Measure to legalize pot could bring billions to state coffers

OLYMPIA — If voters pass Initiative 502 this fall allowing adults to legally grow, sell and smoke marijuana, it could spur an economic boon generating a half-billion dollars a year for the state coffers.

Or it could wind up a financial bust and not bring in a dime.

It all depends on what federal authorities decide to do, because just about everything the measure seeks to achieve will still violate federal law.

“The total fiscal impact … is indeterminate due to the significant uncertainties related to federal enforcement of federal criminal laws related to marijuana,” concludes a report issued Friday on the fiscal effects of the initiative.

And the measure could cost state agencies up to $65 million in the next five years to set up rules for licensing, regulating and taxing sales of marijuana, as well as the services the initiative seeks to fund.

The analysis prepared by the state Office of Financial Management will be included in voter pamphlets this fall.

Initiative 502 would make Washington the first state to legalize recreational use of marijuana by those 21 years and older.

It would create a new industry of producers, processors and sellers of marijuana products, and put the state Liquor Control Board in charge of regulating it. The agency would license wholesalers and retailers with licensees paying $1,250 the first year and $1,000 annually to renew.

With each purchase, a buyer of a marijuana product would pay the regular sales tax plus a heavy excise tax similar to what occurs now with alcohol.

State analysts concluded the amount of revenue generated could be as low as zero, if the feds clamp down, or as high as $2.14 billion over the next five fiscal years, with a fully functioning and regulated marijuana market.

What such a market might look like is educated guesswork. Those analysts relied on a national profile of marijuana users and statistics of their consumption to come up with an estimate of 363,000 marijuana users in Washington if the law passes. They predict each would consume 2 grams per use at a price of $12 per gram, with taxes.

Friday’s report echoes findings provided in a report to lawmakers during the legislative session earlier this year.

“We don’t know what the federal government will do,” said Alison Holcomb, campaign director for New Approach Washington that is behind the measure.

But initiative opponent Philip Dawdy, media director for Safe Access Alliance, said he thinks “it is pretty dubious the state will see millions and millions of dollars from a legal marijuana market. I’m pretty convinced the feds are going to put a straitjacket around it.”

In states such as Washington where medical marijuana use is allowed, federal authorities have not moved to overturn the laws or shut down the production of marijuana for medicinal purposes, Holcomb said.

But Steve Sarich, spokesman for the No on I-502 effort, said federal authorities are shutting down licensed medical marijuana dispensaries in Colorado and California.

“Why do we think the federal government will treat Washington state any different?” he said.

Meanwhile, sales of medical marijuana in Washington are helping cities, counties and the state pay a few bills.

Licensed dispensers of marijuana for medical purposes paid $755,764 in taxes on nearly $6 million in sales in 2011, according to figures from the state Department of Revenue.

Of the total, $582,731 landed in the state’s general fund to pay for day-to-day expenses in public schools, health care and criminal justice. The remainder was distributed to local governments.

Under I-502, a portion of money would go into the general bank accounts of cities, counties and the state government. A big chunk would be earmarked for substance abuse prevention, research, education and health care programs.

One of the missing elements of the report is how much the government might save by no longer treating marijuana use as a crime, Holcomb said.

An analysis done for a legislative committee earlier this year suggested money could be saved by having several thousand fewer cases in the courts each year involving adults arrested for possession of small amounts of marijuana.

She said voters need to think about whether the money spent on such prosecutions “is a dollar well spent or a dollar flushed down the toilet.”

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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