Pot revenue stream unpredictable, study finds

FILE - AUGUST 29: The U.S. Justice Department said August 29, 2013 that it wouldn't sue to challenge laws legalizing marijuana in 20 states. LOS ANGELES, CA - SEPTEMBER 7: A budtender handles marijuana at Perennial Holistic Wellness Center, a not-for-profit medical marijuana dispensary in operation since 2006, on September 7, 2012 in Los Angeles, California. A group of activists have submitted about 50,000 signatures in an effort to force a referendum on a marijuana dispensary ban in Los Angeles to take effect next week. A minimum of 27,425 valid signatures from registered voters is needed to let voters decide on the issue in March, and until the number can be verified, the ban will not be enforced. . The ban would not prevent patients or cooperatives of two or three people to grow their own in small amounts. Californians voted to legalize medical cannabis use in 1996, clashing with federal drug laws. (Photo by David McNew/Getty Images) less FILE - AUGUST 29: The U.S. Justice Department said August 29, 2013 that it wouldn't sue to challenge laws legalizing marijuana in 20 states. LOS ANGELES, CA - SEPTEMBER 7: A budtender handles marijuana at ... more Photo: David McNew / Getty Images Photo: David McNew / Getty Images Image 1 of / 3 Caption Close Pot revenue stream unpredictable, study finds 1 / 3 Back to Gallery

The Connecticut General Assembly’s failure to approve a package of marijuana-legalization laws means that for the foreseeable future - and maybe until 2023 at the earliest - Massachusetts will be eating the state’s lunch when it comes to millions of dollars in fresh tax revenue.

But a new report indicates that cannabis sales and taxes may create volatile, almost unpredictable revenue streams, depending on several market variables, including demand, cross-border sales, and prices that can be undercut by the existing illicit markets. Revenue also seems to shrink as markets mature, according to The Pew Charitable Trusts report released Monday.

And if taxes don’t meet expectations, state lawmakers may find themselves with shortfalls and programs could suffer, according to the experience of the mostly western states that have had legalized recreational cannabis for at least a year.

Still, Washington state, with 7.5 million people, saw tax revenue total $420 million last year, even with neighboring Oregon competing as another full-legalization state. That makes the revenue picture for Massachusetts, which is turning into a regional cannabis destination in its first year of retail sales to adults, perhaps even rosier than anticipated for the Commonwealth, which has a population of 6.9 million, twice the size of Connecticut.

In the most-recent Massachusetts tax report, Department of Revenue Commissioner Christopher Harding reported that the sales and excise taxes of 17 percent generated $22 million in the program’s first seven months, as of the end of May. Another $3 million in local-option taxes were gathered for the various towns, such as Northampton and Great Barrington, which have also become cannabis tourism destinations for consumers from Connecticut and New York.

Alaska is another state where tourism is given credit for a cannabis revenue bump, according to the Pew report entitled “Forecasts Hazy for State Marijuana Revenue” that says Las Vegas is also seeing a tax surge as visitors take advantage of Nevada’s two-and-a-half-year-old marijuana legalization.

“While forecasters and budget staff gain more information, state officials can avoid budget shortfalls and keep program funding stable by being prudent in how they use these new collections,” said the Pew report. “States should be careful to distinguish between marijuana’s short-term growth and long-term sustainability.”

Connecticut’s effort to legalize cannabis fell short of the support needed in the General Assembly this year, amid soft support from some Democrats and strong opposition from minority Republicans. It’s unlikely to surface again during the 2020 legislative session because it’s a General Assembly election year. It passed as a statewide Massachusetts referendum in 2016, but Connecticut has no such ballot initiative.

Some legislative leaders have suggested the question of legalization be put to state voters as an amendment to the Connecticut Constitution. To get on the statewide 2020 ballot would require positive votes from the House and Senate in 2020, as well as the next General Assembly in 2021 or 2022.

“My personal belief is it’s a no-brainer,” said Rep. Steve Stafstrom, D-Bridgeport, who as co-chairman of the Judiciary Committee drew up about a third of the overall legalization package that failed earlier this year. “It doesn’t seem like the votes are there to legalize right now, and this has become a partisan issue, in a way.”

Connecticut was projected to get about $180 million in new tax revenue from adult cannabis sales. While Gov. Ned Lamont campaigned on the issue of full legalization, he did little to push for the reforms once attaining office in January.

Senate President Pro Tempore Martin Looney, D-New Haven, a longtime proponent of legalization, said the failure of the comprehensive bill underscores the gap between the reticence of the General Assembly and the desires of the majority of state residents who support legalization.

“I really believe there is disconnect between what the public wants and what the legislature is willing to do,” Looney said, stressing that the issue is much more than tax revenue. He likens cannabis to another failed experiment in social engineering: the prohibition of alcohol from 1919 until 1933. The refocusing of law enforcement against marijuana use was a way to retain police resources after 1933 and persecute urban minorities, Looney said.

“Opponents seem to be laboring under the presumption that marijuana is difficult to get illegally,” Looney said. “It is not. We should be careful about imposing our will, penalizing behavior when there is a societal split on the issue.”

kdixon@ctpost.com Twitter: @KenDixonCT