Gas Tax Fight and Memories of 1978

May 3, 2022 By Jon Coupal Leave a Comment

With the state government of California sitting on a budget surplus that exceeds $50 billion, Sacramento politicians can’t bring themselves to return a few dollars to middle-class taxpayers.

While the cost of consumer goods and services is rising rapidly, due mostly to feckless government policies, it is the cost of gasoline that truly sticks in the craw of average Californians. Conservatives in the Legislature, mostly Republicans, have accused the Democrats of intentionally running out the clock on providing gas tax relief before an automatic increase goes into effect on May 1st.

That accusation is well-founded.

Nearly a year ago, Republicans in the state Senate pushed for a “gas tax holiday,” including a full suspension on state gas tax collection for the current fiscal year.

The suspension could have easily been backfilled by the state’s overflowing general fund, which would protect transportation funding.

Later, they offered amendments formally requesting the suspension of the state gas tax and postponing the pending increase.

In the Assembly, who can forget the Democrats’ ambush of Assembly Bill 1638 by Assemblyman Kevin Kiley, another gas tax suspension proposal?

Again, by refusing to even hear the bill the ruling political class is revealed as wholly disconnected to the concerns of average citizens.

That’s too bad because a one year suspension of the gas tax would have reduced the cost of fuel by 51.1 cents per gallon, providing instant tax relief.

It is also an elegantly simple solution that would have been easy for state bureaucrats to administer.

While the majority party in the legislature has slow-walked gas tax relief, Gov. Gavin Newsom at least put the issue on the table by introducing some gas price relief in his original January budget as well as his March State of the State speech.

But legislative leaders in both houses rejected his proposal, falsely claiming that transportation projects wouldn’t be fully funded.

Rather, they said they would prefer some sort of direct payments to taxpayers but weren’t clear on who would get the money.

Which brings us to today, exactly where we were a year ago except that now, both the price of gas as well as the gas tax are higher.

It is no surprise that a recent PPIC poll reveals that record percentages of voters believe they are overtaxed. What is surprising, however, is why a majority of our elected representatives in Sacramento are turning a blind eye to the problem and not taking any meaningful action.

If past is prologue, political foot-dragging on tax relief can be very dangerous.

Click here to read the full article at the OC Register

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Californians Don’t Get Much Bang for Billions of Bucks

April 25, 2022 By Dan Walters Leave a Comment

The Howard Jarvis Taxpayers Association isn’t shy about its mission.

Named for the chief architect of California’s Proposition 13 property tax limit, the organization fiercely defends Jarvis’ iconic 1978 measure against those — public employee unions, particularly — seeking its repeal.

So far, Jarvis and its allied groups have prevailed for more than four decades, most recently fending off a 2020 ballot measure that would have removed some of Proposition 13’s limits from business property.

But HJTA, as it calls itself, also works on a broader front, opposing most non-property tax increases and criticizing what it regards as wasteful spending of tax dollars. The latter effort includes an annual report on “waste, fraud and abuse” — essentially a summary of reports from news organizations and independent watchdogs such as the state auditor.

This year’s version, called “Follow the Money 2021,” contains dozens of examples of how public funds have been squandered, embezzled or otherwise misused, plus situations HJTA says show politicians getting special treatment.

One could quibble with some of the examples, but in the main they indicate that taxpayers often are not getting as much bang for their bucks as they should.

So, one might wonder, how does California compare with other states in that regard? By happenstance, as HJTA was preparing its report, an organization called Wallet Hub was offering an answer.

In March, Wallet Hub, a website devoted to consumer finance, released a study of what it calls “return on investment,” merging tax burdens with quality of services to develop an index that compares states on how efficiently they spend public funds.

The factors included in the service side of the equation include schools, roadways, hospitals, crime, water quality and poverty. Minnesota is scored as having the best services.

Unfortunately — but perhaps not surprisingly — California does not fare well in its “return on investment” score. In fact, it’s the fourth worst overall, just ahead of Hawaii, New Mexico and North Dakota. New Hampshire scores the highest, followed by Florida and South Dakota.

In services, California ranks 34th, but its tax burden, one of the highest in the nation, pulls down its overall “return on investment” score. Arch-rival Texas, incidentally, has the seventh highest return.

The HJTA report and the Wallet Hub comparison underscore an irritating aspect of governance in California — the eagerness of political officeholders to create new projects and services and their reluctance to evaluate whether their pet programs are delivering the promised results and intervene when they are falling short.

One of the cases HJTA cites, a high-tech budget tool called FI$cal, is a prime example of the syndrome. Hundreds of millions of dollars have been spent on FI$cal over the last decade and a half and it’s still not working. The state auditor has issued 18 reports critiquing the project’s management and performance but governors and legislators continue throwing money down a rathole.

Many other examples are obvious, some particular projects such as FI$cal and some broader issues such as homelessness. It’s very near the top of voter concerns, as measured in polls and California taxpayers have spent billions of dollars on it. However, the problem seems to be, if anything, growing more acute as politicians and supposed experts debate what might work.

Click here to read the full article at the Press Enterprise

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Lawmakers Hiking Taxes Amid A Surplus

March 25, 2022 By Editorial Board 4 Comments

California state government is projecting significant budget surpluses. In January, Gov. Gavin Newsom announced the state was expecting a surplus of $45.7 billion. Yet once again, state lawmakers have introduced legislation to raise taxes and fees by a combined $190 billion. More revenue is evidently never enough for Sacramento politicians. It’s time for them to learn to spend within their means.

The $190 billion figure comes from the California Tax Foundation’s “Tax and Fee” report, released earlier this month. For context, the proposed tax and fee increases come in the context of significant year-over-year spending increases by the state.

“The state budget for 2021-22 included $257.6 billion in total spending — a 13 percent increase from the prior year — and the governor’s proposed budget for 2022-23 calls for another major increase, to $286.4 billion,” the report notes.

Despite being able to spend tens of billions of dollars more per year, state lawmakers want even more money to play with.

Obviously, by far the largest of the tax proposals is linked to the now-dead single-payer healthcare plan proposed by Sacramento progressives.

Taken together, Assembly Bill 1400 and Assembly Constitutional Amendment 11 called for a $163 billion tax increase, “through the imposition of a gross receipts tax, payroll tax on employers and employees, and personal tax increase on individuals with income above $149,509.”

Then there’s Assembly Bill 2289 and Assembly Constitutional Amendment 8, which would impose a more than $22 billion per year wealth tax. CalTax notes that under these proposals, “California would become the only state to impose such a tax on art, collectibles, retirement funds, farm assets, stocks, and many other assets.”

Then there’s Assembly Bill 2802 which would impose a carbon tax that would hit California taxpayers to the tune of $5 billion to $10 billion per year.

Click here to read the full article at the OC Register

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The Fed Has Failed In Its Inflation Mandate

March 15, 2022 By Jack Salmon 5 Comments

The Consumer Price Index (CPI) measure of inflation clocked in at 7.9 percent for February, marking the highest level of inflation since January 1982. At this rate, consumer prices will double roughly every nine years.

The increase in prices includes many everyday consumer staples. The price of gas in February was up 38 percent since last year; utilities were up 24 percent, and steak and bacon were up 17 percent. Many clothing items were also up by double-digit percentages.

If we can learn anything from this, it is that the Federal Reserve has failed abysmally in its efforts to maintain low and stable prices.

Since 1977, the Federal Reserve has abided two distinct goals, known as its dual mandate. The first is to maintain a low and stable price level. The Federal Open Market Committee (FOMC) considers a 2 percent annual change in the inflation rate of Personal Consumption Expenditures (PCE) — the Fed’s preferred inflation measure — to be consistent with its goal.

From 1990 to 2019, the rate of inflation for PCE averaged 2 percent and rarely exceeded 3 percent.

Then came 2020.

At an economic symposium in Jackson Hole, Wyo., in August 2020, Federal Reserve chairman Jerome Powell announced a fundamental shift in the Fed’s dual mandate — away from a 2 percent target and toward a goal of average-inflation targeting. This change amounts to running inflation above target for some time to make up for the below-target inflation of prior years.

The justification for these changes was largely based on the concern that below-target inflation would lower interest rates, diminishing the Fed’s ability to boost employment — the Fed’s second mandate — during economic downturns.

In addition, the Fed and its regional banks have been increasingly advocating progressive goals such as a focus on race, ethnicity, and gender when determining employment objectives.

A forthcoming research article from the Independent Institute finds that Federal Reserve economists are increasingly driven by political activism and affiliation; they also demonstrate a growing preoccupation with politically charged topics such as climate change, discrimination, and economic inequality. These goals add more pressure on the Fed to maintain accommodative monetary policy, even as inflation spirals out of control.

Perhaps this provides another explanation for why the federal-funds interest rate is still at zero and the Fed is still engaged in quantitative easing after eleven consecutive months of the annualized CPI running above 4 percent.

When outlining its average inflation target in 2020, the Fed kept the details of its new inflation goals very vague — perhaps purposefully so. Jerome Powell noted that his aim was to “achieve inflation moderately above 2 percent for some time.” The problem here is that no one truly knows how much and for how long the Fed plans to run inflation “moderately” above that mark.

No one actually believes that the Fed planned to run PCE inflation at 4 to 6 percent for a year or longer, yet that is exactly where we are heading. Even if we look at PCE inflation averaged over two years, to avoid base effects, average inflation is running at close to 4 percent and has been above the Fed’s 2 percent target since April last year.

When economists were polled in December 2021 on their inflation expectations, most believed that peak inflation had already passed and would return to the 2 percent trend by the end of 2022. Yet many of these same economists have been falsely forecasting peak inflation for almost a year. Somehow peak inflation keeps being pushed back.

A variety of mostly supply-side excuses have been offered to explain away what many saw as “transitory” inflation. These included high lumber prices, base effects, demand for used cars, drought in Taiwan, and broad supply-chain restraints. Yet even Fed chairman Powell retired use of the term “transitory” after realizing that inflation trends were proving to be persistent and at levels well above expectations.

There is a missing piece to this puzzle — namely, demand-side factors. Yet after 14 years of accommodative monetary policy and unprecedented increases in government spending, we rarely hear Fed officials talking about them.

Click here to read the full article at the National Review

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Gas Price Relief Will Be Difficult

March 14, 2022 By Phil Wilson 4 Comments

SACRAMENTO — Just how Gov. Gavin Newsom plans to make good on his promise this week to put money “back in the pockets” of Californians stung by the sharp rise in gas prices remains murky, but suspending or lowering the state’s highest-in-the-nation gas tax appears less and less likely.

The hesitation to tinker with California’s steep gasoline excise tax of 51 cents per gallon — even during an election year in which voters are feeling the pinch at the pump as prices continue to skyrocket amid Russia’s invasion of Ukraine — demonstrates just how politically sensitive the issue remains in a state known for its ribbons of freeways and worship of the automobile.

Though Newsom in his January budget proposal called for canceling an increase in California’s gas tax scheduled for July, his administration is also considering alternatives that could provide direct payments to residents.

The governor’s senior communications advisor, Anthony York, said Thursday that the administration is concerned that a cut in the state gas tax might not get passed along to drivers at the pump. The governor wants to ensure that any relief goes to Californians and is “not pocketed by the oil companies,” York said.

After Newsom vowed in his State of the State speech Tuesday to work with legislative leaders to provide Californians financial relief “to address rising gas costs,” senior advisor Dee Dee Myers also told reporters the rebates were likely to be sent to residents with vehicles and could cost the state billions of dollars. Administration officials have since backtracked on that, saying it was one of several options being explored by the governor.

Assembly Speaker Anthony Rendon (D-Lakewood) and Senate President Pro Tem Toni Atkins (D-San Diego) already signaled their opposition to lowering the gas tax, even temporarily, saying it would not provide substantial assistance and could reduce funding for critical road and bridge repairs statewide. They favor general tax relief to help Californians struggling with rising costs, not only for gas but food, rent and other life essentials.

Republicans are using the high gas prices to their political advantage.

Assembly Republican Leader James Gallagher of Yuba City has joined with other GOP lawmakers in calling for suspending all state gas taxes for six months, saying the state can afford to backfill funds for critical transportation projects with a portion of a massive state budget surplus that the Newsom administration estimates to be more than $45 billion.

“You’re telling me we can’t give this relief to consumers. One of the biggest things that they’re facing right now is the high cost of living, including gas, utility bills that are getting higher, rents, the cost of housing,” Gallagher said after hearing Newsom’s speech in Sacramento on Tuesday. “Something’s wrong. We’re not doing the things that we need to do to ensure that people’s costs are lowered.”

Gallagher said it would provide instant relief to Californians, particularly lower-income residents who are more likely to have long commutes to work.

In 2017, the Democratic-controlled Legislature passed Senate Bill 1, which then-Gov. Jerry Brown signed into law, levying the state’s first gas tax increase in 23 years to fix California’s roads and bridges in disrepair — 12 cents per gallon. Under the law, the tax increases each year on July 1 based on the growth in the California Consumer Price Index.

Last July, the tax increased from 50.5 cents per gallon to 51.1 cents per gallon. This upcoming July, it is scheduled to increase to 53.9 cents per gallon, according to the state Department of Finance. California’s total state taxes and other charges on gasoline are the highest in the country, according to the Tax Foundation, a conservative-leaning think tank based in Washington.

The state expects SB 1 to generate more than $5 billion annually during the first decade of its implementation. According to the Legislative Analyst’s Office, the state’s fuel taxes were expected to raise $8.8 billion in the 2021-22 fiscal year.

Still, state officials say that will fall far short of the amount needed to address all the shortcomings in the transportation system, which would total $117 billion over the next 10 years and includes $20 billion to address the impacts of rising sea levels.

Matt Rocco, a spokesman for the California Department of Transportation, said that with the gas tax still in place, the agency estimates it will have the $28.8 billion needed for the projects prioritized by the governor and Legislature in 2017, when the increase became law: pavement, bridges, drainage systems or culverts, and traffic congestion management systems.

Most of the state gas tax revenue supports state highway maintenance, rehabilitation and improvements, and nearly one-third goes directly to cities and counties.

The 2017 gas tax increase passed after a fierce debate in the Legislature, squeaking by in both the Assembly and Senate with the minimum votes required in both houses. Political turbulence followed closely.

In 2018, Republicans launched a successful recall effort against Orange County Democratic state Sen. Josh Newman, fueled by his vote in favor of the gas tax. Newman reclaimed his seat in 2020.

That same year, California voters rejected a statewide ballot measure, Proposition 6, to repeal the gas tax increase. The measure faced a barrage of opposition from trade unions, contractors, Democratic leaders and the California Chamber of Commerce, which said it “makes our bridges and roads less safe and jeopardizes public safety.”

“For decades, the gas tax was a toxic political football,” said state Sen. Scott Wiener (D-San Francisco). “We need to just leave the gas tax alone and focus on other forms of tax rebates or other supports for working families. We have the tools to do that.”

California Transportation Commission member Michele Martinez, who served for 12 years on the Santa Ana City Council, said the state’s gas tax system is worthy of review, especially as the popularity of electric vehicles grows. Electric car owners don’t pay gas taxes but still drive on the same roads and bridges maintained by those who must pay the taxes, she said.

Click here to read the full article at the LA Times

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Democratic Leaders Reluctant To Halt California Gas Tax Hike

February 18, 2022 By Don Thompson 8 Comments

SACRAMENTO, Calif. (AP) — Amid record-high gas prices, California’s Democratic legislative leaders said Wednesday they are reluctant to adopt Gov. Gavin Newsom’s proposal to halt a gasoline tax increase scheduled to take effect in July because the resulting $500 million goes to vital programs.

“I certainly have concerns” and others among Newsom’s fellow Democrats in the Assembly do as well, Assembly Speaker Anthony Rendon said. “That’s something that could potentially jeopardize a tremendous amount of jobs in this state, it could inhibit some economic growth.”

The hesitancy by Rendon and Senate President Pro Tem Toni Atkins comes with an average $4.72 per gallon gas price in California, the highest in the nation and up $1.30 from a year ago. The national average is $3.51 a gallon, according to AAA.

Senate Republican Leader Scott Wilk said “Sacramento Democrats are tone deaf if they think people don’t need a break at the pump.”

California taxes gasoline at 51.1 cents per gallon, second only to Pennsylvania, according to the Federation of Tax Administrators. The planned tax increase is tied to inflation, which is surging. Last summer the tax increased from 50.5 cents per gallon.

Newsom, a Democrat, in his January budget proposed stopping the increase, at least for this year. That move would cost the state about $523 million in lost revenue that would otherwise go for things like roads and bridges. Newsom said that money can come instead from the state’s $45.7 billion surplus.

“We passed the gas tax for a very specific reason,” Rendon said. “We need to make sure that our transit operations are running and running smoothly. We want to make sure that our roads are safe and all those types of things. We want to make sure that our construction workers, folks in the building trades, are working on those projects.

“If we’re going to halt the gas tax, we want to make sure that we have a sense of what that means to our state and to our economy,” he added.

Atkins said the tax was approved with a difficult vote by lawmakers in 2017 and later ratified by voters. “It’s been doing the job,” she said.

Click here to read the full article at AP News

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The Fight To Limit Taxation Continues

January 25, 2022 By Jon Coupal 5 Comments

Regular readers of this column undoubtedly know what Proposition 13 is, but they may not know it does more than set property taxes at 1% of the home’s market value with a 2% cap on annual increases. It also imposed certain vote requirements for other kinds of taxes, including a requirement that local special taxes receive a two-thirds vote of the electorate and a state tax increase proposed by the California Legislature receive a two-thirds vote of each house.

Photo courtesy of Wendy McCormac, Flickr

Government hates these constraints on taking other people’s money, so they constantly try to find ways around them — and they have. In the early 80’s, they hit upon “benefit assessment districts,” which historically had been used legitimately to fund capital improvements that directly benefited property. But over time, bureaucrats began imposing assessments for general municipal services rendering them indistinguishable from property taxes. The sole reason for this transformation was to avoid Prop. 13’s voter approval requirements.

That’s why the Howard Jarvis Taxpayer Association put Proposition 218 on the ballot in 1996. It gave the people the right to vote on all local taxes and required taxpayer (or ratepayer) approval of assessments and property related fees. But just like when you squeeze a water balloon too hard, it tends to pop out somewhere else, so it is with government avoiding clear voter intent. That’s why state business associations and HJTA are supporting the Taxpayer Protection and Government Accountability Act initiative to close some new loopholes recent court rulings have opened in Props. 13 and 218.

While the initiative is still waiting for a circulating title and summary from the attorney general, the fiscal analysis by the nonpartisan Legislative Analyst’s Office was released last week and it’s instructive in explaining the tangled web of taxes our government weaves.

Click here to read the full article at the San Gabriel Tribune

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California State Worker Pay Database Updated With 2021 Wages, Overtime

January 25, 2022 By Phillip Peese and Wes Venteicher 1 Comment

The data is searchable by employee name and state department, and includes 2021 salary information for civil service employees along with those who work for California State University. It includes 2020 salary information for those who work at the University of California. Data on 2021 University of California salaries will be available later this year.

Gov. Gavin Newsom and the Legislature restored state employees’ pay in July after reducing it a year earlier amid projections of a budget shortfall that never came to pass.

Most state workers also received pay raises of around 5% — or about 2.5% for each of the fiscal years ending in 2020 and 2021. Some classifications of employees received additional recruitment and retention raises.

The state paid roughly 260,000 civil service employees a total of about $21.8 billion in the 2021 calendar year, according to the updated pay data from the state Controller’s Office. That includes full-time, part-time and intermittent workers, and excludes employees at California State University and the University of California.

The total is up from 2020, when the state paid roughly 1,000 more people a total of about $20.8 billion.

Investment officers at the state’s retirement systems again topped the list of highest-paid employees. California’s rules for paying people in those jobs differ from the rest of the state’s civil service, to enable the retirement funds to hire in the competitive world of finance.

But, unlike last year, top officers at the California State Teachers’ Retirement System received bigger payouts than most of their peers at the California Public Employees’ Retirement System after both systems exceeded earnings targets in the fiscal year ending in June.

Seven of the 10 highest-paid state employees worked at CalSTRS, according to the data. The system’s chief investment officer, Christopher Ailman, topped the list with $1.67 million in total pay. That included about $568,000 in regular pay and $1.1 million in other pay.

Click here to read the full article at the Fresno Bee

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Celeb-Heavy Los Angeles Suburb Gets Tough On Water Wasters

January 20, 2022 By Kathleen Ronayne 7 Comments

In a wealthy enclave nestled in the Santa Monica Mountains that is a haven for celebrities, residents now face more aggressive consequences for wasting water — including the threat of having their water flows slowed to a trickle if they repeatedly flout conservation rules.

The Las Virgenes Municipal Water District northwest of Los Angeles offers a bold example of how local authorities across drought-stricken California are trying to get people to use less water, voluntarily if possible but with the threat of punishment if they don’t comply.

Before restricting water flows, the district hopes to spur savings by giving households a real-time look at their water use and stepping up fines for those homeowners who exceed their allotted “water budgets.”

District officials hope their approach will be a wakeup call for residents of the affluent neighborhoods, where most water is used outdoors use to keep expansive yards looking verdant and pretty and for pools.

Flow restrictors are rarely-used tool primarily reserved for people who repeatedly fail to pay bills. Now, the Las Virgenes district is warning that they could be installed on the water connections to homes that have been fined for overuse for three months. In the past, flow restrictors were a possibility after five months of fines, but the district never used them.

“What we’re trying to do is conserve water now so that we can stretch the limited supplies we have available,” said Dave Pederson, the district’s general manager.

California is experiencing the effects of climate change, with drought conditions present for most of the last decade. After two exceptionally dry years left the state’s reservoirs at or near record lows, a string of recent winter storms improved conditions. But most of the state is still in severe drought.

In July, Democratic Gov. Gavin Newsom asked residents to voluntarily cut 15% of their water use, but useage had declined only 6% as of November. The state water board last month imposed a series of mild homeowner water use restrictions, such as waiting two days after storms to water lawns. The board could take more significant steps later in the year if the drought intensifies.

California’s local districts provide water service, regulate use and enforce penalties. The Las Virgenes district serves about 75,000 people communities of Agoura Hills, Westlake Village, Calabasas and Hidden Hills — an area that in recent years has attracted a growing number of celebrities, including Kim Kardashian and Will Smith.

Like much of inland Southern California, the region rarely gets any rain outside the winter months. It’s wealthier than most other parts of the state, with a typical Calabasas home selling for more than $1.5 million, according to the online real estate marketplace Zillow.

Despite calls for conservation, water customers in the area increased useage in August and September and then met the state’s 15% reduction goal in October before again missing the target in November.

Collectively, customers greatly exceeded their water budgets last year and one of the biggest issues the district faces is “the ability for affluent customers to significantly exceed their water budgets consistently since money is not a deterrent,” said Michael McNutt, the district’s spokesman. He declined to provide names of the district’s biggest water users.

Click here to read the full article at AP

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Double Dealing: Legal, Illicit Blur In California Pot Market

January 18, 2022 By Michael R. Blood Leave a Comment

LOS ANGELES (AP) — On an isolated farm, greenhouses stand in regimental order, sheltered by a fringe of trees. Inside are hundreds of head-high cannabis plants in precise rows, each rising from a pot nourished by coils of irrigation tubing. Lights powerful enough to turn night into day blaze overhead.

In the five years since California voters approved a broad legal marketplace for marijuana, thousands of greenhouses have sprouted across the state. But these, under their plastic canopies, conceal a secret.

The cultivator who operates the grow north of Sacramento holds a coveted state-issued license, permitting the business to produce and sell its plants. But it’s been virtually impossible for the grower to turn a profit in a struggling legal industry where wholesale prices for cannabis buds have plunged as much as 70% from a year ago, taxes approach 50% in some areas and customers find far better deals in the thriving underground marketplace.

So the company has two identities — one legal, the other illicit.

“We basically subsidize our white market with our black market,” said the cultivator, who agreed to speak with The Associated Press only on condition of anonymity to avoid possible prosecution.

Industry insiders say the practice of working simultaneously in the legal and illicit markets is all too commonplace, a financial reality brought on by the difficulties and costs of doing business with a product they call the most heavily regulated in America.

For the California grower, the furtive illegal sales happen informally, often with a friend within the tight-knit cannabis community calling to make a buy. The state requires legal businesses to report what they grow and ship, and it’s entered into a vast computerized tracking system — known as “seed to sale” monitoring — that’s far from airtight.

“It’s not too hard” to operate outside the tracking system’s guardrails, the grower said. Plants can vary widely in what each one produces, allowing for wiggle room in what gets reported, while there is little in the way of on-site inspections to verify record-keeping. The system is so loose, some legal farms move as much as 90% of their product into the illicit market, the grower added.

The passage of Proposition 64 in 2016 was seen as a watershed moment in the push to legitimize and tax California’s multibillion-dollar marijuana industry. In 2018, when retail outlets could open, California became the world’s largest legal marketplace and another steppingstone in what advocates hoped would be a path to federal legalization, after groundbreaking laws in Colorado and Washington state were enacted in 2012.

Today, most Americans live in states with at least some access to legal legal marijuana — 18 states have broad legal sales for those 21 and older, similar to alcohol laws, while more than two-thirds of states provide access through medicinal programs.

Kristi Knoblich Palmer, co-founder of top edibles brand KIVA Confections, lamented that the migration of business into the illegal market was damaging the effort to establish a stable, consumer-friendly marketplace.

“To have this system that now appears to be failing, having people go back into the old-school way of doing things … it does not help us get to our goal of professionalizing cannabis and normalizing cannabis,” she said.

In California, no one disputes the vast illegal marketplace continues to dwarf the legal one, even though the 2016 law stated boldly that it would “incapacitate the black market.” Democratic Gov. Gavin Newsom, who was lieutenant governor at the time the law was approved, called it a “game changer.”

But California’s legalization push faced challenges from the start. The state’s illegal market had flourished for decades, anchored in the storied “Emerald Triangle” in the northern end of the state. Not since the end of Prohibition in 1933 had an attempt been made to reshape such a vast illegal economy into a legal one.

In October, California law enforcement officials announced the destruction of over 1 million illegal plants statewide but said they were finding larger illicit growing operations. In the cannabis heartland of Humboldt County, many illegal growers are moving indoors to avoid detection. Investigators are making arrests and serving search warrants every week, but with so many underground grows “we may never eliminate the illegal cultivation,” Sheriff William Honsal said in an email to the AP.

California’s illegal market is estimated at $8 billion, said Tom Adams, chief executive officer of research firm Global Go Analytics. That’s roughly double the amount of legal sales, though some estimates are even larger.

Click here to read the full article at AP

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