DEBT-REDUCTION DILEMMA: LEGAL POT = $1 BILLION A YEAR

Bankrupt California Is Sorely Tempted to Rewrite the Law for a Pot of Gold

Pot is in the air here on the shores of San Francisco Bay. Not in the
smoke that drifts between the cafes, second-hand shops and indie
music stores of legendary Haight-Ashbury. But in the headlines of
local newspapers, the posters plastered on phone booths and the ads
now airing on the radio.

It has been two months since a proposal to legalize marijuana was
added to California's fall referendum ballot, and the debate on the
subject is in full swing. A similar vote crashed and burned in the
1970s, but proponents feel that this time they could win. Last week,
councillors across the water made Oakland the state's first city to
formally endorse the move, and the latest polls show public opinion
is almost evenly divided.

The proposed legislation is fairly conservative. It would allow
growing, selling and consuming cannabis, but local governments could
opt out, smoking in public would remain illegal, cultivation would be
limited to a small plot and vendors would face severe penalties for
selling to anyone under 21.

But a bigger motivation is something profoundly practical: The state
needs the cash. Badly.

In the wake of a brutal recession, California is heavily in debt - a
$70-billion hole that is making governments at all levels rethink
their spending on just about everything.

The proposed law would put a $50-an-ounce tax on all marijuana sales,
which translates into an estimated $1.4-billion a year, according to
the State Board of Equalization.

"It's basically the first time it's been so attractive - because of
the economic times," says Richard Lee, a driving force behind the
$1-million campaign to collect more than 530,000 signatures (well
over the 433,971 required) to get the issue on the ballot.

He says his desire to legalize marijuana stems from a 1991 carjacking
when police took 40 minutes to respond, a delay he attributed to time
wasted on less pressing criminal matters.

Three years ago, Mr. Lee, who also runs a marijuana dispensary,
helped to create Oaksterdam University, which is named for the
Oakland district often compared to Amsterdam and cheekily calls
itself "America's first cannabis college."

The school teaches aspiring green thumbs the history, politics,
economics, legalities and, of course, the horticultural fine points
of marijuana. But Mr. Lee also sees it as the birthplace of legal pot
in North America. "We have made it a political issue this year ... a
victory in and of itself," he says.

"But we do plan on winning. We have labour unions and other groups
that never endorsed us before that are coming aboard. . Things are
reaching that tipping point."

Cannabis and Classrooms

There certainly are growing signs of tolerance. Last week, on the
same day that Oakland endorsed the proposal, the stately New York
Times published a lengthy ode to "haute stoner cuisine" that explored
the impact of marijuana on the food scene and, in the process,
underscoring how casual use of the drug has become.

Even without the West Coast's cultural stereotypes, California is a
logical choice to make pot legal simply because it already has a
thriving marijuana trade.

Since receiving the green light in 1996, the medical use of marijuana
has grown into a billion-dollar industry. Los Angeles now has more
marijuana dispensaries than public schools - estimated at more than
500, although that number is expected to drop precipitously when more
stringent legislation comes into place in June.

Pot is now so prevalent that Oakland city attorney John Russo argued
in an opinion piece for a local newspaper last week that anyone
trying to enforce the current law is living in a "fairy tale" - and
an expensive one at that.

In an interview, he explains that, considering the fiscal pressure on
governments and "looking at how much money has gone into the
prohibition against marijuana, ... I just don't think we can afford
to continue to pretend the so-called war on drugs has any hope of
eradicating marijuana use.

Others who back the initiative include Jim Gray, a retired Republican
judge who wrote a 2001 book entitled Why Our Drug Laws Have Failed
and What We Can Do About It, and a former Los Angeles sheriff, Jeff
Studdard, who lent his voice to the first radio ad for the Tax
Cannabis Campaign.

Even Governor Arnold Schwarzenegger told reporters this month that he
doesn't support the bill personally, but because of "all those ideas
of creating extra revenues, I'm always for an open debate on it.

"We ought to study very carefully what other countries are doing that
have legalized marijuana. What effect did it have on those countries?
Are they happy with the decision?"

Even so, the measure will not pass in November without a fight. The
recent poll conducted by the Public Policy Institute of California
shows 49 per cent of respondents in favour and 48 per cent against -
hardly a commanding lead - and the campaign to raise millions to get
out the vote has so far brought in little more than $200,000.

"It's a deeply flawed initiative. . What were these people smoking
when they wrote this?" asks Sacramento lawyer John Lovell, who
represents some of the more vehement opponents - the state's police
chiefs and narcotics officers.

He contends that even people in favour in principle will oppose the
bill on other grounds, including what he claims is too lax a position
on pot in the workplace.

"If I come to work and you smell alcohol on my breath, you can send
me home, you can discipline me, you can terminate me," he says. "If I
come to work and my clothing smells of marijuana, I even test
positive, I get to go to work that day."

There's also the more basic argument of whether it's wise, from a
policy perspective, to make marijuana more easily accessible.
Proponents say it's no worse than alcohol.

But many critics (including Canada's federal government) still
consider pot a "gateway drug" that can lead to far more harmful substances.

"I think ordinary people understand it is not a positive social good
for people to get high," Mr. Lovell says. "Because when they get
high, when they get intoxicated, when their five senses are
compromised, they make bad decisions."

Californians also must bear in mind what happened in Alaska, which
became the first state to legalize pot in 1975, when it voted to
allow possession of a small amount for personal use, only to reverse
its decision 15 years later.

Even some of the big players in the state's medical-marijuana
industry oppose legalization, which they fear would drive down prices
and disrupt the virtual monopoly they enjoy.

It also would launch a state-wide experiment in behavioural
psychology, Berkeley economist Alan Auerbach says. Making the drug
cheaper and easier to obtain may well cause usage to skyrocket,
whereas taxing it too highly risks creating a black market for
contraband pot much like the one for cigarettes.

Enforcement would probably remain a problem, especially if many local
governments opt out, but Prof. Auerbach says it wouldn't be the first
time a government has had to find a way to impose a new sin tax. "The
world didn't end when we adopted state lotteries," he explains.

Pot Tours Ahead

Looking ahead to November, Mr. Russo, the Oakland solicitor, remains
optimistic. "I think California may lead the way on this one," he says.

If so, it will certainly catch Canada going in the other direction.
Ottawa is striving to counter its reputation for lax enforcement by
cracking down on illicit drug use, and last week Vancouver's
self-styled "Prince of Pot," Marc Emery, was finally extradited to
the U.S. and jailed for five years after pleading guilty to having
shipped marijuana seeds to growers across the border.

Kirk Tousaw, who is his lawyer and executive director of the Beyond
Prohibition Foundation, says a positive vote in California would show
how to legalize marijuana "in a rational, evidence-based way."

"It certainly provides further impetus for our position, which is:
Cannabis is a commodity that is in great demand on both sides of the
border and lots and lots of people use it responsibly."

Oaksterdam U's Mr. Lee says he imagines a day when California is a
major destination for marijuana tourism, with foreigners spending
more on hotels and bike tours of the Golden Gate Bridge than in
pot-vending coffee shops.

He says his school is a case in point: It brings in $2-million a year
in tuition and "over half of our students now are from out of state.
They come into Oakland and they book hotel rooms and buy food while
they're here."

And what about the pot-smoking and its impact on society?

"It's already happening," he concludes."It's not like the world
changes that much."