California budget deal helps keep marijuana growers in business

California cannabis farmers facing a potential “extinction event” could see help in the state budget package with measures that would allow nascent businesses to continue operating with provisional licenses and open opportunities for new growers.

The fixes would give the state and local governments more time to decide whether to grant annual licenses to marijuana businesses that obtained temporary ones after voters passed Proposition 64 in 2016 to legalize recreational cannabis.

Thousands of companies were at risk this year of having their temporary licenses expire before the state or local governments could act on them, throwing uncertainty in an industry the state wants to draw out of the black market.

The state budget deal would grant a five-year extension for the state’s provisional licensing structure, moving its expiration date date from Jan. 1, 2020, to Jan. 1, 2025.

The marijuana budget bill clarifies how companies can obtain licenses, allowing businesses to apply for provisional licenses that can be renewed without first obtaining a less-secure temporary one.

And, the budget package would also give marijuana companies a two-year exemption from the state’s main environmental protection law, the California Environmental Quality Act.

“That’s really a big win for not just cultivators but all licensees,” said Jacqueline McGowan, a lobbyist whose firm, K Street Consulting, represents the cannabis industry in Sacramento.

The Legislature on Thursday passed its primary budget bill, a $214.8 billion spending package. The marijuana measures are contained in a budget trailer bill that the Legislature can vote on in coming days and adopt as policy with the state budget.

Legal cannabis growers this year were losing their businesses this year as a result of state law prohibiting renewals of temporary licenses, which are held by thousands of growers and retailers. McGowan has called this mass-expiration a potential “extinction event” for legal marijuana in the Golden State.

She said that the budget bills “will make a window open for new operators to acquire a provisional (license).”

In April alone, 4,000 temporary licenses expired, according to McGowan. She said it’s unclear how many of those temporary license holders were able to convert to a provisional or full annual license, but in March, just 52 annual licenses and four provisional licenses had been issued, according to Sen. Mike McGuire, D-Healdsburg.

One of the groups that championed local control of the marijuana industry, the California State Association of Counties, supports the budget bills.

“We do urge the state regulatory agencies, when implementing these provisions, to ensure for adequate local verification with cities and counties, including adequate demonstration that an operator’s environmental review is underway as well as local permitting,” CSAC representative Cara Martinson wrote in a letter to Gov. Gavin Newsom and the chairs of the Senate and Assembly budget committees.

The budget bills also set forth a new fine structure for violators of the state cannabis laws. License-holders would face fines not to exceed $5,000 per violation, while non-license-holders would see fines of up to $30,000 per violation, “with due considerations as to the appropriateness of the amount,” according to an analysis of the bill.

Martinson wrote that her organization is “pleased to support increased enforcement measures that authorize a licensing authority to issue a citation to an unlicensed entity for engaging in illegal cannabis activities.”

Andrew Sheeler covers California’s unique political climate for McClatchy. He has covered crime and politics from Interior Alaska to North Dakota’s oil patch to the rugged coast of southern Oregon. He attended the University of Alaska Fairbanks.