Last Thursday, something interesting happened on TVW. The state’s new pot adviser, Mark Kleiman, told interviewer Austin Jenkins that the state’s marijuana math is way off. After admitting that his company, BOTEC Analysis, is an acronym for "Back Of The Envelope Calculation," Dr. Kleiman ran through just such a calculation in which he predicted the state could expect a maximum of $180 million in revenue—far less than the $250-450 million predicted by our state Office of Financial Management.
Kleiman said that the "estimate running around... was the top range that the revenue department put together, and everybody's sort of written that down as the number, that there's $450 million a year in [state government] revenue." But, he explained, "I think if they could bring in $100 million [the first] year they would be doing good work."
Kudos to Kleiman for injecting skepticism and conservative estimation into the daydream that is cannabis revenue forecasting. We need to set the bar lower, in part because the state knew, or should have known, that its pot revenue calculations were based on inflated numbers, math errors, and absurd estimates. It was a bill of goods sold to voters, and it likely helped legal pot succeed at the polls.
Analyzing the State's Data
I've gone through the state's data—and I've been begging them about faulty reasoning for the past few months—and this is why I think they had to have known that their marijuana math was bogus.
The problem began with oversize estimates for how much pot we consume (which, in turns, affects the estimates for tax revenues from all that pot). In March 2012, and again in August 2012, the Office of Financial Management released a mandatory fiscal analysis for Initiative 502. To calculate those tax revenues, OFM created a marijuana consumption worksheet in which they predicted a pot market requiring 188,000 pounds per year, a market which could generate a half billion dollars in tax revenue.
The media ran with those numbers. As a Seattle Times headline read, "State: Potential I-502 pot revenue double what supporters predict." The article stated we could expect upwards of $560 million in taxes. For the next six months, Initiative 502 proponents used the state's numbers to tout the predicted tax windfalls as a main reason to support the proposal.
But it turns out the state's Office of Financial Management intentionally inflated those numbers without disclosing that fact in the I-502 fiscal impact statement. In those reports, OFM wrote:
Frequency of consumption is estimated using the pattern contained in the United Nations Office on Drug and Crime, 2006 Bulletin on Narcotics, Review of the World Cannabis Situation, page 48. The frequency of consumption by users ranged from a low of 18 percent consuming once a year to 3 percent consuming daily. Applying this consumption pattern to an estimated 363,000 Washington marijuana users, and assuming 2 grams of marijuana per use, the number of grams consumed annually is estimated at 85,100,000 grams.
To most people, especially people who don't use pot, these numbers may seem completely acceptable. But most pot smokers will recognize that two grams is not a typical average use. That's like smoking two joints in the morning and smoking two joints at night—which is a lot for all but the most seasoned pothead. Most stoners take a hit or two, which is closer to a quarter gram or less.
The basic marijuana math used by our state's official estimators was to multiply the number of pot users by how often they smoke and how much they smoke—CONSUMPTION = USERS x FREQUENCY OF USE x GRAMS USED PER DAY. To fill in these three values, OFM relied on two studies: the National Survey on Drug Abuse from the federal Department of Health and Review of the World Cannabis Situation from the United Nations.
The State's Estimate of Users
The federal data suggests 18 percent of people below age 25 smoke pot compared with 6 percent of people 26 and older. OFM applied those percentages to arrive at 363,000 potheads in Washington State. This math may be a bit too simple, but it works for me.
The real problem is with the next two numbers OFM estimated: how much pot people smoke in a sitting and how frequently they sit down to do so.
The State's Estimate of Grams Used Per Day
OFM estimates the average amount of pot smoked is 2 grams per day of use, and this data comes from the UN. Unfortunately, the UN report doesn't say that at all. The UN data about the average serving of pot (starting on page 58 of the report) provides a few numbers:
New Zealand study: average use is 60% of a cannabis cigarette per day
"Grey literature" suggests this is enough to get high
The existence of "one hitters" confirms a tiny bit of pot will do the trick
Medical pot study: Heavy users may need 2-10 joints per day
The average coffeeshop visitor in the Netherlands consumes this much
Drug monitors in the UK observe this mean usage rate
An Italian study showed most people smoke very little, but a few daily users may smoke this much
Australian researchers found an average use of 2 joints per day
A Costa Rican study of 41 super-heavy smokers found this super-heavy daily rate
Two studies of religious potheads suggest a tiny number of rastas smoke a shit-ton of marijuana
From all of these pieces of data—including the 2 grams per week that 600,000 coffeeshop visitors in the Netherlands average—OFM chose to run with 2 grams per day, which is the amount of marijuana used by 41 super-heavy users in Costa Rica and by some daily smokers in Italy. Nowhere else in the document, or the world, do average consumption estimates reach 2 grams per day.
The State's Estimate of Usage Frequency
OFM wrote in the I-502 fiscal impact statement that its frequency of use estimates came from the UN report, and ranged from 18 percent consuming once per year to 3 percent consuming daily—or a maximum of 365 times per year. Nowhere did they indicate these numbers had been intentionally modified. But in the Marijuana Consumption Worksheet released with the I-502 fiscal impact statement, OFM changed two numbers before copying the UN data into their own tables.
Here is the UN data compared to the OFM data (in theory, the numbers should be exactly the same across the table, but OFM made two undisclosed changes):
Frequency Category UN Annual Uses
Frequency Category OFM Annual Uses
% of Users
Both of these tables show 18 percent of pot users smoke an average of 2 days of the year (the report actually says 1-3 days per year, and OFM averaged this number). Both tables also show that 7 percent of potheads smoke 365 days of the year. But one row of data, which shows 3 percent of potheads use 130 days of the year (106-155 times per year averaged) was replaced with the number 730, a fivefold increase in that row's data. This results in a 15 percent consumption increase from the methodology claimed in the I-502 fiscal impact statement.
When I pointed out these discrepancies to OFM in February, fiscal impact statement author Julie Murray confirmed that one of the numbers was indeed a copy-and-paste error. But the larger discrepancy, wherein OFM replaced the category "106-155 times per year" with "730 times per year," was intentional. In an email, Murray explained this data change:
"The 730 times per year was deliberate—based off of some information about higher doses for people who get inured to the normal dosage (discussion of this is a couple of pages later in the report), and need about twice the dose (the 730 = 2 * 365).
Then why was intentional modification not mentioned in the I-502 fiscal impact statement, which says the maximum boundary is "3% consuming daily," or 365 times a year?
It was at this point that OFM began ignoring me and refusing to answer my questions. Throughout February and March I contacted the agency five times via email and three times via telephone, trying to get an answer to this question. At one point agency spokesperson Ralph Thomas told me he didn't understand my intentions in asking these questions, that the numbers are just a rough estimate anyway, and that he doesn't see why this matters.
At least three times I asked the agency why it did not write in the I-502 fiscal impact statement that it had intentionally modified the UN source data. On March 20, Mr. Thomas finally responded to me via email, quoting the above-statement from Julie Miller and saying, "We don’t have any further response."
That leaves a number of unanswered questions. If OFM wanted to alter upward the "daily user" category, why didn't it alter the actual "daily user" category—why instead did they replace a smaller category with the astronomical "730 times per year"? And why did they not disclose in the I-502 fiscal impact statement that they had intentionally inflated source data used to calculate their marijuana consumption estimate?
Just this one miscalculation leads to a 15 percent inflation to the amount of pot—and the amount of tax revenue—OFM's stated math would have produced. Furthermore, OFM's decision to cherry pick a statistical outlier as the norm—this claim that the average pot user smokes around 4 joints at a sitting—more than doubles the revenue estimate. If OFM had not modified the UN data on frequency of marijuana use, they would have estimated 28,000 fewer pounds of pot. If they also would have assumed Washington potheads are half as baked as Costa Rican rastas, their pot estimate would drop from 188,000 to 80,000 pounds of pot. If they assumed we were like coffeeshop users in the Netherlands, who use 2 grams per week, the estimate drops to 23,000 pounds of pot.
That makes me wonder, would Washington citizens have legalized pot if they thought the tax windfall would be around $50 million versus $500 million? Who knows, but at least our state's new pot adviser is willing to rain on the pot parade by suggesting our super-flowery revenue estimates are a pipe dream.
Unfortunately, this means that our state government is not going to get all the marijuana tax money it was expecting. Those funds were promised to pay for the state's Basic Health Plan, community health centers, substance abuse treatment and education, and now our legislature wants to direct the remainder of our pot tax windfall into ealy childhood learning programs. But that money may not exist in quite the sum the state predicted. As Kleiman says, we'll be lucky to get one fifth of that.
The TVW interview with Mark Kleiman can be viewed here.