Governor’s May Revision to the Budget Proposal increases that backfill to $150M.

Activities funded by the Cannabis Tax Fund include: (1) Education, prevention, and treatment of youth substance use disorders and school retention – 60 percent ($401.8 million in the January Budget and now $340.4 million in the May Revision); (2) Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation – 20 percent ($133.9 million in the January Budget and now $113.5 million in the May Revision); and (3) Public safety-related activities – 20 percent ($133.9 million in the January Budget and now $113.5 million in the May Revision). The May Revision figures reflect a total decrease of $102.2 million compared to the January Governor’s Budget estimate.

The Governor’s Budget Proposal also focuses on cannabis enforcement. The January Budget included funding for the following entities (these funding numbers will be reduced given the reduction in funding in the May Revision):

(1) Board of State and Community Corrections – $83.9 million Cannabis Tax Fund is allocated to the Board of State and Community Corrections to award grants to local governments to assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with the implementation of the Control, Regulate and Tax Adult Use of Marijuana Act;

(2) State Water Resources Control Board – $6.4 million Cannabis Control Fund and $5.7 million in other special funds, which will increase over time to $13.1 million Cannabis Tax Fund and $6.6 other special funds, to continue the State Water Resources Control Board’s statutorily mandated efforts to address water quality and instream flow-related impacts from cannabis cultivation through enforcement against illegal cultivations and compelling enrollment of eligible cultivators in the Water Board’s regulatory program through outreach and engagement to unpermitted cultivators, and progressive enforcement against sites that do not enroll in Water Board permits;

(3) Department of Fish and Wildlife – $3.8 million Cannabis Control Fund and $4.2 million Fish and Game Preservation Fund to continue the Department of Fish and Wildlife’s Cannabis Regulatory and Enforcement Program;

(4) Department of Cannabis Control – $1.9 million Cannabis Control Fund to establish a permanent Department of Cannabis Control Enforcement District Office in Fresno to further the enforcement activities of the department in the Central Valley; and

(5) California Department of Tax and Fee Administration – A portion of $10 million Cannabis Control Fund will be allocated to the California Department of Tax and Fee Administration to support its cannabis tax enforcement program.

Read more about California Cannabis Legislation – see the full California Cannabis Law Legislative Update.

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