State lawmakers got generally good news in the quarterly revenue forecast released last week: Higher-than-forecast tax receipts are giving them more money to spend.
“Personal and corporate tax collections continue to outstrip expectations,” state economists Mark McMullen and Josh Lehner wrote Feb. 22. “The unexpected revenue growth in the current biennium has left Oregon with unprecedented balances, followed by a record kicker in 2023-25.”
What that means: The state has taken in so much more tax revenue than expected that it’s going to send $3.9 billion back to taxpayers via the only-in-Oregon “kicker,” which provides a rebate when revenues exceed the official forecast by more than 2%.
But McMullen and Lehner’s outlook on one part of the budget much in the news—recreational cannabis revenues—is gloomy.
“The combination of an oversupply of production and saturated retailer market continues to drive prices lower,” the economists wrote. “Given Oregon taxes marijuana based on the price, the trend is for lower tax collections even as the underlying volume of sales remains steadier.”
Here’s what prices look like:
In 2020, voters approved Measure 110, which decriminalized the personal use of many street drugs and shifted the bulk of recreational cannabis revenues to new referral and treatment services for people with substance use disorder. Total cannabis tax revenue is about $150 million per year. Under the measure, the first $45 million of cannabis tax revenue continues to go to schools, local governments, the Oregon State Police, etc. and everything above that goes to referral and treatment for people with substance abuse disorder.
For many years after voters legalized recreational cannabis in 2014, tax revenues grew rapidly, usually outpacing predictions. That’s changed with a leveling off of demand and bumper harvests.
“The crux of the issue today are the record low prices,” the economists write. “The underlying reason for the low prices is an oversaturated market where production (harvest and inventory) outpaces consumer demand, and there are more retailers per capita than in most other states, leading to increased competition.”
As WW has reported, the Oregon Health Authority and the citizen committee responsible for allocating the Measure 110 tax money have been slow to get that money into new treatment.
Now, economists say, there will be less money than anticipated going forward.
“Resources in the current 2021-23 biennium are lowered by another $9.7 million (-3.1%). Over the past two quarterly forecasts, resources in the 2021-23 biennium have been lowered by $25 million,” they write. “Looking forward, resources are lowered $35.9 million (-10.8%) in the upcoming 2023-25 biennium.”
The only upside in the oversupply: “These dynamics are great news for consumers who can enjoy widely available products at low prices.”
H/T: www.wweek.com
