Is Wisconsin Missing Out On The Money By Not Legalizing Marijuana?

Oct 23, 2019

There's a lot of money being made across the country from the legalization of marijuana.

While weed is still illegal at the federal level, nearly 20 states allow the use of medical marijuana. The District of Columbia and 11 states have legalized the recreational use — Illinois is one. The new law goes into effect in January. It's expected to eventually bring in anywhere between $500 million and $700 million a year. 

READ: Going To Illinois For 'Weed Tourism'? What Wisconsin Drivers Need To Know

States are always looking for new revenue sources, so is Wisconsin missing out by not legalizing marijuana?

Wisconsin could bring in $168 million a year if it legalized marijuana, according to state Rep. Melissa Sargent, D-Madison. Instead, Sargent says Wisconsin is in danger of being left behind. Michigan and Illinois have already legalized the recreational use of weed, and it's legal for medical reasons in Minnesota.

"Distributors, manufacturers, etc., will be building shops in these other places so they'll be hiring people in those communities to work to fill these jobs. And once they’re up and running, if they are close to the border based on experience in other industries, we will see that will have an impact on our ability to create those jobs here in Wisconsin, which has a negative impact on the economic stimulus that we could be seeing," Sargent says.

Wisconsin could bring in $168 million a year if it legalized marijuana, says state Rep. Melissa Sargent.

There really isn't a good way to project the amount of money legalizing marijuana could bring in. A lot of states base their projections on what has occurred in other similar-sized places. For Wisconsin, Colorado is one of those similar-sized states.

READ: Where Wisconsin Lawmakers Stand On Legalizing Marijuana

Sargent says what cannot be accounted for is the amount of money that would also come from decriminalizing weed.

"People not entering into the criminal justice system for nonviolent offenses that are currently outlawed because of the prohibition but would not be outlawed anymore," Sargent says.

But what exactly are states doing with all of this money?

Alexandria Zhang, a researcher with the Pew Charitable Trust, says, "Most states direct some portion of the revenue from legalized recreational marijuana to the general fund in various programs like education and health care."

The Pew Charitable Trust released a study in August that looks at how price, demand and the black market make it difficult for states to accurately project the amount of money that may come in.

"The highest uncertainty has been in that first year, of course, since markets just begin to ramp up. In that first year we saw that Nevada's actual revenue collections were 40% higher than its forecast. Whereas California's revenue collections in the first six months were 45% below its forecast," Zhang says. 

An employee collects money while holding packages of marijuana at Top Shelf Cannabis on July 8, 2014, in Bellingham, Wash. Top Shelf Cannabis was the first retail marijuana store to open in Washington state.
Credit David Ryder / Getty Images

Colorado and Washington were the first two states to legalize marijuana in 2012. Zhang says they're still trying to wrap their hands around an accurate forecast. She says states that legalize marijuana based upon the amount of money it could bring in is dangerous, especially if they're planning to use it to fill budget holes.

Instead, Zhang suggests to "think about budgeting that revenue for one-time expenses or savings rather than ongoing spending."

When it comes to revenue growth, she says if often spikes in the first year because it's a new market but tends to slow significantly after that. Zhang says Nevada, Colorado and California are good examples of how to use the money.

Employee Jorge Aguilera talks to a customer at Essence Vegas Cannabis Dispensary after the start of recreational marijuana sales began on July 1, 2017, in Las Vegas, Nev.
Credit Ethan Miller / Getty Images

In Nevada, the money goes into the state's rainy day fund. Last year, it brought in nearly $70 million. In Colorado and California, the money is not budgeted until after it's collected. In 2018, Colorado brought in $266 million from marijuana while California saw an additional $345 million.

Right now, there are no plans to move forward with medical or recreational marijuana legalization in Wisconsin. Bills have been put forth, but the GOP leadership is at odds.

This is the second story in our series Weed & Wisconsin: When Neighboring States Legalize