Strengthening Fiscal Oversight of California’s Cannabis Tax Revenue

California has collected more than $7.87 billion in cannabis-related tax revenue since recreational sales began in January 2018. As a candidate for State Controller, I view this figure not through the lens of policy debates on legalization, but through the strict fiduciary responsibilities of the office: to safeguard taxpayer dollars, ensure proper allocation of dedicated revenues, prevent waste and misallocation, and promote transparency and accountability in government spending.

The Controller serves as California’s chief fiscal officer, with independent auditing authority and a duty to protect the integrity of state finances. This includes revenues generated by legally operating businesses that comply with tax obligations. Regrettably, the record under the current administration, including Controller Malia Cohen’s office, reveals significant shortcomings in tracking, allocating, and verifying outcomes for these funds.

Under Proposition 64’s framework, cannabis tax revenues flow into the California Marijuana Tax Fund and are distributed according to a three-tier structure. Tier 1 covers regulatory costs. Tier 2 provides fixed allocations for community reinvestment, research, and related purposes. Tier 3 directs the remainder primarily toward youth education and prevention (60%), environmental restoration (20%), and law enforcement (20%). Yet implementation has fallen short of these statutory promises.

In the first 19 months following legalization, after-school programs specifically referenced in voter materials received zero dollars from cannabis tax revenue. Funds earmarked for youth initiatives were redirected — for example, $80.5 million shifted toward childcare vouchers. In numerous cities, revenues entered general funds where law enforcement spending absorbed a substantial share. Grant funds remain unspent due to administrative hurdles, and local jurisdictions collecting significant cannabis taxes (estimated at over $100 million annually) face no standardized statewide reporting requirements for how those dollars are expended.

Outcome tracking remains inadequate. Recipients often report inputs — such as the number of programs held or participants served — rather than measurable results, such as reductions in substance use or improvements in educational attainment. This lack of rigorous performance measurement undermines public confidence and fiduciary responsibility. Additionally, the tax base itself shows strain: revenues peaked near $1.4 billion in 2021 and have since declined, with $243.5 million in tax defaults outstanding as of late 2023 and approximately 15% of cannabis businesses in default.

These issues reflect a broader failure to exercise robust, independent oversight. The Controller’s office must do more than process disbursements; it must actively audit compliance with allocation mandates, demand transparency from state agencies, local governments, and grantees, and protect the interests of compliant taxpayers and businesses contributing to the state’s coffers.

As State Controller, I would approach this differently, guided by a clear commitment to fiduciary duty:

• Implement mandatory, standardized outcome-based reporting for all entities receiving cannabis tax funds — state agencies, counties, cities, and nonprofits alike. Funding continuation would depend on demonstrated, quantifiable results rather than administrative compliance alone.
• Establish a publicly accessible, real-time expenditure dashboard tracking every dollar from collection through allocation to outcomes. Californians deserve visibility into how dedicated revenues are used.
• Require uniform reporting from local jurisdictions on their cannabis tax collections and expenditures, closing the current accountability gap.
• Prioritize performance-based grant renewals and direct community investments, routing a defined portion of funds back to the specific areas generating the revenue to minimize leakage into general funds.
• Conduct targeted audits focusing on high-risk areas such as unspent grants, redirections, and administrative overhead to root out waste and inefficiency.

All state officers, including the Controller, hold a solemn responsibility to act as fiduciaries for California taxpayers and for the legitimate businesses operating within the law and paying their fair share. This duty transcends any particular industry. Effective oversight strengthens the revenue base, deters misuse, and restores trust in government.

California’s cannabis tax revenues represent a significant stream of public funds. Ensuring their proper stewardship is not optional — it is a core function of the Controller’s office. Voters deserve a Controller who will enforce accountability rigorously and without exception. I am committed to fulfilling that role.