Pubdate: Tue, 19 Nov 2013
Source: Denver Post (CO)
Copyright: 2013 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Alicia Caldwell

COLORADO POT TAX WILL GO TO SCHOOLS- OR WILL IT?

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?
- ---
MAP posted-by: Jay Bergstrom