California's Department of Cannabis Control proposes funding shift to combat illegal markets

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 activity. The proposals are designed to enhance enforcement capabilities while ensuring the legal market remains viable.

A key proposal involves shifting funding for illicit market enforcement from the Cannabis Control Fund to the Cannabis Tax Fund. This change is intended to stabilize funding for enforcement activities, which have been strained by a significant financial imbalance. The Cannabis Control Fund, primarily supported by licensing fees, is projected to face a negative balance by the 2026-27 fiscal year if no adjustments are made. The DCC highlighted that California's illicit cannabis market is substantial, with an estimated 11.4 million pounds produced illegally each year, compared to just 1.4 million pounds from licensed sources.

The proposed funding shift aims to align the DCC's enforcement funding with other state agencies that combat illegal cannabis operations, thereby reducing the financial burden on licensed businesses. The DCC also seeks new authority to seal buildings used for illegal cannabis activities, a measure intended to prevent rapid reopening of illicit operations after enforcement actions.

Additionally, the DCC plans to refine eligibility criteria for Board of State and Community Corrections (BSCC) grants, which support local law enforcement efforts related to cannabis. The proposed changes would expand access to these funds, which have been underutilized, ensuring they are directed toward the most pressing public safety challenges.

The Legislative Analyst's Office (LAO) provided feedback on these proposals, suggesting adjustments to the eligibility threshold for local governments seeking BSCC grants and recommending that the sealing authority proposal undergo further policy review. The LAO emphasized the need to assess the funding shift in light of pending legislation that could impact cannabis tax revenues.

The discussions underscored the urgency of addressing the structural deficit in the Cannabis Control Fund while balancing the needs of the legal market and public safety. As the state navigates these complex issues, the proposed measures represent a strategic effort to enhance enforcement capabilities and support a regulated cannabis market that prioritizes consumer safety and community health. The subcommittee's decisions will play a crucial role in shaping California's cannabis regulatory landscape moving forward.