California proposes funding shift for cannabis enforcement and grants program expansion

California's Senate Budget and Fiscal Review Subcommittee No. 4 convened on May 19, 2025, to discuss critical proposals from the Department of Cannabis Control (DCC) aimed at addressing the state's ongoing challenges with illegal cannabis activities. The proposals, part of the May revision, seek to enhance enforcement capabilities while ensuring the sustainability of the legal cannabis market.

A key proposal involves shifting funding for illicit market enforcement from the Cannabis Control Fund to the Cannabis Tax Fund. This change is designed to stabilize funding sources and alleviate the financial strain on the Cannabis Control Fund, which is projected to face a negative balance by the fiscal year 2026-27. Currently, the fund is heavily reliant on licensing fees, which do not adequately cover the costs associated with enforcing regulations against illegal cannabis operations. The DCC highlighted that California's illicit market produces approximately 11.4 million pounds of cannabis annually, dwarfing the 1.4 million pounds produced legally.

The DCC also proposed new enforcement authority that would allow the department to seal buildings involved in illegal cannabis operations. This measure aims to prevent rapid reopening of illicit businesses, which often resume operations shortly after being shut down. Property owners would have the opportunity to contest the sealing through a hearing process, fostering collaboration in addressing illegal activities.

Additionally, the DCC plans to refine eligibility criteria for the Board of State and Community Corrections (BSCC) grants, which support local law enforcement efforts related to cannabis. The proposed changes aim to increase the number of eligible local governments, thereby enhancing the effectiveness of these grants.

The Legislative Analyst's Office (LAO) provided insights during the meeting, suggesting adjustments to the proposals, including raising the threshold for small jurisdiction eligibility for BSCC grants and recommending that the sealing authority proposal undergo further policy review. The LAO emphasized the importance of assessing the funding shift in light of pending legislation that could impact cannabis tax revenues.

The discussions underscored the delicate balance between supporting the legal cannabis market and ensuring adequate funding for enforcement activities. The DCC's proposals are seen as essential steps toward achieving the goals of Proposition 64, which aimed to regulate cannabis production and sales while protecting public health and safety.

As the committee deliberates these proposals, the outcomes will significantly influence California's approach to cannabis regulation and enforcement, shaping the future landscape of the state's cannabis industry.