Marijuana Tax Revenue and Education

Overview

In 2012, Colorado voters approved the legal sale of marijuana to adults 21 and older with a portion of the tax revenue going to education. Though the amount of tax revenue that comes from marijuana sales is minimal -- around 1% of the state's total education budget -- the money is directed to a variety of programs, including school construction, bullying prevention and behavioral health. This is a brief glimpse of the revenue that comes into the Colorado Department of Education through marijuana sales.

Legislation

In 2012, Colorado voters approved Amendment 64 which allowed adults 21 and older to consume or possess marijuana and required the state to set up a regulatory structure for the retail marijuana industry. It also mandated an excise tax with the first $40 million collected to be reserved for school construction. 

In 2013, voters approved Proposition AA, allowing the state to levy up to a 15% excise tax on unprocessed marijuana and up to a 15% retail tax on marijuana sales. In addition, both medical and retail marijuana continue to be subject to the state’s 2.9% sales tax.

In 2017, Senate Bill 267, changed the formula, increasing the statewide retail tax to 15% from 10% and changing how the revenue was distributed. 

In 2018, the legislature passed House Bill 1070, changing the formula for the amount of excise tax on retail marijuana that can be collected. Starting July 1, 2018, the excise tax collected for education was either greater than 90% of the revenue annually collected or the first $40 million collected.

But that again changed in 2019 when House Bill 1055 mandated that 100% of excise tax on retail marijuana must be collected for school construction.

How is marijuana tax revenue distributed?

There are two ways tax revenue comes into the state's coffers.

Building Excellent Schools Today (BEST)

Written into Amendment 64 is a commitment to credit the Colorado Capital Construction Assistance Fund with the first $40 million generated each fiscal year from the retail marijuana excise tax to renovate existing school buildings or construct new buildings. In 2018, the state legislature passed House Bill 1070, increasing the amount of retail marijuana excise tax that can be credited to the assistance fund. In 2019, the legislature changed the fund to allow 100% of the excise tax collected to go to the Capital Construction Assistance Fund. 

The BEST program prioritizes health, safety and security issues such as asbestos removal, new roofs, building code violations, and poor indoor air quality. BEST grants are competitive, awarded annually and in most cases must be supplemented with local district matching funds.  

Marijuana tax revenue is just one of four funding sources for the Capital Construction Assistance Fund, the total of which is only a fraction of what is needed for the repair, maintenance and construction of Colorado’s public schools. To see how much marijuana tax revenue went into the Capital Construction Assistance Fund, visit the Capital Construction Unit's fact sheet.

Marijuana Tax Cash Fund (MTCF)

In 2014, the state legislature created the Marijuana Tax Cash Fund to collect sales tax revenue from retail and medical marijuana. Revenue from MTCF must be spent the following year on health care, to monitor the health effects of marijuana, health education, substance abuse prevention and treatment programs and law enforcement.

Under MTCF the department has received money specifically for:

• The School Health Professional Grant program to address behavioral health issues in schools.
• A grant program to help schools and districts set up initiatives to reduce the frequency of bullying incidents.
• Grants to fund drop-out prevention programs.
• Early Literacy Competitive Grants to ensure reading is embedded into K-3 curriculum. 
• A grant to expand concurrent enrollment programs.
• Grants to fund physical education courses and social-emotional health programs for K-5 students.