Missouri voters made their intentions perfectly clear when they legalized both medical and recreational marijuana. They voted for a new industry that would simultaneously fund vital state services through a dedicated tax structure. The promise was straightforward: tax revenues from cannabis sales would directly support military veterans, public defenders, and drug-addiction treatment programs.
Fast forward to recent fiscal reports, and the reality looks vastly different from that original promise. A recent report from the Missouri Independent revealed that approximately $95 million in cannabis tax revenue is currently sitting completely unspent in state coffers. Budget projections indicate that this unused pile of cash will remain untouched over the next two years unless lawmakers authorize the intended beneficiaries to access it.
This financial bottleneck is just one piece of a highly critical puzzle. State Auditor Scott Fitzpatrick earlier this year released an audit of the Missouri Division of Cannabis Regulation, highlighting deep, systemic flaws in the state’s medical marijuana program. The audit uncovered severe issues ranging from an easily manipulated licensing process to massive legal bills and inadequate market oversight.
Unused Cannabis Tax Revenue From Missouri Cannabis Industry
When Missourians legalized adult-use marijuana in 2022, they passed a constitutional amendment that divides sales tax and fee revenues evenly among three specific funds. The Missouri Constitution strictly prohibits spending this money on anything other than the Missouri Veterans Commission, the state public defender system, and drug treatment programs that the Department of Health and Senior Services oversees.
Despite this clear mandate, legislative hurdles have kept the cash locked away. Governor Mike Kehoe proposed a budget transferring $131 million of recreational marijuana money into these funds, allocating $40 million each for veterans and addiction treatment, and $51.7 million for the public defender system. However, transferring the funds is meaningless if lawmakers do not actively authorize these agencies to spend the money.
Public Defenders Pushed to the Brink
The Missouri State Public Defender system provides legal representation to citizens who cannot afford an attorney, fulfilling a fundamental constitutional requirement. The office is currently dealing with a massive turnover rate. Director Matthew Crowell noted that low pay is the primary reason attorneys leave the agency.
To combat this, the public defender’s office requested funds to increase starting salaries from $65,000 to $70,000, bringing them in line with the attorney general’s office. They also requested funding to place a mitigation specialist in every district office. These social workers help connect clients with basic needs, heavily reducing the chances of probation violations and return trips to jail.
Despite the availability of cannabis tax revenue specifically earmarked for this purpose, the House Budget Committee significantly reduced these recommendations. Even if the office received everything it asked for, millions of dollars would still sit idle in the state treasury.
Drug Treatment Programs Face Unnecessary Cuts
Funding for substance use treatment and education faces similar legislative obstacles. While the House Budget Committee recommended spending $38.5 million on various drug-addiction programs, proposed budget plans would still eliminate vital initiatives.
Proposals include cutting a $500,000 grant for drug and DWI courts that supports medication-assisted treatment for opioid and alcohol addiction. The budget also targets a $300,000 cut to drug abuse resistance education in schools. State representatives have pointed out that preventative treatment saves the state significant money in the long run, yet tens of millions of available cannabis dollars remain unappropriated for these crucial services.
A Scathing Audit of the Marijuana Program
The unspent tax revenue was a focal point of State Auditor Scott Fitzpatrick’s report, but the audit’s findings regarding the state’s medical marijuana licensing process were even more alarming. The rollout of Missouri’s multi-billion dollar cannabis industry was built on a foundation of inconsistent scoring and a lack of transparency.
The Illusion of Blind Scoring
To ensure fairness, the state contracted a third-party vendor, Wise Health Solutions, to conduct a “blind scoring” process for the 2,257 facility license applications submitted in 2019. The system was designed to keep the identities of the applicants completely hidden from the graders.
The audit revealed that this anonymity was easily circumvented. The state allowed applicants to create their own unique application identifier numbers to attach to their supporting documents. Many applicants simply used variations of their actual business names.
According to the established rules, applications containing identifying information should have been penalized for redaction violations. Instead, graders evaluated them normally. The audit found that 83 percent of applications with identifiable numbers were granted licenses, compared to just a 15 percent success rate for the overall applicant pool.
Missing Notes and Inconsistent Grades
The lack of accountability in the scoring process was exacerbated by explicit instructions given to the graders. The training manual provided by Wise Health Solutions encouraged reviewers to take as few notes as possible to reduce the public records available for potential lawsuits. The manual explicitly stated: “Say it and forget it, write it and regret it.”
Without detailed grader notes, the state had no way to verify why certain scoring decisions were made. The audit identified 59 instances where applicants submitted identical or substantially similar responses to the exact same question, yet received entirely different scores from the same grader. In a highly competitive process where a single point could determine who received a lucrative license, these inconsistencies destroyed the integrity of the program.
Costly Legal Battles
The flawed licensing process resulted in severe financial consequences for the state. Out of the 1,909 applications that were denied, 849 filed formal appeals. Applicants cited the inconsistent scoring and conflicts of interest as primary reasons for their lawsuits.
Defending against this massive wave of litigation cost the Division of Cannabis Regulation over $12.5 million between 2020 and 2023. Due to administrative appeals and settlements, the state ultimately awarded 68 additional facility licenses, increasing the total number far beyond the original constitutional minimums.
Ongoing Regulatory and Oversight Weaknesses
The audit also exposed serious gaps in the ongoing regulation of operational marijuana facilities. The Division of Cannabis Regulation repeatedly failed to perform required annual inspections due to staffing shortages. At one point, the division simply changed the state regulations to remove the annual inspection requirement entirely.
When inspectors did conduct inspections, they sometimes allowed facilities to pass without requiring proof that the facilities had corrected their safety or operational violations. Furthermore, regulators performed minimal inventory checks and relied heavily on self-reporting from the businesses. This lack of physical inventory verification significantly increased the risk of businesses diverting marijuana products into the illicit market.
Even the newer microbusiness licensing program, designed to help disadvantaged individuals enter the cannabis industry, suffered from oversight failures. The audit identified instances where the state approved microbusiness licenses that violated local zoning laws and constitutional distance requirements. The state approved one facility despite it being located just 174 feet from a church, directly violating the 1,000-foot setback rule.
Finally, the audit noted a complete lack of coordination between cannabis regulators and the Department of Revenue. Because the state was not utilizing its own seed-to-sale tracking system data to verify tax returns, an estimated $852,000 in marijuana sales went underreported.
The Path Forward for Missouri Cannabis
The Missouri marijuana industry generates billions of dollars in economic activity, but the administrative framework managing it requires immediate reform. Lawmakers must respect the mandate of the voters and authorize the release of the $95 million in tax revenue to the programs desperately needing support. Why are we collecting millions in tax dollars if the state won’t spend the funds on the programs outlined in the legislation?
