Hartford, CT (Hartford Business Journal ) — In just six months, the COVID-19-induced economic recession has pushed Connecticut’s unemployment rate up to 15% as the state budget deficit is also projected to top $2.1 billion in the current fiscal year.
Looking for ways to jumpstart Connecticut’s economy — which never fully recovered from the 2008 financial crisis — and minimize the need to cut services or raise taxes, some state lawmakers and advocates say there will likely be a groundswell of support for more “sin tax” revenue in the 2021 session, which begins Jan. 19.
That could pave the way for sports betting, internet gaming and recreational marijuana legalization, which have been hot-button issues that have garnered millions of dollars in lobbyist spending at the state Capitol in recent years.
“There’s going to be a big need for revenue,” said Sen. Paul Formica, an East Lyme Republican and ranking member on the General Assembly’s Appropriations Committee, which leads the state budget-writing process. “I’m sure there is going to be a big discussion on sin taxes in the long session starting in January.”
Connecticut’s two tribal casinos, Mohegan Sun and Foxwoods Resort Casino, have complained that neighboring states with sports betting, internet gaming, iKeno and iLottery have a competitive advantage with those new offerings. Reporting a 20% dip in July slot revenues, Foxwoods last month said those states — including New York, New Jersey and Pennsylvania — since 2018 have collectively generated nearly $100 million in tax revenue from those games.
Recreational marijuana advocates also say Connecticut needs to revisit legalizing cannabis for those 21 years and older because the new industry could generate total revenue up to $180 million in the second full year of retail sales.
Estimates offered by state lawmakers and marijuana-legalization advocates project that recreational pot sales could raise up to $60 million in tax receipts in the first fiscal year of adoption.
But revenue from sin taxes, such as those on liquor, cigarettes and gambling, are volatile and difficult to project, according to a 2019 analysis by Pew Charitable Trusts, which means they won’t be a panacea to the state’s looming budget woes.
Other states hit hard by the pandemic are also looking to recreational pot legalization. Pennsylvania’s governor, for example, recently called for legalizing pot as part of his state’s economic recovery plan.
Paired with broad public support, according to recent polling, proponents say Connecticut could get out in front of two promising industries.
“Every little bit helps in a $20-billion budget with a $3-billion deficit,” said Formica, a restaurant owner whose 20th Senatorial district has a large population of casino workers. “We can learn from other states, both the good and the bad they have experienced.”
Uncertain rights to sports betting, online gaming
While most lawmakers are well-versed on the pros and cons of legalizing sports betting, concerns remain on how online games might complicate passage of a comprehensive gambling expansion.
Additionally, the casinos and Gov. Ned Lamont’s administration have been at odds over sports betting, with the tribes arguing that their exclusive rights to casino games in Connecticut include sports betting if permitted. But off-track betting operators, the Connecticut Lottery Corp. and others are also vying to participate in the new potential offerings.
The governor’s office has expressed interest in a bill that would legalize only sports betting, but with terms opposed by the tribal leaders, the Connecticut Mirror reported in early March. Sportech Venues Inc., which holds the exclusive license to offer off-track betting in Connecticut, recently penned an op-ed that blamed the tribes for blocking sports betting legislation.
George Henningsen, chair of the Mashantucket Pequot Gaming Commission, refuted those claims, stating that the tribes are willing to consider opening sports betting to other operators, but that they own exclusive rights to it. After all, the tribes argue they have made nearly $9 billion in gaming payments to the state’s budget since 1993.
Meanwhile, Mohegan and Foxwoods have teamed to jointly build a satellite casino in East Windsor but that project has been stalled by legal and zoning issues, and the city of Bridgeport has lobbied for its own casino, which the tribes and MGM have previously expressed interest in.
Rep. Matt Ritter (D-Hartford) says negotiations surrounding gambling expansion have not progressed in his four-plus years as House majority leader.
“I’m kind of at my wits end with everything going on with our casinos,” said Ritter, who would like to see sports betting and online gaming offered in Connecticut. “We need to move into the 21st century. The fact that we do not have sports betting is beyond silly.”
Ritter said he sees a path for both the tribes and other operators to have a piece of sports betting and online gaming, with the casinos taking home the largest share of the new revenue stream.
“I fully support it, and at some point I’m not going to negotiate behind closed doors for months on end,” he said. “I will just put it on the floor, people can vote any way they want. At this point, I’m sick of having backdoor conversations.”
Officials from both Mohegan and Foxwoods did not respond to requests for comment.
Connecticut Lottery Corp. CEO Greg Smith said he was optimistic that the governor’s budget bill last session included internet lottery revenues, and that the virtual offering seemed to be gaining momentum among state lawmakers before the pandemic cut short the 2020 legislative session.
Smith says the Rocky Hill-based Lottery, which has recorded a 15% bump in sales over the last three months, would be the best handler of sports betting because it would return all profits to the state.
The Lottery estimates that it would return to the state $45 million from iLottery sales in the first five years of operation, and $30 million in sports betting revenue after the inaugural debut. Both revenue estimates would grow over time, he said.
“The idea of getting into a serious conversation and figuring out what’s possible, in my opinion, is the best approach,” Smith said.
Recreational pot facing many hurdles.
Similar to sports betting, there’s an underground market for marijuana that has no public health or safety standards. Estimates show that roughly 12% of Connecticut’s 3.5 million residents use the federally illegal drug in some way, advocates say.
Adam Wood, a co-director of the Connecticut Coalition to Regulate Marijuana, a three-year-old chapter of the nationwide Marijuana Policy Project, said the state should be eager to regulate the sale of marijuana for both safety and economic reasons.
“The fact that this regulation would not only bring public health and public safety benefits, but could provide jobs and revenue in a time when the state needs it the most, certainly makes the issue increasingly relevant,” said Wood.
But regulating marijuana is a complicated task. Just ask Massachusetts and Illinois, which have both run into many regulatory and supply challenges since adopting recreational cannabis use in recent years.
Questions facing its passage in Connecticut include: How would recreational sales be regulated?; How would producers meet demand?; How would retail sales be taxed?; How would the state provide opportunities for minority-owned businesses?; Would the state expunge prior cannabis convictions?
An official from Fine Fettle Dispensary, which has locations in Newington, Willimantic and Massachusetts, says the state has a strong medical marijuana program, but it’s not large enough to supply products for a recreational market. In fact, no state has been prepared in the shift from medical to recreational pot use, the company says.
“We need to be prepared in terms of supply to get all of the revenue they are hoping for, and be the premium program in the area, and keep prices low,” a company spokesman said. “Those questions are really important.”
Please note: This content carries a strict local market embargo. If you share the same market as the contributor of this article, you may not use it on any platform.