The Municipality of Anchorage is facing a nearly $462,000 budget gap in its Child Care and Early Education Fund due to lower-than-projected revenue from a cannabis tax. Voters approved a 5% tax on cannabis products in 2023 to support child care and early education initiatives.

Cannabis Tax Revenue Falls Short

Initial projections estimated $5.9 million in cannabis tax revenue for 2025, but the actual amount collected was closer to $4.8 million. The 2026 forecast initially anticipated $6.1 million, but current estimates predict revenue will be around $5.2 million. This shortfall is attributed to a recent decline in marijuana consumption within Anchorage.

Impact on ACCEE Fund Programs

Christina Hulquist, executive director of the Anchorage Child Care and Early Education Fund (ACCEE), informed Assembly members that a reduction in funding is necessary for 2026. While surplus funds from 2024, the tax’s first year, will partially offset the deficit, a $462,000 shortfall remains.

As a result, the ACCEE fund will pause $400,000 in planned retention bonuses for child care providers and $100,000 allocated for startup costs for new in-home day care businesses.

Remaining Budget Allocations

Despite the cuts, the ACCEE fund will still allocate significant resources to key programs. Approximately $1.75 million will be dedicated to “early educator child care subsidies,” and $2.4 million will go towards direct assistance for child care providers.

Roughly $2 million will fund pre-kindergarten classrooms in low-income schools within the Anchorage School District, and $1.13 million will be used for pilot programs and capital projects, including playground improvements and facility upgrades.

National Trends and Policy Implications

While national cannabis consumption has generally increased with legalization, trends vary significantly by state. Nora Morse, deputy chief of staff for Mayor Suzanne LaFrance, explained that “Marijuana consumption has decreased over the past few years, meaning incoming revenue is also decreasing.”

Morse added that taxes on products like cannabis are intended to discourage use, and the municipality is observing this effect. A recent report commissioned by Gov. Mike Dunleavy revealed that 61% of Alaskans live in “child care deserts,” highlighting the critical need for continued support of the child care sector.