Here is a reprint of the Wine Press - which is a weekly newsletter from the NYWGF.
Sunday, December 21, 2008
Special Budget Edition and Issues Primer
CAUTION: This is a very long edition of The Wine Press, and so get a big glass of
I do not envy Governor Paterson, nor do I blame him. He inherited his position abruptly and unexpectedly when former Governor Eliot Spitzer resigned, and also inherited what has become
A budget proposal is just that—a proposal—and there are many steps and several months before a final budget will become law. The Governor has the option to amend his proposal within a certain time frame based on public input. Then the legislature (Senate and Assembly) will offer their versions, and negotiations begin. In
FUNDING ELIMINATION would likely lead to the end of the New York Wine & Grape Foundation, and our ability to support the industry through research and promotion. Few people understand that the money we receive goes right out the door to Cornell University for a comprehensive research program; a dozen wine trails throughout the state; five regional branding groups; a cooperative advertising program for individual wineries; a wine competitions program; agencies that create promotion programs for Concord grape juice, table grapes and wine in New York City and across the state; a public television series on New York wines and foods; educational programs on grapes and grape products; and much more. We were created by 1985 State legislation as a private, not-for-profit organization to centralize and coordinate research and promotion programs statewide. That’s what we do.
Our core budget since 1985 has been State matching funds requiring equal or greater private sector contributions, and providing the incentive for that. In the past few years we’ve had supplemental funding for several new initiatives including a “Total Quality Focus & Sustainability” research program conducted by Cornell, along with many of the promotion programs cited above. Traditionally, the Governor has included the matching funds in his budget proposal, and the legislature add the supplemental funds. Governor Paterson’s proposal has nothing, for the first time in 25 years. (Our friends in the apple, maple, and other agricultural sectors also got nothing, so we are not being “targeted”). Ironically, this proposal occurred a week after Agriculture Commissioner Patrick Hooker (a great guy and supporter) received the final report of the Wine Grape Task Force he created, which recommended strengthening the marketing and promotion programs.
Zeroing us out seems like a logical way to same money, but in the end it may actually cost the state a lot (as our British friends say, “Penny wise and pound foolish”). A 2005 economic impact study by respected wine economist Barbara Insel showed that the
Unfortunately, our industry does not have a sufficient private sector funding mechanism to sustain our organization and its work on their behalf. (By contrast, our friends in the apple industry have a marketing order self-assessment mechanism ensuring the survival of their organization and its core programs, so state funding on top of that is just icing on the cake, and its absence doesn’t threaten the association’s existence.) That is something we’re working on, but it certainly won’t be in place by the time this year’s State budget is finalized. So The Wine Press may soon become a relic of the past.
WINE IN GROCERY STORES will be World War III in
(The New York Wine & Grape Foundation (that’s us) does not take a position on this issue. We are basically a research and promotion organization, with our promotion program supporting whatever means are available to legally sell
Besides the grocery and liquor stores, other combatants will be the New York State Wine Grape Growers, which represents grape farmers who have advocated this issue for decades as a way to increase the demand for their grapes and sustainability of their farms; New York Farm Bureau and Long Island Farm Bureau, for the same reasons.
A little history is instructive. This is the first time that this issue has had sponsorship by a Governor since 1984, at that time Mario Cuomo who primarily wanted to help solve the state’s grape crisis. He proposed two years of ONLY
So what has changed in 25 years? The number of liquor stores has declined through attrition (i.e., without wine in grocery stores) from about 4500 to 2400, serving a population of about 19 million. The liquor lobby is no longer represented by my friend and former formidable opponent, Mr. Bill McDevitt, an honorable gentleman who is ailing. The grocery store lobby now has more astute leadership who might let liquor stores sell potato chips.
In short, this is all about money (surprise, surprise). The Governor needs it, the grocery stores want it, and the liquor stores don’t want to lose it. And all views are justified. Even though this is all about money, there will be many other “moral” justifications advanced by lobbyists on both sides. The Governor’s dilemma is obvious, so let’s focus on the other two (with the standard opposing arguments in parentheses where appropriate).
The grocery stores see this as a way to diversify their product lines, offer new convenience to their consumers like that afforded in two-thirds of all states, and help offset the impact of some negative measures like an expanded bottle bill.
(Opposing views: Grocery stores already sell beer as well as “wine coolers”, along with hundreds of food products, so they don’t need anything else.
The liquor stores see this as their death knell. Since the Repeal of Prohibition 75 years ago, they have had a monopoly on the sale of spirits and wine, based on a classic New York “deal” at that time, and can sell very little else. (My footnote: Recently a major liquor/wine store in the
(Opposing views: Just because the system is old doesn’t mean it’s right, smart, or good for
These, and many other, arguments and counterarguments will fill the halls of
EXCISES TAXES is a simpler, and shorter, subject. Governor Paterson proposes to raise the excise tax on wine from 19 to 51 cents per gallon as a way to raise about $53 million.
Basically, this is a “sin tax” for making a “sinful” product, and a simple political target on both federal and state levels. Excise taxes are levied on all beverages containing alcohol (wine, beer and spirits) at different levels, with the spirits industry always trying to achieve “equivalency” and in this year making some progress. (Governor Paterson has proposed major increases in wine and beer excises taxes, but not spirits.)
Excise tax increases ultimately hurt grape farmers. The best example is from 1991, when the first President Bush, after vowing “Read my lips, no new taxes”, raised wine excise taxes (but not beer) from 17 cents to $1.07 a gallon. Literally overnight, that killed the category of “wine coolers” which had rescued many
Hundreds of scientific and medical studies from around the world have shown that regular moderate wine consumption has significant health benefits for most people. So decreasing consumption caused by higher taxes would ultimately lead to increased health care costs.
This is one issue where all segments of trade—grape growers, wineries, wholesaler, retailers, and restaurants—actually all agree, as would consumers if they really understood that it’s going to increase the prices they have to pay for wine. Excise taxes are paid by the wineries (or wholesalers representing them in a state), but by the time the product reaches the shelf, the base tax has essentially doubled. The wineries, wholesalers, and retailers are in no position to absorb the new tax, which means it will be passed on to consumers.
In addition, like the elimination of Foundation funding, it is truly counterproductive for the State of
For the last word on this topic, at the end of this Wine Press I will leave you with a couple thoughts from Thomas Jefferson, who is turning over in his grave at the concept of excise tax increases.
CONCLUSION (on the budget): Foundation Funding Elimination…Wine in Grocery Stores…Excise Tax Increases…2009 will certainly be an interesting year in Albany. One thing we know for sure is that, however much most of
Finally, in case there is not another Wine Press before the end of this year or thereafter, I want to wish you all, regardless of what or how you celebrate, the most wonderful holidays and a very Happy New Year.