Gov. Jerry Brown has proposed giving $14 million to his Department of Justice in 2018-19 to crack down on tax evasion, conspiracy and other financial crimes by the black market cannabis industry as well as stem the flow of illegal cannabis in the mail and parcel delivery systems.
While North Coast law enforcement officials, legislators and cannabis industry officials are supportive of the state’s efforts to address the black market, they also voiced various concerns about the proposal.
Brown’s May revise for the state budget would create five investigative teams based in Sacramento, Los Angeles, Fresno and San Diego. The department says enforcement efforts by the investigative teams would reduce the unfair advantage the black market has over the fledgling legal cannabis industry, cover enforcement gaps in illegal distribution, reduce environmental damage and recoup lost tax revenues.
California 2nd District Assemblyman Jim Wood, D-Santa Rosa, said although he is encouraged by Brown’s commitment to provide resources to combat illicit cannabis businesses, none of the investigation teams are located in North Coast counties.
“I recognize that this is a statewide problem,” Wood said in a statement to the Times-Standard on Wednesday, “but the Emerald Triangle has been the epicenter of the cannabis industry and I would have preferred that a team be focused in our area to help support the many legitimate cannabis businesses that have stepped up to comply with the new licensing and regulatory processes.”
“In the meantime, four of my Assembly colleagues and I have requested $25 million in this year’s budget to fund grants at the local level for enforcement,” Wood continued.
The $25 million grant program would provide funding to local governments, which would have to provide a 25 percent match to receive the funds, according to the proposal.
This reporter reached out to the Department of Justice, Department of Finance and Brown’s office to clarify whether the investigative teams would be able to investigate cases outside the cities where they are based, but did not receive a response by publication time.
Humboldt County Sheriff William Honsal said the governor should provide the funding to local law enforcement agencies rather than creating new bureaucratic entities that act separately from existing marijuana task forces. Honsal said he would instead like the Department of Justice to be referred to cases or piggyback on enforcement operations like California Department of Fish and Wildlife and State Water Board officials already do.
“That would force these people out of Sacramento, out of the Bay Area, out of Los Angeles and get out to the root of the problem where there is real tax evasion going on, where there’s real crime going on as far as white-collar crime in this,” Honsal said.
Honsal said he would like to see more about Wood’s proposal on the grants, but said he would also like to see some more state funding without strings attached or have to compete with other counties. This way, Honsal said he could hire more people on to the sheriff’s office cannabis enforcement division, which has five positions funded to cover the entire county.
“Marijuana enforcement is not just through harvest season anymore,” Honsal said. “This is a 365-day operation.”
North Coast state Sen. Mike McGuire, D-Healdsburg, said Brown’s proposal is a “smart move,” but said there should be an investigative team dedicated to the North Coast region.
“The North Coast is the heart of California’s cannabis country, which means we also have the lion’s share of the challenges related to the black market,” McGuire said Wednesday. “While the state has invested mightily in the [California Department of Fish and Wildlife] Watershed Enforcement Team, we need to continue to advance investments that will protect those who are legal and licensed and go after those bad apples that currently exist in the industry.”
California Department of Fish and Wildlife Deputy Director of Communications Jordan Traverso said Brown’s budget does not increase funding for their department’s cannabis enforcement programs, which focuses on environmental violations and have been expanded since the industry has become more regulated.
The California Growers Association, which represents about 1,300 members in the industry as well as consultants and attorneys, has various views on Brown’s funding proposal, according to its Executive Director Hezekiah Allen.
For himself, Allen called Brown’s proposal a “measured and reasonable approach to enforcement perhaps a bit too soon and inconsistent with Prop. 64,” referring to the 2016 ballot initiative that legalized adult-use, recreational cannabis.
While he agrees that enforcement should eventually be funded, Allen said the state’s tax revenues are significantly lower than what was hoped for. He also said the cannabis market is failing, not to mention operating on temporary licenses and emergency rules. Allen said the state should use what funds are available for other important programs, such as substance abuse counseling and prevention for kids, which he said Proposition 64 prioritized.
Allen also argued the state could generate more revenue by allowing small and mid-sized cannabis businesses to receive tax breaks in the early years, which will allow them to get stable footing in the marketplace and eventually generate more revenue for the state.
“What’s really exciting to us is the prospect of tax reform,” Allen said. “We think that there are polices that could generate more revenue for the state and if we were generating additional revenue then sure, enforcement should be on the table. But given we have such a significant shortfall of projected revenue, it seems like we’re sort of in a bare minimums.”
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