Paid For By Pot? How Marijuana Money Is Shaping School Budgets
2024 | Kira Granito (Staff Writer)
Section 1: Introduction
In 2016, Nevada voters were asked, “Shall the Nevada Revised Statutes (NRS) be amended to allow a person, 21 years old or older, to purchase or sell marijuana paraphernalia, given that the state imposes a 15 percent excise tax on wholesale sales of marijuana?” Those who supported this ballot initiative campaigned on the idea that the marijuana tax would be used to support public schools, which were ranked 47th in the nation at the time, regarding school funding, according to the Education Data Initiative. [1] In a margin of about 4%, Nevada voters proved to be in favor of the legalization of marijuana, given that part of the tax money would go to schools. However, fast forward to 2024, 8 years since the marijuana tax was implemented, Nevada’s national funding ranking has only gone up to 46th in public education funding and remains 50th in public education spending, leading many to ask a new question. Where is the marijuana money going?
Section Two: History of Marijuana and Legislation
In Title 56 - Regulation of Cannabis, the Nevada State Legislator has declared and found that “The cannabis industry is significant to the economy of the State of Nevada” and “A well regulated cannabis industry provides significant tax revenues to the State and runs contrary to the criminal and corrupt elements that exist in an unregulated and illegal market.” [2] However, shortly after the legislation allowing for recreational marijuana went into effect in 2017, complications with tax distribution and external crises started to arise. For example, during the COVID-19 pandemic, state budget allocations began to strain, and educational funding became a point of concern. Major school districts like Clark County School District (CCSD) were not ready for their classes to become completely digital, so there had to be financial accommodations for health and technological emergencies. This redirection of funds to critical areas was not necessarily a concern at the time. However, 4 years later, school districts are starting to see the repercussions of robust school funding plans.
So, if money is still coming in from a rapidly growing marijuana industry and the effects of the COVID-19 pandemic are starting to dwindle, why is it that Nevada still ranks among the lowest in school funding nationwide?
Section 3: Allocation and Management
The truth of the matter is that the historic challenges facing Nevada’s public school funding go beyond just the amount generated by cannabis excise taxes and a worldwide epidemic. Financial problems run deep within Nevada’s school districts and stem from issues with economic distribution and management. According to the Nevada Department of Taxation, Nevada’s cannabis excise tax revenue is expected to exceed $120 million by the end of fiscal year 2024 after reaching $133 million in 2023. [3] However, despite the increase in legislative tax allocations, Nevada’s schools remain at the bottom of the barrel in terms of funding. While many are quick to point fingers at a lack of financial income, the more significant part of the problem is the hole in the barrel: financial mismanagement and bureaucratic delays in the state's revenue distribution.
CCSD serves nearly 75% of the state's student population. [4] Many critics argue that CCSD’s sheer size contributes to inefficiency and administrative chaos. There have been multiple proposals to divide the district, arguing that a smaller structure could improve responsiveness and financial management. However, the calls to revamp the structure of CCSD have come to no avail. Meanwhile, CCSD is expecting to fall $20 million short of their annual budget plan of about $3.48 billion for the 2024-2025 school year, sparking further turmoil. [5]
While it is true that management issues in large representative districts like CCSD may be the cause of Nevada’s educational funding crisis, it is ignorant to place the blame solely on one source. Legislative misappropriations and delayed allocation of funds also exacerbate the inflation of educational funding. The longer cannabis tax revenue remains unused, the less purchasing power it holds in regard to rising inflation costs. This combination of mismanagement at the district level and inefficiencies at the state level continues to complicate Neavda’s public school funding system.
Section 4: Legislation Embezzlement
Between 2020 and 2022 alone, Nevada’s population has grown about 1.17% annually, outpacing the national average of 0.31% during the same period. [6] The majority of this growth has been concentrated in Clark County, and the trend shows no signs of slowing, even after the COVID-19 pandemic, with a 2.71% population increase from 2020 to 2023. [7] This rapid growth has complicated legislative decisions regarding educational funding. As Clark County's population density increases, voting deadlocks have become more frequent due to the differing legal needs of its various regions. On top of that, state funding has been limited because of Nevada’s tax system. Nevada tends to follow a revenue-based funding formula, meaning that education budgets are determined by the state’s available revenue rather than fixed and predetermined expenditure needs.
Under the Pupil-Centered Funding Plan, the model allocates a base funding per-student amount, with additional weighted funds for specific needs, such as English learners and students with disabilities. [8] However, this system has its drawbacks. When available state revenue decreases due to policy changes like tax cuts, education funding also drops, making school district budgets unpredictable. When state revenue declines, as it did during the 2021-2023 biennium, education funding decreases as well. Nevada was forced to reduce its General Fund contributions to education in order to increase funding for other local revenue sources. [9] While some excise taxes from industries like recreational marijuana contribute to education funding, the financial impact of these taxes is limited by nationwide inflation and the rising number of students in districts like CCSD.
Neavda’s educational funding issues are like a hydra: if you cut one head off, two more will grow in its place. According to the Nevada Commission on School Funding, the state spends an average of $12,863 per student, well below the national average of $15,503. [10] Programs like the “Opportunity Scholarships,” which are meant to increase educational access, instead divert critical funds from public schools to private institutions. [11]
Even more concerning, much of the state’s education funding is not reaching students - public or private. A large portion is allocated to Nevada’s Rainy-Day Fund, which allocates a significant portion of educational finances towards unforeseen crises like natural disasters. Governor Joe Lombardo recently announced that the Rainy-Day Fund is now fully saturated, holding over $1.24 billion generated from the State General Fund (about 26% of the funds total). [12] Given Nevada’s low likelihood of such events, critics argue that these funds could be better utilized to address the immediate educational needs of the state.
Section 5: Federal vs. State Law Discrepancies
While marijuana is legal in Nevada, it remains prohibited under federal law. The legal discrepancy between federal and state marijuana laws creates significant challenges for both businesses and consumers. Despite its legalization in states like Nevada, marijuana continues to be classified as a Schedule I drug under the federal Controlled Substances Act, making its use and sale illegal nationwide. [13] This creates a legal gray area where businesses legally operating under state law still face the risk of federal prosecution. As a result, managing and allocating marijuana revenue, especially for state services like education, has become increasingly complex. The ongoing conflict between state and federal laws not only complicates regulatory enforcement but also leaves businesses uncertain about their legal standing and the potential for federal intervention.
In addition to legal concerns, marijuana businesses in Nevada face challenges with basic banking services. Due to marijuana's federal illegality, most financial institutions are reluctant to offer services to cannabis-related businesses. As a result, many marijuana enterprises are forced to operate primarily in cash, creating transparency issues and increasing the risk of fraud. [14] For state governments like Nevada, this also complicates the collection and auditing of cannabis taxes. Without the ability to deposit marijuana tax revenue into traditional banking systems, the state's financial health is less secure, and there are fewer guarantees that the full amount of tax revenue earmarked for education is being properly used.
While marijuana taxation in Nevada has become a significant source for the funding of public services - particularly education - it remains vulnerable due to federal prohibition. If federal laws were to change or if marijuana were reclassified, the financial stability of programs reliant on marijuana taxes could be jeopardized, potentially leaving schools and other services without critical funding. [15] The dependence on this volatile revenue source raises concerns about long-term sustainability and fairness in funding public programs.
Section 6: Future of Funding
Nevada’s marijuana tax was introduced with the expectation that it would significantly boost public school funding. However, rather than increasing the overall education budget, subsequent cuts in education allocations have effectively neutralized any anticipated financial gains from marijuana revenue. The “new” funding for schools has not lived up to expectations, leading to growing public frustration and concerns over transparency in both school districts and the legislative process. This has shifted the focus of our initial questions to one that feels inevitable: What do we do now?
The first step toward fixing our funding issues is to address the problems of our past while considering the questions that will shape our future. It begins with students writing letters to their senators and CCSD representatives about issues that matter to them. Given that Nevada’s per-student spending is still below the national average, lobbying for increased federal and state funding could be a step in the right direction. [16] Efforts to improve school conditions can start by pushing the state to secure grants for better school air conditioning and addressing water shortages. However, the most influential action that can be taken is voting for representatives who will work to reform Nevada’s education system. Supporting politicians who recognize the importance of breaking up large districts like Clark County into smaller, more manageable units can help address localized needs more effectively. Moreover, replacing outdated models like the Pupil-Centered Funding Plan and the rainy day fund would ensure that Nevada is optimizing its educational financial resources.
Above all, there must be transparency and accountability. Marijuana tax revenues should be considered a supplement rather than a replacement for existing educational funding. While the "Paid For By Pot" initiative seemed like a promising solution, the reality has proven more complex. Marijuana tax revenue often ends up offset by cuts in state contributions, leaving the net increase closer to zero or even negative for many schools. With the right adjustments, more transparent policies, and a real commitment to transparency, there is still the potential to address these issues and finally direct those funds where they are most needed: Nevada’s students and schools.
Sources
Stinnesbeck, Jann. “Fact Sheet - 2018 Recreational Marijuana.” Legislative Counsel Bureau (Nevada).
NRS. “TITLE 56 - REGULATION OF CANNABIS.” NRS: Chapter 678A - Administration of Laws relating to Cannabis.
Nevada Department of Taxation. "Cannabis Tax Revenue, August 2024." Nevada Department of Taxation, 2024,
Clark County School District. "Clark County School District." U.S. News & World Report,
Staff, KTNV. “CCSD Puts a Price Tag on Its Budget Shortfall: $20 Million. Here’s What Else We Learned.” Channel 13 Las Vegas News KTNV,
Ibid.
Clark County vs. Nevada: Population Trends over 1969-2022. Nevada Regional Economic Analysis Project.
Nevada Legislature. “An Overview of the Nevada Pupil-Centered Funding Plan for School Finance.” Nevada Legislature, January 2024.
Nevada Legislature. “Nevada Legislative Appropriations Report .” 2023 82nd Appropriations Report.
Lane, Tiffany. “Question in Light of School District Budget Deficit: ‘Where Is the Marijuana Money?’” KSNV.
Nevada School Choice Coalition. "Home - American Federation for Children - School Choice." Nevada School Choice Coalition, February 21, 2020
Zalucki, Rachel. “Nevada’s Rainy Day Fund Is Now 100% Full at over $1.24 Billion.”
U.S. Drug Enforcement Administration. "Marijuana." U.S. Department of Justice.
Financial Crimes Enforcement Network. BSA Expectations Regarding Marijuana-Related Businesses. U.S. Department of the Treasury, 2014.
Ibid.
Nevada State Education Association. “K12 Budget Hearing: It’s a Rainy Day in Nevada.” Nevada State Education Association, May 9, 2023.