Schools will wait years for impact of marijuana tax
Forty percent of pot sales tax will be invested in Common School Fund
Marijuana businesses began paying taxes at the start of 2016, but schools and other government services wont see the cash until at least the summer of 2017.
As general manager of Alberta Green House, Michael Smith said the new sales tax might decrease quantities in purchases but he doesnt think it will stop many people from shopping. What he is more worried about is whether the extra cash will go to the services that have been promised.
We get the same types of promises with the lottery money in the state, Smith said, arguing that only small percentages actually show up in schools. Im really hoping that when we actually count the dollars that make it to the school system, and even to law enforcement, that the money is all there and it hasnt just been siphoned off in to different politicians hands.
He may be right to worry. Following the river of money expected to start flowing from the new tax is long and convoluted.
The authors of Measure 91, which legalized recreational marijuana use and sales in Oregon after a November 2014 vote, made sure to tie the controversial product to popular government services.
The states Common School Fund will get 40 percent of the tax revenue, 35 percent will go to various law enforcement agencies and 25 percent will go to mental health and substance abuse services.
Retail sales officially began Oct. 1, 2015, but so far, there has been no revenue to the state.
Theres no revenue or anything that pays for the recreational program right now, said Mark Pettinger, a spokesman for the Oregon Liquor Control Commissions recreational marijuana program.
Starting Jan. 4, dispensaries started calculating between 17 and 25 percent in sales taxes on recreational marijuana. Their first tax returns are due April 30.
Taxman, OLCC first in line
To set up the infrastructure for such a large state program before the tax started, the Oregon Liquor Control Commissions liquor side has lent money to its new recreational marijuana program to the tune of about $3.8 million from 2015 to 2017. Thats an estimate though. The actual amount based on real costs wont be known until the end of the 2015-17 fiscal biennium. Thats when the OLCC can pay itself back and the recreational marijuana program becomes self-sustaining.
The official estimate, from the OLCC, is that the program will cost $3.2 million annually to run after 2017. The administrative costs will be paid through licensing fees from various levels of the industry growers, distributors, retailers and others.
We did some educated estimating to come up with fee structure going forward theyll be adjusted up or down to cover the true costs of the program, so that it will be self-supporting, Pettinger said.
Once the taxes are collected, OLCC will be second in line to pay off its loan. First in line is the Oregon Department of Revenue, which will oversee the distribution of the money to the various jurisdictions, such as the Department of State Lands, which manages the Common School Fund.
The Common School Fund is different than the State School Fund, which is distributed annually by a weighted average and makes up the bulk of any Oregon districts budget. The Common School Fund was established at Oregons statehood as a land trust and to this day consists of investments in real estate and equities in perpetuity for generations of schoolchildren. The dividends currently 4 percent of a three-year average of the principal are distributed to counties based on the number of school-aged kids in the county and then further divided by the proportion of kids in a district.
For the 2015-17 biennium, the total funds distributed is currently projected to be $132 million, according to the Oregon Department of Education.
So what does all this mean for local schools?
Projections call for the state to realize between $17 million and $40 million in revenue from marijuana sales.
Lets say the tax revenue from the recreational marijuana program comes in at $25 million on the low side of the projections. The Common School Fund will get 40 percent of that, or $10 million, starting in mid-2017. That money will be added to the $1.45 billion in the fund and 4 percent maybe 5 percent if a pending proposal is accepted of the fund will be distributed to counties and then to districts. The first year, the additional cash in the fund will be barely noticeable. To continue with the $10 million example, 4 percent would be $400,000 to be divided up among the states 197 districts.
Compound interest and annual deposits will grow the account in future years, but the impact to schools will likely remain subtle.