Newsom announced the revision proposal on May 13, which aims to set aside $150 million in order to “temporarily reduce taxes” and simplify the tax structure, while $21 million will go toward local governments to help expand cannabis’s retail footprint.

Newsom said in response to a question from a Bloomberg reporter that he is “…addressing the persistent issue that is exactly what we anticipated would be a persistent issue—and that’s dealing with the black market, going after the illegal growers and the illegal operators,” Newsom explained. “Trying to level-set, trying to be flexible in terms of the cost pressures related to the current tax structure, and the lack thereof, in the black market.”

“This is [the] beginning of a process from my humble perspective, in terms of my thinking,” Newsom continued. “This will be a multi-year process to get that black market, get it on the retreat—not the ascendancy—and to get the retail and responsible adult-use market on steady ground.”

In conjunction with Newsom’s statement, the Department of Cannabis Control also released a statement from Director Nicole Elliot. “We have heard from many of you who have said that the current cannabis tax framework is overly complex,” Elliot wrote. “We know that current tax policies disproportionately burden cannabis farmers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.”

She summarized some of the changes in the proposal, which includes setting the cultivation tax to zero starting on July 1, strengthening tax enforcement policies, altering the deadline for collecting excise tax, and more. “I share this information because I wanted you all to know about the work the Governor’s Office is doing to support our collective efforts,” Elliot concluded. “Creating a sustainable, safe, equitable, and legal cannabis market in our state is no small feat—it is a labor of love, and it takes all of us working together to help make this a reality.”

The Reason Foundation, which promotes libertarian values, recently analyzed the possible results of altering the current cannabis tax. Ultimately, the organization recommended to repeal or suspend the current cultivation tax, reduce retail excise taxes, or pursue other methods to garner interest from local governments. “Tax costs are a significant component of retail prices and this analysis shows that a reduction in taxes can make legal products more price-competitive with illegal products and lure more consumers into the regulated market. This overall market growth will quickly displace the lost revenue resulting from a reduction in tax rates,” the Reason Foundation concluded.

Newsom initially unveiled his budget proposal for the 2022-2023 fiscal year in January, stating that he strives to make positive changes. “It is my goal to look at tax policy to stabilize markets; at the same time, it’s also my goal to get these municipalities to wake up to the opportunities to get rid of the illegal market and the illicit market and provide support and a regulatory framework for the legal market,” Newsom said. He shared that $595 million of cannabis tax revenue became available to fund substance abuse treatment efforts, environmental remediation illegal cultivation sites, and public safety activities.

In June 2021, Newsom proposed a $100 million package “to be provided as grants to cities and counties to help cannabis businesses transition from provisional to regular licenses.” Seventeen cities and counties were chosen to receive this grant.

Meanwhile, in late April, Assembly Bill 2691 was approved to allow small cannabis business owners to take their products directly to consumers at cannabis farmers markets and other special events. According to Assemblymember Jim Wood, who introduced the measure, this will help small cannabis businesses navigate through the various challenges of high taxes and competition with larger businesses, and will help increase visibility among local consumers.

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The California Department of Cannabis Control (DCC) announced on March 4 that it was releasing a list of changes to the state’s regulations on cannabis. According to a press release, these changes intend to “streamline and simplify” existing cannabis regulations, as well as “enhance consumer protections and make permanent changes that are currently in effect as emergency regulations.”

According to DCC Director Nicole Elliot, these changes are a reflection of the intention of the department to continue bettering the state’s cannabis programs. “This proposal is a direct result of DCC’s engagement with stakeholders and the thoughtful feedback received through letters, conversations, meetings and previous rulemaking processes,” said Elliott in a press release. “We are deeply [committed] to creating a cannabis regulatory structure that works for all Californians, including California’s cannabis industry, consumers and communities.”

This most recent round of regulation proposals also marks the beginning of a 45-day public comment opportunity, which will end on April 19, 2022. Public comments can be sent via email, or presented during a live hearing on two different days: March 23 and April 19. The DCC also held a webinar on March 3 to educate viewers on the rulemaking timeline, and how to share feedback.

The proposed changes can be read in their entirety here, which includes a variety of suggestions, ranging from video surveillance and sale of live cannabis plants, cannabis event requirements, certificate of analysis and much more. The DCC summarizes some of these key changes to include no longer requiring distributors to have paper copies of product test results, allowing pre-packaged food and beverages for sale at consumption lounges, ingredient restrictions for inhaled cannabis products, and a ban on medical devices or applicators such as “nasal sprays, eye drops or metered-dose inhalers.”

According to an article written by cannabis attorney Hilary Bricken, “Unlike other states, California hasn’t implemented sweeping changes to its cannabis regulations with immense impacts on the industry,” Bricken wrote. “Instead, it has adopted a series of emergency rules with substantive changes here and there since 2018.”

“The DCC’s changes appear to be technical fixes and more consolidation rather than huge regulatory shifts,” she continued. “The DCC states in its Initial Statement of Reasons that the need for these rules is to ‘consolidate, clarify, and make consistent’ licensing and enforcement regulations across all of California’s cannabis license types.” Bricken goes into further detail with some of the highlights of these changes as well, choosing 15 different points of interest.

If approved, these regulations are expected to go live in Fall 2022. Emergency regulations that were established in September 2021 would also be permanently adopted as well.

California has a few bill proposals in the works currently, exploring some other necessities of the industry. On February 15, Assemblymember Bill Quirk introduced AB-2188 which would end workplace discrimination for positive drug tests when cannabis metabolites are detected. “The bill would make it unlawful for California employers to penalize or discriminate against a person when making decisions about hiring, termination, or other aspects of employment if the discrimination is based on the person’s off-duty cannabis use or the presence of non-psychoactive cannabis metabolites revealed in an employer-mandated drug screening,” said Attorney Lauren Mendelsohn of the Law Offices of Omar Figueroa in an email to High Times.

In January, Assemblymember Mia Bonta sponsored a bill that would require courts to update any cases relating to cannabis convictions. “California made a promise. I’m focused on making sure that California keeps its promises,” Bonta said. “This bill would allow us to automatically seal qualifying cannabis criminal records.”

As for overall performance of California’s cannabis industry, the Americans for Safe Access annual “State of the States” review rated California as a “C+.” With high marks in “Consumer Protection and Product Safety” (154/200) and “Program Functionality” (85/100) and lower marks in “Affordability” (40/100), ranking it average among states in the country.

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