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State analyst warns about uncertainty over size of California's pot industry and a possible federal crackdown

Marijuana growing will be regulated by a new state agency. (Associated Press)
Marijuana growing will be regulated by a new state agency. (Associated Press)

Gov. Jerry Brown’s proposal to merge regulations of medical and recreational marijuana sales in California is a wise move, but officials should be careful in allocating large amounts of money to the new system, the state Legislative Analyst’s Office concluded Tuesday.

The analyst urged caution, saying it is difficult to estimate how many marijuana businesses will pop up, and there is a chance the new Trump administration may choose to start enforcing federal laws that classify marijuana as an illegal drug.

“We find that determining the level of resources needed in 2017-18 and beyond is complicated by the significant uncertainty caused by other issues, such as the future size of the cannabis industry and potential federal actions,” the analyst’s report said.

The report endorsed merging a system for regulating medical marijuana approved by the Legislature in 2015 and one for recreational pot approved by voters when they passed Proposition 64 in November. Having one system will save money, reduce duplication and create less confusion for the industry, the report said.

The legislative analyst noted that there is disagreement on how large California’s regulated industry will be.

The State Board of Equalization estimates there will be 1,700 dispensaries and retailers paying taxes, but the Department of Consumer Affairs, which will oversee the businesses, expects 6,000 pot shops, based on experience in Colorado.

It is also uncertain whether a system to tax and license sales will be ready by the voter-approved deadline of Jan. 1.

“This uncertainty is reflected in the administration’s estimate that there will be no excise tax revenue from cannabis in 2017‑18,” the analyst's report says.

It recommends less money be budgeted for future years and a reduction in the governor’s $62.7-million loan to help create the regulatory system during the fiscal year beginning July 1.

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