PATRICK EYES FUNDING PLAN FOR PROGRAMS HIT BY ALCOHOL TAX REPEAL

By Matt Murphy
STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, NOV. 15, 2010……Gov. Deval Patrick plans to begin immediately exploring options to replace as much as $43 million in funding for substance abuse treatment and prevention programs that will be lost once the repeal of the state’s alcohol sales tax take effect.

Calling the programs “enormously important,” Patrick told reporters Monday afternoon that he hoped to find a way to fully fund those programs in fiscal 2011, despite losing six months of anticipated revenue from the sales tax after the repeal takes effect in January.

Voters approved a rollback of the 6.25 percent sales tax on alcohol at the ballot box earlier this month, delivering relief to consumers and retailers and cutting off funding to the state’s substance abuse treatment and prevention programs that had been funded in this year’s budget with dedicated revenue from the tax.

Back from a week-long vacation in California, Patrick told reporters at a groundbreaking event for the new Yawkey Commuter Rail Station that he had a meeting planned later in the afternoon with Administration and Finance Secretary Jay Gonzalez to discuss the implementation of the alcohol tax repeal and options for fully funding substance abuse treatment programs through the fiscal year.

He said holding those line items harmless would likely require finding an additional $43 million.

“I’m committed to finding a solution. I just don’t have the solution,” Patrick said.

The state budget for fiscal 2011 earmarked revenue from the 6.25 percent sales tax on alcohol for state-sponsored substance abuse treatment and prevention programs. The state collected $97 million over the final 10 months of fiscal 2010 after the tax hike went into effect. That total had projected to increase to $111 million in fiscal 2011.

Asked whether he would consider raising the excise tax on beer and alcohol to offset the loss in sales tax revenue, Patrick said he hadn’t even considered that an option until the possibility was raised to him by alcohol distributors.

“I don’t have any such plans,” Patrick said, adding, “Please don’t write that it’s on the table, because it’s not something I’ve given any thought to.”

Vic DiGravio, president of the Association for Behavioral Healthcare, told the News Service there was still time to consider all the options before warning beneficiaries of the state’s substance abuse programs that their benefits were in jeopardy of ending. He said there was “no immediate crisis” but called finding a short-term solution to the loss of tax revenue his “primary concern.”

“We are in the process of trying to work with the folks in the Patrick administration and the Legislature to figure out next steps. Our immediate and primary concern is to make sure there are funds available to operate for the rest of the fiscal year,” DiGravio said.

DiGravio said the state’s substance abuse and prevention programs would have enough funding to continue operations through the end of January with revenue from alcohol sales tax collections being collected through the holiday season.

“The reason why the sales tax on alcohol was so important to us and advocates and providers is that it provided a sustainable source of funding for prevention and treatment programs,” DiGravio said.

Better than expected tax collections through the first four months of the fiscal year have left the state approximately $413 million over benchmark. Patrick, however, cautioned immediately after his election that the positive revenue growth should not be interpreted as a license to spend.

"There are people who are dealing with substance abuse demons and they depend on programs to help them and the support for those programs has been voted away by the people of the commonwealth. That is an unfortunate outcome, but that is the outcome,” Patrick said the day after winning a second term. “We're going to have to figure out some other way. We're not at a place where there's some room full of cash where if you just bring forward a worthy idea, we can just write that check."

During the campaign to repeal the alcohol tax, package store owners and beer distributors accused the state of double dipping on their product by levying a new tax on a product that is already taxed through a state excise tax.

The excise tax on a gallon of beer in Massachusetts is 11 cents, compared with 30 cents in New Hampshire where there is no sales tax.

“Our excise tax is one of the lowest in the country. It hasn’t been adjusted since 1975,” DiGravio said, who added that he has heard no talk of an appetite to raise the excise tax now that Ballot Question One passed.

Sen. Steven Tolman, a Brighton Democrat, and leader of the effort to defeat the tax repeal, said he was distraught over the decision by voters to cut off the funding supply for substance abuse treatment, but declined to speculate on where he would like to the see the money come from to maintain programs.

“I won’t get into what I’ll support right now. When I do decide I want to make sure it’s right rather than shooting from the hip,” Tolman told the News Service. “A lot of people are in need of services and the alcohol industry, through their infinite wisdom and misleading ads, has just cut the cord.”

Tolman said it was unlikely the Legislature would consider delaying implementation of the tax repeal until July, despite precedent for not adhering to the strict letter of ballot initiatives.

“In my heart, would I like to extend the date until July? Yeah, but I don’t think we can do that. I don’t think I have the votes to do that,” Tolman said.

END
11/15/2010

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VOTERS REPEAL ALCOHOL TAX, REJECT SALES TAX CUT
By Michael Norton

STATE HOUSE NEWS SERVICE

NOV. 2, 2010...Massachusetts voters on Tuesday chose to repeal the 2009 tax on retail alcohol sales by passing Question 1 while rejecting another proposal, Question 3, to cut the sales tax from 6.25 percent to 3 percent.

The alcohol tax was ripped by opponents as an extra levy on an already-taxed product, an added burden on struggling consumers, and a disadvantage for package stores, especially those near the New Hampshire border.

The repeal is set to take effect on Jan. 1, 2011,before lawmakers are scheduled to reconvene for a new legislative session.

"The voters supported Question One because it's unfair to double-tax one product and because it was putting too many local businesses at a competitive disadvantage," P.J. Foster, a spokeswoman for the Yes on One Committee, said in a statement late Tuesday night.

Supporters of the tax, which had passed after years of efforts, said it had helped bolster substance abuse treatment programs and argued that alcohol should not be exempt from the sales tax because it is not a necessity.

"We're disappointed," Vic DiGravio, co-chair of the Committee Against Repeal of the Alcohol Tax, told the News Service late Tuesday night as election results showed 52 percent favoring repeal and 48 percent opposed.

In her statement, Foster said, "We certainly support the continued funding of substance abuse programs, which have been funded by the state for years and were funded at the same level this past year.  We will work to make sure they maintain atleast the same level of funding."

In the days before the election, tax repeal supporters outspent those trying to keep it, with package stores and alcohol industry distributors contributing more than $1.26 million. The Yes on One Committee spent a total of $2.75 million to convince voters to overturn the tax. Supporters of keeping the tax raised approximately $200,000.

DiGravio said polls showed the question failing only ten days ago, before a major advertising campaign by repeal proponents.  "Clearly the money the alcohol industry threw at this made a big impact," he said. "What's most regrettable to us is we just didn't have the money to match them."

The Legislature instituted the tax in the summer of 2009, trying to boost state revenues during the recession and give treatment programs a reliable funding source.

The state collected $97 million from the tax in the last 10 months of fiscal 2010, according to the Department of Revenue, a total projected to rise to $111 million for the full fiscal 2011 budget year.

Question 3, slashing the state sales tax, failed after a concentrated push to defeat it by public employee unions and major business groups.  Opponents of the question said its passage would have forced $2.5 billion in cuts to education, local aid and health care programs and undercut investments in infrastructure needed to support business.  All four candidates for governor opposed the tax cut, which would have taken effect on Jan. 1, 2011.

With 93 percent of precincts reporting, 57 percent opposed the tax cut and 43 percent supported it.

The reduction would have given Massachusetts the lowest sales tax rate in New England, with the exception of sales tax-free New Hampshire.

Business Leaders Against Question 3, anchored by the Greater Boston Chamber of Commerce and Associated Industries of Massachusetts (AIM),recently launched a radio ad campaign against the tax cut. The Massachusetts Teachers' Association ran television commercials detailing cuts in education funding if the question passed.

Supporters of Question 3 said its passage would have put $688 into taxpayers' pockets each year and forced state government to cut spending.  Libertarian Carla Howell, who pushed the ballot initiative, said many businesses favored the tax cut. Howell said no retail
business owner "in his right mind" would oppose a sales tax cut.

A study released this month by the Beacon Hill Institute at Suffolk University concluded the tax cut would create 27,199 private sector jobs, increase annual investment by $73 million and raise wages by $1.03 billion. It also concluded the revenue loss to state government from the tax cut would be $2.08 billion rather than the $2.5 billion projected by the Massachusetts Taxpayers Foundation.

Supporters of Question 3 also cautioned during the campaign that its defeat may stir Beacon Hill to raise taxes.

END
11/02/2010