Last week the Marijuana Policy Group put out its report on the Economic Impact of Marijuana Legalization for 2015 in Colorado. It’s not light reading. In fact, there’s so much to chew on it’s going to take me a while to process all of it. However, I want to put some of the highlights out to you now while I dig deeper into it.
The Measuring Process
The Marijuana Policy Group (MPG) has spent time constructing a new model that, hopefully, accurately integrates the legal marijuana industry into Colorado’s overall economy. They call it, uniquely enough, the “Marijuana Impact Model”. The goal is to set the gold standard in determining how to measure the industry. They did a damn good job. The methodology and inclusions look really solid.
MPG measures specifically how legalization impacts the state economy in four ways: output, tax revenues, GDP, and employment. To do that, they’ve divided the industry into three sections; cultivation, manufacturing, and retailing. I won’t bore you with the rest; I’m the daughter of an economist and this stuff makes me happy. But I know it doesn’t trip everyone’s trigger.
The Big Takeaways
There’s a LOT of data in the report, but what you really need to know is just a few things about marijuana in 2015:
$996 million in total sales
59% of that was retail and 41% was medical – retail sales grew a little over 14% from 2014. The state sold 112 metric tons of flower and approximately 10.7 million units of non-flower. To put the size of that in perspective, cigarette sales in Colorado for 2014 were $1.05 billion, just a $9 mil difference. There’s a reason the tobacco industry is funding anti-marijuana campaigns.
Let’s be clear though – the 42.4% increase in sales over 2014 isn’t wholly from an increase in demand. 36.2% of the increase is due to a supply shift – away from gray and black market suppliers and into legal channels. That’s important not only from a law enforcement standpoint, but because we, as Colorado citizens, get to benefit from the taxes on legal sales.
$121 million in combined sales and excise taxes
That’s a 91% increase from 2014! It’s about three times more than the state made on alcohol taxes, in a state with a massive craft beer industry. More than it made from gaming, and just a little less than it made from the lottery. Cannabis is filling a significant hole in the state revenue stream.
And that increase is almost solely due to the demand increase in retail sales. Because retail sales have the higher taxes on them, we can expect that we’ll see significant increases in tax revenue through 2020 when demand will level out.
$2.39 billion economic impact
Measuring economic impact is always tricky, but because legalization stops at the boarders, cannabis is one of the few industries contained entirely within state lines. So this number is actually more accurate than other industries.
For every $1 spent on retail marijuana, we get $2.40 worth of benefits inside the state with local output and employment. ONLY government spending programs have a higher output. By 2 CENTS. The state’s return on investment for legalization is pretty damn good.
18,005 FTE jobs attributed
The economic output includes a tremendous amount of jobs. 70% of those FTEs are employed DIRECTLY by marijuana businesses. The other 30% are ancillary jobs or induced employment created by spending from the direct employees.
Because so much of the industry is part time based, it actually takes 2.14 people to create one FTE. If we do the math from the 12,591 direct jobs, then we’re looking at 26,945 people who work directly in the industry. Which is just under 1% of the jobs in the state.
Those four points are just the tip of the iceberg in the report, but they provide a pretty clear picture of the statewide industry. It’s growing. It’s providing significant taxes and economic benefit to everyone in the state. And it’s significantly shrinking the black market.
In the coming weeks I’ll have more specific data for you on the impact within Fort Collins itself and what that means for those of us who live here. In the mean time, smoke ‘em if you’ve got ‘em. The Colorado economy thanks you.