In 2018, the California Equity Act was passed to empower minority business owners impacted by the War on Drugs. The California Cannabis Industry Association (CCIA) recently released an accountability report on the social equity program that specifically examined the initial seven districts that received funding: Humboldt, Long Beach, Los Angeles, Mendocino, Oakland, Sacramento, and San Francisco. The resultant information shows that the social equity program isn’t performing to expectations.
“You’re expected to start basically a million dollar a year business, from scratch, not knowing what the budget is, not knowing what the state’s going to put in front of you in terms of costs. Not having, really, the technical expertise to start the business,” said an anonymous equity applicant in Oakland. “But you’re given a piece of paper saying you’ve got a license, start a business without either the proper capitalization and in that case, in our case, and everybody’s case, the consultants weren’t in place at that time.”
Mendocino County requires social equity applicants to be “extremely low income” or “very low income” – earning between $20,000-$50,000 annually. Social equity applicants in Mendocino must also meet any one of five criteria related to the effects of the War on Drugs. Per Green Market Report, those criteria are:
To date, Mendocino County hasn’t approved a single Equity Eligibility Application. The combination of the income limits and the five criteria have eliminated any otherwise viable candidates. Mendocino County has accumulated over $3 million in total funds for social equity applicants in 2020 and 2021.
Ninety percent of respondents said the lack of capital is a massive problem in their business, and 82% claimed to make less than $50,000 in gross receipts the prior fiscal year. The Oakland Cannabis Commission revealed that the city was sending some equity operators who have fallen out of compliance with the loan agreement to collections. Loan repayment is most often cited as the most pressing cannabis-related social equity issue to focus on in Oakland.
Brandon and Evelyn from Green Paradise, a cannabis dispensary in Los Angeles, said, “The hardest part about the social equity program, I think, for us, definitely raising capital we’ve experienced. So when we think about the funds, that big issue, the program itself, not a lot of information was given directly from the department.”
Of the 200 identified social equity applicants in Los Angeles, only 28 have received temporary approval.
The eligibility, structure, and funding implementation varies from county to county. This lack of uniformity for tracking social equity-related dollars in cannabis across all jurisdictions in California makes finding and analyzing data difficult.
The Diversion, Inclusion and Social Equity Committee recommends the state create a “comprehensive definition for what constitutes cannabis social equity on the state level in order to facilitate more direct and intentional support of marginalized individuals seeking to enter the cannabis industry.”
Until there is statewide consensus for eligibility and funding, California will struggle and fail to fulfill its equity goals. And until the data is publicly available, the CCIA, state, or local governments can make no improvements to assist those who need it most. As noted in the report, more significant financial relief for social equity business owners is necessary to make more funding accessible to these individuals.