Is the California $100 Million Cannabis Budget Enough To Help Struggling Companies?

Long gone are the days when marijuana was illegal pretty much everywhere in the world. The global cannabis market is currently worth $20.5 billion, and it’s projected to reach over $90 billion within the next five years. There is a significant demand for marijuana for recreational and medical use, and that’s why most U.S. territories, California included, were thrilled as legalization bills started passing in the past decade.

Just a few years back, Californians rejoiced at the prospect of making a pretty penny on tax revenue as the legal market replaced the illicit one. However, this didn’t happen as planned. As more and more legal cannabis companies started gasping for air in the current climate, the California legislature had to approve a huge bailout plan to support the struggling marijuana industry.

Cannabis companies in the largest U.S. cities are mainly struggling financially because of bureaucratic missteps when transitioning them from the temporary licenses they obtained years ago into permanent ones with more rigorous requisites. That’s where the new California $100 million cannabis budget comes into play. Here’s all you need to know about it.

California $100 Million Cannabis Budget Explained

In an unprecedented turn of events, the Golden State’s legislature is about to offer marijuana growers, sellers, and distributors a hefty sum to help bolster their business operations. We’re talking about a $100 million grant for cannabis entrepreneurs that are trying to upgrade their provisional licenses and finally get permanent ones instead.

As of April this year, about 82% of California’s licensees still held provisional licenses because they couldn’t afford the huge monetary investment that finalizing the licensing process takes. Current California Governor Gavin Newsome has even proposed (and is still negotiating) a six-month extension of the January 1st deadline for marijuana business owners to put their paperwork in order. 

The ongoing deadline negotiations haven’t been well received by several environmental groups. They argue that offering cannabis business owners more time to meet the permanent license deadline goes against what the California Environmental Quality Act (CEQA) dictates and fails to protect the environment, primarily water, air, plants, and wildlife in local communities, as promised to voters back in 2016.

The Struggles of the Cannabis Industry in California

Back in November 2016, Californians took the ballots to vote for the legalization of marijuana for recreational use in the Golden State, paving the way for cannabis farms, testers, stores, and distributors across the entire country. However, unlicensed companies have continued to flourish as the number of licensed shops failed to grow as initially expected by state officials. ‌

Initially, up to 6,000 shops were expected to get their permanent licenses in the first few years after legalizations. Yet, it’s estimated that there are three times as many illegal dealers as licensed ones. Only 1,086 retail and delivery companies have transitioned since the bill passed. It can take cannabis entrepreneurs up to two years to get their license with an initial cost of $250,000. That might not seem like much for bigger companies, but it is too big of a problem for startups and small businesses.

California’s 15% tax on legal marijuana is said to be the main culprit for pushing cannabis consumers to the illicit market. Besides, cities and counties within the state failed to roll out financial aid programs to encourage legacy sellers to get licensed out of fear that the general public wouldn’t want the government helping a stigmatized industry.

However, in an attempt to combat the illegal cannabis market in California, the current administration is willing to provide funds to the affected companies within 17 cities in the state, with Los Angeles being one of the biggest beneficiaries with up to $22 million. Other locations earmarked to receive financial aid are San Francisco, Long Beach, Oakland, and Desert Hot Springs.

How Will the Bailout Help the Industry in California?

The new $100 million cannabis budget would help cities and counties hire marijuana consultants and other experts to assist in performing environmental studies and legitimate businesses by transitioning from provisional to permanent licenses. This financial contribution is vital in promoting and maintaining a more equitable and sustainable market.

The many California errors and mishaps regarding the marijuana industry come as a cautionary tale for other territories in the United States that are just figuring out how to balance social-equity provisions and tax rates as they try to compete with the illicit market.

Having more licensed cannabis businesses means the CEQA can further regulate the industry’s environmental impact in the Golden State. By giving cannabis entrepreneurs more time to get their regular licenses, the state is actually motivating them to get their businesses in good standing with the rules and regulations stated in Proposition 64. 

With or without a deadline extension, the funds provided by the government are essential to get the numerous California unlicensed dispensaries up and running after a slow and painful regularization process that doesn’t seem to end. It’s a light at the end of the tunnel that could potentially change the industry’s landscape for the better and put the brake on the still-growing illegal market. 

Thrive in the Marijuana Industry

The state of California has made many mistakes when it comes to handling the legalization of marijuana and the regularization of dispensaries and other cannabis businesses. However, it’s not too late for companies within the industry to flourish, and a good California cannabis consulting group like M Consulting Experts can certainly help.

We specialize in providing product development, licensing, compliance, manufacturing, distribution, retail and brand strategy, supply chain management, and facility design advice for the cannabis industry. Our team of specialists has the hands-on industry experience to answer the most commonly asked questions by cannabis entrepreneurs like you. We provide consulting on:

  • current marketplace conditions
  • California cannabis regulations
  • extraction and refinement state
  • track and trace (METRC)
  • And more.

If you’re struggling to get your new marijuana business to take off or want general advice on any of the topics listed above, visit our site and schedule an appointment with us today.

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Please fill out the applicable Consulting Services form on the Contact Page of our website and one of our Team members will reach out to you as soon as possible.

Our Team is excited to hear from you! Please fill out the applicable Consulting Services form on the Contact Page and one of our Team members will reach out to you as soon as possible.
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