Many factors are reducing revenue in an industry that is only a decade old and threatening funding for public projects.
DENVER — Colorado’s marijuana industry knows what it’s like to feel the high, but now the excitement is fading. Marijuana sales have been falling in the state for more than a year, threatening public programs funded by the tax revenues that produce the sales.
In an industry built on getting high, marijuana sales are now at record lows.
“Right now, the Colorado marijuana industry is going through the biggest downturn we’ve ever seen,” said Truman Bradley, executive director of the Wheat Ridge-based Marijuana Industry Group. “Our industry is going through major layoffs. Thousands of people have lost their jobs and small business owners are going under. Unfortunately, I assume that this will remain the case in the coming year as well.”
Why is this all happening now? It starts with supply and demand. When everyone was sent home in 2020, there wasn’t, shall we say, much to do. That led to a big spike in marijuana sales during the pandemic. Now that people aren’t stuck at home anymore, they don’t buy as much weed.
“The medical market is down about 47% nationwide and the recreational market is down about 20%. Those are huge, huge numbers,” Bradley said. “To put that in perspective, that means marijuana tax revenues are down a hundred million dollars from a year ago. That means critical programs funded by marijuana tax revenues are at risk.”
But that’s just one problem.
In Colorado, wholesale marijuana prices are at record lows. Today it costs $658 a pound. That’s half the price compared to this time last year when it sold for $1,316.
“The price of marijuana is the lowest since recreational marijuana was legalized in Colorado,” said Andy Padilla, professor and chair of economics at MSU Denver. “I believe the price drop is due to the increased supply of marijuana.”
Revenue is also declining. As of September 2022, stores generated nearly $147 million ($146,880,577) worth of marijuana sales. That’s down from more than $181 million ($181,130,791) in September 2021 and $206 million ($206,488,268) in the same month in 2020.
“That means when the state’s joint budget committee meets to review marijuana tax revenues this year, they’re going to be looking at a $100 million shortfall in marijuana taxpayer dollars,” Bradley said.
Inflation is another possible cause of the downturn.
“As inflation rises, people will have to make choices,” Padilla said. “If we haven’t seen that an increase in wages goes hand in hand with an increase in inflation, people will have to make sacrifices.”
When people buy less weed, schools see less money.
Andy Stine is Director of Capital Construction at the Colorado Department of Education. Last fiscal year, the department’s Building Excellent Schools Today (BEST) program raised $97 million in marijuana taxpayer dollars to fund grants to build and renovate schools.
“The excise tax on marijuana revenue accounts for a large portion of the revenue that goes into the program,” Stine said.
The amount of money it brings in from marijuana tax revenues is likely to fall this year.
“We would need to reduce the amount of grants we can offer in the next fiscal year,” Stine said.
Marijuana tax revenues fund about 100 different programs statewide. Last year, Colorado collected a record $423 million in cannabis taxes. Programs like BEST have multiple revenue streams to fund them, but if they receive less money from marijuana taxes, they won’t be able to fund all of the grants.
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