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April 28, 2022 SB 22-205
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0901
Sen. Coram; Fenberg
Rep. Valdez A.
Date:
Bill Status:
Fiscal Analyst:
April 28, 2022
Senate Business
Clare Pramuk | 303-866-2677
clare.pramuk@state.co.us
Bill Topic: INTOXICATING HEMP & TETRAHYDROCANNABINOL PRODUCTS
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
This bill classifies certain industrial hemp products as adult-use cannabis products,
requires that the manufacturer of these products be licensed under the Colorado
Marijuana Code, and creates penalties for violations. The bill increases state revenue
and expenditures beginning in FY 2022-23 and ongoing, and may impact local
government revenue.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $1,456,483 to multiple state
agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under SB 22-205
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue Cash Funds $951,523 $1,768,557
Total Revenue $951,523 $1,768,557
Expenditures Cash Funds $1,456,483 $2,180,310
Centrally Appropriated $311,619 $473,526
Total Expenditures $1,768,102 $2,653,836
Total FTE 10.7 FTE 20.5 FTE
Transfers - -
Other Budget Impacts TABOR Refund $951,523 $1,768,557
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April 28, 2022 SB 22-205
Summary of Legislation
The bill amends the Pure Food and Drug Act administered by the Department of Public Health and
Environment (CDPHE), the Colorado Marijuana Code administered by the Department of Revenue,
and the Colorado Consumer Protection Act administered by the Department of Law, to regulate
products that contain certain amounts of intoxicating cannabinoids as adult use cannabis products.
Pure Food and Drug Act. Under current law, a product containing industrial hemp produced by
wholesale food manufacturing facilities registered with the CDPHE is not deemed to be adulterated.
The bill clarifies that a product containing adult use cannabis is deemed adulterated if it is not
manufactured by a person licensed under the Marijuana Code. The bill creates three new
misdemeanor criminal offenses related to adult use cannabis products that are also subject to civil
penalties up to $10,000 per violation. The bill also prohibits a local government from conducting food
safety inspections where industrial hemp products for human consumption are held without approval
by the CDPHE.
Marijuana Code. The bill establishes new definitions for adult use cannabis products, artificially
derived cannabinoid, intoxicating cannabinoid, and tetrahydrocannabinol. The Marijuana
Enforcement Division in the Department of Revenue is required to promulgate rules to set limits for
the amounts of tetrahydrocannabinols (THC) and intoxicating cannabinoids in adult use cannabis
products and establish procedures for designating and transferring an adult use cannabis product as
a retail marijuana product. A retail marijuana store is prohibited from receiving or selling an adult
use cannabis product that was not properly designated and transferred as a retail marijuana product.
A retail marijuana products manufacturer is prohibited from transferring an adult use cannabis
product unless it is designated and transferred as a retail marijuana product.
Consumer Protection Act. A person who violates the provisions of the bill related to hemp, cannabis,
or anything made from hemp or cannabis, engages in a deceptive trade practice.
Background
Delta-9 THC occurs naturally in cannabis and is the main psychoactive ingredient in medical and
retail marijuana. Industrial hemp is defined in Colorado law as cannabis that contains a delta-9 THC
concentration of no more than three-tenths of one percent on a dry weight basis. Industrial hemp,
because of its low delta-9 THC content, is not considered a Schedule 1 Controlled Substance federally.
Industrial hemp also contains cannabidiol (CBD) which is made into a number of products including
foods, lotions, and medications that are widely available. Industrial hemp products not currently are
currently on the market outside of regulated marijuana markets that contain delta-8 THC, an
artificially derived CBD produced from industrial hemp. The delta-8 THC is synthesized from CBD
with the use of solvents and has psychoactive and intoxicating effects. The federal Food and Drug
Administration has not evaluated or approved products containing delta-8 THC.
Special sales tax. Retail marijuana is not subject to the state sales tax but is subject to a special
15 percent sales tax on the final consumer purchase price, which is deposited into the Marijuana Tax
Cash Fund; 10 percent of which is apportioned to local jurisdictions where retail marijuana is sold.
Local jurisdictions may also apply a special tax on retail marijuana sales. Page 3
April 28, 2022 SB 22-205
Excise tax. Retail marijuana is subject to a 15 percent state excise tax applied to the average market
rate or contract price of retail marijuana. The first $40 million collected from the excise tax is
transferred to the Public School Capital Construction Assistance Fund and the remainder deposited
the State Public School Fund. Several counties also assess an excise tax on retail marijuana.
Comparable Crime Analysis
Legislative Council Staff is required to include certain information in the fiscal note for any bill that
creates a new crime, changes the classification of an existing crime, or creates a new factual basis for
an existing crime. This section outlines data on crimes comparable to the offense in this bill and
discusses assumptions on future rates of criminal conviction for those offense.
Prior conviction data and assumptions. This bill creates a new factual basis for the existing offense
of violating the Pure Food and Drug Act by adding that making a product that contains levels of THC
that result in adult use cannabis by an entity that is not a regulated marijuana licensee is a violation.
From FY 2018-19 to FY 2020-21, zero offenders have been sentenced and convicted for this offense;
therefore, the fiscal note assumes that there will continue to be minimal or no additional criminal case
filings or convictions for this offense under the bill. Because the bill is not expected to have a tangible
impact on criminal justice-related revenue or expenditures at the state or local levels, these potential
impacts are not discussed further in this fiscal note.
Visit leg.colorado.gov/fiscalnotes for more information about criminal justice costs in fiscal notes.
State Revenue
The bill increases state revenue by $951,523 in FY 2022-23 and $1,768,557 in FY 2023-24 from marijuana
licensing fees to the Marijuana Cash Fund. This revenue is subject to TABOR. The bill will also
increase revenue from civil penalties for violations of the Pure Food and Drug Act, which are credited
to the Wholesale Food Manufacturing and Storage Protection Cash Fund.
Fee impact on marijuana licensees. Colorado law requires legislative service agency review of
measures which create or increase any fee collected by a state agency. These fee amounts are estimates
only, actual fees will be set administratively by the DOR based on cash fund balance, estimated
program costs, and the estimated number of licensees subject to the fee. It is not known which fees
will be increased to fund the bill; as a result, the table below identifies the total fee increase necessary
to cover the bill’s expenditures.
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April 28, 2022 SB 22-205
Table 2
Fee Impact on Marijuana Licensees
Fiscal Year Type of Fee Total Fee Increase
FY 2022-23 Marijuana Licensing Fees $951,523
FY 2023-24 Marijuana Licensing Fees $1,768,557
Other revenue impacts. There may also be changes in revenue from licensing of food manufacturers
by the CDPHE if manufacturers are no longer regulated by the CDPHE, and instead are licensed with
the Marijuana Enforcement Division. Excise and sales tax revenue may also change if the cost of
producing retail marijuana products changes or if industrial hemp is not subject to excise taxes. These
revenue changes depend on a variety of unknown factors and have not been estimated.
Assumptions
The fiscal note assumes that 250 industrial hemp product manufacturers currently registered with the
CDPHE will apply to become licensed with the Marijuana Enforcement Division. If this number is
determined to be significantly different than the number of manufacturers that want to enter the
regulated marijuana market, the regulatory staffing costs may vary.
State Expenditures
The bill increases state expenditures from the Marijuana Cash Fund by $951,523 in FY 2022-23 and
$1,768,557 in FY 2023-24 in the Department of Revenue and by $816,579 in FY 2022-23 and $885,279 in
the CDPHE. Expenditures are shown in Table 3 and detailed below.
Table 3
Expenditures Under SB 22-205
Cost Components FY 2022-23 FY 2023-24
Department of Revenue
Personal Services $643,648 $1,275,152
Operating Expenses $11,205 $22,275
Capital Outlay Costs $105,400 -
Legal Services $43,371 $177,426
Vehicles $6,945 $13,890
Centrally Appropriated Costs
1
$140,954 $279,814
FTE – Personal Services 8.3 FTE 16.5 FTE
FTE – Legal Services 0.2 FTE 1.0 FTE
DOR Subtotal $951,523 $1,768,557
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April 28, 2022 SB 22-205
Table 3
Expenditures Under SB 22-205 (Cont.)
Cost Components FY 2022-23 FY 2023-24
Department of Public Health and Environment
Personal Services $180,501 $243,674
Operating Expenses $2,970 $4,050
Capital Outlay Costs $18,600 -
Lab Equipment $243,843 $243,843
Lab Operating $200,000 $200,000
Centrally Appropriated Costs
1
$170,665 $193,712
FTE – Personal Services 2.2 FTE 3.0 FTE
CDPHE Subtotal $816,579 $885,279
Total $1,768,101 $2,653,836
Total FTE 10.7 FTE 20.5 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. The Marijuana Enforcement Division will add 16.5 FTE, prorated to 8.3 FTE
in FY 2022-23 for a January 1, 2023, start date. This staff will address the following tasks:
rulemaking to define adult use cannabis products;
license application processing;
outreach and education;
investigations;
coordinating with the CDPHE and law enforcement;
updating to testing requirements for testing facilities;
inspections; and
investigations and enforcement actions.
The division also requires legal services to assist with rulemaking and administrative actions. The
division requires 440 hours in FY 2022-23 and 1,800 hours in FY 2023-24 at a rate of $98.57 per hour.
Legal services are provided by the Department of Law. Standard operating, capital outlay costs, and
vehicle leases are included.
Department of Public Health and Environment. The CDPHE will add 2.0 FTE to the Disease Control
and Public Health Response Division to analyze industrial hemp products and work with testing labs,
and 1.0 FTE to the Marijuana Health Monitoring and Research Section to study the health effects of
adult use cannabis products. The FTE are prorated for staggered start dates. Expenditures also
include specialized lab equipment for analyzing synthetically derived cannabinoids. Standard
operating and capital outlay costs are included.
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April 28, 2022 SB 22-205
Department of Law. By establishing violations of this bill as unfair and deceptive trade practices, the
bill may increase the number of complaints the department receives. The department will assess the
complaints and prioritize workload to determine which will be investigated within existing resources.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 3.
Other Budget Impacts
TABOR refunds. The bill is expected to increase the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the State Revenue section above. This estimate assumes the
March 2022 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2023-24. Because TABOR refunds are paid from the General Fund, increased cash fund
revenue will reduce the amount of General Fund available to spend or save.
Local Government
This bill may change sales and excise tax revenue to some local jurisdictions, which cannot be
estimated in this fiscal note.
Effective Date
The bill takes effect upon signature of the Governor, or upon becoming law without his signature,
except provisions in the Marijuana Code and Consumer Protection Act, which take effect
January 1, 2023.
State Appropriations
For FY 2022-23 the bill requires an appropriation of $1,456,483 as follows:
$810,569 to the Department of Revenue from the Marijuana Cash Fund and 8.3 FTE, of which
$43,371 is reappropriated to the Department of Law and 0.2 FTE, and $6,945 is reappropriated to
the Department of Personnel and Administration for vehicle lease payments; and
$645,914 to the Department of Public Health and Environment from the Marijuana Tax Cash Fund
and 2.2 FTE.
State and Local Government Contacts
Agriculture Counties Information Technology
Law Municipalities Public Health and Environment
Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.