Mass. Tax Repeal Taps Drug, Alcohol Abuse Funds

When Massachusetts voters decided to eliminate the sales tax on alcohol, they also eliminated the main source of funding for the state's drug and alcohol abuse programs.

Now lawmakers and advocates are scrambling to find a way to pay for the programs in the face of an ongoing budget crunch.

"It really, really handicaps us. It really puts a lot of the programs on unstable ground," said state Sen. Stephen Tolman.

When lawmakers last year voted to apply the state's 6.25 percent sales tax rate to liquor sold in stores, the goal was to bring in an extra $110 million annually, more than half of which went to substance abuse programs. But liquor store owners and other opponents of the tax, fearing it would drive away customers, spent more than $3.7 million on a campaign to repeal the levy.

Those supporting the tax spent just $248,000 campaigning against the repeal. They said the alcohol sales tax was designed to help shield critically needed detox beds and other programs from the ups and downs of the budget cycle. Eliminating the tax undermines that, they said.

"If people knew that the money was all going to recovery programs, we would have won," said Tolman, D-Boston. "They didn't address that issue. They misled people that this was just money being squandered away by the politicians."

PJ Foster, spokeswoman for the "Yes on One Committee," which was funded in large part by the package store industry, said the tax put Massachusetts liquor stores at a competitive disadvantage, especially against New Hampshire, which has no sales tax.

Foster brushed aside concerns that the vote to repeal the tax jeopardized funding for substance abuse programs.

"The state has always funded substance abuse programs and the state will always fund these programs," Foster said. "I don't think there is an issue."

Those who run the state's substance abuse programs - from detox beds to the state's three recovery high schools for students struggling with drug and alcohol addiction - disagree.

During the economic downturn in the early 2000s, funding for about half the detox beds in the state was slashed, according to Vic DiGravio, head of the Association for Behavioral Healthcare, a statewide association of community-based mental health and treatment providers.

"For the industry to say that these programs have always been funded is not true, they should know better," DiGravio said. "The state is in a fiscal crisis. There's not a pile of money hanging around."

He said that unless lawmakers come up with another source of funding for the programs, which he said serve more than 100,000 Massachusetts residents, they will run out of money.

"These programs were funded during the past two years because of the sales tax on alcohol," he said. "That money will stop coming in on Jan. 1."

Although the alcohol sales tax was estimated to bring in close to $110 million for the current fiscal year, only about $62 million would end up going to substance abuse programs. By law, a portion of the state sales tax is dedicated to the MBTA, the state's school building assistance fund and other state funds.

DiGravio said he and other backers of substance abuse programs were reluctant to discuss possible new sources of funding for the programs without first consulting with legislative supporters such as Tolman.

He conceded that advocating another tax increase would be a tough political pitch given the recent election. The state faces an estimated $2 billion budget gap for the next fiscal year.

Part of the argument against the sales tax in Massachusetts was that the state already imposes an excise tax on alcohol. The excise tax per gallon of beer in Massachusetts is 11 cents compared with a 30 cent excise tax per gallon of beer sold in New Hampshire.

Gov. Deval Patrick, who opposed the repeal effort, said making up the lost revenue "is not something we can easily find," particularly during an economic downturn when drug and alcohol abuse can rise.

"I'm not sure what the solution to that is, only that we have to find one because this is not about a line item," Patrick told reporters after the repeal was approved. "It's about people - our neighbors, our friends, our family members who need services."