Terrific new Pew issue brief highlights hazy nature of marijuana revenue for states

The fine folks at Pew have this very fine new brief about state marijuana tax revenues titled “Forecasts Hazy for State Marijuana Revenue.”  I recommend this 16-page document (which is also available on-line here) for many reasons, and here is its astute conclusion:

Supporters of legalizing recreational marijuana expected a new revenue source for states, but market uncertainties continue to challenge revenue forecasters and policymakers.  The difficulty in forecasting revenue is compounded by the fact that states have only recently begun to understand the recreational marijuana market: the level of consumer demand for recreational marijuana products, the types of users and how much they might pay for the drug, and competition with the black market.  States have learned some lessons but continue to grapple with unknowns.

While forecasters and budget staff gain more information, state officials can avoid budget shortfalls and keep program funding stable by being prudent in how they use these new collections.  States should be careful to distinguish between marijuana revenue’s short-term growth and long-term sustainability.  While these new dollars can fill immediate budget needs, they may prove unreliable for ongoing spending demands.  Policymakers should look to other, more familiar sin taxes for lessons on how to manage marijuana tax revenue most effectively.