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Increased Marijuana Excise Tax Distributions for Cities and Counties


March 28, 2018 by Toni Nelson
Category: Revenues , Marijuana

Increased Marijuana Excise Tax Distributions for Cities and Counties

Cities and counties that allow marijuana businesses will soon be seeing an increase in state shared revenue distributions following passage of the 2018-2019 state supplemental budget earlier this month.

The 2017-2019 state budget adopted last year reduced the anticipated marijuana excise tax distributions for cities and counties by 60%, from the original $15 million per state fiscal year to $6 million. This worked out to a combined distribution of $1.5 million per quarter, with payments distributed on or around the last day of each quarter (September 30, December 31, March 31, and June 30).

However, there was a caveat: if the February 2018 forecast of state general fund revenues was at least $18 million higher than the June 2017 forecast, the distribution would be restored to $15 million annually for FY 2017-2019 (although the legislature maintained its intent to reduce future distributions to $6 million per year after FY 2019).

The February 2018 forecast exceeded the estimate, and the 2018-2019 supplemental budget that was passed by the legislature earlier this month removed the caveat entirely and restored the full $15 million annual distribution for FY 2017-2019 — increasing the quarterly payments from $1.5 million to $3.75 million — as well as stating an intent to maintain the $15 million distribution after 2019 (although obviously that can be altered in any future legislative session). See ESSB 6032, section 901.

What Does This Mean for Cities and Counties?

Over the first two quarters of state fiscal year 2018 (which started July 1, 2017 and ends June 30, 2018), the Office of the State Treasurer (OST) has distributed a total of $3 million to cities and counties. That means it must distribute the remaining $12 million for FY 2018 over the two remaining quarters.

At the end of March, there will be a distribution of $8.25 million to cities and counties ($3.75 million plus a one-time “catch-up” payment of $4.5 million for the previous two quarters). After that, OST will distribute $3.75 million per quarter, beginning with June 2018, as shown below.

Total Marijuana Excise Tax Distributions to Cities/Counties, FY 2018
Sept 30, 2017 Dec 31, 2017 Mar 31, 2018 June 30, 2018 TOTAL
$1.5 million $1.5 million $8.25 million $3.75 million $15 million
 
Total Marijuana Excise Tax Distributions to Cities/Counties, FY 2019
Sept 30, 2018 Dec 31, 2018 Mar 31, 2019 June 30, 2019 TOTAL
$3.75 million $3.75 million $3.75 million $3.75 million $15 million

What Does This Mean for My City/County in Particular?

The exact formula to calculate distributions to any individual city or county is complicated and depends on population size (the state releases new population estimates on June 30), marijuana retail sales within the jurisdiction over the past fiscal year as a proportion of total statewide sales, and the number/total population of cities and counties that prohibit marijuana. (Jurisdictions that prohibit marijuana producers, processors, or retailers are not eligible to receive these funds.)

However, you can get a pretty good estimate of the impacts on your jurisdiction by multiplying the amount you received at the end of December by 5.5 for your March distribution and then by 2.5 for each quarter after that, as shown in the hypothetical example below. (We are showing calendar years here, rather than state fiscal years, because cities and counties budget on a calendar year basis.)

Hypothetical Marijuana Distributions to an Individual City/County
Calendar Year 2017 Actual Payments
March 31, 2017 June 30, 2017 Sept 30, 2017 Dec 31, 2017
N/A  legislation not in effect yet $1,000 $1,000
       
Calendar Year 2018 Estimated Distributions
March 31, 2018 June 30, 2018 Sept 30, 2018 Dec 31, 2018
$5,500* $2,500** $2,500*** $2,500***
       
Calendar Year 2019 Estimated Distributions
March 31, 2019 June 30, 2019 Sept 30, 2019 Dec 31, 2019
$2,500*** $2,500*** Depends on next state budget

* Catch-up distribution: December 2017 distribution times 5.5
** December 2017 distribution times 2.5
*** Subject to adjustment based on retail sales from July 1, 2017 to June 30, 2018

As a side note, the marijuana calculations are so complicated — and frequently in flux as local governments continue to take action on regulating or prohibiting marijuana — that we will no longer be providing marijuana excise tax estimates for individual jurisdictions in our State Shared Revenue Estimator. However, we will keep you informed of all the latest information on marijuana excise taxes and other state shared revenues when we release 2019 Budget Suggestions in July.

Questions? Comments?

If you have questions about marijuana excise tax distributions, please feel free to contact me at tnelson@mrsc.org or (206) 625-0916 x109.

If you have questions about other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772.


 

About Toni Nelson

Toni has over 24 years of experience with Local Government finance and budgeting. Toni's area of expertise include "Cash Basis" accounting and reporting, budgeting, audit prep and the financial issues impacting small local government.

VIEW ALL POSTS BY Toni Nelson

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