EDITOR'S NOTE: Interested in the marijuana business industry? NJ Cannabis Insider is a new premium intelligence briefing that features exclusive weekly content geared toward entrepreneurs, lawyers and realtors. View a sample issue.

In the budget passed at the 11th hour last month, state officials penciled in $20 million for marijuana tax revenue this fiscal year, which runs from July 1 to June 30, 2019.

Based on data from previous years, the math doesn't work.



New Jersey's medical marijuana program would have to grow exponentially to reach $20 million in taxes, meaning state officials may be anticipating more tax revenue than the program can possibly generate.



In 2017, New Jersey generated $1.9 million in taxes off medical marijuana, according to data from the state Treasury Department. The five dispensaries that were operating last year sold 5,200 pounds of cannabis to roughly 16,000 patients.





Since the beginning of 2018, and especially since Gov. Phil Murphy issued an executive order in March that expanded the medical marijuana program, patient numbers have shot up. As of publication, there are almost 27,000 patients registered in the program.



After Murphy's executive order, the state has added about 500 patients per week to the program, growth that isn't expected to slow.



"We do expect that registration level to continue," Assistant Health Commissioner Jeff Brown said. "We are wrapping up a needs assessment with projections that will be released publicly once complete."



So, let's assume that 500 patients are added to the program weekly throughout the fiscal year. By next July, the program would have roughly 51,000 patients. If those patients buy marijuana at the same rate as patients did in 2017, they would buy roughy 13,106 pounds of cannabis, or about 209,696 ounces.



At $100 for a quarter-ounce, based on recent pricing information from the in-state dispensaries, total revenue for the six alternative treatment centers would be roughly $83.9 million. Since all the state takes from medical marijuana sales is the 6.625 percent sales tax, the state would get just more than $5.6 million in tax revenue by July 2019, barely a quarter of the estimated $20 million in revenue.



That calculation is based on patients buying marijuana at the same rate, which could jump in the coming year. Murphy wants to increase the maximum amount patients are allowed to buy in a month, from two ounces to four, and more ailments are being added to the state's program.



But even if patients start buying medical marijuana at twice the rate of 2017, the state's tax revenue would only reach $11.2 million for this fiscal year, based on the above calculations.





A person in Murphy's administration said the $20 million estimate was a conservative guess, based on the returns of Arizona and Michigan, two programs that are much bigger than New Jersey's. Arizona has 172,227 patients and Michigan has 269,553 patients



At $100 for a two-year registration for the roughly 25,000 new patients expected to enroll in the medical marijuana program between now and July 2019, the state would generate $2.5 million.



Adding that to the generous $11.2 million estimate of sales tax revenue on medical marijuana, we're at $13.7 million, still more than $6 million short of the projected revenue.



But expansion could be the final wildcard.



The Department of Health will add six medical marijuana providers later this year, which could bring in application fees to be added to revenue. But what those fees would be isn't clear at the moment. And it's not expected that those dispensaries will be selling before spring of next year, leaving only a few months in the fiscal year 2019 budget window. All of that might push the total to $15 million.



How the state plans to fill that gap remains to be seen.

Are you interested in the N.J. cannabis industry? Subscribe here for exclusive insider information from NJ Cannabis Insider.

Payton Guion may be reached at PGuion@njadvancemedia.com. Follow him on Twitter @PaytonGuion. Find NJ.com on Facebook.