CALIFORNIA'S NEW 'POT' OF GOLD

Caitriona Palmer Reports From Los Angeles on How the Unlikeliest of
Weeds May Soon Be Helping the Cash-Strapped Golden State Beat the Recession

Reeling from the effects of a lingering global recession, the economy
of California has gone to pot. So innovative lawmakers in the Golden
State have come up with a novel way to pull the world's eighth
largest economy away from the brink of a financial meltdown: by
legalising the sale and use of cannabis.

In November voters in California will be asked to consider
Proposition 19, a law that would legalise possession and cultivation
of a small amount of cannabis for personal use.

Last week in Oakland, local government officials passed a resolution
that would allow the licensing of four huge cannabis factories,
making the city in northern California the world's first
industrialised pot zone.

The planned factories -- each bigger than a football pitch -- would
house over 50,000 cannabis plants and state-of-the-art facilities to
harvest, dry and package the weed, in addition to the production of a
variety of cannabis spin-off products including hash cookies and massage oils.

For cash-strapped officials eager to replenish empty coffers across
America, a new realisation is dawning: pot equals big bucks.

Potheads can thank the global recession for this sudden change of
heart. With many states suffering massive budget deficits, officials
are realising that taxing the sale of marijuana could bring in
millions of dollars in annual revenue.

Now taxing the sale of marijuana seems as tempting to American
politicians as the movement to end Prohibition was in the 1930s.

"The issue has become seductive in a way that perhaps it had not been
before," said Tom Ammiano, a member of the California state assembly
and a proponent of legalisation. "People see their schools closing,
they see furlough days and reduced health care, and then they see
this $1.4bn industry that's untaxed and unregulated."

Even California's lame duck governor, former actor Arnold
Schwarzenegger -- the man who many Californians blame for the state's
dire economic morass -- has conceded that legalising marijuana might
help revive California's sluggish economy.

The 'governator' -- who said that he smoked pot as a young man in the
seventies -- announced last year that it was "time for debate" on the
legalisation of marijuana.

After nearly six years in office, California's state budget deficit
under Schwarzenegger hovers around $20bn -- despite drastic public
spending cuts over the past two years -- and his approval rating has
sunk below 25pc. Earlier this month state employees and vendors for
the first time received IOUs instead of their usual paycheques.

This week when I drove from Los Angeles to Santa Barbara, evidence of
California's empty bank account could be seen in the potholed
freeways and crumbling bridges along Interstate 101.

Foreclosure signs are still commonplace -- especially in the wealthy
beach communities of Santa Barbara where many dotcom and investment
millionaires have homes. The proposed legislation to legalise
marijuana across California could potentially bring in more than $1bn
a year to the state, said State Assemblyman Ammiano, and ease some of
the pressure on the growing deficit.

"Think of all the pot smokers out there," said a 30-something
Californian woman who favours legalisation. "They can bail California
out of its deficit. Smoke more pot!"

Under the legislation, any person in California over the age of 21
could possess an ounce (28g) of marijuana and cultivate the drug for
personal use in a plot no larger than two square metres.

Should other states across America follow suit, economists suggest
that over $7bn could be raised annually through 'pot revenue' while
an additional $13.5bn could be saved in police and judicial costs --
particularly the annual costs of sending tens of thousands of
non-violent marijuana users to jail. But opponents say that
legalising pot will only cause more social problems, raise
health-care costs and potentially put millions of recreational takers
on a lethal slide towards crack and cocaine.

"What message does legalising marijuana send?" asked a teenage
student in Washington state before a preliminary vote earlier this
year on whether pot should be sold in liquor stores. "That you're
willing to gamble our future for a little tax revenue?"

With the mid-term elections looming in November, some politicians
also hope that by endorsing the 'pot vote', they may grab the
attention of young voters -- who are also partial to a joint or two.

But this strategy can have its drawbacks. Some analysts suggest that
the danger for any politician courting young people by backing
legalisation of pot is that they may be too lazy -- or stoned -- to
vote for it.

Supporters of the bill point to the millions of dollars in tax
revenue that California already collects from medical marijuana,
which has been legally available since 1996 for those suffering from
a range of conditions, including multiple sclerosis, insomnia and chronic pain.

If Californians are willing to spend $200 they can get a prescription
from a local doctor for 'Super Silver Haze' or 'Purple Trainwreck',
and access one of an estimated 2,100 medical marijuana dispensaries,
wellness clinics or taxi services across the state who will deliver
the drug of choice to their door.

This medical 'cannabusiness' earns the city of Oakland an annual
turnover of $28m through tax revenue. The city is now bidding to
become the new Silicon Valley of cannabis cultivation, with the
recent council vote approval to open four super cannabis factories.

Pot is currently illegal in the United States but there has been a
significant relaxing of the laws in the past decade. The Obama
administration has openly said that it will leave the medical
marijuana clinics alone -- as long as they play by the rules.

Even the president has admitted to smoking pot in the past. When
asked by reporters if he had inhaled he retorted, "I thought that was
the point." But experts say that it is still unclear whether the
federal government would step in should states begin to legalise the
drug on their own.

But across America, the balance seems to be tipping in favour of
those who want to treat marijuana like alcohol or cigarettes: as a
drug to be licensed, taxed and sold under state supervision.

"We're one step closer to ending cannabis prohibition and the unjust
laws that lock people up for cannabis while alcohol is not only sold
openly but advertised on television to kids every day," said Richard
Lee, a pot enthusiast and entrepreneur who led the Proposition 19
initiative in California.

A poll last year showed that 56pc of Californian voters support
legalising pot and taxing its proceeds as a means to stemming the
state's financial mess, and that more than 70pc of Americans favour
the use of medical cannabis.

All eyes -- Democratic and Republican alike -- are now on California.

If California votes to lift the ban on pot then the tide of
legalisation may sweep across the US. Come 2011 it may not be just
California but other cash-strapped states who will be finding their
pot of gold at the end of the electoral rainbow.