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Should Washington rethink the way it spends marijuana revenue?

Marijuana has generated mountains of revenue for Washington state. (AP Photo/Ted S. Warren)

Since recreational marijuana was first sold in Washington, it’s become a major source of tax revenue for the state. Even so, a recent Pew report recommends the state be more careful about how it spends that money in the near future.

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In the next few years, many forecasters predict both Washington and Colorado will see a decline in revenue growth from marijuana, with the largest boom likely behind each state.

Pew recommends mitigating against that in the future by being smart about how that revenue is collected.

“One strategy is to collect the money before spending it,” said the report. “Recognizing the uncertainty with marijuana revenue, Colorado and California collect the taxes in a separate fund and then use the money for the following year.”

Another blueprint Washington could consider can be seen in Nevada, where proceeds from marijuana revenue go to the state’s rainy day fund.

For now, more than half of Washington’s marijuana revenue goes toward recurring costs such as Medicaid, substance abuse programs, and other health care initiatives. That’s something Pew notes could prove risky should those funds dry up, essentially putting the cart before the horse from a spending perspective.

“States should be careful to distinguish between marijuana revenue’s short-term growth and long-term sustainability,” the report recommends.

Projecting that growth can be difficult, too, given how new legal cannabis is in the U.S.

“The biggest issue is lack of data, lack of history,” Oregon Office of Economic Analysis Senior Economist Josh Lehner said in the report.

The history we do have is largely positive — between 2017 and 2018, marijuana tax revenue increased 17 percent statewide. Between 2016 and 2017, it went up a whopping 70 percent.

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The end result: In 2018, marijuana generated more tax revenue ($361 million) than either liquor ($314 million) or cigarettes ($357 million) in Washington state.

Still, Pew researchers are hesitant to predict similar numbers in the coming years.

“States have learned some lessons but continue to grapple with unknowns,” the report reads.

That uncertainty is driven by a handful of factors. Pew details how challenging it can be to glean honest responses when asking residents how often they use marijuana. That makes it hard to get a sense for demand.

“Sixty percent of Oregonians say they’ve had a drink in the last month. Twenty percent say they’ve used marijuana. Does marijuana go all the way up there, where the majority of Oregonians say they’ve used it in the past month? That’s the big-picture uncertainty,” said Lehner.

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