States are using tax revenue from marijuana to plug holes in their budgets and address serious problems.

At the beginning of legalization, states had no idea how much money they might earn from marijuana taxation. Without that information, the money was initially earmarked toward less critical budget items like drug education programs and minor services. That is quickly changing.

Municipalities and states are drooling at the large tax receipts from the cannabis industry and as they get more comfortable with the steady stream of dollars they are looking at bigger projects for capital deployment.

Colorado is proposing to shift $16.3 million from marijuana tax revenue to a program that will build permanent affordable housing. Currently, the law states that these tax dollars can only be spent on marijuana- and addiction-related measures. Governor Hickenlooper wants to build 1,200 units for chronically homeless people and another 300 for temporarily homeless people. He also wants to pair the housing units with behavioral services.

Colorado's homeless population has increased to 8 percent and some blame that on the legalization of marijuana. The reasons are debatable, but the key item is that the state is looking to solve an ongoing civic problem with its marijuana tax money. On the municipal side, Edgewater CO used its tax revenues from marijuana to rebuild its sewer system, repair streets and will fund half of the cost of a new civic center with the money.

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Oregon estimated it would rake in $44 million in tax revenues in 2016; instead, they counted $75 million. The money is supposed to go to schools and police agencies, but the state first has to reimburse the department that oversees the program and they haven't done that yet. Still, this is only the first year of the program and if the numbers keep increasing, predictably the state will look to use that money for other programs. 

Washington state made a similar miscalculation. They forecast $374 million in marijuana tax revenue for the 2016-2017 budget, but they're on pace to take in $472 million. Some of it is allotted to education and substance-abuse prevention programs and a significant portion goes to funding Medicaid. The state is under a court order to provide more money to its public schools and some politicians are looking at the cannabis tax receipts as a way to satisfy the courts. 

Michigan is is considering using cannabis money to repair potholes. Supporters of adult use legalization in that state are hoping to get it on the ballot in 2018. They are proposing that after the program is funded, leftover tax dollars would be allocated with 35 percent going to schools and 35 percent going towards roads and bridges. The remainder would be given to the local communities. 

School System

Schools, infrastructure and law enforcement are major budget items for any city and state. Years of penny-pinching has left many of these neglected issues in need of updates and the federal government hasn't managed to approve any big spending bills. That leaves it up to the states and cities.

It becomes clear that these city leaders will weigh spending those allotted millions on more substance-abuse prevention programs versus repaving roads or repairing schools. It won't take long for them to change the existing laws for more flexibility in spending the new source of income.