Gold Dome, Wayne Laugesen

State bureacracy not ready to oversee recreational marijuana

Advocates of marijuana legalization promoted virtues of order that appeal to the masses. They said taxation and regulation are better than black market mayhem that cannot generate taxes and fees.

It they were right in theory, government dysfunction may undermine their claims. Colorado state auditors issued a damning 89-page report Tuesday that highlights an array of embarrassing problems with the state’s medical marijuana trade. Not problems with buyers and sellers, so much, but with state regulators who are supposed to ensure a great contrast between lawful, regulated trade and the old criminal alternative.

The audit reveals a system that could raise significant money, as promised. The state pulled in more than $8 million in licensing fees alone in the first two months of regulation. Granted, that’s a startup boom. But it’s $8 million more in fees than were ever collected from the playground and alley dealers who preyed on kids.

But the new Medical Marijuana Enforcement Division, a division of the Department of Revenue, has managed to rack up 19 straight months of operational losses. Auditors said the reason is simple. The agency spent too much money too fast on “large capital purchases, such as furniture, computer equipment and software for a marijuana plant tracking system.” The plant tracking system isn’t even used.

Instead of building a regulatory system within the means of the industry that funds it, state officials eagerly tried to live beyond their means by immediately building a bloated bureaucracy that barely functions. Other failures highlighted in report, as explained by The Associate Press, include:

• Colorado’s vaunted seed-to-sale tracking of marijuana plants never materialized because the regulators ran out of money to implement it. Regulators envisioned a heavily regulated system to track medical marijuana from cultivation to packaging and sale. But after spending about $1.1 million on the system, including video surveillance, the division fell $400,000 short of implementing it. The seed-to-sale model, auditors concluded, “does not currently exist.”

• Funding problems have led to painfully slow issuance of licenses. Final licensing decisions for Colorado’s 1,440 marijuana-related businesses took an average of 23 months. Of the original licenses submitted in the summer of 2010, 41 percent were still pending by October 2013.

• Some licenses were awarded improperly. Auditors checked 35 new business application files and found that 10 were issued licenses despite problems such as failing or incomplete background checks.

• Sales taxes were underreported. Auditors found $760,000 in underreported sales taxes from 56 dispensaries in fiscal years 2011 and 2012.

This is the same agency that we expect to regulate and manage money from the forthcoming above-ground trade of recreational marijuana.

A lot of Coloradans who voted to legalize medical marijuana, and then recreational sales and use, do not use the drug. They voted yes because they wanted government to harness an untameable black market trade to reduce mayhem, help fund education and generally work in the interests of the common good.

They did not vote to legalize marijuana so that state employees could create another poorly managed, over-furnished, slow, inefficient and ineffective bureaucracy. We have a surplus of those.

Coloradans expect state employees to regulate marijuana efficiently and effectively. We expect less fancy furniture, fewer speculative gadgets and a lot more effort making sure marijuana retailers collect taxes and pay them to the state. We expect regulators to keep their expenses in check so sales of marijuana fund more than salaries and amenities of those who regulate them.

Those seeking wages and profits from the lawful production and sale of marijuana are right to demand a better regulatory system.

“We understand as responsible producers and retailers that a robust regulatory agency is the keystone to our continued success in limiting the diversion of cannabis,” wrote Kevin Fisher, Chairman of the Medical Marijuana Industry Group, who joined the group’s executive director Tuesday in decrying what state auditors found.

Without effective regulation, Coloradans will quickly decide they aren’t better off than the days when criminals owned this market.

Wayne Laugesen is editorial  page editor of the Colorado Springs Gazette, where this op-ed first appeared

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