AUGUSTA, Maine — A midcontract study of Maine’s agreement with the Maine Beverage Co. to operate the wholesale liquor business in the state has triggered interest in getting more revenue from the sale of liquor to help fund the state two-year budget.
“There are some things we can do that would raise some additional revenue,” Liquor Commission Director Dan Gwadosky said. “I can’t tell you how much until we drill down on the numbers and look at all the options and how they interact.”
But in response to a question, he confirmed that it was in the millions of dollars a year. Finance Commissioner Ryan Low said he expects it is “a good chunk of change” but agreed with Gwadosky that it would take some analysis to get a good estimate.
Rep. John Martin, D-Eagle Lake, asked Gwadosky how much a 5 percent across-the-board increase in all liquor prices would generate for the state and whether it could be done. The state has not had an across-the-board increase since February 2005.
“Frankly, I think we are going to need some more money here pretty soon,” he said.
Sen. Bill Diamond, D-Windham, co-chairman of the Appropriations Committee, said he has no doubt the panel will need additional dollars to bring the two-year budget into balance. He said several committees have rejected portions of the governor’s proposed budget that add up to about $7 million a year. He is also concerned that revenues will not meet projections for the next two years and will add to the “hole” in the budget.
“I am glad Representative Martin asked that question, it has a lot of us thinking,” he said. “If there is more revenue to be realized here I think we should look at it.”
Gwadosky said the state could adjust the profit margins allowed on the wide variety of wine and liquor sold in the state by rule making and that would provide some additional revenue.
“The problem is we guarantee the company what they get and any additional revenue is through the profit-sharing arrangement in the contract,” he said.
Sen. Richard Rosen, R-Bucksport, said the panel should look at any “revenue enhancements” that could be realized from wholesale liquor sales. He agreed the committee would need to find additional revenues and cuts to bring the budget into balance.
“I don’t think this is an area the Legislature has taken a very close look at, “he said. “I think there is some surprise at the opportunities that exist here to find new revenues.”
The state paid $150,000 for the independent evaluation of the state’s contract with Maine Beverage, which is halfway through its 10-year term. Low said the governor believed it was important to get the study after Maine Beverage indicated last year it wanted to start negotiations to extend the existing agreement or craft a new one.
The state got $125 million upfront in 2004 to balance the state budget and has received an additional $19 million from the profit-sharing provision of the agreement. The 88-page study laid out several options for the state, from continuing the current agreement with some minor changes to the state once again operating its own wholesale liquor distribution system.
If the state took over the wholesale business in 2014, when the current agreement ends, the study estimates the state will get $40 million a year in revenue from wholesale liquor sales in addition to the taxes collected on retail sales.
“I don’t see how anyone can say this was a good deal for the state,” said Sen. Debra Plowman, R-Hampden. “And I do want to say I am upset we just got this report plopped down in front of us as this got under way with no time to read and analyze what is in here.”
Plowman serves on the Legislature’s Legal and Veterans Affairs Committee, which has policy jurisdiction over the liquor agreement. She said that panel should hold a separate, in-depth, hearing on the report and assess its implications for state policy.
“I am not smelling any stale cigarette here, I am smelling a lot of smoke and when I smell smoke, I expect there is fire,” Plowman said.