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Marijuana Tax Revenue and Education

Overview

A few years ago, Colorado voters approved the legal sale of marijuana to adults 21 and older with a portion of the tax revenue going to education. Though the amount of tax revenue that comes from marijuana sales is minimal -- around 1 percent of the state's total education budget -- the money is directed to a variety of programs, including school construction, bullying prevention and behavioral health. This is a brief glimpse of the revenue that comes into the Colorado Department of Education through marijuana sales.

Legislation

In 2012, Colorado voters approved Amendment 64 that allowed adults 21 and older to consume or possess marijuana and required the state to set up a regulatory structure for the retail marijuana industry. It also mandated an excise tax with the first $40 million collected to be reserved for school construction. 

In 2013, voters approved Proposition AA, allowing the state to levy up to a 15 percent excise tax on unprocessed marijuana and up to a 15 percent retail tax on marijuana sales. In addition, both medical and retail marijuana continue to be subject to the state’s 2.9 percent sales tax.

In 2017, the legislature changed the formula, increasing the statewide retail tax to 15 percent from 10 percent and changing how the revenue is distributed. 

How is marijuana tax revenue distributed?

Marijuana Tax Revenue Infographic July 2017 - 2017-18
There are two ways tax revenue comes into the state's coffers.
  • Excise tax: The first $40 million in excise tax on wholesale retail marijuana is credited to the state’s Building Excellent Schools Today (BEST) fund. Revenue in excess of $40 million is credited to the Public School Fund, which is run by the state treasurer's office.
  • Sales tax: Beginning July 1, 2017, 10 percent of the 15 percent state marijuana retail tax revenue will be allocated to local governments and distributed according to the percentage of marijuana sales within city and/or county boundaries.
    • Here's how the remaining 90 percent of the retail tax revenue will be apportioned in FY 2017-18:
      • 28.15 percent, minus $30 million, will go to the General Fund
      • 71.85 percent will be credited to the Marijuana Tax Cash Fund (MTCF)
      • $30 million will be credited to the state public school fund and distributed to rural school districts with 55 percent going to large rural districts and 45 percent to small rural districts
    • Here's how the remaining 90 percent of the retail tax revenue will be apportioned in FY 2018-19:
      • 15.56 percent will stay in the General Fund
      • 71.85 percent will be credited to the MTCF
      • 12.59 percent will be credited to the state public school fund and distributed to all districts

Building Excellent Schools Today (BEST)

Written into Amendment 64 is a commitment to credit the state’s BEST program with the first $40 million generated each fiscal year from the marijuana excise tax to renovate existing school buildings or construct new buildings. The fund prioritizes health, safety and security issues such as asbestos removal, new roofs, building code violations, and poor indoor air quality. BEST grants are competitive, awarded annually and in most cases must be supplemented with local district matching funds.

The $40 million in marijuana tax revenue is just one of four funding sources for BEST, the total of which is only a fraction of what is needed for the repair, maintenance and construction of Colorado’s public schools. A statewide facility assessment determined a need of nearly $18 billion in capital construction projected through 2018.

Here is how marijuana excise tax revenue has been used for the BEST program:

  • In Fiscal Year 2015-16, $40 million in marijuana excise tax was allocated to the BEST program plus an additional $40 million was paid into the fund from a one-time disbursement resulting from Proposition BB, a successful statewide ballot measure in 2015 that allowed the state to keep the surplus in marijuana tax revenue.
  • In Fiscal Year 2016-17, $40 million of marijuana excise tax was allocated to the BEST program with the excess $5.7 million going to the Public School Fund.
  • In Fiscal Year 2017-18, $40 million of marijuana excise tax was allocated to the BEST.

Marijuana Tax Cash Fund (MTCF)

In 2014, the state legislature created the Marijuana Tax Cash Fund to collect sales tax revenue from retail and medical marijuana. Revenue from MTCF must be spent the following year on health care, to monitor the health effects of marijuana, health education, substance abuse prevention and treatment programs and law enforcement.

Under MTCF CDE received money specifically for:

  • The School Health Professional Grant program to address behavioral health issues in schools.
  • A grant program to help schools and districts set up initiatives to reduce the frequency of bullying incidents.
  • Grants to fund drop-out prevention programs.
  • Early Literacy Competitive Grants to ensure reading is embedded into K-3 curriculum. 

Marijuana tax revenue distributions to the Colorado Department of Education, 2015-2017

School Construction – BEST

  • 2015-16: $80 million*
  • 2016-17: $40 million
  • 2017-18: $40 million
*Includes $40 million from one-time tax revenue disbursement approved by voters, allowing Colorado to keep surplus

Early Literacy Competitive Grant Program

  • 2016-17: $4.4 million
  • 2017-18: $4.4 million

School Health Professional Grant Program

  • 2015-16: $2.3 million
  • 2016-17: $2.3 million
  • 2017-18: $11.9 million

School Bullying Prevention & Education Grant Program

  • 2015-16: $2 million
  • 2016-17: $900,000
  • 2017-18: $2 million

Drop-out Prevention Programs

  • 2015-16: $2 million
  • 2016-17: $900,000
  • 2017-18: $2 million

State Public School Fund

  • 2017-18: $30 million


Totals

2015-16

  • Total 2015-16 marijuana revenue for CDE: $86.3 million
  • Total 2015-16 state education funding: $5.3 billion

2017-18

  • Total 2015-16 marijuana revenue for CDE: $90.3 million
  • Total 2015-16 state education funding: $5.6 billion

 

2016-17

  • Total 2016-17 marijuana revenue for CDE: $54.2 million
  • Total 2016-17 state education funding: $5.4 billion

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