Los Angeles Budget Threatens to Hamper Cannabis Social Equity Rollout

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The city of Los Angeles’ proposed budget for the next fiscal year, released last month, seems to send a clear signal: plenty of funding for law enforcement, including more crackdowns on unlicensed cannabis businesses, and not so much money for social equity programs.

When it comes to cannabis, the $10 billion-dollar budget doubled down on cannabis-related enforcement while funneling less-than-expected funds toward licensing and regulation—at a time when the city’s Department of Cannabis Regulation is working to get its social equity program underway.

As Cannabis Wire reported in April, law enforcement would receive 40% more funding specifically for police overtime, an increase of $47 million that includes $10 million to crack down on unlicensed cannabis businesses.

In contrast, the Department of Cannabis Regulation, led by Cat Packer, would get $3,000,000 to implement its social equity program, a system that offers priority application processing and compliance support to residents of neighborhoods that were disproportionately impacted by the war on drugs, particularly individuals who were arrested or convicted for a cannabis offense under prohibition.

The amount allocated for the social equity program, according to Packer, is lacking, and she addressed the City Council on April 23, calling for an additional $2.25 million to begin implementation of its Business, Licensing, and Compliance component , along with a public information campaign. This funding would enable the department to provide qualifying applicants with technical assistance and promote sales in licensed shops.

The department, wrote Packer, anticipates that some 1,000 applicants will require technical assistance. And though Mayor Eric Garcetti’s proposed budget provides funding for some parts of the social equity program, it does not address its needs in totality.  “Without appropriate funding,” Packer underscores, “the Department will not be able to meet the anticipated demand for program services which will lead to application processing delays” and negatively impact the city’s tax revenue.

In her letter to the Council and a recent bulletin, Packer also notes that the Department of Cannabis Regulation  is at work on a study to review the effects of gang injunctions in the San Fernando Valley, Boyle Heights, and Downtown Los Angeles. This effort aligns with the department’s previous work to identify regions that were subject to disproportionate arrests and convictions under prohibition. In Los Angeles, these injunctions, which are civil court orders that, among other activities, restrict individuals from associating with friends and family, were used against residents of neighborhoods deemed to be hotspots for organized crime.  

The Department of Cannabis Reguation’s study on gang injunctions, Packer indicated, will “evaluate variables which may identify additional disproportionately impacted areas,” a move that could expand the pool of applicants who qualify for the program.

The Los Angeles city charter requires the mayor to submit a proposed budget to the Council by late April. Upon its receipt, it is referred to the Budget and Finance Committee, which holds public hearings where various stakeholders, including departments and bureaus, general managers, and the chief administrative officer,  provide feedback.

On Thursday of last week, the Committee held its final budget hearing.

During public comment, members of the Equity First LA Coalition urged the Council to fully fund the DCR’s budget requests. The group also called for 25% of all cannabis tax revenue to be allocated to community reinvestment programs and that unused funds not revert to the general fund.  

The city’s Chief Legislative Analyst, Sharon Tso, then presented her report to the Budget and Finance Committee, which recommends that the city provide the $2.25 million requested by the Department of Cannabis Regulation, “of which $1.5 [million] would go into the social equity [program] and $750[,000] would be set aside for the public information campaign.”

In his proposed budget, Mayor Garcetti warns that Los Angeles’ projected expenses are expected to outpace revenue growth, though one revenue source that LA is banking on? Cannabis sales. “In the current year,” writes Garcetti,  “cannabis businesses are projected to remit almost $40 million in business taxes to Los Angeles, in addition to sales tax receipts. This amount could potentially expand, if the City is able to move forward more expediently in its efforts to permit new cannabis businesses and better enforce against illegal sales.”

During last week’s Budget and Finance Committee hearing, councilmember Mike Bonin supported the recommendation to fulfill the Department of Cannabis Regulation’s request for additional funding for the public education campaign saying, “If we’re not doing the outreach properly, it impacts how much revenue we’re going to get.”

Then, echoing the mayor’s concerns over a potential economic downturn, Bonin added: “I’d encourage DCR, if they encounter any problems as a result of this, to come to us quickly so we can resolve this. We can’t afford a hiccup.”

The full City Council has until June 3 to accept, reject, reduce or increase the budget. It has also instructed the DCR to begin the pre-vetting process for social equity applicants by May 28 and to begin accepting applications for new commercial cannabis business licenses no later than September 3.

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