Washington pot czar has tips for California on black market, pricing
California likes to trumpet its record of pioneering public policy, but the state is a follower when it comes to legal cannabis.
While the Golden State was first out of the gate with its unprecedented 1996 law authorizing medicinal use, Washington and Colorado got a head start by taking the plunge and legalizing recreational marijuana in 2012. With a California legalization measure seemingly destined for the 2016 ballot and a new study advising a tightly regulated market, officials from Colorado and Washington on Thursday shared some wisdom at a Public Policy Institute of California event in Sacramento.
How are you going to be able to compete with the black, or in our state, the gray market?
Washington State Liquor and Cannabis Board Director Rick Garza
1. Beware black market competition
Replacing illegal activity with a regulated marketplace is consistently a selling point for legalization campaigns. But you have to be careful about it: tax medical cannabis too much, for instance, and you could make it so expensive that people stick with the cheaper black market.
“The concern we had...was the high rate of taxation,” with 25 percent levied on various phases of the process, said Washington State Liquor and Cannabis Board Director Rick Garza. “How are you going to be able to compete with the black, or in our state, the grey market?”
But concerns about excessive taxes eased with the realization that illegal dealers also tacked on mark-ups, Garza said. And prices have stabilized from $30 a gram for the legal stuff initially, when supply was low, to the current $8-to-$10 a gram that’s competitive with black market rates.
2. People want to pay taxes
Tax rates help determine not just whether illegal sales thrive but also who can enter the market. California cannabis companies have warned about high taxes driving them out of business or limiting customer access. But Garza said retailers are happy to pay up, citing a tax compliance rate of about 98 to 99 percent.
“The value of that license goes up exponentially every year, so their incentive to be compliant is pretty high,” said Lewis Koski, who oversees marijuana enforcement for the Colorado Department of Revenue and formerly headed the Marijuana Enforcement Division. “So in a lot of cases we found that they overpaid on their taxes just to be sure.”
3. Labeling and testing are works in progress
Regulators have stayed busy determining everything from how to label potency to which pesticides should be allowed. Washington just recently adopted rules for emergency recalls of tainted product. Oregon is coming up with a packaging symbol to keep kids away and working to certify pesticide-testing facilities.
“That’s the new challenge for us right now, is the issue of testing,” Garza said.
The science still has some catching up to do with the legalization policy.
Lewis Koski, who oversees marijuana enforcement for the Colorado Department of Revenue
Producers are confused too. An example: Colorado rules prevent certain levels of microbial contaminants like mold. So growers react by applying pesticide. But most pesticide labels limit their use to a finite number of crops. Oregon regulators have issued about 20 advisories in recent months about improper pesticide use.
4. So are the traffic stops
For the second year in a row, California legislators are considering a bill equipping cops with devices to test drivers for being stoned. Testing techniques like oral swabs remain in development in Washington and Colorado.
“The science still has some catching up to do with the legalization policy,” Koski said. “Not only is it a bit of a challenge to determine what that threshold (for drugged driving) is, but it’s also another challenge to be able to test for it.”
In the meantime, the focus has been on training officers to recognize the effects of weed. Koski said a rise in arrests from Driving Under the Influence of Drugs (DUID) is probably attributable in part to that preparation. About three-quarters of Washington State Patrol officers have received the training, Garza said, up from about 20 percent before legalization.
5. Think about how to get data
When he was a cop back in the pre-legalization days, Koski would focus on alcohol when he pulled over an apparently impaired driver. As a result, he said, he wouldn’t necessarily record if a driver also had marijuana in their system – a potential data gap for tracking legalization’s effects.
Similarly, Koski said, school districts generally track suspensions for alcohol and cigarette use but lump other intoxicants into “drug related.”
“It’s really important to start thinking about what data you want to capture and who’s going to have to cooperate with you to get that taken care of,” Koski said.