The last 14 months have been the longest sustained downturn for Colorado’s cannabis industry since state-licensed retail sales started in 2014.
According to numbers released in January by the Colorado Department of Revenue, cannabis sales for November 2022 had topped out at $130 million. That’s down from $158 million in November 2021. And the trend is even more severe when you look at medical marijuana sales specifically, which were down 39% from a year prior.
This downturn not only affects cannabis businesses, it affects every public program in Colorado that receives cannabis tax dollars. In 2022, the state made $325 million dollars in cannabis tax revenue — down from $423 million in 2021.
“I certainly think $100 million is a significant number even in [the context of] Colorado’s budget,” Truman Bradley, executive director of the Marijuana Industry Group (MIG), says. “When you cut 25%, approximately, of state and local marijuana tax revenues, you are going to have to look to other funding sources.”
Four main variables are driving this downturn on the recreational side, according to Bradley. The first has to do with the tapering off of COVID-19. People were buying more cannabis in part because of the stress of the situation, in part because they were home more often, and in part because they had limited substitutes like bars or concerts. As the pandemic waned, buying patterns changed. And the cannabis industry’s seemingly unstoppable revenue was throttled.
“We are victims of our own success,” Bradley says.
As other states have legalized cannabis, Bradley says, a portion of Colorado cannabis tourism dollars have left the state.
“Now you don’t see people coming over the border to buy legal cannabis here when they can just get it at their dispensary in Tucson or Albuquerque or Scottsdale.”
Finally, he says, there’s the issue of surplus. Both the 2021 and 2022 harvests were some of the best Colorado has ever had. There was almost no loss to hail, early freezing or rampant disease, which seemed like a boon with the ever-ascending COVID-times cannabis sales. When those sales slowed, however, many cultivators were left with a surplus of flower, driving prices down.
“Some businesses didn’t realize that the COVID bubble was just that,” Bradley says. “They planted probably more than they should have.”
On the medical side of the industry, this sustained downturn has more to do with state legislation, specifically HB-1317 (Weed Between the Lines, “Concentrated regulation,” July 1, 2021). That bill, which took effect on Jan. 1, 2022, passed on the fear that 18-year-old medical marijuana patients were buying concentrates and selling them to their younger peers.
The validity of that concern has been hotly debated. Regardless, the resulting bill made access to cannabis much harder for the people who need it most: the medical patients. It made it more expensive to get a medical license, and severely restricted medical purchases. Now it’s hard for a patient to buy more than a few days of their medicine at any one time, Bradley says.
He references one medical patient he knows who served in Vietnam and lost both legs; a senior citizen who requires a special modified van.
“For him to get in his car and have to physically go down to the dispensary in order to buy enough medical marijuana to last him three days and then he has to do it again, that’s absurd,” Bradley says.
Which has forced many medical patients back to the illicit market, where they can buy all the medicine they need in a single purchase — and where purchases are always tax free.
Shortly after the bill passed, the registry of medical cannabis patients dropped. “When you look at where the numbers are today, it’s the lowest we’ve seen the medical marijuana patient registry in many years,” Bradley says.
All of this has culminated in the sustained downturn the cannabis industry has seen over the last 14 months, which in turn has resulted in $100 million less for public programs focusing on mental health, housing and education. Bradley points to Denver’s policy dedicating 2% of every cannabis sale to affordable housing — which raised $9,990,334 in 2021. Or the Pueblo County measure that allows for 50% of the county’s annual marijuana excise sales tax funds to go to scholarship-granting organizations.
“That means less scholarship dollars for kids graduating high school down there,” he says. “This is real.”