DENVER (AP) – The federal government has reluctantly agreed to let Colorado be the first state to collect taxes from the legal sale of recreational marijuana, but it also has made clear it doesn’t agree with the move and may try to stop it, if isn’t tightly controlled.
Instead of keeping a low profile with the money, however, some Colorado lawmakers are trying the bold move of using millions of dollars they’ve collected so far from pot sales to seek matching funds from the federal government to keep kids off drugs.
The plan calls for transferring $3.5 million from the state’s marijuana cash fund to its general fund and then sending the same amount to a state department that would apply for a federal match.
Democratic state Sen. Pat Steadman, the measure’s sponsor, joked that the bookkeeping move “is what I’m calling money laundering.”
Supporters say the transfer shouldn’t raise any concerns since federal authorities already collect marijuana dollars from the state’s medical pot industry and have established guidelines for recreational sales that include keeping the drug away from minors and off federal lands.
Moving the money from one fund to another, proponents say, simply acknowledges and avoids potential conflict.
Colorado just needs to do “a little two-step” to calm federal nerves, Steadman said, explaining the plan to fellow budget writers. “We wouldn’t want the tainted money to draw a federal match, now, would we?” he added, sarcastically.
Skeptics are rolling their eyes. “Colorado is now becoming basically a cartel, a drug cartel,” said Sen. Kent Lambert, a Republican on the budget-writing committee, who nonetheless voted in favor.
“I don’t know what they’re trying to do,” Lambert said. Maybe “avoid federal scrutiny? I don’t think you’re going to hide it from the federal government.”
The match request would seek funds from the U.S. Centers for Medicare & Medicaid Services “for behavioral health community programs for school-based prevention” of child drug use.
Federal Medicaid authorities would have to approve the idea, but it’s not immediately clear how the agency would respond. A CMS spokeswoman declined comment Thursday.
The idea of sending marijuana revenue to the state’s general fund isn’t new. Colorado has for years put a 2.9 percent sales tax on medical pot, with the revenue going to the general fund, which routinely sends money along to federal accounts.
But the recreational sales industry has created enough cash that lawmakers for the first time will be able to seek a dollar-for-dollar match of pot money with federal money.
In Washington state, where retail sales haven’t yet begun, voters assigned a new dedicated marijuana fund to receive pot taxes and spend the money on health care, drug abuse treatment and education, and marijuana-related research. It’s too soon to say whether Washington lawmakers would seek federal matching funds for any of those efforts in the future.
A spokesman for the Colorado department that would seek Medicaid funding insisted that the request to federal authorities will be from general fund dollars.
“None of our programs seek funding from marijuana revenues,” Marc Williams said in an email.
Williams added that the prevention grants “would likely give preference to those programs operating in school districts or areas where there are a larger number of young, Medicaid-eligible clients.”
Steadman predicted the federal government would agree to the match.
“As long as it is an eligible benefit within the Medicaid program and we’re investing state dollars to expand benefits or expand the scope of our program, that’s eligible for a federal match,” Steadman said this week.
“And apparently we should be doing that with general fund dollars, not marijuana tax fund dollars, although in my estimation, all of those dollars are the same shade of green,” he said.
The U.S. Department of Justice said in a memo to the states last August that in order to avoid a crackdown on pot laws that flout the federal ban, certain conditions must be met. At the top of the list was keeping marijuana away from minors.
Colorado legalized marijuana for all adults over 21 in 2012, though tax collections didn’t start perking up until January, when retail sales began. Projections vary, but legislative budget-writers have projected marijuana taxes and fees will bring Colorado at least $67 million for the fiscal year that begins in July.
The budget proposal, which includes a total of $31.4 million in marijuana spending, now faces debate from the full Legislature.
Republican Rep. Cheri Gerou predicted a fight. “We’re going to be picked apart, once this thing becomes public,” she said.
5 Things To Know About Colorado Pot Revenue
– HOW IT’S GOING: Recreational pot sales began Jan. 1. Legislative economists estimate Colorado will sell nearly 2 million ounces of recreational pot next fiscal year. At an estimated $200 an ounce, Colorado would sell nearly $395 million worth.
– HOW MUCH POT COSTS: Marijuana is like alcohol, the price isn’t set by the state and it fluctuates wildly based on potency and quality. Pre-rolled joints at some dispensaries sell for roughly $4. High-quality strains can fetch about $400 an ounce, an ounce being considered the equivalent to a keg of beer.
– POT TAXES: Colorado taxes recreational pot at least 17.9 percent, not counting local taxes. In Denver, it’s nearly 29 percent. Since recreational sales began, the state has collected more than $7.6 million, including industry fees and medical marijuana taxes. Gov. John Hickenlooper’s office estimates pot taxes and fees could produce $125 million for the fiscal year beginning in July.
– WHERE POT TAXES GO: When Colorado legalized pot in 2012, voters assigned the first $40 million from excise taxes to school construction. Sales taxes are up to state lawmakers to appropriate, and they’re just starting to debate how.
– ONE OPTION: Budget writers propose spending $23 million now, including taxes and fees from the pre-existing medical marijuana industry, mostly to support efforts to prevent people under 21 from using pot. Using a $3.5 million program for drug prevention efforts focused on kids eligible for Medicaid, Colorado would then apply for a federal matching grant. The feds would have to agree.
– By Kristen Wyatt, AP Writer
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