The Covid-19 pandemic has caused the worst economic conditions since the Great Depression. Businesses and furloughed employees do not suffer alone. Government agencies preparing for the next fiscal year are projecting massive revenue losses now and into the future, jeopardizing public services that are desperately needed during this emergency.
In Santa Barbara County, the cannabis industry has emerged as a bright spot that will allow the continued operation of critical government services during the dual crises of a public health emergency and near economic shutdown. Since implementing its tax on cannabis businesses in 2018, Santa Barbara county has collected nearly $20 million from cannabis farms.
“That’s $20 million we wouldn’t otherwise have had,” said County Supervisor Steve Lavagnino at the April 13 Santa Barbara County Budget Workshop. He compared the importance of cannabis revenue to that of sales and bed taxes. These other two important tributaries in the county’s revenue stream have dried up in the economic shutdown. The losses in the current fiscal year ending in June are projected to be $3.6 million.
At the April 13 budget workshop, Santa Barbara County staff indicated that cannabis taxes for the 2019-20 fiscal year are exceeding projections by over $1 million and county supervisors will set aside $3 million in cannabis tax revenue specifically for its Covid-19 response. Another $7 million in projected cannabis revenues for next year will backfill discretionary funding for critical services and help the county to continue to operate at its current level.
“Cannabis farmers pushed for a county-level tax in 2018, but we never foresaw this scenario, where the taxes we pay will provide a lifeline for critical services,” said Tristan Strauss, president of CARP Growers, the cannabis farmers group based in Carpinteria. “In hindsight, voter approval of the cannabis tax and Santa Barbara County’s acceptance of compliant cannabis farmers were more important than we could have imagined.”
County representatives do not foresee an ability to grow services, yet cannabis taxes should allow the county to avoid cutting firefighters, sheriff’s department personnel and healthcare workers among other county employees (totaling 4,200) through at least the end of this fiscal year.
As an essential industry, cannabis businesses have continued to operate under strict safety protocols and precautions during the Covid-19 pandemic. In Santa Barbara County, cannabis farmers pay 4 percent on gross sales. The county will have collected more than $20 million in cannabis cultivation taxes by the end of this fiscal year. While other counties are grappling with furloughs that create an even greater demand for public services, Santa Barbara County is using this new revenue stream to retain its employees and deliver services.
A UCLA study cited at the April 13 county supervisors meeting forecasts that an economic recession will likely continue through September. Fee-driven revenues have also been depleted due to dramatically scaled back operations in county departments enacted to prevent the spread of coronavirus.
Already, cannabis taxes will be used in support of the county’s Recreational Master Plan ($350,000), Community Choice Energy ($219,000), Branch Library Funding ($203,000) and the Animal Services Facility ($35,000).