House Appropriations Committee hears JFO on cannabis tax revenue and allocations

The House Appropriations Committee on April 1 heard a Joint Fiscal Office briefing on Vermont's retail cannabis tax collections, forecasts for fiscal year 2027, and how proceeds are being allocated across state funds.

Tab Barnett of the Joint Fiscal Office told committee members that the January consensus forecast estimates about $23,600,000 in cannabis excise tax revenue and about $10,100,000 in sales tax for FY27. "Vermont has two taxes on retail cannabis: one is a 14% cannabis excise tax and a 6% sales tax," Barnett said, adding that a 1% local-option sales tax also applies where adopted.

The forecast and revenue-tracker data give the committee a sense of the size and stability of the market: Barnett estimated retail sales at roughly $160 million and said monthly excise collections have settled into a relatively steady range after the market's initial ramp-up. "There are indications that the market is relatively mature," he said, noting moderate year-over-year growth forecasts tied to inflation.

Why it matters: the distribution of cannabis tax proceeds affects the state budget and several program areas. Barnett said the excise tax is split 70% to the general fund and 30% to a substance-misuse prevention special fund administered by the Department of Health. The 6% sales tax is deposited to a universal after-school and summer special fund administered by the Agency of Education and used to award multi-year grants to programs and centers.

The committee weighed the practical implications for agency budgets. Barnett noted that annual fee revenue from market participants is roughly $2.5 million but the Cannabis Control Board's budget request for FY27 is about $7.1 million, creating a funding gap. "No other state has a fee structure that fully supports the expenses of their cannabis regulators," Barnett said, arguing that substantially higher fees would impose a significant burden on small cultivators.

Members asked whether alternative tax designs (for example, taxing by THC potency as some states do) would meaningfully change revenue or fairness. Barnett said converting across bases (retail-percent versus potency-based) is a mathematical lift and offered to gather comparative data; James Pepper, chair of the Cannabis Control Board, said he has category-level sales data and offered to share a report with the committee.

Committee members also raised policy options, including one suggestion to consider directing cannabis excise proceeds into the Health Care Trust Fund to leverage federal Medicaid dollars; members asked staff to follow up with budget office colleagues on whether that idea has merit. No formal motions or votes were taken during the briefing.

Barnett told the committee the JFO will provide a short "Fast Facts" summary on cannabis excise revenues and a revenue-tracker spreadsheet showing month-by-month collections; committee staff said they would post shared materials. The committee recessed for a 10-minute break and said it would return to other agenda items after the materials are posted.