The Reality of the Reefer Refund

Are we really getting “pot money” back from the state?

I love this question.

But first, some background:

Voters approved Amendment 64 — the amendment to our state constitution that, among other proposed legislation, allowed for the sale of recreational marijuana — back in 2012. The next round of “legalize it” came a year later, when the state asked (via referendum) if voters were ok instituting two new taxes on recreational cannabis once sales got going. One was an excise tax of 15 percent that would fund K–12 schools; the second was a 10-percent sales tax that would fund programs that provide marijuana- related safeguards, such as law-enforcement training and substance abuse programs. That was called Prop AA, and voters — once again — said, “Let’s roll.”

On Jan. 1, 2014, Colorado fired up its newly legal recreational marijuana industry and business has been booming ever since. Now, with the first year’s estimated $60 million in marijuana excise- and sales- tax revenue, our state’s school system and cannabis- related safeguards are poised for one hell of a boost.

Except for one teeny little unforeseen hitch — another voter-approved amendment known as TABOR. The 1992 Taxpayers’ Bill of Rights (that’s TABOR, yes) mandates that the state repay taxpayers when it amasses in new tax revenue more than what’s predicted. It’s an interesting check and balance between the people and an often tax-happy government. It’s precisely because of TABOR that taxpayers have seen close to $3.5 billion in refunds since its inception. With an additional 25 percent tacked onto cannabis sales, it’s easy to see how the TABOR proposal could raise the brows of some Coloradans.

But, if State Senator Pat Steadman’s proposed legislation takes hold, the possibility of the refund goes up in smoke.

“Twice now, voters have told us to tax and regulate [marijuana] with some expectation that the revenue will be used to fund schools and to deal with the consequences of legalization,” he tells Out Front. “The excise tax specifically goes toward K–12 school funding.” I ask him how that breaks down, exactly. Better lunches? Teachers’ raises?

“It’s all for capital — buildings, renovations, new roofs, new athletic fields, things of that nature,” he says. “None of the money collected from the excise tax goes toward operations or salaries.”

Explicitly, the money goes to a school construction program called BEST (Building Excellent Schools Today). The program was green lighted by former Speaker of the House Andrew Romanoff and helps primarily rural districts without sufficient property wealth secure grants to improve their buildings.

That’s the deal with the 15-percent excise tax. When pressed for specifics on how the additional 10-percent sales tax would be spent, he says it’ll fund, “things like impaired-driving awareness, ad campaigns about legalities and how to keep [marijuana] away from kids, direct services for mental health and substance abuse, and spending the money in a way where legalization won’t lead to adverse consequences.”

Another strange option is abolishing marijuana taxes altogether for a year, something Steadman isn’t keen on. In an interview with Colorado Public Radio last week, he’s quoted:

“To turn off the tax now or to pull back from our commitment to those programs now, I think, is really the wrong course. Having the taxes in place is part of making this whole experiment with legal marijuana work.”

“The thing most people don’t realize,” he says, “is that we’ve put a vote to the people twice, and each time, they voted that they’d like [marijuana] properly regulated and taxed.” He says that where the money should go was decided by the people via Prop AA. “We need to keep faith with voters and heed their signals and messages on what their intentions are.” He believes giving the people a specific vote to override TABOR in the instance of marijuana taxes is the key to doing just that.

With strong bipartisan agreement in Colorado’s legislature, it doesn’t appear that’ll be an issue. “We’re looking at putting the question on the ballot in November and seeking voter approval to not do a refund.”

But let’s humor the TABOR (“We’re getting a check!”) route for those of you who are still hopeful. How much could each adult in Colorado be looking at if the estimated $58.7M were divided between us?

(I feel obligated to tell you now that Steadman is going to laugh at this notion.)

“Before you get into all that, here’s the thing,” he says with a smile that’s visible through the phone. “Because of Paragraph C3 in the TABOR legislation, there’s no mechanism or law on how to make the refund. There’s no clear definition to whom [marijuana-tax refunds are] owed. Is it the consumer? The grows? Everyone?” he inquires.

I have no answer. I’m too busy playing with numbers. Here’s what I came up with:

The 2014 census numbers us at 5,355,866. Subtracting the census count for minors brings that figure down to 4,730,676, meaning that if all the adults were to divide the estimated $58.7 in marijuana-tax revenue, we’d all stand to get checks for a whopping $12.40 (The possibilities, ladies and gents.)

“Now if the state were to handle the marijuana- tax refund the way it’s handled other TABOR refunds, that number’s a little too low,” Steadman posits. “The industry is still new; it’s still growing, so the total [tax collection] amount is difficult to predict.”

He waxes on about a huge misconception voters (and the media) have about TABOR, which is that there’s a magic number that new taxes have to hit in order for the refunds to kick in, and that the refund is only the surplus.

“The refund wouldn’t be what exceeded predictions, no — the refund is the entirety of the new-tax collection.” He says that under TABOR, 100 percent of the new taxes collected in the first full fiscal year of implementation has to be refunded.

But are you ready for the kicker? If the state goes through with TABOR — and keep in mind that it’s in our state’s constitution to do so — the money won’t come from the marijuana taxes; most of it will come from the general fund. He says: “The excise tax money is constitutionally dedicated to the BEST program. We can’t take that away from BEST, so we’d have to use other tax funds to provide the refund. Neither of the new taxes have exceeded the limits that voters were told they would generate,” he says.

The ‘magic number’ on the Prop AA ballot was $70M. “As of right now, it looks like we’re coming in at around $10M below that figure.” He reminds me that the final amount is still hard to predict but, “we’re confident we’re not going to go over $69M.”

So what’s it gonna be, sir? “We need a third vote to make sure we spend the money on what we said we would: marijuana-related expenses and school construction.”

In a strange occurrence of Republican/Democrat agreement, it appears both parties are on board with the idea. Sen. Steadman is sponsoring the bill, currently in the works, and will bring it before the Joint Budget Committee within the coming weeks. “We’ll carry it as a budget bill at that point,” he assures us. “The people have voted for this twice. We need to honor that.”