This is part two of a series on the California legislature. Part one examined the laws passed in 2020.
Following an unprecedented year of challenges, the California legislature figures to have a full host of cannabis issues on its plate for the new session, which begins in January.
With the state set to consolidate its three cannabis regulatory agencies in the coming months, 2021 looks to be a period of significant transition for the nearly 3-year-old California REC market.
Due to a COVID-related slowdown, the legislature will consider fewer bills overall next year. But cannabis is likely to remain a hot topic. The condensed legislative activity might even force lawmakers to work more collaboratively, Max Mikalonis, a lobbyist with Sacramento-based K Street Consulting, told WeedWeek.
“It could encourage legislators to put multiple ideas, that last year would’ve been multiple bills, into a single bill,” he said. “That’s sometimes been frowned upon, but it might become a necessity.”
Here’s a look at some issues awaiting lawmakers in 2021:
High taxes continue to be a major concern for operators and regulators alike. While state tax increases will be frozen in 2021 (thanks to AB 1872), the legislature is expected to continue discussions on which tax methods and rates are most effective.
- Assemblyman Rob Bonta (D-Oakland) has authored unsuccessful bills each of the past three years calling for the state excise tax – which consumers pay retailers, who then pay distributors, who must pay the state – to be reduced from 15% to 11% and for the cultivation tax to be eliminated. Bonta, who was re-elected with nearly 88% of the vote in November, recently said he intends to continue this push.
- He argues the experience of other states shows that lowering pot taxes attracts more consumers and businesses to the legal market and boosts tax revenue.
- In late 2019, the California Legislative Analyst’s Office recommended dropping the cultivation tax – which is based on weight and paid by farmers – and to tax based on THC potency instead. The Bureau of Cannabis Control (BCC) also recently awarded a $1M grant to UCLA to assess the feasibility of a cannabis potency tax. The concept is likely to get further consideration in 2021.
The vast majority of cultivation licenses issued by the state have been provisional, or temporary. This has allowed farmers to produce crops without waiting for state-mandated environmental reviews needed for full annual licensure. Lots of provisional licenses are set to expire in 2021.
- Many in the industry have encouraged the state to extend the timelines of the existing licenses, which would allow licensees to continue operating while they work with local jurisdictions on environmental concerns.
- Kristin Nevedal, a member of the Cannabis Advisory Committee, which reports to the BCC, recommended Wednesday that the committee invite licensing authorities to a meeting in early 2021 to present on the issue and explain the challenges of converting those provisional licenses to annual licenses.
- Nevedal expressed concern that if the licenses expire without action from the state, it “could pose challenges to the legal supply chain … and possibly strengthen the unregulated market.”
- “It is an extinction event” for the industry if the state doesn’t address this issue in 2021, said Mikalonis, with K Street Consulting.
Delivery driver expansion
Currently, delivery vehicles are prohibited from carrying more than $5,000 worth of cannabis products at a time. They also may not carry more than $3,000 worth of products that are not specifically allocated for a delivery at that time.
- Licensed operators have complained that the limits give a competitive advantage to their illicit counterparts, who don’t have to follow the rules.
- Assemblyman Kevin McCarty (D-Sacramento) introduced a bill this year calling for raising those limits, as well as the establishment of different limits for different vehicle types, such as a $500 limit for bicycle deliveries and a $50,000 limit for cargo vans. The bill died in committee.
- The issue figures to get a closer look in 2021, particularly as delivery services have taken on an increased role during the pandemic.
Flavored product ban
The Cannabis Advisory Committee held a spirited debate in October regarding whether to recommend a ban on flavored inhaled cannabis products, similar to the state’s ban on flavored tobacco products, before ultimately voting to not recommend such a ban.
- Supporters of a ban argue that it would protect children by preventing vape companies from targeting them with candy-like flavored products.
- Opponents of a ban argue that it’s inappropriate to treat the cannabis industry the same as the tobacco industry, due to inherent differences in product types and health risks. Some have suggested more data is necessary before a ban can be considered.
- A bill (AB 1639) that would have banned flavoring in all vape products – cannabis or tobacco – died in the Assembly this summer. The issue is likely to be readdressed in 2021.