Plan to create special pot banks moves forward in California

FILE - In this Dec. 29, 2018, file photo, vendors from MF Extracts counting their intake of cash at their booth at Kushstock 6.5 festival in Adelanto Calif. The California Senate on Tuesday May 21, 2019, approved a measure, SB51 by state Sen. Bob Hertzberg, D-Van Nuys, to create special banks to handle money from legal marijuana retailers. The bill now goes to the Assembly for consideration. (AP Photo/Richard Vogel, File)
In this Thursday, May 16, 2019 photo, state Sen. Bob Hertzberg, D- Van Nuys, at the Capitol in Sacramento, Calif. The California Senate approved Hertzberg's bill, SB51, on Tuesday May 21, 2019, that would create special banks to handle money from legal marijuana retailers. The bill now goes to the Assembly for consideration. (AP Photo/Rich Pedroncelli)

SACRAMENTO, Calif. — Shut out of the traditional banking system by federal laws, the country's largest legal marijuana market in California could benefit if the state approves a measure creating a special class of banks to handle pot money.

The state Senate voted 35-1 on Tuesday to pass a bill that would allow people to start banks and credit unions that could accept cash deposits from marijuana retailers.

Those banks could issue special checks to the retailers that could only be used for certain purposes, including paying taxes and California-based vendors.

State lawmakers also say such banks would make it easier for licensed pot retailers to pay their taxes, which fell far short of expectations in the first year after legalization.

"This is as close as we can get until the federal government changes its policy," said Sen. Bob Hertzberg, a Van Nuys Democrat and the author of the bill that now goes to the Assembly.

Marijuana has been legal in California since January 2018, but it's still illegal under federal law.

U.S. statutes also prohibit banks from handling money that comes from criminal activity. Banks that knowingly accept money from licensed marijuana retailers haven't been able to get federal deposit insurance.

Meanwhile, pot businesses can't get debit or credit cards or use checks, according to a report by legislative staffers.

The result, according to Hertzberg, is "millions of dollars buried in barrels." He called it a public safety issue, putting retailers at risk of robbery.

Marijuana tax collections were $100 million short of expectations in August. Earlier this month, marijuana revenue projections by the state through June 2020 were cut by $223 million.

Republican Sen. Jeff Stone said the state is losing "probably hundreds of millions" of dollars in taxes each year because marijuana retailers can't write a check to the state.

"They've got to come in with wheelbarrows to carry in all the cash," he said.

Retailers have also blamed low tax collections on sluggish sales due to a still flourishing black market.

Last week, lawmakers rejected a bill that would have temporarily lowered taxes on growers in an effort to help licensed retailers compete with the illegal sellers.

___

The legislation is Senate Bill 51.

Other News

Great Lakes no help for a struggling Trump on road to 270

Aug 15, 2016

Donald Trump needs a place to reset the electoral map, and he seems to be looking at the industrial heartland states on the Great Lakes.

Global stocks dip ahead of release of Fed minutes

Aug 17, 2016

Global stocks and the price of oil dipped Wednesday as investors awaited the release of the minutes to the Federal Reserve's latest meeting for hints on when the next interest rate increase might come

Fed minutes: Conditions could 'soon warrant' a rate hike

Aug 17, 2016

Fed minutes: Conditions could 'soon warrant' rate hike, as near-term risks have diminished

The Budget Report seeks to provide comprehensive coverage and analysis on the current economic, financial issues around the world. First hand finance and economic news all day, every day.