SB 57 veto response + Cannabis tax revenue is down + State revenue below projections

Good morning and welcome to the A.M. Alert!

RESPONSE TO THE SB 57 VETO

California Gov. Gavin Newsom on Monday vetoed SB 57, the Sen. Scott Wiener-authored bill authorizing San Francisco, Oakland and Los Angeles to operate supervised drug consumption sites in a bid to cut down on overdose deaths.

Newsom, who has championed progressive criminal justice reforms to put an end to the War on Drugs, instead opted for a cautious approach in his veto message. He said he is “acutely concerned” about allowing safe-injection sites to operate in unlimited numbers, which he said could introduce unintended consequences.

“These unintended consequences in cities like Los Angeles, San Francisco, and Oakland cannot be taken lightly. Worsening drug consumption challenges in these areas is not a risk we can take,” Newsom wrote.

Instead, he called for Health and Human Services Secretary Mark Ghaly to convene city and county officials “to discuss minimum standards and best practices for safe and sustainable overdose prevention programs.”

Newsom’s veto earned him rare praise from the Legislature’s Republican leaders, Sen. Scott Wilk and Assemblyman James Gallagher.

“Glad to see the governor veto this. People struggling with addiction need help, not a legal place to shoot up,” Wilk said in a statement. “I look forward to working with the governor to convince Democrats in the legislature that a compassionate approach to addiction is better done through medical and mental health treatments.”

Wiener, D-San Francisco, voiced his frustration in a statement shared on Twitter Monday, saying that the state “lost a huge opportunity to address one of our most deadly problems: The dramatic escalation in drug overdose deaths.”

Wiener has promoted a host of progressive measures curbing the war on drugs. They include a bill to decriminalize many psychedelics, which was watered down to a study by the Assembly Appropriations Committee earlier this month. He said that SB 57 was not a radical bill — it simply granted permission to cities which had requested it to operate safe consumption sites in their jurisdictions.

Wiener chafed at the idea that the matter needs more study.

“We know from decades of experience and numerous peer-reviewed scientific studies that they work,” Wiener said in a statement. “Safe consumption sites have been in operation around the world for approximately 30 years, with great success and literally zero overdose deaths.”

Wiener tweeted on Monday that San Francisco should move ahead with opening up the sites in spite of veto.

“With two successive Governors vetoing this bill, it’s crystal clear the State isn’t going to step up. San Francisco needs to take matters into its own hands & open up safe consumption sites to save lives,” Wiener wrote.

CANNABIS TAX REVENUE IS DOWN, AGAIN

Is California’s cannabis tax revenue going up in smoke? The California Department of Tax and Fee Administration is out with the second quarter results for cannabis tax revenue and, almost across the board, revenues are down.

As you may recall, cannabis is taxed several times along the supply chain in California. There’s the cultivation tax, the excise tax, the sales tax — and that’s just at the state level. Local governments can impose their own taxes.

You may also recall that Gov. Newsom’s 2022-23 budget eliminated the cultivation tax, beginning July 1, leaving just the excise and sales tax, both of which now are borne by retailers.

With that in mind, here’s how California did: The state collected more than $141 million in excise tax receipts in Q2, down from $151 million in the first quarter; $25.8 million in cultivation tax revenue for second quarter, down from $36.3 million in the first quarter; and $108 million in sales tax revenue, up from $106 million last quarter.

Overall, the state collected $275 million in Q2, a nearly $20 million decrease from Q1, where the state posted a total of more than $294 million.

STATE REVENUES FALL SHORT OF PROJECTIONS

July is over, and the California Department of Finance is out with the results from the first month of the new fiscal year. And it’s not looking great for the General Fund: July cash receipts were $1.2 billion, falling just over 12% below the 2022-23 Budget Act forecast.

Preliminary general fund agency cash receipts for the entire 2021-22 fiscal year fell $2.1 billion below the Budget Act forecast of $233.9 billion, nearly 1% below what was forecast.

“Shortfalls in July continued to be largely driven by lower proceeds from personal income tax,” according to a department memo.

Personal income tax cash receipts to the general fund were more than $1 billion below the month’s forecast of $7.8 billion.

“July is not a significant month for personal income tax cash receipts, except for withholding, which is significant every month,” according to the department. “Notably, withholding receipts fell $731 million short of projections in July, or 10.1%”

QUOTE OF THE DAY

“In September, we will review the procedures of adding consultants, lobbyists & other paid professionals to our labor boycott list. You can’t get paid to union bust or take on fights against workers and ALL of labor & expect to turn around and benefit from our members’ money.”

- Lorena Gonzalez, president of the California Labor Federation, via Twitter.

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