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Caldwell: Colorado pot tax will go to schools — or will it?
By Alicia Caldwell
Denver Post Columnist
Posted: 11/18/2013 05:54:13 PM MST | Updated: 65 min. ago
State Rep. Dan Pabon, D-Denver, speaks to a gathering of Proposition AA proponents at a victory party on election night earlier this month. (Karl Gehring, The Denver Post)
The marijuana tax issue seemed simple enough — vote "yes" on Proposition AA and up to $40 million a year would go to Colorado school construction.
Voters loved the idea.
As it turns out, nothing is simple when it comes to marijuana.
The next issue that state legislators and policy makers will have to address involves the reliability of pot tax money and whether it can be counted on to fulfill long-term commitments.
A big chunk of the recreational marijuana tax money — a 15 percent excise tax up to $40 million annually — is to go toward the Building Excellent Schools Today (BEST) program.
One of the things the state does through BEST is issue certificates of participation (COPs) to fund much-needed school construction projects. This lease-financing mechanism has become a common procedure in Colorado since there is no statewide vote necessary for COPs.
This next piece is complex, but important.
The state counts on land trust money to make payments on the BEST COPs it has issued, but it's technically the state general fund that guarantees payment.
The same dynamic would hold for pot money destined for BEST. The general fund would be on the hook for payments — something that probably would ease the minds of skittish investors — not marijuana taxes directly.
The risk, as it were, shifts to the state. COPs typically run 20 years. So, if the weed tax money peters out before then, the already-stressed state general fund will face additional pressure.
It's not all that theoretical a notion.
The state recently had to tap the general fund for $18.6 million to make COP payments when a big drop in natural gas prices reduced revenues pledged to make those payments, said Henry Sobanet, the governor's budget director.
"It crowds something else out," he said of the pressure on the general fund.
That's a case of economic variables wreaking havoc with budgeting, but Colorado's weed tax faces political uncertainties too.
Yes, state voters made recreational marijuana legal. And the feds are standing down on enforcement of federal law that makes pot illegal. But that could change with a new president.
"Obama is going to be out of office in a couple of years," said Mary Wickersham, a former BEST board member and director of the Center for Education Policy Analysis at the University of Colorado Denver. "What is going to happen with this revenue?"
In California, the city of Oakland has been far more circumspect about marijuana revenue. The city gets $2.5 million a year from a 5 percent business tax on medical marijuana shops.
David McPherson, the city's revenue and tax administrator, told me Oakland isn't counting on the money long-term, just in case the feds crack down and the revenue disappears. The city puts the money into the general fund to pay operating expenses for rec centers, police and fire.
"We don't plan further than a two-year budget cycle for that very reason," he said.
The weed tax reliability question is more than just cocktail party banter for budget wonks.
The issue will land at the statehouse soon because BEST has essentially hit its limit on COPs, a ceiling set by the legislature.
"They awarded all the way up to the cap," Wickersham said. "In essence, it's done."
The question now is whether the legislature is willing to raise the cap to use the weed tax money for new schools. How much? And is it responsible to count on pot money for two decades?
A bad call could obligate the state's general fund and even raise generational equity issues.
Whoever thought spending marijuana tax money would be this complex?
E-mail Denver Post editorial writer Alicia Caldwell at [email protected]. Follow her on Twitter: @AliciaMCaldwell
Read more: Caldwell: Colorado pot tax will go to schools — or will it? - The Denver Post http://www.denverpost.com/caldwell/ci_24550031/colorado-pot-tax-will-go-schools-mdash-or#ixzz2l3M0PtgL
Read The Denver Post's Terms of Use of its content: http://www.denverpost.com/termsofuse
Follow us: @Denverpost on Twitter | Denverpost on Facebook
By Alicia Caldwell
Denver Post Columnist
Posted: 11/18/2013 05:54:13 PM MST | Updated: 65 min. ago
State Rep. Dan Pabon, D-Denver, speaks to a gathering of Proposition AA proponents at a victory party on election night earlier this month. (Karl Gehring, The Denver Post)
The marijuana tax issue seemed simple enough — vote "yes" on Proposition AA and up to $40 million a year would go to Colorado school construction.
Voters loved the idea.
As it turns out, nothing is simple when it comes to marijuana.
The next issue that state legislators and policy makers will have to address involves the reliability of pot tax money and whether it can be counted on to fulfill long-term commitments.
A big chunk of the recreational marijuana tax money — a 15 percent excise tax up to $40 million annually — is to go toward the Building Excellent Schools Today (BEST) program.
One of the things the state does through BEST is issue certificates of participation (COPs) to fund much-needed school construction projects. This lease-financing mechanism has become a common procedure in Colorado since there is no statewide vote necessary for COPs.
This next piece is complex, but important.
The state counts on land trust money to make payments on the BEST COPs it has issued, but it's technically the state general fund that guarantees payment.
The same dynamic would hold for pot money destined for BEST. The general fund would be on the hook for payments — something that probably would ease the minds of skittish investors — not marijuana taxes directly.
The risk, as it were, shifts to the state. COPs typically run 20 years. So, if the weed tax money peters out before then, the already-stressed state general fund will face additional pressure.
It's not all that theoretical a notion.
The state recently had to tap the general fund for $18.6 million to make COP payments when a big drop in natural gas prices reduced revenues pledged to make those payments, said Henry Sobanet, the governor's budget director.
"It crowds something else out," he said of the pressure on the general fund.
That's a case of economic variables wreaking havoc with budgeting, but Colorado's weed tax faces political uncertainties too.
Yes, state voters made recreational marijuana legal. And the feds are standing down on enforcement of federal law that makes pot illegal. But that could change with a new president.
"Obama is going to be out of office in a couple of years," said Mary Wickersham, a former BEST board member and director of the Center for Education Policy Analysis at the University of Colorado Denver. "What is going to happen with this revenue?"
In California, the city of Oakland has been far more circumspect about marijuana revenue. The city gets $2.5 million a year from a 5 percent business tax on medical marijuana shops.
David McPherson, the city's revenue and tax administrator, told me Oakland isn't counting on the money long-term, just in case the feds crack down and the revenue disappears. The city puts the money into the general fund to pay operating expenses for rec centers, police and fire.
"We don't plan further than a two-year budget cycle for that very reason," he said.
The weed tax reliability question is more than just cocktail party banter for budget wonks.
The issue will land at the statehouse soon because BEST has essentially hit its limit on COPs, a ceiling set by the legislature.
"They awarded all the way up to the cap," Wickersham said. "In essence, it's done."
The question now is whether the legislature is willing to raise the cap to use the weed tax money for new schools. How much? And is it responsible to count on pot money for two decades?
A bad call could obligate the state's general fund and even raise generational equity issues.
Whoever thought spending marijuana tax money would be this complex?
E-mail Denver Post editorial writer Alicia Caldwell at [email protected]. Follow her on Twitter: @AliciaMCaldwell
Read more: Caldwell: Colorado pot tax will go to schools — or will it? - The Denver Post http://www.denverpost.com/caldwell/ci_24550031/colorado-pot-tax-will-go-schools-mdash-or#ixzz2l3M0PtgL
Read The Denver Post's Terms of Use of its content: http://www.denverpost.com/termsofuse
Follow us: @Denverpost on Twitter | Denverpost on Facebook
