Cannabis Taxation and Expenditures

Conclusions 6

• CL1
  The County’s allocation for deferred maintenance and capital project expenses from cannabis tax revenue has not been adjusted to reflect the decline in tax revenue over the past five years.
• CL2
  Current County budget projections indicate that Cannabis Program ongoing expenditures will exceed expected cannabis tax revenues by $1.1 million in fiscal year 2025-26, posing a burden on County taxpayers.
• CL3
  Cannabis tax revenues have been declining due to market oversupply and price collapse, stressing the County’s operating expenditures for the Cannabis Program.
• CL4
  Currently Santa Barbara County’s budgeting, tracking, and reporting of cannabis- related revenue, expenses, and compliance violations are decentralized, making it difficult to provide comprehensive and detailed information on demand.
• CL5
  Despite declining illicit cannabis cultivation activity in the County, a significant portion of the County’s cannabis tax revenues continue to be allocated to combat this activity each fiscal year.
• CL6
  The Cannabis Program began with the expectation that it would provide a windfall of tax revenue to Santa Barbara County. However, those expectations are no longer being met due to changing market conditions. Cannabis tax revenue has been steadily declining in Santa Barbara County since fiscal year 2021-22. Current County expenditures from cannabis tax revenue on deferred maintenance and capital projects, licensing, monitoring, compliance, and enforcement are projected to become a financial burden to Santa Barbara County in the near future if the current cannabis tax structure and expenditures are not reviewed and revised to account for the continuing decline in cannabis tax revenue. 2024-2025 Santa Barbara County Grand Jury 7 FINDINGS AND RECOMMENDATIONS Finding 1: Cannabis tax revenues have been declining due to market oversupply and price collapse, stressing the County’s operating expenditures for the Cannabis Program. Recommendation 1: The Grand Jury recommends that the Board of Supervisors ensure that the Cannabis Program’s annual operating expenditures do not exceed annual cannabis tax revenues. Finding 2: The County’s allocation for deferred maintenance and capital project expenses from cannabis tax revenue has not been adjusted to reflect the decline in tax revenue over the past five years. Recommendation 2: The Grand Jury recommends that the Board of Supervisors revisit its capital projects allocation to be funded by cannabis tax revenues, ensuring that such allocations do not exceed available funds. Finding 3: Current County budget projections indicate that Cannabis Program ongoing expenditures will exceed expected cannabis tax revenues by $1.1 million in fiscal year 2025-26, posing a burden on County taxpayers. Recommendation 3: The Grand Jury recommends that the Board of Supervisors prioritize covering the direct operating costs of the Cannabis Program so as to achieve more balanced budgets in the future. Finding 4: Currently Santa Barbara County’s budgeting, tracking, and reporting of cannabis- related revenue, expenses, and compliance violations are decentralized, making it difficult to provide comprehensive and detailed information on demand. Recommendation 4: The Grand Jury recommends that the Board of Supervisors direct the County Executive Officer to develop an automated and centralized information database to track and report the budget, revenues, expenses, and administrative activities related to licensing and compliance specific to the Cannabis Program. Finding 5: Despite declining illicit cannabis cultivation activity in the County, a significant portion of the County’s cannabis tax revenues continue to be allocated to combat this activity each fiscal year. Recommendation 5: The Grand Jury recommends that the Board of Supervisors annually re- evaluate the allocation of cannabis tax revenue for combating illicit cannabis cultivation activity in the County. 2024-2025 Santa Barbara County Grand Jury 8 REQUIREMENTS FOR RESPONSES Pursuant to California Penal Code §933 and §933.05, the Grand Jury requests each entity or individual named below to respond to the findings and recommendations within the specified statutory time limit. Responses to Findings shall be either: - Agree - Disagree with an explanation - Disagree partially with an explanation Responses to Recommendations shall be one of the following: - Has been implemented, with a summary of the implementation actions taken - Will be implemented, with an implementation schedule - Requires further analysis, with an analysis completion date of fewer than 6 months after the issuance of the report - It will not be implemented with an explanation of why Santa Barbara County Board of Supervisors - 90 days Findings 1, 2, 3, 4, 5 Recommendations 1, 2, 3, 4, 5 2024-2025 Santa Barbara County Grand Jury 9

Agency Responses 1

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.