California is paying a price for the shaky rollout of its legal marijuana market.
Budget documents released Thursday show California Gov. Gavin Newsom’s administration is scaling back what it expects to collect in cannabis tax revenue by $223 million through June 2020.
What that means is that slower-than-expected pot sales are gouging a hole in California’s budget.
Industry officials say most consumers continue to purchase pot in the illegal market, where they avoid taxes that can near 50 percent in some communities.
State taxes include a 15 percent levy on purchases of all cannabis and cannabis products, including medical pot.
Local governments are free to add taxes on sales and growing too, which has created a patchwork of rates around the state.
In Long Beach, the overall tax on recreational pot is 33.25 percent. That includes the 15 percent state cannabis excise tax, plus the city’s 8 percent excise tax and a 10.25 percent sales tax.
The city last year cited lagging marijuana sales tax revenue as a reason for a projected $9 million budget shortfall. In April, leaders discussed enacting a two-year pilot program that would give non-retail businesses a break on tax rates, provide incentives and streamline processes to help the industry get off the ground.
The state of the cannabis industry came Thursday as Newsom released his proposed $213.5 billion state government spending plan. The budget would boost spending on homelessness, wildfire prevention and K-12 education.
His proposal announced Thursday is up $4.5 billion from his first budget plan released in January. It includes a $21.5 billion surplus that is unchanged from January but remains the largest surplus in at least 20 years.
He now hands the proposal to state lawmakers, who must pass a budget by June 15 or lose pay.
Staff writers Kelly Puente and Stephanie Rivera contributed to this report.