Date: 08/12/2014
Final
Marijuana Tax Revenue Forecast
MARIJUANA SALES TAX REVENUES
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09:57 AM -- Marijuana Tax Revenue Forecast
Larson Silbaugh, Senior Economist, Legislative Council Staff, came to the table to present on the Legislative Council Staff marijuana tax revenue forecast. He stated that the forecast that the office had produced was a brand new forecast, and was only based on only 6 months of data. He detailed the data points used and considerations made in constructing the forecast, and noted the ways that the forecast could be improved over time. He stated that Legislative Council had assumed an adult usage rate of 12.9 percent in Colorado, noting that there was not much information available on individual usage rates. He stated that the forecast had assumed an average usage of 3.5 ounces of marijuana per year per user. Tourists were also considered in the estimation of usage to add such consumption to overall state consumption. Mr. Silbaugh told the committee that to estimate tax revenue, Legislative Council Staff also had to consider the medical, gray, and black markets. He noted adjustments that had been made to the forecast over time, including reducing the average consumption to 1.9 ounces per user per year.
10:05 AM
Representative Pabon asked Mr. Silbaugh to elaborate on the assumptions that Legislative Council had made when estimating marijuana tax revenue. Mr. Silbaugh stated that there is a degree of inaccuracy in all of the assumptions made, but that Legislative Council had the least confidence in the average annual consumption statistic it had used. Representative Pabon asked if other data points had become available since retail marijuana had been legalized, and Mr. Silbaugh responded that the only concrete Colorado-specific data that had been collected was the number of red card holders and monthly tax collections.
10:09 AM
Mr. Bommer asked Mr. Silbaugh if any estimations had been made on medical marijuana users transitioning to the retail market. Mr. Silbaugh stated that there had not been as much cannibalization of the medical marijuana market as expected and that in fact the number of red card holders had increased since retail marijuana went on sale.
10:11 AM
The committee discussed the data available and whether there were systems in place to collect data that would be of use on marijuana consumption in Colorado. Mr Silbaugh continued his presentation, describing the marijuana tax revenues that had been collected so far for FY 2013-14 and the projected revenues for FY 2014-15. He stated that the retail marijuana market is still in a process of maturation, and that there were a number of factors at play within the market that could have an impact on its growth or stabilization.
10:15 AM
Commissioner Pace asked Mr. Silbaugh to speak to the lower-than-expected excise tax revenue collections. Mr. Silbaugh stated that because of the Colorado Constitution, a one-time transfer of medical marijuana inventory to retail inventory was not taxed when retail marijuana operations were originally opened. Commissioner Pace asked Mr. Silbaugh to explain whether medical marijuana caregivers could be a reason for the lower revenue collections, and Mr. Silbaugh stated that it definitely could, but he had not seen any data to support this.
10:19 AM
Mr. Blake asked Mr. Silbaugh to speak further on how significantly caregivers might be affecting the retail marijuana market. Committee questioning and discussion of this topic ensued.
10:22 AM
Mr Silbaugh responded to questions on where the $40 million in excise tax revenue amount that was approved by voters through Proposition AA came from and whether tax revenue collections could trigger a Taxpayer Bill of Rights (TABOR) refund. The committee discussed the first $40 million in excise tax revenues that must be collected and directed towards the BEST program and why projections for overall tax revenue were significantly higher than actual collections.
10:27 AM
Representative Singer asked Mr. Silbaugh to clarify a statement he had made on Proposition AA being exempt from TABOR. Mr. Silbaugh responded that they are exempt from the TABOR revenue limits, but still subject to TABOR election provisions. The committee discussed this issue, which revolves around whether or not the state will need to perform a refund under TABOR because of retail marijuana tax revenue, the ability of the General Assembly to adjust the special sales and excise tax rates, and the $40 million excise tax collection for the BEST program. Mr. Silbaugh responded to questions on the state law that allows an individual to grow up to 6 marijuana plants, the potential effects of this upon the demand for retail marijuana in Colorado, and whether an assumption for this was used in the Legislative Council forecast.