Just the Facts on the Alcohol Tax

Marc Kilmer Jul 25, 2012

It’s always good to know that someone reads what you write. I’m happy when people comment on our blog to say “great job” or something positive, but I’m even happier when people criticize my entry. I welcome fact-based criticism; it shows me someone read and analyzed what I wrote and it makes me double-check my facts and analysis. So that’s why I was pleased that Steve Lebowitz, aka, JustdaFacts, decided to leave some informed commentary on last Wednesday’s blog post on the alcohol tax. Instead of responding there, I decided to devote a whole new blog post to his criticism. So, Steve, today’s blog post is for you. (For others, you may want to re-read the previous blog post to get up to speed. It’s about this news story on the state’s alcohol sales tax).

(Steve’s comments are in italics with my responses below them).

Let me help you sort your bills and fiscal years out, there, Marc. The AP story that got you so worked up is referencing FY 2013, which began July 1, 2012. You seem to be confusing the present fiscal year with last year, and you're only looking at one of a pair of bills.

Nope, I’m well aware of the fiscal years and the legislation involved. When the alcohol tax was passed, the legislation that divvied up the revenue from the bill only earmarked funds for one fiscal year (FY12). Alcohol tax revenue in FY13 goes into the general fund.

Demarco, the governor, and legislators like to pretend that the funding for disability services in this fiscal year (FY13) comes from the alcohol tax. It’s somewhat accurate to say that, but it’s just as accurate to say that the thousands of dollars I paid in taxes last year are going to fund the disability services in question. My tax money as well as the alcohol tax money both go into the general fund and then legislators and the governor allocate revenue from that fund to pay for these services. There’s no direct connection between the new alcohol tax revenue and the funding programs mentioned in the news stories.

The bill you link, HB 1213 of 2011, which became Chapter 572 L. 2011, allocated $47.7 million for public school construction in FY 2012 only, but a separate bill, SB 994 of 2011, which became Chapter 571 L. 2011, did indeed allocate $15 million for services for the developmentally disabled that year.

I’m well aware of that, too. You may want to check out my letter to the Washington Post that went into more detail on it.

As the numbers you present show, when the General Assembly earmarked the revenue from the alcohol tax, the biggest chunk went to school construction, not services for people with disabilities. Even after this happened, Demarco and other advocates continued to give the impression that the alcohol tax increase was passed to help people with disabilities even though they got a pittance compared to school construction projects.

If Demarco and others were really in favor of helping people with disabilities, they never would have agreed to the final version of the alcohol tax legislation. Demarco could easily have killed the bill and waited until he got the new tax revenue specifically tied to disability services or Medicaid funding, but he and his allies stood by and let their constituency get the shaft in the waning days of the session.

When the Republican senators proposed an amendment to the alcohol tax legislation that would have mandated all revenue from the alcohol tax go to people with disabilities, Demarco did nothing to support it. Sure, the Republicans were playing partisan games, but it was a partisan game that would have gone even further to help people with disabilities than Demarco’s original proposal. Why not embrace it and fight for far more funding for people with disabilities?

At the time the bills were enacted, legislators and stakeholders agreed the school construction funding would be a one-time allocation for 2012, but funds from the tax would cover the cost of services for the developmentally disabled and other healthcare needs in future years.

No, they agreed that the funds from future fiscal years (FY13 and beyond) would go into the general fund without future expenditures tied to that funding source. As the fiscal note for both SB 994 and HB 1213 show, the funds are only earmarked for FY12.

The original Lorraine Sheehan legislation did set up a trust fund that ensured a portion of future alcohol tax revenue went to disability services. If there was such an agreement among the stakeholders and the policymakers, why did they not enshrine this agreement in law? The original legislation had this, so it could have been done had the stakeholders and policymakers really wanted it.

In fact, Vinny DeMarco, the "lobbyist" whom you and my other friends on the right have a habit of identifying as such, even though you never call the equally registered lobbyists of Americans for Prosperity Maryland "lobbyists," …

Why so defensive? Demarco’s a lobbyist and a damn good one. I admire his success even if I don’t agree with him. And since I’ve never written a word about AFP Maryland’s employees in this blog, I’m pretty sure you are mistaken in this attack on me.

…said at the time that developmentally disabled services and other healthcare allocations would increase and would become a regular part of the annual budget process in future years.

So far Vinny DeMarco is right. Fast forward to last session's approval of the FY 2013 budget and you'll find $64 million from alcoholic beverage sales tax increase is directed to healthcare needs, including $27 million for developmentally disabled services--more than was allocated last year.

No, $64 million from the general fund is directed towards healthcare needs.

So, the legislature and the advocates did exactly what they agreed to do with the alcoholic beverage sales tax revenue in FY 2012 and FY 2013. Vinny DeMarco's statements in the article you criticized were accurate, and the AP reporter got the facts right.

Yes, in FY12, they did what they said they’d do with alcohol sales tax revenue because it was written into law. And what they did was give little to people with disabilities and use most of the money to fund school construction projects (much of it likely allocated because of political considerations).

But in FY13, these disability services were funded by revenue from the general fund. Again, Demarco and the governor can say that the disability services are being funded by alcohol tax revenue, but that’s only because every other state government program funded through the general fund is, in some indirect way, funded by alcohol tax revenue.

What’s happening here is that Demarco let the governor and legislator use and discard people with disabilities during the 2011 alcohol tax fight and now the governor and Demarco are using budget sleight-of-hand to conceal it. Demarco bused in people with disabilities to push for the alcohol tax, and promoted the alcohol tax as being necessary to help people with disabilities. Then when legislators and the governor increased the alcohol sales tax, he stood aside as they earmarked most of the funds to pay for school construction. Then when the alcohol tax revenue is no longer earmarked for school construction or any other purpose, he and the governor claim that disability service programs paid for out of the general fund are actually being funded by the alcohol tax revenue. This gives them both some cover for the bait-and-switch they pulled on people with disabilities in 2011.

It’s a neat trick since the press in Maryland is generally too lazy to look into the facts and people like “JustDaFacts” Lebowitz will spring to the left’s defense if someone calls them on their shenanigans.