California officials expect a tax windfall from legalized pot. But they have a problem: With marijuana still banned by the federal government, there are no institutions to finance the state's fledgling marijuana industry.
“We're trying to figure out how we bank a billion dollars in expected tax revenue in 2018,” state Treasurer and 2018 gubernatorial candidate John Chiang said on “Inside OC with Rick Reiff.”
To that end, Chiang has convened the Cannabis Banking Working Group, comprised of elected officials, bankers, law enforcement, regulators and industry reps, to try to bridge the state and federal divide.
Voter passage of Prop 64 last November legalized recreational use of marijuana in California beginning next year. But the federal prohibition effectively bars banks and other traditional financiers from offering loans, checking accounts and other services to pot-related businesses; that could force the businesses to remain cash enterprises, hampering their growth and frustrating enforcement.
Chiang said he's trying to forge a bipartisan consensus with treasurers in other states that have legalized medical or recreational pot and have them work with their governors, Congressional delegations and the Trump Administration.
Chiang said the state can't finance the pot industry itself because it has the same restriction as commercial banks: “We have to comply with federal law.”
In a wide-ranging interview, Chiang expressed ambivalence toward the controversial bullet train, whose estimated cost is approaching $70 billion: “I am a proponent but not a strong proponent.”
Chiang said if he became governor he would launch a “massive” effort to find private investors for the train, but if such funding did not materialize, “at some point you have to terminate the project.”
Chiang touted the new California Secure Choice plan, a state-administered investment program for workers whose employers do not provide a retirement plan. Chiang said “millions” of Californians will benefit from the paycheck-deduction program, which has been opposed by the financial services industry. Chiang said there would be no risk to taxpayers even if the individual retirement accounts experience losses.
Chiang sits on the boards of the CalPERS and CalSTRS retirement systems, whose unfunded pension liabilities are now estimated at $170 billion. He called the mounting deficits “an important issue … We have to address it and we have been addressing it.”
In his run for governor, Chiang, a Democrat, is touting his financial expertise. Before being elected state treasurer he was state controller, helping to steer the state through the 2008 financial crisis. His low-key persona contrasts with other declared candidates, including Lt. Gov. Gavin Newsom and former Los Angeles mayor Antonio Villaraigosa.
“I don't need to be the outsized personality,” Chiang said. “I just want to be the person who delivers effective and positive results.”
Talk about coincidences: Chaing recalled his first campaign in 1979, for vice president of the student council at Carl Sandburg High School in suburban Chicago. His running mate atop the ticket was Dave Jones. Jones is now California's insurance commissioner, meaning these two high school buddies from the Midwest comprise one-fourth of California's statewide elected officeholders.
And, Chiang said with a smile, Jones has already endorsed him for governor.