Connecticut Sen. Looney talks pot, taxes, possible run for governor

April 19--NEW HAVEN -- This scenario invoves a lot of variables.

In a field expected to be crowded for both parties, will Democratic state Senate Pro Tempore Martin M. Looney of New Haven run for governor?

Looney, in a discussion with the New Haven Register editorial board, laid out what would have to unfold to make that a reality.

First, Gov. Dannel P. Malloy would have to leave office in the next few months. Lt. Gov. Nancy Wyman would them become govenor and Looney would leave the state Senate to become lieutenant governor.

If Wyman ultimately decided not to run for govenor, "I would certainly run at that point under those circumstances," Looney said.

"I think the key thing is people are waiting to hear the lieutenant governor's plans. That will impact quite a few people in their planning," Looney said.

One other factor: Malloy, after announcing this month that he will not seek a third term, said he has every intention of remaining in office for the next 18 months and, no, Looney has not run this scenario past him.

The Senate leader said this is the one circumstance he currently can identify in which he would run.

"Other circumstances, I do not know yet," he said.

Beyond a short contemplation on the possibility of higher office, the majority of Looney's discussion was about the state budget, taxes, teacher pensions and legalizing marijuana.

He also put the odds at 50-50 on finishing the legislative session before lawmakers are scheduled to adjourn June 7.

"I think we have a better than average chance of getting a budget before the end of the fiscal year. But if we go beyond July 1, it will be open-ended as far as how long it will take," Looney said.

On recreational marijuana, the issue did not get a vote in the Judiciary Committee, but it is a fully developed bill with a public hearing and Looney would not rule out including it in the final budget or the budget implementer.

"It will come at the point where we would have to close the deal on the last $100 million in the budget," Looney speculated.

Eight states and the District of Columbia have legalized it, with Colorado, the first state to do so, realizing more than $100 million in annual revenue. Closer to home, Massachusetts has joined the group, with legalization set for 2018.

"We have to recognize that marijuana has been and will continue to be available -- legal or not. The experiment with prohibition should have taught us a lesson that we apparently never learned," Looney said.

The issue, has split lawmakers and Malloy does not favor legalization. The public, however, in a 2015 Quinnipiac poll, favored legalization of small amounts for adults by 63 percent.

The bottom line is how to deal with a projected $1.7 billion deficit in fiscal 2017-18 and the $1.9 billion deficit anticipated in fiscal 2018-19.

Looney said the proposals sent to lawmakers by Malloy on sharing the cost of teachers pensions with the towns; revisions to the Educational Cost Sharing grant; and his proposed tax on hospital real estate all will be modified.

Malloy hopes to address $700 million of the $1.7 billion through union concessions and $407 million if the towns pick up one-third of the cost of teacher retirement benefits.

The last piece involves the hospitals, with Malloy proposing towns be allowed to tax the property and buildings of hospitals within their borders, which the administration estimates will cost them about $212 million.

Connecticut would then bump up Medicaid payments by $250 million to cover that. The hospitals are wary, however, that the state will come through with this, particularly in light of the unknown intentions of the federal government on Medicaid.

New Haven Mayor Toni Harp has said she is reluctant to tax Yale New Haven Hospital, unless, as Looney has said, lawmakers amend the proposal to promise to hold the hospitals harmless on a loss of Medicaid funding.

Laurence Grotheer, spokesman for Harp, said the mayor is also cognizant that something as new as taxing the hospitals would involve a legal challenge, in addition to property assessment appeals, tying up the payments for a long time.

Looney said by allowing this real estate tax, the state would save the $55 million it now puts into the PILOT (payment in lieu of taxes) program that pays a percentage of the tax revenue lost to towns where tax-exempt hospitals are located.

The Senate leader said for New Haven it is a much better alternative than the PILOT as it would be getting the full tax on hospital real estate.

Harp actually favors the revenue suggestions floated by Connecticut Voices for Children, Grotheer said. They include, among others things, a tax on services; an additional half a percentage point on top earners; higher rates on dividends and capital gains.

As for sharing payment of teachers' retirement costs, Looney said Connecticut is only one of a few states where that obligation is completely absorbed by the state.

He said, under the present arrangement, wealthy communities make out the best.

Looney pointed out that Greenwich can afford higher salaries and a lower student-teacher ratio for its 8,800 students.

The state covers $24 million in retirement benefits for these teachers, while in New Britian, where there are 10,000 students, the pension costs annually are $17 million as the teachers make less money.

He said the state is on the hook for $7 million more because of the decisions that Greenwich made on compensating its school staff.

Looney said paying one-third is likely too much for some towns, but it could be levied at a smaller percentage based on a town's ability to pay.

"But I think the governor has raised a valid point ... as an area of municipal aid from the state that is very seldom acknowledged by the towns. They just take it for granted," Looney said.

He predicted some form of this proposal will pass, even if it makes the changes prospective.

The deadline for the Appropriations Committee to come up with a budget is April 27, while Finance, Revenue and Bonding has to report out by April 28. This is all based on final revenue estimates that won't be available until April 24.

"Everything will be in a crunch next week," he said.

Looney said Malloy is also "on the right track" in revisions to the Educational Cost Sharing formula "more based on need, which is likely to be a mandate from the Supreme Court at some point."

As for labor contract savings, Looney said the expectation is there will be no wage increases for the first two years which would save $300 million of the $700 million. He said the remaining $400 million could be some combination of increased payment for physician and pharmaceutical co-pays; possibly more contributions to their pensions and modifying the way overtime is calculated toward pensions.

Malloy has said there could be layoffs of up to 4,200 workers -- the worst-case scenario -- if a deal is not reached. Layoff notices went out in 2011, the last time there was a serious budget gap, but were rescinded when a deal was reached.

Some are calling for the eradication of all overtime as part of pension eligibility, but Looney said it is more complicated than that.

He does not favor including overtime when workers volunteer for it in their last few years of employment to boost a pension payout, He said it is different if someone works overtime on a regular basis because of staff shortages.

Some form of sales tax increase geared to towns is likely to be recommended, Looney said, whether that is an additional half-percent from retail collected by the towns themselves or collected by the state to be redistributed back to municipalities.

Looney would also like to see the state gradually move toward the federal threshold on the estate tax.

"People move out of Connecticut when they do estate planning," Looney said of a bill he has proposed to address this.

Connecticut's estate tax starts at $2 million, while the federal exemption is $5.4 million. He favors raising the threshold over a number of years to meet that federal level.

He said financial planners told him that wealthy families start to do their estate planning seven to 10 years before they die. When they realize how low Connecticut's threshold is, that's when they change their residence to a property out of state.

Looney said in that decade after they have left, Connecticut loses their sales, income tax and charitable giving, as well as the estate tax. The Senate leader said the state would be better off making it easier for them to stay.

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