Regulation

California Wants To Throw $100 Million at Its Mismanaged Retail Marijuana Sector

Lawmakers want to pay cities to help cannabis businesses navigate the state’s oppressive bureaucracy.

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California's nascent legal recreational marijuana industry is so heavily taxed and regulated that the black market still dominates. It's so burdensome to try to get conventional permission to grow and sell marijuana the "legal" way that thousands of dispensaries operate without proper licenses. Government officials have been attempting to crack down on the problem and force them to close their doors.

On Monday California lawmakers attempted to address this problem in a very California way: Assembly members authorized a $100 million subsidy to help potential marijuana vendors get properly licensed.

As the Los Angeles Times explains, the subsidy isn't going to the dispensaries or growers themselves—not that it should. The $100 million is instead going to local government agencies and cities so they can "hire experts and staff to assist businesses in completing the environmental studies and transitioning the licenses."

California's environmental regulations, most specifically the California Environmental Quality Act (CEQA), make it extremely expensive (and sometimes even impossible) to build anything new or improve anything in the state. CEQA requires businesses, entrepreneurs, and developers to pay for extensive environmental impact studies. It also permits pretty much anybody to file suit to try to stop construction using any sort of claim of potential environmental harm, no matter how tenuous. It is being used by opponents of marijuana operations (typically neighbors who don't want them around) to try to block cannabis operations.

In order to give marijuana dispensaries and growers time to arrange these complicated studies, the state launched a provisional licensing system after recreational marijuana was made legal in California in 2016. Five years later, 82 percent of marijuana dispensaries in the state are still operating with just the provisional licenses, according to the governor's office.

Rather than confront the regulations that make it impossible for cannabis entrepreneurs to comply with state law, lawmakers are essentially rewarding bad governance. Jerred Kiloh, president of the United Cannabis Business Association tells the Times that even that might not be enough, because cities have been slow to organize their own local cannabis policies. That's exactly what happened in Los Angeles, where one of the major reasons the city had so many unlicensed dispensaries was because the city's own bureaucracy could not get its act together. Two years after marijuana legalization, the city still had not been able to actually roll out business licenses to new dispensaries.

Los Angeles will get $22 million of this new state funding, essentially a financial reward for its bureaucratic failures.

Gov. Gavin Newsom also wants to add a six-month extension to the compliance deadlines for full licensing. This is being resisted by a coalition of environmental organizations, including the Sierra Club.

Environmentalists have been complaining about the potential impact of large marijuana grow operations, particularly in matters like pollution and water and energy consumption. The resistance here is comically misguided. A piece from the Sierra Club from 2017 notes the massive scope and impacts of illegal grow operations and drug cartel operations on public lands as part of a call for tight regulations of the legal industry.

But those massive illegal grow operations are still happening because of how difficult California and CEQA make it to operate a legal cannabis business. This is much, much worse for the environment than the prospect of the state being more flexible on environmental regulations for the benefit of those who are actually trying to follow the rules. After all, the drug cartels don't care about restrictions on pesticide use.