Colorado lawmakers use marijuana taxes to lessen budget shortfall
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To fill the potholes in the state budget, Colorado lawmakers are turning to pot.
Why it matters: Colorado voters believed that marijuana tax revenue would mostly fund education and enforcement when they legalized pot at the ballot box in 2012, not a miscellaneous list of government programs.
State of play: In this year's $46.8 billion state budget, the roughly $220 million in projected marijuana taxes for the next fiscal year is spread throughout the spending package to help fill a $1.5 billion shortfall.
- 73% will go to the marijuana tax cash fund for distribution for other purposes.
- 14% will get siphoned into a discretionary spending account to fill budget gaps.
- 11% will go toward education through the state public school fund.
- 1.5% will get allocated to a different marijuana cash fund.
Between the lines: Local governments once received 10% of gross retail marijuana sales taxes, but legislative budget writers previously lowered it to 3.5%. This year, they plan to eliminate the payout.
The big picture: The diversion of marijuana money from education is becoming a trend.
- Mid-pandemic, budget writers took $137 million in marijuana taxes to cover ordinary government services.
Yes, but: Marijuana tax revenue is becoming a less reliable source as low prices, reduced demand and intoxicating hemp lead to declining sales.
- In 2025, marijuana sales totaled $1.3 billion, the lowest mark since 2016 as the market started to form, state figures show.
- Likewise, marijuana sales taxes landed at $236 million last year.
What we're watching: A newly introduced bill would significantly change how marijuana is taxed. The move is designed to stabilize tax revenue annually.
- The measure would replace the 15% excise tax with a $1 per pound tax on unprocessed retail marijuana.
- The 15% sales tax would get capped at 2 cents per milligram of total intoxicating cannabinoids through 2029 and then increase to 5 cents.
The bottom line: More than a decade after becoming the first state to offer retail marijuana, tax dollars the industry generates remain intoxicating for state budget writers.