Cannabis Industry in Crisis: CaCOA Fights Against Excise Tax Increase at California Assembly Budget Hearing

In powerful testimony before the California Assembly Budget Subcommittee No. 5 today, CaCOA Executive Director Amy O'Gorman Jenkins delivered a stark reality check about the state's struggling legal cannabis market and urged immediate legislative action to prevent the looming excise tax increase that threatens to devastate California's licensed cannabis businesses.

"The legal cannabis industry in California is not growing or thriving. It is shrinking. And unless we take urgent corrective action — starting with halting the scheduled excise tax increase — we risk watching this industry collapse altogether," Jenkins told lawmakers who convened to discuss the recently released California Cannabis Market 2024 Report.

As the only voice representing California's legal cannabis retailers, cultivators, and manufacturers on the panel, Jenkins challenged the report's optimistic portrayal with alarming industry statistics that reveal the true state of the market:

• California cannabis sales have plummeted by $1.1 billion (19%) since 2021

• California cannabis excise tax revenue has dropped by $88 million (13%)

• More than 17,000 cannabis industry jobs have disappeared across California since 2022

• Over 7,100 California cultivation licenses have been surrendered or abandoned

• 60% of cannabis manufacturing licenses have been lost, eliminating over 1,000 California cannabis brands

• 21% of legal cannabis dispensaries have closed, leaving just 1,200 licensed cannabis retail shops in California — many of which are teetering on the edge of insolvency

Jenkins emphasized that these cannabis industry metrics reflect market failure, not market consolidation, and warned lawmakers that the scheduled July 1 cannabis excise tax increase from 15% to 19% would be "policy malpractice" that could trigger even more cannabis business closures and cannabis industry job losses.

"Even a modest 10% drop in legal cannabis sales due to this tax increase would result in a net revenue loss of more than $13 million for California. This cannabis excise tax hike won't just hurt cannabis businesses — it'll hurt the state's bottom line too," she explained to the Assembly Budget Subcommittee.

Jenkins contrasted California's struggling market with Michigan's thriving cannabis industry, noting that Michigan now outsells California despite having just one-quarter of our population — not because they grow better cannabis, but because they've implemented sensible tax policies, broad retail access, and effective enforcement.

To address California's cannabis industry crisis, Jenkins outlined three urgent cannabis policy priorities:

1. Prevent the Cannabis Excise Tax Increase: Support and pass AB 564 (Haney), which would freeze California's cannabis excise tax at 15% rather than allowing the scheduled increase to 19%. This would create a cumulative cannabis tax burden of up to 30% when combined with local cannabis taxes and state sales tax.

2. Crack Down on Illicit Cannabis Products: Aggressively enforce against high-potency cannabis intoxicants falsely marketed as hemp products, which California's own report indicates account for up to 60% of the cannabis market and are sold without age verification, cannabis testing, or cannabis taxation.

3. Expand Legal Cannabis Retail Access: Address the fact that 57% of California cities and counties still ban legal cannabis retail, leaving millions of cannabis consumers without access to safe, tested cannabis products and driving them to California's illicit cannabis market.

"We're not asking for a bailout. We're asking for a fighting chance," Jenkins concluded.

"Proposition 64's intent was to create a safe, taxed, and regulated cannabis marketplace that works for California. But today, more than seven years later, that promise remains unfulfilled."

The testimony comes at a critical moment as Assembly Bill 564 advances through the California legislature. CaCOA is co-sponsoring this important cannabis tax legislation and urges cannabis retailers, dispensary owners, and industry supporters to contact their California representatives to support it.