California is paying a price for the shaky rollout of its legal marijuana market.
State budget documents released Thursday show the Newsom administration is sharply scaling back what it expects to collect in cannabis tax revenue through June 2020 — a $223-million cut from projections just four months ago.
The reduced income for the state treasury means that slower-than-expected pot sales are punching a hole in California’s budget.
The diminished optimism for retail pot sales comes as shops continue to be undercut by a thriving illicit market, in which consumers can avoid taxes that can approach 50% in some communities.
Meanwhile, state regulators have struggled to meet the demand for licensing, and many communities have either banned commercial sales or not set up rules for the legal market to operate.
Gov. Gavin Newsom said it was likely to take five to seven years for the legal market to reach its potential, a point he has made repeatedly.
But he also pointed a finger at local communities that have been resistant to legal sales and growing.
“It takes time to go from something old to something new,” Newsom said in Sacramento.
“We knew [some counties and cities] would be stubborn in providing access and providing retail locations and that would take even longer than some other states, and that’s exactly what’s happening,” he added.
Josh Drayton of the California Cannabis Industry Assn. credited Newsom with taking a clear-eyed view of the slow-emerging market and scaling back tax projections accordingly.