Cannabis Prevented Layoffs In Chicago — Could It Help Other Cities As Well?

In November, Chicago Mayor Lori Lightfoot announced the cancellation of a previously planned 350 layoffs and furloughs for city employees as part of the 2021 budget.

The about-face comes on the heels of higher-than-expected revenues from the state's legal cannabis market. In October, Illinois saw its figures exceed $100 million for the first time, helping push 10-month sales totals to $800 million.

The news comes backed by some of the nation's highest cannabis tax rates, which can top 41% on certain purchases. In July, municipalities across the state with dispensaries received approval on an additional individual 3% tax allowance to bolster local and state budgets.

Chicago offers up a possibility for other municipalities to replicate, but projecting cannabis revenues is no simple task.

Related link: COVID-19 And Marijuana: Can Cannabis Municipal Bonds Help Government Budgets?

Job Creator? Yes. Job Saver? It Remains To Be Seen.

Outside of Chicago, there are very few — if any — other records of layoffs being prevented by cannabis revenue.

In recent years, legal cannabis has been regarded as a job creator and revenue builder, rather than a job saver. In February 2020, Leafly reported that the industry supported over 243,000 full-time jobs.

Local benefits are present as well.

Towns like Pueblo, Colorado received an economic boost from cannabis revenue. In 2018, cannabis represented 5% of the county's $85.9 million general fund, with only sales tax and licensing revenues going towards the total.

In 2020, the city created a cannabis oversight panel to review tax information and create an annual report. The seven-person board will not make any regulatory decisions.

The promise of improved coffers has reeling markets, including several towns in Orange County, reconsidering their cannabis bans. Still, job retention is often uncited when discussing motivation for any policy changes.

In July 2020, MPG Consulting suggested how Cannabis Based Municipal Bonds could help governments recover economically.

It indicated that Colorado could translate its revenue into a short-term bond at $166 million or a $591 million long-term bond, with a respective $123 and $438 million for education and infrastructure projects.

Projections for Minneapolis indicated the city could have $385 million via a three-year bond, or just over $2 billion in a ten-year option, expediting access to affordable homes in the area.

Related link: Is Legalizing Pot A Quick Fix For State Budget Woes? This Study Says 'No'

Uncertain Projections And Impacts

Projecting state cannabis revenues is a difficult task.

A 2019 Pew Charitable Trusts report on state cannabis revenue called forecasting "hazy" due to unknown prices and market demand coupled with a lack of historical data.

The report cites the market's lack of data to rely on, as opposed to other "sin industries."

Projection woes can be found in California, which saw revenues fail to reach estimates in 2019.

According to Pew, other factors creating projection issues for legal cannabis include market friction and sales across borders.

Revenue projections may not be the only factor preventing cannabis from aiding in recovery.

A September 2020 study from Anderson Economic Group (AEG) reminded readers that cannabis is not a cure-all for state woes.

Among sticking points in the cure-all belief, AEG noted that implementing and launching a legal market can take a year or more.

Reports over the years highlighted additional pain points and hurdles created in taxing a commodity that is sold on illicit markets across the country.

With such difficulties remaining in play, Chicago's outcome may be a harbinger for good news. However, it could just as much be an outlier in an uncertain process that continues to play out.

It seems clear that while legal cannabis may play a part in recovering economies, it is unlikely to be the singular solution that some hold onto.

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Posted In: CannabisGovernmentNewsRegulationsMarketsAnderson Economic GroupMPG ConsultingPew Charitable Trust
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