Given the level of economic distress that has prevailed in our state for at least the last 20 years or so, it’s astonishing that elected officials and taxpayers have been looking for answers without much success.
The punishing tax increases of the Malloy years have gotten us nowhere. And those such as yours truly, who often resist tax increases, are hard-pressed to identify areas of the state government in which to find substantial savings through spending cuts and the like.
The matter has taken on additional urgency. The administration of Gov. Ned Lamont is projecting a $2.1 billion deficit for the fiscal year that started in July and a $3.5 billion deficit for the next two fiscal years. Debt and unfunded pensions are 33% of Connecticut’s gross domestic product. Lamont has acknowledged that the amount is one of the highest in the nation as a percentage of GDP.
We can spend the estimated $3.1 billion Rainy Day Fund to keep us temporarily afloat. But if you still want Connecticut to claw its way back to solvency, then tell me specifically how you would achieve those savings without finding new revenues. A study that Lamont recently assigned to the Boston Consulting Group on downsizing state government while capitalizing on an anticipated wave of state employee retirements could yield $500 million in savings, but that could take many years to fully realize.
So along comes respected UConn economist Fred Carstensen with his own study. This one predicts that if Connecticut were to legalize recreational marijuana, revenues of as much as $1 billion could be realized over the first five years – or for the first four years if you don’t count the initial 12 months spent getting the program off the ground. By year five, Carstensen projects as many as 17,000 jobs could be created.
I’ve always liked Carstensen, who heads the Connecticut Center for Economic Analysis, which specializes in economic impact and policy analysis studies, and have found his previous work to be thoughtful, credible and data-driven. In this case, however, some skepticism is in order. Carstensen’s study was funded by the Marijuana Policy Project, a group advocating for full legalization of cannabis. Still, I find it hard to believe Carstensen would risk his reputation by inflating numbers and pandering to the MPP. I’d be surprised if he needed the money that badly anyway.
Carstensen’s report is entitled Projecting Economic Impacts of Legalizing Marijuana in Connecticut, and while the numbers do strike me as a tad optimistic, there is no doubt that legal cannabis sales would generate significant revenues for the state and its municipalities without causing a lot of problems – though I’m sure the cannabis haters out there will disagree with that latter assertion.
My day job is up in the Berkshires, where I’ve been a newspaper editor since 2013. I’ve been an on-the-ground witness to the ongoing cannabis phenomenon in Massachusetts, from the vote to legalize by ballot initiative in November 2016 to exactly two years later when the first store actually opened.
One of the first to open was Theory Wellness, just down the road from my office in Great Barrington. Most town officials were happy about it, even if they aren’t exactly cannabis enthusiasts. Local officials were psyched because, unlike Connecticut, Massachusetts allows municipalities to enact so-called “local-option” sales taxes whereby a town can add up to 3 percentage points to certain goods and services such as hotel rooms and meals in restaurants. The legislature in Boston extended the local option to include cannabis sales.
Marijuana buyers pay the standard 6.25% state sales tax, a special state-imposed 10.75% excise tax and the 3% local option sales tax collected by the state and returned to the towns. So when surveying a menu or talking to a “budtender,” most customers know they’ll be paying an extra 20% on top of the list price. In addition, as part of a “host community agreement” towns negotiate with the cannabis business, a so-called “community impact fee” of three percent of gross sales.
For its first six months of operation alone, Theory paid nearly $1 million in taxes to the town of Great Barrington. This is a town of 7,000 full-time residents with an operating budget of only about $30 million, including education spending.
This is basically free money. The long lines and clogged parking lots during Theory’s first few months of operation necessitated police details, for which the company itself was legally obligated to pay.
I have not seen numbers from the second and third quarter. Those will be down considerably because recreational sales were suspended for several weeks and, even after the stores reopened for business, sales were slow because – one Berkshire County cannabis store employee told me – during the shutdown many customers went back to black-market dealers and never returned.
The state announced in the beginning of August that since the first store opened in November 2018, Massachusetts has collected more than $150 million in tax revenue on $785 million in gross sales. That number is bound to decline as the product is legalized in places like Connecticut and New York. But it might rise if more people who went back to the black market during the pandemic return to the stores in the months to come. Also bear in mind that Connecticut has half the population of Massachusetts.
So if you don’t think Connecticut should legalize adult-use cannabis and you don’t want taxes to increase (that’s the typical conservative line), then where, exactly, will you find the savings in the state government to help close a budget gap of several billion over the next few years?
We can stand on our high horses and feel morally superior as our neighbors legalize, but those who want the drug will drive to Northampton or the Berkshires (I’ve seen and spoken to them) and spend some money elsewhere in those towns. We’re already driving businesses away from Connecticut. Do we really want more residents to look elsewhere for recreation?
Legal weed isnt going to fix Connecticut’s fiscal woes but it will surely help. It should go without saying that maintaining a prohibition on a substance that’s less harmful than alcohol – and one that will bring in badly needed revenue and jobs – makes no sense. Too bad the subject is unlikely to be raised in this week’s special session of the General Assembly.
Contributing op-ed columnist Terry Cowgill lives in Lakeville, blogs at CTDevilsAdvocate.com and is managing editor of The Berkshire Edge in Great Barrington, Mass. Follow him on Twitter @terrycowgill or email him at email@example.com.
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