Colorado is awash in marijuana money -- legal marijuana money, that is.
According to Governor John Hickenlooper, the state is predicting that tax revenue from the sale of medical and recreational marijuana will reach $134 million for the upcoming fiscal year, far exceeding original estimates.
"It's well on its way to being a billion-dollar industry," Michael Elliott, executive director of the Marijuana Industry Group, told The New York Times. "We went from 110,000 medical marijuana patients to four billion people in the world who are 21 and up."
While Elliott's numbers are perhaps a bit overambitious -- are all four billion people in the world over the age of 21 really going to smoke weed? -- the ongoing experiment in Colorado is proving just how lucrative fully legalized marijuana can be for cash-strapped states.
In the current fiscal year ending June 30, the state is expected to bring in roughly $51 million from the sale of recreational and medical marijuana. For the following fiscal year, that number increases by more than $82 million, nearly 90% of which is expected to come from recreational, as opposed to medical, sales.
These figures greatly exceed analogous estimates in Washington State, where recreational sales of cannabis are slated to begin in June. Budget forecasters there are speculating the industry will add $190 million to the state's tax rolls over the next four years. Like Colorado's initial estimates, however, it seems reasonable to conclude this could prove to be overly conservative.
"Every governor and legislator in the country will be like, 'Hey, check out these numbers,'" a Democratic state lawmaker from Seattle told the Times.
In Colorado, the money will be allocated between regulatory oversight, school construction projects, substance abuse treatment, and drug prevention programs. Most notably, a staggering $40 million is earmarked for the Department of Education's BEST program which is tasked with "helping public schools with a multitude of capital construction needs; from new roofs and boilers, to major renovations and new schools."
As I've discussed before, one of the biggest issues going forward as more states follow Colorado and Washington's lead will be addressing the paucity of financial services available to the increasingly legal marijuana trade.
While Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) have both indicated their willingness to handle official tax revenue derived from the sale of marijuana, neither appears ready to make the plunge into servicing the underlying businesses.
At the end of last year, Bank of America told Washington State officials that it felt comfortable managing its tax proceeds, even though a portion derives from illegal activity under federal law. According to Washington's treasurer, "Bank of America is fine with it."
But more recently, despite positive overtures from the federal government, Wells Fargo is still refusing to offer services to businesses that are actually engaged in the industry itself.
"Our policy of not banking marijuana-related businesses and not lending on commercial properties leased by marijuana-related businesses is based on applicable federal laws," a Wells Fargo spokeswoman told David Migoya of The Denver Post.
It ultimately remains to be seen how this will play out. One thing that isn't as uncertain, however, is that many more states will likely start lining up to take part in this new tax bonanza.