Protect cannabis tax revenue to bolster children’s welfare

Kids should not pay the price for a larger and more profitable cannabis Industry. That’s why we urge the Legislature to accept and support the policies put forward in the governor’s May state budget proposal and to join us in valuing child care and youth services. 

Cannabis taxes are the only guaranteed revenue stream in the state budget for child care for children from birth to 13 years old. Cannabis tax revenue enables more than 21,000 children to be in subsidized child care. About 2.3 million California children are eligible for subsidized child care, 86% of whom are children of color, yet we are meeting the needs of only 11% of eligible families. When it comes to providing subsidized child care to families, we are way behind. 

Over the last several months, the cannabis industry has ramped up its campaign to win a state tax cut and has effectively partnered with several state legislators who have introduced bills on this topic. Any tax cut for the cannabis industry represents a threat to funding for child care. 

That’s why, in February, 152 child and youth organizations and physician and public health groups came together to sound the alarm. We launched a campaign to educate state policymakers and the media about the threat to child care funding posed by changes to cannabis tax policy. 

In addition to the near-term cuts that would take place if cannabis taxes were reduced, we are concerned about long-term impact. Maintaining a sustainable, long-term funding source to address child care access frees up general-fund dollars to address urgent matters, such as raising the wages of the child care workforce. The field is dominated by women of color who earn less than minimum wage and lack guaranteed health or retirement benefits. 

In addition to child care, cannabis revenue is a major funding source for youth substance use prevention. To date, state agencies have made $145 million in grants to community organizations working in substance use prevention in communities of color in 50 counties. 

Fortunately, Gov. Gavin Newsom has put forward a solution that will protect funding for child care and youth substance abuse prevention in the long term. In his recently released budget proposal, he proposes giving the cannabis industry tax relief through eliminating the cannabis cultivation tax. At the same time, he puts in place a three-year guarantee that funding for child care and youth substance use prevention will remain at $401 million annually, an amount that represents a substantial investment for kids services.

And, as importantly, the governor proposes an increase to the excise tax, from 15% to 19%, in 2025. This increase represents a more revenue-neutral approach to cannabis taxes and helps guarantee a reliable funding stream for kids’ needs. By putting forward this policy, the governor is keeping promises he made to voters when, as lieutenant governor, he led the campaign for Proposition 64, which legalized for adults the recreational use of cannabis.

We urge the Legislature to accept and support the policies put forward in the governor’s May budget proposal. As child advocates, we often see policymakers invest in kids with a one-time allocation during budget-surplus years such as this. We rarely see long-term, sustainable investments in kids of color and kids living in poverty. In the coming weeks, as the state budget is finalized, California leaders must put in place solutions that protect kids for the long term.