Page 1
June 23, 2023 SB 23-290
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 23-0271
Sen. Fenberg
Rep. Amabile
Date:
Bill Status:
Fiscal Analyst:
June 23, 2023
Signed into Law
Aaron Carpenter | 303-866-4918
aaron.carpenter@coleg.gov
Emily Dohrman | 303-866-3867
Emily.dohrman@coleg.gov
Bill Topic: NATURAL MEDICINE REGULATION AND LEGALIZATION
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☐ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill modifies the regulation of certain natural psychedelics and updates the criminal
provisions related to the administration Proposition 122. Starting in FY 2023-24, the
bill increases state revenue and expenditures.
Appropriation
Summary:
For FY 2023-24, the bill requires and includes an appropriation of $1.6 million to
multiple state agencies. See State Appropriations section.
Fiscal Note
Status:
The fiscal note reflects the enacted bill.
Table 1
State Fiscal Impacts Under SB 23-290
1
Budget Year
FY 2023-24
Out Year
FY 2024-25
Out Year
FY 2025-26
Revenue General Fund - Indeterminate Indeterminate
Cash Funds - $1,521,493 $3,042,985
Total Revenue - $1,521,493 $3,042,985
Expenditures General Fund $1,572,060 $2,502,308 $870,190
Cash Funds $595,180 $654,421 $2,554,166
Centrally Appropriated $272,620 $545,658 $616,867
Total Expenditures $2,439,860 $3,702,387 $4,041,223
Total FTE 15.5 FTE 30.8 FTE 35.6 FTE
Transfers - - -
Other Budget Impacts TABOR Refund - $1,516,711 $3,033,423
General Fund Reserve $235,809 $375,346 $130,529
1
These impacts represent the total costs for the implementation of Proposition 122, as the budget currently does not include
money for its implementation. The amounts are in place of, rather than in addition to, what was shown in the Blue Book
fiscal note for Proposition 122. Page 2
June 23, 2023 SB 23-290
Summary of Legislation
In 2022, Colorado voters passed Proposition 122, which required the Department of Regulatory
Agencies (DORA) to establish a regulatory frame work for the administration of certain natural
psychedelics (mainly psilocybin and psilocin, which are found in certain mushrooms) in licensed
facilities and to decriminalize the use of certain natural psychedelics (psilocybin, psilocin,
dimethyltryptamine, ibogaine, and mescaline excluding peyote). This bill modifies provisions related
to how state departments regulate natural psychedelics and updates the criminal provisions related
to the measure, as described below.
DORA. Proposition 122 required DORA to establish and regulate the manufacture, cultivation,
testing, storage, transfer, transport, delivery, sale, and purchase of certain natural psychedelics. The
bill instead requires DORA to regulate facilitators, who are professionals who oversee the
administration of the natural psychedelic substances. DORA is also charged with establishing
facilitator licenses and fees, reviewing facilitator license applications, conducting investigations,
taking disciplinary actions, maintaining an online list of licensees, and publishing a report on
implementation. DORA must start accepting applications by December 31, 2024. The bill requires
licensing fees be deposited into the Natural Medicine Facilitator Cash Fund and continuously
appropriates money in the fund to DORA.
Natural Medicine Board. Proposition 122 created the Natural Medicine Advisory Board in DORA to
advise DORA in establishing regulations, to review and evaluate research, and to make
recommendations to the General Assembly and state agencies. The bill clarifies the duties of the board
and creates the Indigenous Community Working Group to identify issues related to the
commercialization of the regulated psychedelics for indigenous people, provide advice and
recommendations to the board and DORA, and work with federally recognized American tribes and
the Indigenous Community Working Group to recommend a definition and criteria for social equity.
Colorado Department of Public Health and Environment. The bill requires the Department of Public
Health and Environment (CDPHE), in coordination with the Department of Revenue (DOR), to
promulgate rules concerning testing standards and certification requirements of regulated natural
psychedelics, including the establishment of an independent testing and certification program.
Department of Revenue. The bill establishes the Natural Medicine Division in the DOR to regulate
the cultivation, manufacturing, testing, storage, distribution, transport, transfer, and dispensation of
regulated natural psychedelics, including requiring a license for each of these activities. Beginning
December 31, 2024, the division must grant or refuse licenses, promulgate rules, conduct
investigations into any complaints, take disciplinary actions, develop forms, licenses, identification
cards, and applications; publish report on implementation; and develop and promote a public
education campaign.
The bill outlines types of business licenses, which include a health center license, cultivation facility
license, manufacturer license, testing facility license, and any other licenses determined necessary by
the division, and occupation licenses and registrations for owners, staff, and contractors who work or
have access to restricted areas. The bill establishes the requirements around each license type and
allows the division to establish licensing fees, a fingerprint background check fee, and a subpoena fee,
with revenue from these fees deposited into the newly created Regulated Natural Medicine Division
Cash Fund. Page 3
June 23, 2023 SB 23-290
Criminal provisions. Proposition 122 decriminalized the personal use of certain natural psychedelics
if the person is twenty-one years of age or older and only within the context of counseling, spiritual
guidance, beneficial community based use and healing, supported use, or related services. In
addition, the proposition created penalties for the use of psychedelics by a person under the age of 21
and when someone over the age of 21 fails to prevent access for someone under the age of 21.
The bill allows those under the age of 21 to be fined up to $100 or attend four hours of substance use
education or counseling, and creates new crimes including:
facilitating without a license (a class 2 misdemeanor);
open consumption of natural psychedelics (drug petty offense and a fine of up to $100 and up to
24 hours of public service);
illegal cultivation (drug petty offense and a fine of up to $1,000); and
unlicensed and illegal manufacturing (level 2 drug felony).
The bill also clarifies that an individual on parole or probation are not in violation of their parole or
probation if they use a natural psychedelic substance as authorized under the bill.
Sunset review. The bill repeals the regulation of certain natural psychedelics on September 1, 2032,
and requires DORA to conduct a sunset review.
General Fund loan. Proposition 122 required that any money taken from the General Fund to pay for
regulation startup costs to be paid back when revenue was collected. The bill removes this
requirement.
Income tax. Federal regulation 26 U.S. Code Section 280E disallows businesses from taking
deductions or credits aside from direct cost of goods sold if the business involves trafficking controlled
substances that are prohibited under federal law. The bill allows a taxpayer who is licensed pursuant
to the Colorado Natural Medicine Code to subtract an amount equal to any expenditure that is eligible
to be claimed as a federal income tax deduction, but disallowed under 26 U.S. Code Section 280E, from
their state taxes. The bill allows businesses to deduct other expenses, such as rent and personnel costs.
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. The following section outlines crimes that are comparable to the offense in this bill
and discusses assumptions on future rates of criminal convictions resulting from the bill.
Unlawful practice of facilitation. This bill creates the new offenses for facilitating without a license,
a class 2 misdemeanor. To form an estimate on the prevalence of this new crime, the fiscal note
analyzed the existing offense of unlawful practice of a mental health professional without a license as
a comparable crime. From FY 2019-20 to FY 2021-22, 2 individuals have been convicted and sentenced
for this existing offense. Of the persons convicted, both were white females. The fiscal note assumes
a high degree of compliance in the profession and thus, there will continue to be minimal or no
additional criminal case filings or convictions for this offense under the bill. Page 4
June 23, 2023 SB 23-290
Unlawful manufacturing or cultivation. This bill creates the new offenses for unlawful
manufacturing and unlawful cultivation, a level 2 drug felony and drug petty offense respectively.
To form an estimate on the prevalence of this new crime, the fiscal note analyzed the existing offense
of prohibited acts related to regulated marijuana as a comparable crime. From FY 2019-20 to
FY 2021-22, 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.
Open consumption. This bill creates the new offenses for open consumption of natural psychedelics,
a drug petty offense. To form an estimate on the prevalence of this new crime, the fiscal note analyzed
the existing offense of unlawful use of a controlled substance. From FY 2019-20 to FY 2021-22, 17,893
have been convicted and sentenced for this existing offense. Of the persons convicted, 12,113 were
male, 5,744 were female, and 36 did not have a gender identified. Demographically, 15,100 were
White, 1,771 were Black/African American, 691 were Hispanic, 94 were Asian, 78 were American
Indian, 120 were classified as "Other," and 39 did not have a race identified. However, the fiscal note
assumes that natural psychedelics represent a small portion of these offenses, 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.
Assumptions. 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 an estimated $1.5 million in FY 2024-25 and $3.0 million in
FY 2025-26 from the licensing fees and fingerprint background checks. In addition, General Fund
revenue will decrease by an indeterminate amount on an ongoing basis beginning in FY 2024-25.
Fee impact on regulated natural psychedelic professionals and businesses. 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, based on estimated populations and expenditures to
implement the bill. Actual fees will be set administratively by DORA and the DOR based on cash fund
balance, program costs, and the number of licenses. subject to the fee. To provide an idea of potential
fees, the fiscal note based the population of each license type on the license applications received in
Oregon through April 10
th
and projected out for a full year impact. The number of applications filed
in Oregon can be found here. The table below identifies the fee impact of this bill. Revenue in
FY 2024-25 is prorated for a half year impact.
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June 23, 2023 SB 23-290
Table 2
Fee Impact on Various Natural Psychedelic Professions and Businesses
Fiscal Year
Type of
Fee
Proposed
Fee
Number
Affected
Total Fee
Impact
FY 2024-25
Facilitator License $3,489 125
60
$436,125
Healing Center License $2,116 35 $74,060
Cultivation/ Manufacturer License $2,116 40 $84,640
Testing License $2,116 5 $10,580
Employee License $2,116 425 $899,300
FY 2023-24 Total $1,504,705
FY 2025-26
Facilitator License $3,489 250
120
$872,250
Healing Center License $2,116 70 $148,120
Cultivation/ Manufacturer License $2,116 80 $169,280
Testing License $2,116 10 $21,160
Employee License $2,116 850 $1,798,600
FY 2024-25 Total $3,009,410
Fingerprint-based background checks. This bill increases state cash fund revenue from fingerprint-
based criminal history background checks to the CBI Identification Unit Cash Fund in the Department
of Public Safety by $33,575 per year. Revenue in FY 2024-25 is prorated by half a January 1
st
start date.
This assumes 850 checks will be conducted for employee registration/licenses. The current fee for
background checks is $39.50, which includes $11.25 for a Federal Bureau of Investigation (FBI)
fingerprint based check, which is passed on to that federal agency. The federal portion of this fee, or
$9,563 of the revenue, is excluded from the state TABOR limit.
Income tax deductions and credits. The bill decreases General Fund revenue on an ongoing basis
beginning in FY 2024-25 by allowing credits and deductions for state income taxes that are disallowed
under U.S. Code Section 280E. The amount of expenses able to be deducted under this provision are
not able to be determined due to the lack of available data on how licensed facilities will be structured.
State Expenditures
The bill increases state expenditures by $2.4 million in FY 2023-24, $3.7 million in FY 2024-25, and
$4.0 million in FY 2025-26, paid from the General Fund and cash funds in the DOR, DORA, and the
CDPHE. Expenditures are shown in Table 3 and detailed below.
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June 23, 2023 SB 23-290
Table 3
Expenditures Under SB 23-290
FY 2023-24 FY 2024-25 FY 2025-26
Department of Revenue
Personal Services $469,236 $1,308,380 $1,554,353
Operating Expenses $7,560 $22,275 $25,650
Capital Outlay Costs $60,030 $78,300 -
Legal Services $190,332 190332 $190,332
Computer Programing $6,500 $58,969 $7,328
Vehicle Lease - - $4,630
Centrally Appropriated Costs
1
$95,750 $293,327 $354,919
FTE – Personal Services 4.7 FTE 15.5 FTE 19 FTE
FTE – Legal Services 1.0 FTE 1.0 FTE 1.0 FTE
DOR Subtotal $829,408 $1,951,583 $2,137,212
Department of Regulatory Agencies
Personal Services $443,300 $606,282 $606,282
Operating Expenses $7,020 $12,555 $12,555
Capital Outlay Costs $33,350 $20,010 -
Legal Services $101,510 $10,574 $148,036
Outreach $10,000 $5,000 $5,000
Centrally Appropriated Costs
1
$98,816 $159,216 $159,216
FTE – Personal Services 5.2 FTE 9.3 FTE 9.3 FTE
FTE – Legal Services 0.5 FTE 0.1 FTE 0.8 FTE
DORA Subtotal $693,996 $813,637 $931,089
Department of Public Health and Environment
Personal Services $351,023 $417,732 $449,865
Operating Expenses $6,075 $6,750 $7,425
Capital Outlay Costs $33,350 $6,670 -
Lab Startup and Operating $447,954 $412,900 $412,900
Centrally Appropriated Costs
1
$78,054 $93,115 $102,732
FTE – Personal Services 4.1 FTE 4.9 FTE 5.5 FTE
CDPHE Subtotal $916,456 $937,167 $972,922
Total $2,439,860 $3,702,387 $4,041,223
Total FTE 15.5 FTE 30.8 FTE 35.6 FTE
1
Centrally appropriated costs are not included in the bill's appropriation. Page 7
June 23, 2023 SB 23-290
Department of Revenue. Starting in FY 2023-24, expenditures in the DOR will increase to hire staff,
update computer software, and to pay legal service costs, as described below. The fiscal note assumes
General Fund will be required for the first two fiscal years to allow for the department to build a
reserve in the cash fund; therefore, expenditures from the cash fund will begin in FY 2025-26.
Staffing. Once fully implemented, the fiscal note estimates the DOR will require 19.0 FTE. This
includes 7.0 FTE administration and policy staff to stand up, support, and lead the new division,
2.0 FTE data collection and research staff, 6.0 FTE licensing staff, and 4.0 FTE investigation staff.
The administration and policy staff, along with 2.0 data collection and licensing staff will start in
FY 2023-24 to establish the office and begin work on establishing procedures for the new
regulation. The remaining staff will begin in FY 2024-25 with start dates phasing in through
January 1, 2025.
Staffing costs include personal services, operating costs, and capital outlay costs, with first year
costs prorated for the General Fund paydate shift. In addition, capital outlay costs in FY 2024-25
include standard firearm and body armor costs for the criminal investigators.
Computer programming. The DOR will require various computer programming costs, including
updating licensing software to include the new license types (cost in FY 2023-24 only) and
programming to update GenTax (starting in FY 2024-25). GenTax programming include
158 hours of contract programming at a rate of $232 per hour, 467 hours of user acceptance testing
at a rate of $32 per hour and 231 hours at $32 per hour for changes in the related reporting.
Legal services. The DOR requires 1,800 hours of legal services per year to promulgate rules, for
general counsel on implementation and on licensing, and to handle disciplinary decisions. Legal
services are provided by the Department of Law at a rate of $105.74 per hour.
Vehicle lease. Starting in FY 2025-26, the DOR will require a vehicle from the state fleet to provide
onsite visits of the various regulated businesses. Vehicle leasing costs are paid to the Department
of Personnel and Administration, with reappropriations for fleet vehicles adjusted through the
annual budget process.
Department of Regulatory Agencies. Starting in FY 2023-24, expenditures in the DORA will increase
to hire staff, provide outreach, and to pay legal service costs, as described below. DORA received
supplemental funding in the current FY 2022-23 for start-up costs around Proposition 122; the fiscal
note assumes this funding will cover startup costs for the department in FY 2023-24.
Staffing. Once fully implemented, the fiscal note estimates the department will require 9.3 FTE.
This includes 5.2 FTE administration and policy staff to stand up, support, and lead the program,
and to support the Natural Medicine Board and the Indigenous Community Working Group; and
4.1 FTE for licensing and investigation staff. The administration and policy staff will start in
FY 2023-24 to establish the office and procedures for the new regulation. The remaining staff will
begin in FY 2024-25. In addition, depending on the number of applications received, the
department may need to hire temporary staff to process an initial influx of applications in
FY 2024-25.
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June 23, 2023 SB 23-290
Staffing costs include personal services, operating costs, and capital outlay costs. In addition,
capital outlay costs in FY 2024-25 include standard firearm and body armor costs for the criminal
investigators.
Outreach. Starting in FY 2023-24, expenditures in DORA will increase create and administer a
public outreach campaign. The fiscal note assumes that outreach, communication, and training
will cost $10,000 to develop the materials, and $5,000 per year ongoing to update materials as
needed.
Legal services. The DOR require 960 hours in FY 2023-24 and 100 hours in FY 2024-25 of legal
services to promulgate rules and for general counsel and 1,400 hours per year starting in
FY 2025-26 for litigation, general counsel, and rulemaking. Legal services are provided by the
Department of Law at a rate of $105.74 per hour.
Department of Public Health and Environment. Starting in FY 2023-24, expenditures in the CDPHE
will increase to hire staff to work with DOR to establish a testing certification program. The fiscal note
assumes that the certification program will resemble the marijuana testing certification program, with
the department providing guidance to testing facilities and providing certification to labs. It is
estimated that the CDPHE will require 5.5 FTE to provide certification, establish testing standards,
and provide guidance to testing facilities. In addition, expenditures will increase by $480,000 in
FY 2023-24 and $412,900 to purchase lab equipment and lab supplies and establish an analytical
method to test the regulated substances. Because the CDPHE does not have authority to spend from
a cash fund, the fiscal note assumes that expenditures will come from the General Fund.
Department of Public Safety. The bill increases cash fund expenditures for fingerprint-based
criminal history background checks by 850 per year starting in FY 2024-25 from the CBI Identification
Unit Cash Fund in DPS. Due to the low number of background checks, the additional workload can
be accomplished within exiting appropriations.
Judicial Department. Starting in FY 2023-24, workload to the trial courts within the Judicial
Department will increase in two ways. First, workload will increase to hear additional record sealing
petitions, as the bill allows for record sealing when a conviction has occurred for an offense that was
unlawful at the time but is not unlawful under the bill. The fiscal note assumes that the increase in
record sealing petitions for the substances outlined in the bill will be minimal. In addition, workload
will increase if applicant or licensee choose to appeal a regulatory decision by the DOR and DORA to
the courts. The fiscal note assumes that cases appealed to the trial courts will be minimal.
Parole and probation. To the extent the bill reduces parole and probation violations, costs to the
Department of Corrections and the Probation Division in the Judicial Department will decrease. The
fiscal note assumes that violations of parole and probation from using natural psychedelic substances
are minimal and no change in appropriation is required.
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 2.
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June 23, 2023 SB 23-290
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 2023 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2024-25. 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.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve. Based on this fiscal note, the
bill is expected to increase the amount of General Fund held in reserve by the amounts shown in
Table 1, decreasing the amount of General Fund available for other purposes.
Effective Date
The bill was signed into law by the Governor on May 23, 2023, and takes effect July 1, 2023, and applies
to any offenses committed on or after July 1, 2023.
State Appropriations
For FY 2023-24, the bill requires and includes the following General Fund appropriations:
$733,658 to the Department of Revenue and 5.6 FTE, of which, $190,332 is reappropriated to the
Department of Law, with 1.0 FTE; and
$838,402 to the Colorado Department of Public Health and Environment and 3.7 FTE.
Funding for the Department of Regulatory Agencies is paid from the Natural Medicine Facilitator
Cash Fund. The cash fund is continuously appropriated; therefore, no appropriation is required to the
department.
State and Local Government Contacts
Agriculture Counties District Attorneys
Human Services Information Technology Judicial
Law Personnel Public Health and Environment
Public Safety Regulatory Agencies 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.