Editor’s note: This article was co-authored by Chris Micheli and Michael Daft. This article was originally self-published by the authors and has been republished on IVN with their consent. 

California voters on November 8 approved Prop. 64, which is an initiative statute that legalizes marijuana and hemp under state law, with specified limitations. The ballot measure designates state agencies to license and regulate the recreational marijuana industry and it imposes a state excise tax on retail sales of marijuana equal to 15% of the sales price, as well as state cultivation taxes on marijuana of $9.25 per ounce of flowers and $2.75 per ounce of leaves.

In addition, Prop. 64 exempts medical marijuana from some taxation and establishes packaging, labeling, advertising, and marketing standards and restrictions for marijuana products. The ballot measure allows local regulation and taxation of marijuana. Additionally, Prop. 64 prohibits marketing and advertising marijuana to minors and it authorizes resentencing and destruction of records for prior marijuana convictions under specified circumstances.

According to the fiscal estimate prepared by the Legislative Analyst Office and Director of Finance, the enactment of Prop. 64 will result in “net reduced costs ranging from tens of millions of dollars to potentially exceeding $100 million annually to state and local governments related to enforcing certain marijuana-related offenses, handling the related criminal cases in the court system, and incarcerating and supervising certain marijuana offenders.

“Net additional state and local tax revenues potentially ranging from the high hundreds of millions of dollars to over $1 billion annually related to the production and sale of marijuana. Most of these funds would be required to be spent for specific purposes such as substance use disorder education, prevention, and treatment.”

According to the official ballot arguments, a YES vote on this measure meant: “Adults 21 years of age or older could legally grow, possess and use marijuana for nonmedical purposes, with certain restrictions. The state would regulate nonmedical marijuana businesses and tax the growing and selling of medical and nonmedical marijuana. Most of the revenue from such taxes would support youth programs, environmental protection, and law enforcement.

“Prop. 64 creates a safe, legal system for adult use of marijuana. It controls, regulates and taxes marijuana use, and has the nation's strictest protections for children. It provides billions for after school programs, job training, drug treatment, and cracking down on impaired driving. Fix our approach to marijuana.”

A NO vote on this measure meant: “Growing, possessing or using marijuana for nonmedical purposes would remain illegal. It would still be legal to grow, possess or use marijuana for medical purposes.

“Proposition 64 purposely omits a DUI standard to keep marijuana–impaired drivers off our highways. California Association of Highway Patrolmen and Senator Dianne Feinstein strenuously oppose. Legalizes ads promoting smoking marijuana, Gummy candy and brownies on shows watched by millions of children and teens. Shows reckless disregard for child health and safety.”

According to a summary prepared by the independent Legislative Analyst Office (LAO), marijuana is generally illegal under existing state law - either to possess it or use it. In 1996, voters approved Proposition 215, which made it legal under state law for individuals of any age to use marijuana in California for certain medical purposes. Individuals must have a recommendation from a doctor to use medical marijuana.

In 2003, the Legislature legalized medical marijuana collectives, which are nonprofit organizations that grow and provide marijuana to their members. As a result of 2015 legislation passed by the Legislature, the state is currently adopting new medical cannabis regulations. Local governments will continue to have the ability to regulate where and how medical marijuana businesses operate in this state.

The LAO notes that, under federal law, it is illegal to possess or use marijuana, including for medical use. The U.S. Supreme Court ruled in 2005 that federal agencies could continue under federal law to prosecute individuals who possess or use marijuana for medical purposes even if legal under a state's law.

Currently, however, the U.S. Department of Justice (DOJ) chooses not to prosecute most marijuana users and businesses that follow state and local marijuana laws if those laws are consistent with federal priorities. These priorities include preventing minors from using marijuana and preventing marijuana from being taken to other states. More than half a dozen requirements must be met under the DOJ’s Cole Memo.

In addition to California, voters in Nevada, Maine and Massachusetts also passed ballot measures to legalize recreational use of marijuana. Colorado, Washington, Oregon, and Alaska currently allow its limited use. Medical marijuana was also on the ballot in four states this year where it passed in all four states.

Due to the voters’ enactment of Prop. 64, California now (1) legalizes adult nonmedical use of marijuana, (2) creates a system for regulating nonmedical marijuana businesses, (3) imposes taxes on marijuana, and (4) changes penalties for marijuana-related crimes.

Specifically, Prop. 64 changes state law to legalize the use of marijuana for nonmedical purposes by adults age 21 and over. As a result, adults age 21 and over will be able to purchase marijuana at state-licensed businesses or through their delivery services (effective January 1, 2018). Businesses can generally not be located within 600 feet of a school, day care center, or youth center, unless allowed by a local government. Proponents claim that marijuana will have limited access and that these are the strongest protections for youth of any other states’ measures.

In addition, Prop. 64 changes the name of the Bureau of Medical Cannabis Regulation to the Bureau of Marijuana Control and makes the Bureau responsible for regulating and licensing nonmedical marijuana businesses (it is obviously already handling the regulation of medical cannabis in this state). In addition, the ballot measure requires other state agencies to regulate and license different parts of the nonmedical marijuana industry (including Department of Food & Agriculture and the Department of Public Health). These state agencies will have responsibilities similar to the ones they currently have for medical marijuana.

Under the ballot measure, cities and counties can regulate nonmedical marijuana businesses. For example, cities and counties can require nonmedical marijuana businesses to obtain local licenses and restrict where they could be located. Cities and counties can also completely ban marijuana-related businesses. However, they cannot ban the transportation of marijuana through their jurisdictions.

The ballot measure imposes new state taxes on growing and selling both medical and nonmedical marijuana. The new tax on growing marijuana will be based on a dollar amount per ounce of marijuana, and the new excise tax will be based on the retail price of marijuana products sold.

The measure will also affect sales tax revenue to the state and local governments. While the fiscal impact of Prop. 64 could be large, taxation (like licensing) will not begin until January 1, 2018.

After initial spending, revenues will be allocated as follows:

• 60 percent for youth programs—including substance use disorder education, prevention, and treatment.
• 20 percent to clean up and prevent environmental damage resulting from the illegal growing of marijuana.
• 20 percent for (1) programs designed to reduce driving under the influence of alcohol, marijuana, and other drugs and (2) a grant program designed to reduce any potential negative impacts on public health or safety resulting from the measure.

In addition, Prop. 64 imposes packaging and labeling requirements so that all marijuana sales will include a standard warning label. Labels on edibles will have to include safe portion sizes and warning about allergies. These cannot be targeted towards children and packages must be child-proof. While Prop. 64 allows for the advertisement of marijuana-related products, it cannot be targeted toward children.

Prop. 64 also changes state marijuana penalties. And, under the ballot measure, individuals serving sentences for activities that are made legal or are subject to lesser penalties under the measure will be eligible for resentencing. And law enforcement can no longer use the smell of marijuana or the presence of paraphernalia as a basis for broad searches and seizures.

Despite the enactment of Prop. 64, employers in California can still maintain a drug-free workplace. As such, employers will still be able to enforce workplace rules against the use of marijuana. Note that this provision was not contained in the prior legalization ballot measures, which caused the California Chamber of Commerce, among other business groups, to oppose those previous measures. So employer policies that relate to drug possession, use, testing and impairment are not impacted by the voters’ adoption of Prop. 64.

According to the proponents, “Proposition 64 finally creates a safe, legal, and comprehensive system for adult use of marijuana while our children. Marijuana is available nearly everywhere in California—but without any protections for children, without assurances of product safety, and without generating tax revenue for the state.

"Prop. 64 controls, regulates and taxes adult use of marijuana, and ends California's criminalization of responsible adult use. How Prop. 64 Works:

• Under this law, adults 21+ will be allowed to possess small amounts of nonmedical marijuana, and to grow small amounts at home for personal use. Sale of nonmedical marijuana will be legal only at highly regulated, licensed marijuana businesses, and only adults 21+ will be permitted to enter. Bars will not sell marijuana, nor will liquor stores or grocery stores."

"Child Protections:

• Drug dealers don't ask for proof of age and today can sell marijuana laced with dangerous drugs and chemicals. 64 includes toughest-in-the-nation protections for children, requiring purchasers to be 21, banning advertising directed to children, and requiring clear labeling and independent product testing to ensure safety. 64 prohibits marijuana businesses next to schools."

On the other hand, opponents of Prop. 64 argued the following: “Flaw #1: Doubling of highway fatalities. Flaw #2: Allows marijuana growing near schools and parks. Flaw #3: Will increase, not decrease black market and drug cartel activity. Flaw #4: Could roll back the total prohibition of smoking ads on TV. Flaw #5: Proposition 64 is an all-out assault on underprivileged neighborhoods already reeling from alcohol and drug addiction problems.”

Prop. 64 as a practical matter allows adults aged 21 or older to buy, possess or transport small amounts of marijuana for personal use. They can also cultivate up to six plants as long as it is not visible to the public. They cannot sell it. The ballot measure also provides extensive state licensing schemes based upon the work currently being done by a number of state agencies that are charged with implementing the medical cannabis laws. The ballot measure establishes standards for marijuana products and it allows local government to regulate and tax marijuana.

Major concerns from opponents of marijuana legalization have focused on the advertising restrictions and whether enough will be done to protect children; the failure to include a DUI standard (Prop. 64 provides funding to the California Highway Patrol to undertake the determination of this standard); and whether so called “on-demand delivery” will be permitted (which the proponents claim is prohibited).

Keep in mind that, despite the enactment by the state’s voters of Prop. 64, marijuana remains illegal under federal law because it continues to be classified as a Schedule I substance under the federal Controlled Substances Act. Both federal and state laws require government contractors to maintain drug-free workplaces.

As a result of the enactment of Prop. 64, state agencies will be tasked with creating a regulatory program for both medical and recreational cannabis usage in this state. Local jurisdictions will have to decide whether they want marijuana-related activities to be sanctioned within their jurisdictions considering the societal and revenue impacts of the products. And the state may be looking at $1 billion annually in new state revenues as a result of Prop. 64.

The following is a summary of the key provisions of Prop. 64:

Regulatory Framework

• Enacts the Adult Use of Marijuana Act (Control, Regulate and Tax Adult Use of Marijuana Act).
• Legalizes marijuana for those over 21 years old, protects children and establishes laws to regulate marijuana cultivation, distribution, sale, and use, and protects Californians and the environment from potential dangers.

Administration

• Changes the name of the “Bureau of Medical Marijuana Regulation” established in Section 19302 in Chapter 3.5 of Division 8 to the “Bureau of Marijuana Control” housed in the Department of Consumer Affairs.
• Bureau of Medical Cannabis Regulation will license medical marijuana distributors, transporters, testing facilities, and retailers.
• Department of Food and Agriculture will license and regulate medical marijuana growers.
• Department of Public Health will license and regulate producers of edible marijuana products.
• State Water Resources Control Board will regulate the environmental impacts of marijuana growing on water quality.
• Department of Fish and Wildlife will regulate environmental impacts of marijuana growing.
• Department of Pesticide Regulation will regulate pesticide use for growing marijuana.

Taxation

• Imposes new state tax on growing, both medical and nonmedical, at $9.25 per ounce of dried marijuana flowers and $2.75 per ounce of dried marijuana leaves.
• Imposes new state retail excise tax, both medical and nonmedical, at 15% of retail price.
• Existing state and local sales tax affects nonmedical marijuana only at current tax rates.
• Existing and future local taxes apply to both medical and nonmedical marijuana and be subject to local government decisions.

Personal Use/Possession

• A person 21 years of age or older can legally process, possess, purchase, obtain, or give away marijuana for personal use as described.
• Any marijuana or marijuana products are not deemed contraband, as long as they conform to the personal use exemptions, and cannot be subject to search or seizure.

Medical Use

• Must possess a physician’s recommendation and, beginning January 1, 2018, all identification cards issued need to be supported by a physician’s recommendation.
• Prop 64 does not alter Prop 215.
• Physician recommendations must conform to MMRSA standards and current medical marijuana legislation.

Advisory Committee

• Bureau will convene an advisory committee formed from representatives from the marijuana industry, labor organizations, state and local agencies, public health experts, and subject matter experts, including the Department of Alcoholic Beverage Control.
• Advisory committee will publish an annual public report beginning January 1, 2019.

Enforcement

• Licensing authority can suspend or revoke a license after proper notice and hearing and inform the bureau.
• Local governments can restrict or prohibit any type of business licensed under the act.
• However, they could lose grant funding if they prohibit retail sales or cultivation, including outdoor personal use cultivation.

Residency

• All licensees must be California residents as of January 1, 2015, with a sunset clause of December 31, 2019.

Cultivation

• A person over 21 years of age can cultivate up to six plants and possess the marijuana at their personal residence for personal use.
• No more than 6 plants per residence, but does not apply to medical users who can have up to 100 ft2 of growing space, per MMRSA.
• All plants and harvested marijuana in excess of one ounce must be (1) kept at the person’s private residence, (2) in a locked space, and (3) not visible from a public place.
• Violations of (1) or (3) above are punishable as infractions with a maximum $250 fine.
• Cities and counties can restrict personal use cultivation, but may not completely prohibit cultivation inside a private residence.
• Cultivators must comply with conditions set by Dept. of Fish and Wildlife and State Water Resources Control Board for environmental laws.
• California to establish an organic certification program and standards for recognizing regional appellations of origin.The Dept. of Food and Agriculture will regulate marijuana as an agricultural product.

Consumption

• Consumption is legal to smoke or ingest marijuana except in any public place, besides a licensed dispensary when authorized.
• Violations of this are subject to a $100 infraction.

Smoking Restrictions

• Smoking is prohibited except in specified tobacco smoking areas.
• “Smoking” includes use of an electronic smoking device, vaporizer, or any other device used for the purpose of circumventing the prohibition of smoking in a public place.

Use in Vehicles

• Consumption or possession of an open container of marijuana or marijuana products is prohibited while driving or riding as a passenger in a motor vehicle.
• Consumption in the passenger compartment of vehicles specially licensed for on-site consumption is permitted.Driving with marijuana is legal up to one ounce for personal use.

School Grounds

• Consumption is forbidden within 1,000 feet of a school or youth center while children are present, except on residential property.
• Possession or use on school grounds, youth center, or day care center is banned while children are present.No licensee shall be located within 600 ft of a school or youth center, unless a state or local licensing authority allows.

Manufacturing

• Unlicensed manufacturing using volatile or poisonous solvents are subject to heavy felony penalties.

Employment Rights

• Prop 64 does not interfere with employer rights to discriminate against marijuana users, medical or otherwise, both on and off the job.

ID Cards

• Patients who obtain ID cards are exempted from the 7.5+% sales tax currently imposed on marijuana sales.
• Identifying information in the ID cards is subject to the Confidentiality of Medical Information Act.
• The cost of the state patient ID card is limited to $100, or $50 for Medi-Cal patients.

Child Custody

• Qualified patients may not be denied child custody rights merely because of their status as medical marijuana users.

Large Cultivators

• New category Type 5 cultivation licenses will begin being issued on January 1, 2023 for farms over the MMRSA limit of ½ acre indoors and 1 acre outdoors.

Microbusinesses

• New category Type 12 microbusiness licenses are established for small retailers with farms not exceeding 10,000 ft2.

Vertical Integration

• Prop 64 does not prohibit vertical integration of licenses and does not prohibit direct farm-to-consumer sales.
• A licensee may hold any combination of licenses, with the exception of Type 5 large cultivators, who may not hold distribution or testing licenses.

Distributors

• Unlike MMRSA, Prop 64 does not prohibit licensed distributors (Type 11) from obtaining other kinds of licenses, except for large scale Type 5 cultivation licenses.

License Conditions

• Licenses may be denied based on competition or monopoly power, perpetuation of the illegal market, encouraging abuse or diversion, posing a risk of exposure to minors, environmental violations, or excessive concentration in any city or county.
• No marijuana licensee can also hold a tobacco or alcohol license.Bureau must investigate the feasibility of creating nonprofit license categories with reduced fees or taxes by Jan 1, 2018.

Pricing

• Licensees are barred from price fixing, restraint of trade, price discrimination between different locations, and selling at less than cost to undercut competitors.

Adult Use Facilities

• Licenses for Adult Use Facilities are distinct from those for medical facilities issued under MMRSA.

Existing Operators

• Licensing priority will be given to applicants who show they have acted in compliance with Prop 215 since September 1, 2016.

Transportation

• Bureau will establish standards for types of vehicles and qualifications for drivers eligible to transport commercial marijuana.
• Local government cannot prevent delivery of marijuana on public roads by licensees in compliance with the Act.
• No separate license category for transportation between licensees, as defined in MMRSA.

Labeling

• Prop 64 prescribes specific label warnings on every package of marijuana and marijuana products.
• There is separate warning language for marijuana and marijuana products, specifically to point out the delay of effects in marijuana products.

Minors

• Marijuana products cannot be designed to be appealing to children or easily confused with commercially sold candy or foods that do not contain marijuana.
• Minors can be used by law enforcement as peace officers to try and entrap marijuana dealers.
• Misleading claims and marketing to minors are banned, and no billboards along highways, use of cartoon characters, language, or music known to appeal to kids can be used.

Additional Taxation

• All retail sales, medical and non-medical, are subject to a 15% excise tax in addition to the regular state sales tax, effective January 1, 2018.
• All marijuana is subject to a cultivation tax of $9.25 per ounce of dry-weight for flowers of $2.75 for leaves, effective January 1, 2018.
• Patients with state ID cards are exempt from the current 7.5+% sales tax, effective immediately, but not from the excise or cultivation taxes.
• Cities and counties can impose their own additional business taxes on facilities that are cultivating, manufacturing, processing, selling, distributing, providing, storing, or donating marijuana.

Distribution of Funds

Tax revenues allocated to the new California Marijuana Tax Fund will go to:

• Reasonable enforcement costs of the Bureau and other regulatory agencies not compensated by other fees.
• $10 million per year from 2018 thru 2028 for CA public universities to study and evaluate the implementation of Prop 64.
• $3 million per year from 2018 thru 2028 for the CA Highway Patrol to establish protocols to determine whether drivers are impaired.
• $10 million per year beginning in 2018, increasing by $10 million per year to $50 million per year in 2022-2023 for the Governor’s Office of Business and Economic Development for a community reinvestment program, 50% for grants to nonprofits.
• $2 million per year to the CA Center for Medicinal Cannabis Research for research on the efficacy and safety of medical marijuana.

The remaining funds leftover will be distributed the following ways:

• 60% allocated to a Youth Education, Prevention, Early Intervention, and Treatment Account for youth programs to prevent drug abuse.
• 20% for Environmental Restoration and Protection Account for cleanup and restoration projects.
• 20% to a State and Local Law Enforcement Account for CHP DUI programs and grants for local governments relating to enforcement of Prop 64.

Criminal Penalties

Possession:

• Illegal possession of an ounce by people between 18-21 years old will be a $100 infraction.
• Illegal possession of more than an ounce by adults is a misdemeanor, punishable by a $500 fine and/or six months in jail.
• Possession of less than an ounce on a school ground during school hours is a misdemeanor, punishable by a $250 fine, or $500 plus 10 days in jail for a repeat offense.

Cultivation:

• Illegal cultivation of 6 plants or fewer by people between 18-21 years old is a $100 infraction.
• Illegal cultivation of more than 6 plants by an adult is a misdemeanor punishable by a $500 fine and/or 6 months in jail.
• Felonies may be charged in the case of repeat offenders, or people with violent or serious prior convictions.

Possession for Sale:

• Penalties are dropped from felonies to misdemeanors, but allow for felony enhancements for repeat offenders, those with violent or serious prior convictions, or sale to minors.

Transportation:

Penalties are dropped from felonies to misdemeanors, but allowed for felony enhancements for importing, exporting, or transporting for sale more than 1 ounce of marijuana or 4 grams of concentrated marijuana.

Those previously convicted of offenses that would not be a crime, or would carry a lesser penalty, with Prop 64 may petition the court for a recall or dismissal of their sentence.

Chris Micheli is an attorney and legislative advocate with the Sacramento governmental relations firm of Aprea & Micheli. Michael Daft is a lobbyist at Aprea & Micheli, Inc. They can be reached at (916) 448-3075.

Photo Credit: Eric Limon / shutterstock.com