In the first 12 days of legal cannabis sales, state regulators report dispensaries sold nearly $20 million in products in nearly 500,000 transactions, but some have already raised concerns about how the tax revenue from recreational cannabis will be spent.
From Jan. 1 to Jan. 12, the state reported 495,385 recreational cannabis transactions totaling $19.7 million in sales. The single largest day for sales was on New Year’s Day, when sales began. Sales that day totaled $3.2 million. After the first day, sales tapered off, especially as some dispensaries had to close because of product shortages and to give employees time off. So far, the slowest day was Jan. 6 when $796,000 in recreational cannabis sales were reported.
The official revenue numbers from the state aren’t expected for weeks, but assuming the average tax was 35 percent, the amount of tax revenue from $19.7 million in sales would be about $6.9 million.
That money will be split among a number of different funds, with 35 percent going to the state’s general revenue fund. A quarter of every tax dollar generated from recreational cannabis will go to the newly created Restore, Reinvest and Renew program. When she was a state senator, Toi Hutchinson explained what that’ll be spent on.
“That money is specifically going to small community agencies in the areas that have been impacted the most, that do the work on the ground,” Hutchinson said in 2019.
Hutchison left the legislature last year to become Gov. J.B. Pritzker’s senior advisor to the governor for Cannabis Control.
The Illinois Criminal Justice Information Authority released a map Monday that shows the parts of the state that would be eligible for Restore, Reinvest and Renew program funds. The map includes large parts of Chicago, Springfield and the Metro East area near St. Louis. Other areas include parts of Kankakee County, Scott County and Macon County.
“Researchers identified the areas using community-level data on gun injury, child poverty, unemployment, and state prison commitments and returns,” the ICJIA said. “Together with the R3 Board, ICIJA will award grant funds to community organizations that support economic development, provide violence prevention and reentry services, and offer youth development and civil legal aid. A notice of funding opportunity for the grants will be released in the coming months.”
State Rep. Tim Butler, R-Springfield, opposed adult-use cannabis legalization, partly because of how the tax revenue will be spent. He pointed to Illinois’ poor handling of grant dollars in the past with programs like the Neighborhood Recovery Initiative under former Gov. Pat Quinn. Audits of that program found waste and abuse in the $55 million program.
“I certainly think NRI should guide how we look at these things, on how not to do these types of programs,” Butler said. “We can’t have insider deals. We can’t have this money go to waste. This is important tax revenue and it’s a lot of tax revenue coming in the door. That’s one of the reasons this was sold to the people of Illinois, is this was tax revenue going to pay our bills. This isn’t going to pay our bills.”
Last year, Hutchinson said some of the funds will go to the groups to ensure they’re compliant with the state’s laws for grant recipients.
“It’ll include also technical assistance to help folks get up to where they’re data compliant so they’re able to successfully receive grant funds from the state so that we can actually monitor how these dollars are funded and then see results over time,” Hutchinson said.
Butler said he’d rather see such groups be in compliance before they apply for tax dollars “so the dollars can be spent the way they should be instead of having to spend them on spreadsheets or compliance issues.”
“That seems to me to be we’re taking dollars and probably not putting them where they should be,” he said. “But at the end of the day, these people need to be compliant.”
The rest of the tax money will be divided up with 20 percent going to substance abuse and mental health services, 10 percent to the state’s backlog of unpaid bills, 8 percent to local law enforcement and 2 percent for public cannabis education and safety campaigns.
Beginning July 1, municipalities that approved a local sales tax can tack on up to 3 percent in recreational cannabis taxes to spend as they see fit. In Springfield, for example, part of the revenue will go to police and fire pension funds.
Altogether, including any local sales taxes on legal cannabis, consumers could pay north of 40 percent tax on recreational cannabis, among the highest taxes in states that have legalized it.
Medical cannabis users pay much less in tax. Medical cannabis cultivators still pay the 7 percent cultivator privilege tax for medical pot.