Washington will be flirting with roughly $200 million in annual recreational marijuana tax income by the end of the decade. At the same time, however, state and banking officials are looking over their shoulders for potential federal action that could make doing business with the industry more difficult.
State and banking officials briefed the Washington Senate Banking and Financial Institutions Committee on Thursday about the economics of the state's fledgling marijuana industry.
Mike Kashmar, chief financial officer of the Washington State Liquor Control Board, mapped out excise tax predictions for the recreational marijuana industry through 2019. The projections are $36.3 million in revenue for 2015; $80 million in 2016; $120 million in 2017; $160 million in 2018, and almost $194 million in 2019.
The state has issued 306 licenses for marijuana growers and processors, and another 84 licenses for retail stores. So far, 69 of those stores have actually sold pot. These stores are in 26 of Washington's 39 counties, with 17 counties having more than one store.
The trickier part of Washington's fledgling legally regulated industry is how federal law hangs over banks and lending institutions that want to work with marijuana businesses, which are outlawed federally. "The federal guidance here is both complex and at times contradictory," said Denny Eliason of the Washington Bankers Association. About 20 Washington banks have ventured into marijuana-related financial activities.
The feds are allowing Washington financial institutions handle marijuana business accounts, but are requiring banks and the state liquor board to protect children, prevent criminal activities from that pot money, and ensure against involvement with pot grown on public lands. The financial institutions also must prevent the money from being diverted to states where marijuana is illegal, which means national credit cards cannot be involved. New federal requirements on marijuana-related banking reports went into effect earlier this year.
The federal banking rules apply only to recreational marijuana, with medical marijuana still a question mark. Last session, legislators tried to merge the two pot worlds under one state regulatory system, but failed. It is likely another attempt will be made in the 2015 session. How a merged regulatory system is designed will determine how the feds oversee the finances for Washington's medical marijuana industry, said Linda Jekel, the Washington Department of Financial Institutions' director of credit unions.
Financial institutions remain leery about the feds’ suggestions that the national authorities will cut Washington slack to experiment with a recreational marijuana industry, while also saying marijuana production, sales and financing could still be hit by federal law enforcement.
"The federal regulatory agencies are still saying this is a crime. ... We have heard a lot of verbal assurances, but we've never seen anything in writing," said Mark MacDonald, president of Community Bankers of Washington.
Eliason and MacDonald said Congress needs to pass legislation to allow normal business activities involving the marijuana industry in states that have legalized recreational pot. "Candidly, I don't think Congress will act until a major state legalizes marijuana — California, New York or Texas," Eliason said.
Sen. Steve Hobbs, D-Lake Stevens and co-chair of the banking committee, said: "It appears financial institutions are taking a risk." Hobbs added, "Hopefully, the feds can fix this."