Colorful Commentary

Half a mile high: Coloradans not buying as much pot as expected

Posted June 24, 2014 by Ali Mickelson


Coloradans are consuming about half as much retail marijuana as state economists predicted before voters approved special taxes on recreational pot in 2013, and many state residents have instead stuck to using medical marijuana, taxed at a significantly lower rate.

That was one of the key revelations to come from the June revenue forecast released last week by the Colorado Legislative Council and the Office of State Planning and Budgeting. The forecast also showed the Colorado economy continues to grow faster than the national economy, though the growth is by no means even across the state.

Coloradans 18 or older and who get a doctor’s recommendation can register to purchase medical marijuana, which is subject only to the state’s regular 2.9 percent sales tax, not the special sales and excise taxes voters approved in Proposition AA last year for retail marijuana. Anyone, state resident or otherwise, who is 21 or older can purchase retail, or “recreational,” marijuana.

Legislative economists in 2012 estimated the sales and excise taxes on retail pot would bring in $67 million in the 2014-15 fiscal year, and in March, they dropped that estimate to $54 million.

But now they have dropped that estimate even further – to $30.6 million.

“We sort of expected that the adult-use (recreational) market would cannibalize the medical marijuana market,” legislative economist Larson Silbaugh told lawmakers last week. “So far, there isn’t any evidence that the medical marijuana market is sort of shrinking with people going to the adult-use market.”

Economists had estimated that Colorado consumers would purchase an average of 3.5 ounces of retail marijuana per year. Tax collections so far haven’t born out those assumptions, Silbaugh said, and economists have now lowered their estimates to 1.9 ounces per consumer per year, a 45 percent decrease from original estimates.

He noted that some marijuana users have said it is cheaper for regular consumers to go to a doctor and get a recommendation for a medical marijuana card than to purchase retail pot. In fact, the “red card” registry has continued to grow since January, when recreational sales became legal, he said. Legislative economists have also noted that the cost of a medical marijuana registry card has dropped from $35 to $15.

Silbaugh cautioned that the state had only collected four months of data and that more numbers would mean better predictions for a product whose legal sales economists have never been able to measure until now.

Economists now predict the state will close out fiscal year 2013-14 with $94.8 million more than previously projected, $25 million of which will stay in the general fund. The remainder will be transferred to the Colorado Conservation Board Construction Fund, the State Education Fund, the Capital Construction Fund, the Hazardous Substance Site Response Fund and the Economic Development Fund. The fiscal year 2014-15 general fund budget is anticipated to be 0.3 percent, or $31.4 million, higher than budgeted in the 2014 legislative session. The fiscal year 2015-16 budget is also expected to be higher than anticipated, with an increase of $630.7 million, a 6.8 percent increase from what was budgeted for fiscal year 2014-15.

Even with higher-than-anticipated revenue, the state has not restored pre-recession spending levels for K-12 education and a number of other programs.

In fiscal year 2013-14, the Referendum C cap will equal $11.8 billion. Legislative Council estimates that revenue subject to TABOR will be $354.3 million below the Ref C cap in fiscal year 2013-14 and $264.7 million below in fiscal year 14-15. However, total state revenue will be an estimated $2.8 million above the estimate published in the Blue Book voter guide in 2013, when the marijuana tax was approved by voters. So even though pot taxes are bringing in less than expected, and even though economists’ predictions about overall revenue collections were only slightly off, because of TABOR, there is a possibility that the $2.8 million will be needed to refunded to voters.

Legislative Council staff expected a decision on refunds wouldn’t be made until the 2015 legislative session.

The possible refunds are another example of the limitations of TABOR.  Marijuana taxes have been approved by the voters twice; however, the constructs of TABOR may require voters to once again vote to permit all marijuana revenues to go to capital construction for public schools. And, while revenue for schools is what the voters have clearly chosen at the ballot – twice –  TABOR may instead require a rebate.

This again highlights one of the many glitches written into TABOR, a measure that supporters claim is intended to carry out the will of the people but often does the opposite.

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