New York and New Jersey share more than the Hudson River. Marijuana and sports betting are in play as the neighboring states scurry for revenue sources amid the COVID-19 crisis.
New York Gov. Andrew Cuomo, in Monday’s State of the State address, called on the legislature to legalize both adult-use marijuana — which he said could net $300 million — and online sports wagering. New Jersey has sports betting in place with a roughly $5 billion handle — and an estimated 20% of that coming from New York residents. Cuomo pitched both concepts without particulars.
While New Jersey Gov. Phil Murphy has yet to sign a bill to create a legal framework in New Jersey for recreational marijuana distribution and is calling for tougher penalties for users under age 21, he said in Tuesday’s State of the State speech that a set of “innovative and groundbreaking” laws was imminent.
“If New Jersey has sports betting and cannabis legalized, New York does not want the central tax revenues going out of state. That’s a big impetus,” said Howard Cure, director of municipal bond research for Evercore Wealth Management. “And the states need the money.”
The two states are not alone in chasing revenue.
“This year's budget cycle will create incentives for expansions of state revenue bases,” municipal bond analyst Joseph Krist said.
Both states have felt the pinch from bond rating agencies as the coronavirus has bludgeoned their economies. In October, Moody’s Investors Service
Cuomo, a third-term Democrat, cited the rapidly expanding sports gambling market since the U.S. Supreme Court in 2018 —
New York State needs to catch up, said Lee Igel, a clinical professor at New York University’s Tisch Institute for Global Sport.
“We’re beyond the question of whether to legalize or not, Clearly the world is used to it,” Igel said. “Come on, New York.”
Cuomo cited a $15 billion budget hole in his speech. Lawmakers must enact a fiscal 2022 spending plan by April 1.
Sports betting and marijuana dynamics are similar, according to Krist, especially now that New Jersey is a legal marijuana state. “The restricted New York market makes less sense from an economic standpoint as legalization makes its way to surrounding border states," he said.
This year marks Cuomo's third attempt at marijuana legalization.
Two-thirds of New Jersey voters in November approved marijuana legalization for people 21 and older. Murphy, a first-term Democrat up for re-election this year, has played up the social-justice angle to the issue, citing high levels of minority arrests.
“They have to hash out tax rates, locations and outlets, and there’s also a social aspect,” Cure added. “More poorer people have served jail time because of minority arrests than in the past.”
Murphy also cited business growth potential in minority communities.
“We’re setting up a cannabis industry that will support the growth of small businesses, many of which will be owned by women, minorities and veterans,” Murphy said. "This hasn’t been an easy fight, nor has it happened as quickly as I would have liked, but we are in a better place, a smarter place and a more just place than ever before."
Cuomo was strident in his call for further federal aid, saying Washington should not let New York “drop dead” again — referring to a newspaper headline during New York City’s 1970s fiscal crisis.
Murphy, by contrast, emphasized goals that align with the incoming Biden administration. They include big-ticket infrastructure, such as the Gateway tunnel and related portal bridge projects, and clean-energy incentives.
