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Jill Terreri Ramos
By Jill Terreri Ramos January 21, 2019

Fahy claim about 'disappointing' marijuana revenue is wrong

Gov. Andrew Cuomo wants New York state to legalize recreational marijuana. Some state lawmakers, including Assembly Majority Leader Crystal Peoples-Stokes, D-Buffalo, have long supported the idea. But there has been pushback to Cuomo’s proposal. Assemblymember Patricia Fahy, a Democrat from the Albany area, favors starting with decriminalization but raises concerns about youth usage and driving under the influence, among other issues.

Fahy wrote an op-ed in the Times-Union of Albany and discussed her concerns in media interviews.

In an interview with radio host Susan Arbetter, Fahy questioned how much tax money New York state would collect if recreational marijuana became legal.

"Everybody thinks that this is going to be a massive money-maker," she said. "There are projections of $200 to $400 million additional in New York state. We are seeing all those numbers reach disappointing levels in the states that have legalized. They’re not meeting their targets for the most part."    

The Cuomo administration predicts $300 million in tax revenue from the sale of recreational marijuana once legalization is fully phased in, according to budget materials. But is Fahy correct? Have other states missed their revenue targets?  

Background

Ten other states and the District of Columbia have legalized recreational marijuana, though Vermont and DC do not allow commercial sales.

An assessment by New York State agencies on the effects of legalization, published in July 2018, warned that "some states overestimated revenue initially, as they did not account for the length of time it takes for a recreational market to be established, leading to fewer than expected sales."

We asked Fahy’s spokesman, Alexander Flood, for evidence of her claim. He pointed us to California, where the state collected less than it anticipated in the first full year of marijuana sales after a rocky rollout. He also referred us to reporting that showed that Colorado’s revenues didn’t meet expectations in the beginning.

"The complexity of the laws at the state level being rolled out has, in turn, complicated revenue projections for these states," Flood wrote in an email.

We looked at revenue results in states that have legalized commercial sales:

  • In Colorado, revenue predictions were reduced by the governor during the first year of sales. But revenues "now greatly exceed original estimates of $70 million per year," according to a 2016 analysis from the Tax Foundation. Information from the Colorado Department of Revenue shows that marijuana tax revenues have increased steadily, and in fiscal year 2018, the state collected $263.8 million.   
  • In Washington, retail sales began in July 2014, and from the start, tax receipts exceeded expectations, according to the state’s Economic and Revenue Forecast. In fiscal year 2018, the state had brought in $367 million in cannabis license fees and taxes, up from $319 million in 2017, $189 million in 2016, and $65.7 million in 2015, according to annual reports from the Washington State Liquor and Cannabis Board.
  • In California, legalization of recreational marijuana took effect in 2018. The state fell short of its estimates by $101 million during the first six months, according to a report from the state’s Legislative Analyst’s Office. A rocky roll-out impeded growth in the legal market, according to the Los Angeles Times.
  • In Alaska, the first legal sales of recreational marijuana took place in fiscal year 2017, and collections of $1.7 million "did not meet projections because licensing took longer than expected," according to the Alaska Department of Revenue. However, the story doesn’t end there. "After a slow start, this new industry has grown rapidly, and ... the marijuana tax is now generating over $1 million per month in revenue for the state," according to a state revenue report published in December 2018.
  • In Oregon, revenues from recreational marijuana have been "substantially higher" than estimates when the measure was on the ballot, according to Joshua Lehner, an economist with the state’s Office of Economic Analysis.
  • In Nevada, the state brought in 140 percent of the revenue it expected during the first full year of legalization, according to the state’s Department of Taxation.
  • In Massachusetts, recreational marijuana was approved by voters in 2016, but the state’s first two retail stores did not open until November 2018. 

Maine is still working on its rules and regulations, and Michigan just legalized in November 2018.

While many states have seen impressive growth in revenue, predicting future revenue may be complicated. States have a difficult time predicting usage, pricing and how legalization in nearby states affect tax revenues, according to a report from Pew Charitable Trusts and the Rockefeller Institute for Government, both nonpartisan organizations. However, researchers wrote that "volatility in marijuana tax collections has been less of an issue and has primarily stemmed from seasonality."     

Our ruling

Fahy said states that have legalized recreational marijuana "are not meeting their targets for the most part."

It is true that, at first, some states struggled to meet their targets because of a slower than expected rollout of legalization. This occurred in Colorado, California and Alaska. Revenue, however, has grown in Colorado and Alaska. Oregon, Washington state and Nevada never had problems reaching their targets.

To say that states aren’t meeting their revenue targets "for the most part" doesn’t give a clear picture of what’s happening with legalized marijuana in the states.

We rate Fahy’s statement Mostly False.  

 

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Mostly False
As for recreational marijuana revenue projections, "we are seeing all those numbers reach disappointing levels in the states that have legalized. They’re not meeting their targets for the most part."
in a radio interview
Monday, January 14, 2019

Our Sources

2019 State of the State and Budget Proposals, New York Gov. Andrew Cuomo. Accessed Jan. 15, 2019.

Interview, Assemblymember Patricia Fahy, The Capitol Pressroom, Jan. 14, 2019. Accessed Jan. 14, 2019.

Interview with Assemblywoman Crystal Peoples-Stokes on New York's Marijuana Report, WGRZ, July 15, 2018. Accessed Jan. 15, 2019.

Telephone interview, Mason Tvert, spokesperson, Marijuana Policy Project, Jan. 17, 2019.

Telephone interview, Katherine Loughead, policy analyst, Tax Foundation, Jan. 17, 2019.

Assessment of the potential impact of regulated marijuana in New York State, July 2018. Accessed Jan. 16, 2019.

Revenue Estimates, Governor’s Budget Summary, 2018-19, (California.) Accessed Jan. 17, 2019.

Cannabis Tax Revenue Update, Legislative Analyst’s Office (California), Nov. 15, 2018. Accessed Jan. 17, 2019.  

"Maine taps Los Angeles consulting firm to help write recreational-marijuana rules," Portland Press-Herald, Dec. 8, 2018. Accessed Jan. 18, 2019.

Annual Report, 2017, Tax Division, Alaska Department of Revenue. Accessed Jan. 18, 2019.

Revenue Sources Book, Fall 2018, Alaska Department of Revenue, Tax Division. Accessed Jan. 18, 2019.

June marijuana revenue statistics news release, State of Nevada, Department of Taxation, Aug. 28, 2018. Accessed Jan. 18, 2019.

Marijuana Legalization and Taxes: Lessons for Other States from Colorado and Washington, The Tax Foundation, May 12, 2016. Accessed Jan. 18, 2019.

2018 Annual Report, Colorado Department of Revenue, July 1, 2017-June 30, 2018. Accessed Jan. 18, 2019.

Email conversation, Joshua Lehner, economist, Oregon Office of Economic Analysis, Jan. 18, 2019.  

"California could see a $643 million marijuana tax haul in first full year of legalization, Gov. Jerry Brown says," Los Angeles Times, Jan. 10, 2018. Accessed Jan. 18, 2019.

"One year of legal pot sales and California doesn’t have the bustling industry it expected. Here’s why," Dec. 27, 2018, Lost Angeles Times. Accessed Jan. 18, 2019.  

"Are sin taxes healthy for state budgets?" Pew Charitable Trusts, Rockefeller Institute of Government, July 2018. Accessed Jan. 18, 2019.

"Canadian pot companies came up way short on sales expectations. So what happened?" Nov. 19, 2018. Marketwatch. Accessed Jan. 18, 2019.

Annual Report, Fiscal Year 2017, Washington State Liquor and Cannabis Board. Accessed Jan. 18, 2019.

Annual Report, Fiscal Year 2018, Washington State Liquor and Cannabis Board. Accessed Jan. 18, 2019.

Washington State Economic and Revenue Forecast, November 2014. Accessed Jan. 18, 2019.

Massachusetts Fiscal Year 2019 Final Budget, Accessed Jan. 18, 2019.

Retail Marijuana Establishment Sales Data, Massachusetts Cannabis Control Commission, 1/7/19-1/13/19. Accessed Jan. 18, 2019.

"Washington State has brought in $70 million in tax revenue from legal marijuana sales," Associated Press, July 4, 2015. Accessed Jan. 20, 2019.

"Colorado’s pot market bringing in way more tax revenue than expected," Associated Press, Feb. 19, 2014. Accessed Jan. 20, 2019.

"Gov. Hickenlooper scales back Colorado marijuana tax prediction," Associated Press, April 7, 2014. Accessed Jan. 20, 2019.

State of Colorado Joint Budget Committee, Appropriations Report, Fiscal Year 2014-2015. Accessed Jan. 20, 2019.

Marijuana Tax Data, Colorado Department of Revenue. Accessed Jan. 22, 2019. 

"What legal states need to know about sketchy pot tax predictions," The Cannabist, Dec. 22, 2016. Accessed Jan. 20, 2019.

Email conversation, Nathalie Dailida, spokeswoman, Massachusetts Department of Revenue, Jan. 21, 2019.

News release, Massachusetts Executive Office for Administration and Finance, Dec. 21, 2018. Accessed Jan. 21, 2019.

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