Lamont’s Budget Proposal Assumes Marijuana Revenues

Advocates of social justice, budget hawks and libertarians outline divergent visions for projected revenues

In his budget address on Wednesday, Gov. Ned Lamont not only called for the legalization of recreational cannabis, but allocated expected tax revenue from marijuana sales as part of his budget, signaling his expectation that the proposal will become law. 

“Our neighboring states are offering recreational marijuana on a legal and regulated basis,” Lamont said. “Massachusetts dispensaries are advertising extensively here in Connecticut. Rather than surrender this market to out-of-staters, or worse, to the unregulated underground market, our budget provides for the legalization of recreational marijuana.” 

“Our proposal really centers equity at the forefront of licensing, the workforce, the training, rather than just throwing some of the money at distressed municipalities,” Hughes said. 

Lawmakers have debated marijuana legalization for years, though going into this session, Democratic leaders anticipated that legalization was all but inevitable. The main question still up for debate is how to use tax revenue generated from cannabis sales, with Republicans and centrist Democrats arguing for revenue to be allocated to the General Fund, and progressive Democrats hoping for a more equity-focused proposal that would reinvest in communities disproportionately affected by drug enforcement. 

The Governor attempted to strike a compromise in his proposed bill, which would allocate half of the state’s cannabis tax revenue to fund the PILOT program, which reimburses municipalities for tax-exempt properties.

The other half of the cannabis revenues would be directed towards 25 cities and towns on Connecticut’s Distressed Municipalities list targeting the parts of the state with lowest incomes, highest unemployment rates, and lowest education rates. Lamont also proposed an equity commission to analyze which municipalities have been disproportionately harmed by cannabis production, enforcement and use. 

The compromise solution appears to have satisfied neither side of the aisle, with House Republican leader Vincent Candelora saying marijuana legalization has “now morphed into a social justice proposal” and Democratic House Speaker Matt Ritter saying that PILOT should be funded another way, and that cannabis revenue should “be more intentional” in its focus on equity. 

State Rep. Anne Hughes, co-chairwoman of the Progressive Caucus, denounced the governor’s proposal, and instead threw her support behind fellow caucus member State Rep. Robyn Porter’s bill. 

“Our proposal really centers equity at the forefront of licensing, the workforce, the training, rather than just throwing some of the money at distressed municipalities,” Hughes said. 

Unlike the Governor’s proposal, Porter’s bill legalizes home cultivation, an idea shared by Candelora, who said he supported “the libertarian belief that people should be allowed to grow the plant in their households” as opposed to a “commercialized market.” The Governor’s perceived emphasis on revenue was a concern for Republicans and Democrats alike. 

“I want people to be mindful that it’s not just about revenues, which in Black and Brown communities we’re calling reparations,” Porter said. “It’s about reinvesting that money back into the ones who have been harmed the most.” 

Lamont’s budget proposal also includes a 3 percent optional local excise tax benefitting municipalities, which would bring in an estimated $50 million to cities and towns in the next five years. 

That tax would come on top of the 6.35 percent sales and use tax, which the state estimates would bring in more than $100 million to the state in the first five years, and the 9.5 percent excise tax, estimated to result in $171 million in that same period of time.  

All told, the effective tax rate for marijuana could be exceed 18 percent, which may sound high, but is actually slightly less that Massachusetts’ effective tax rate of 20 percent and well below Washington, which effectively taxes marijuana at a rate of nearly 40 percent

“I think we’re all hopeful that we’re close, but the biggest challenge we face right now is that there are 12 bills running around out there, and we need to get some consolidation of ideas,” Ritter said. “It’s going to be a close vote.”

Office of Policy and Management Secretary Melissa McCaw also said that the tax rates could be adjusted if legal cannabis was too cost-prohibitive to successfully disincentivize the black market. 

“If we needed to tweak those tax rates in future years to ensure that the original policy goals are achieved, Governor Lamont would certainly support that,” McCaw said. 

Sales would begin in May of next year, and the legislation would also allow those convicted of marijuana possession to petition for their criminal records to be expunged. The proposal also allocates funding to address new public health challenges associated with legalization, with resources to support licensing, enforcement, and product safety. 

The addition of the Governor’s proposed legislation to the debate, and the budget’s assumption that legalization will pass, has added urgency to the debate, but legislative leaders say they are still uncertain about the path forward. 

“I think we’re all hopeful that we’re close, but the biggest challenge we face right now is that there are 12 bills running around out there, and we need to get some consolidation of ideas,” Ritter said. “It’s going to be a close vote.”

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