Today, Governor Newsom released his revised 2025-2026 state budget, which proposes shifting funding for Department of Cannabis Control’s (DCC) illicit cannabis enforcement activities from the Cannabis Control Fund to the Cannabis Tax Fund.
This change will enable DCC to uphold California’s commitment to protecting public safety and a well-regulated legal cannabis market without increasing licensing fees, according to a press release from the governor’s office.
The revised budget also includes proposals to:
- Authorize DCC to shut down illegal cannabis operations and collect background on the properties to ensure property owners are informed and incentivized to stop unlicensed activity on their property.
- Increase DCC resources for consumer protection and illicit investigation efforts.
- Expand eligibility for Board of State and Community Corrections (BSCC) grants to jurisdictions that prohibit cultivation but allow cannabis retail stores and further prioritize grants for illicit cannabis enforcement.
Several interrelated issues inform this proposal:
- The illegal market is persistent: The legal cannabis market continues to face stiff competition from the illicit market, only about 40% of California consumers purchase cannabis from legal sources.
- Fee increases could reach 40%: DCC’s primary funding source, the Cannabis Control Fund, is operating at a structural deficit, with annual shortfalls nearing $50 million.
- The fiscal framework requires recalibration: The current funding structure creates a paradox where sustaining and enhancing enforcement efforts against the illicit market will require the department to raise costs on legal cannabis businesses, making it harder for them to compete.
The Governor’s proposal addresses these issues by utilizing the Cannabis Tax Fund, an existing industry-generated revenue source, for funding enforcement activities that benefits all Californians. Redirecting these costs would reduce unnecessary financial pressure on compliant businesses while maintaining critical enforcement efforts against illegal activity.
If the proposal is approved, DCC would join other state agencies in receiving illicit cannabis enforcement funding from the Cannabis Tax Fund.
Additionally, the proposed changes to the BSCC grant program will expand funding opportunities for local law enforcement to support enforcement against the illicit cannabis market.
More information is available on the Department of Finance’s website.
