Spending the marijuana money on education makes political sense, but this alone doesn’t do anything to increase education funding.
“Last session, the marijuana retail tax money did not go where it should have due to political gamesmanship,” Gov. Steve Sisolak said yesterday. “We are here today to say, that’s going to be fixed this session.”
Democrats introduced Senate Bill 545 yesterday. It would move the proceeds from the retail sales tax on marijuana into the Distributive School Account. The tax contained in the marijuana initiative, a wholesale tax, already goes there. But many people don’t understand that there are two separate taxes, the second on retail sales. They think they were tricked into voting for marijuana legalization. That’s why this is smart politics.
Assembly Speaker Jason Frierson said the move would send “about $120 million to the DSA.” The Clark County School District says it needs $120 million more to fund the raises promised by Sisolak. Combine those two bits of information and it looks like a budget solution is in sight.
In reality, however, this move won’t increase education revenue by one dime.
To understand why, imagine you’ve guaranteed that your son will take home $50,000 a year. But his current job pays only $30,000, so you subsidize him to the tune of $20,000. A friend offers to give you or your son $5,000 a year. Does it change your son’s take-home pay if the friend gives the money directly to your son, instead of to you? No. If your son’s earnings go up $5,000, he’ll receive $5,000 less from you. His total take-home pay remains the same.
That’s analogous to putting the marijuana money into the DSA.
Nevada currently guarantees each local school district an average of $5,967 per pupil through the DSA. That’s just a part of Nevada’s total per-pupil spending, which is $9,329. The current cost of the per-pupil guarantee is $2.9 billion. Including money for class-size reduction and special education, Nevada’s total spending obligation through the DSA is $3.2 billion.
The first funding sources for that obligation are “local” sales and property taxes. They pay for around half of that amount.
That leaves the state directly responsible for $1.6 billion. To help pay that bill, state government has put several taxes directly into the DSA, including revenue from the wholesale tax on marijuana.
Combined, those taxes equal around $400 million. That leaves a $1.2 billion hole, which is Nevada’s general fund contribution. To recap, Nevada state government guarantees $3.2 billion in funding, but spends only $1.2 billion from the general fund.
Watch what happens when lawmakers put a new revenue source directly into the DSA, such as the $120 million from the retail sales tax on pot. Now, state tax contributions to the DSA equal $520 million compared to a $1.6 billion spending obligation. This means politicians need send only $1.08 billion from the general fund to the school account.
This proposal will create a round of positive headlines. But all it does is change the source of education funding, not the amount of that funding.