Curious Alaska: Where does the money from marijuana taxes go?

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Question: What is happening with the tax revenue generated by marijuana sales in Alaska?

When Alaskans voted to legalize the sale of marijuana in 2014, they also voted to tax it. And we’ll get to where that money goes (spoiler: It gets appropriated to a few state agencies for a variety of programs), but first, let’s look at a few underlying questions, such as where all that money comes from and who pays it.

What and who gets taxed

Alaska taxes marijuana cultivators who sell the raw product to places like retail stores and edibles manufacturers.

And different grades of marijuana get taxed differently, said Lacy Wilcox, president of the Alaska Marijuana Industry Association.

That breaks down to a tax of $50 per ounce of bud and flower, which is the highest grade of the plant.

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Immature or failed buds, which might be from a crop failure or aren’t sellable as a bud or flower and may get used for some other product are taxed at $25 an ounce.

There’s also a $15 per ounce tax for trim, which goes into things like vape pens or edibles, Wilcox said.

Clones are also taxed at $1 per plant.

The “taxable moment,” Wilcox said, is when marijuana products are set to leave the farmer. Let’s say, Wilcox said, a farmer grows a pound of pot and sells it to a dispensary. When the farmer initiates the transfer to the store, the farmer would then owe the Department of Revenue $800, or $50 per ounce.

That’s the state tax, but there are also municipal taxes, like one in Anchorage that’s a flat 5% at the retail level. That money goes into the municipal Assembly’s General Fund, said assembly member John Weddleton.

How it’s paid

Cultivators are required to pay the tax monthly, according to the Department of Revenue. Most of the tax payments are made in cash at a drop box in Anchorage. It’s located downtown in a parking garage and you need a key to access it, according to the revenue department.

Rising sales — and revenue

In total, Alaska pulls in millions of dollars in marijuana taxes every year. And that number has increased quite a bit since legalization.

In fiscal year 2018, the state collected about $10.8 million in marijuana taxes (including penalties and interest), while in the following year Alaska collected roughly $19.1 million, and by fiscal year 2020 the state reported about $24.2 million collected, according to the Department of Revenue’s annual report.

The state also participated in a recent study about increasing marijuana sales along with Oregon, Washington and Colorado during the pandemic, said Eliza Muse, who works in the Division of Public Health.

“We saw a real precipitous increase across all four states,” Muse said.

She said it’s not clear exactly what’s behind the increase, whether people are stockpiling, or are stressed, or because the state loosened up access and allowed people curbside and online purchasing of marijuana products.

Where the money goes

Broadly, state marijuana tax revenue is broken into multiple chunks: 25% goes to general government funding; 50% goes to state recidivism reduction programs; another 25% goes to drug treatment and marijuana education programming.

The 25% that gets put into the general fund can be used by the Alaska Legislature however it sees fit, said Kelly Cunningham, operating budget coordinator with the Legislative Finance Division.

The other chunks are designated for programs that run the gamut from keeping kids away from heavy drug use to helping offenders keep from being reincarcerated.

But there’s a catch: Just because funds are designated for those purposes doesn’t mean they have to be allocated there. The Legislature could theoretically use the money for anything, Cunningham said.

But for the past several years, the funds have been helping pay for programs at the Department of Health and Social Services, the Department of Corrections and the Department of Public Safety.

For fiscal year 2022, that means around $11.5 million was appropriated to the Department of Corrections, $18.2 million went to the Department of Health and Social Services, and $2 million went to the Department of Public Safety, Cunningham said.

One of the programs funded by the tax revenue involves case managers who work with probation officers starting about six months before someone might be discharged from a correctional facility. They come up with a plan for when that person leaves, which might include help with things like food, substance abuse treatment and employment, Crystal Smith with the state’s Division of Behavioral Health said.

“Then, when they get out, that case manager helps them connect with those different services,” she said.

The intent, Smith said, is to keep people from reoffending and give people a path to a different lifestyle.

The state also established the Marijuana and Education Treatment Fund, into which the other 25% of marijuana tax revenues flow, said Muse, who manages the fund with the state’s Division of Public Health.

The goal of that work is to help Alaskans understand what legal marijuana means, which can take a lot of forms, she said. The state worked with marijuana retailers to come up with talking points about responsible marijuana use, like “start low, go slow,” regarding edible consumption, Muse said.

“I think the retailers want to see healthy, happy customers, and they don’t want them to have a bad experience either,” Muse said. “And, in public health too, we want to make sure people are safe and healthy.”

Some of the funds in the 25% for treatment and education also go toward after-school programs for middle school students where staff are trained to talk honestly with students about marijuana and “life post-legalization,” Muse said.

At the Department of Corrections, the funds get used for a multitude of projects, like GED or English courses or anger management therapy while people are incarcerated, said Laura Brooks, at the state’s Division of Health and Rehabilitation Services.

“The funding that’s available really spans the whole spectrum,” Brooks said.

The money also covers certain aspects of health care for incarcerated people, mostly tied to medical problems related to substance use. Around 80% of the state’s corrections population has a substance use disorder, Brooks said, so the funds can help with anything from dental care to medical detox.

Funds from the tax revenue also went toward a sex offender management program, a domestic violence program, vocational programs and to community residential centers, according to Betsy Holley, spokeswoman for the corrections department.

Finally, the state Department of Public Safety gets an annual $2 million from the tax revenue, which goes to the Council on Domestic Violence and Sexual Assault, according to spokesman Austin McDaniel.