‘Break-open’ ticket potential revenue debated
By Peter Hirschfeld
Vermont Press Bureau | February 06,2013
Albert J. Marro / Staff Photo
Some Vermont economists say the administration has over estimated the money to be raised by rip open tickets by as much as $10 million.
MONTPELIER — Gov. Peter Shumlin wants to raise $17 million next year by imposing a 10 percent tax on the “break-open” tickets sold at bars and service clubs across the state. But legislators say the governor’s revenue estimates reflect the same kind of wishful thinking as the people playing the game of chance.
Fiscal analysts for the Legislature say the proposed tax on this unregulated lottery would raise only $6.5 million — about a third of the administration’s estimate. And lawmakers say the lower projections — released by the Joint Fiscal Office this week — jeopardize the weatherization programs and renewable energy subsidies for which Shumlin had earmarked the money.
“My experience with the Joint Fiscal Office is that they do a very good job estimating revenues,” House Speaker Shap Smith said Tuesday. “I would hope that the administration will now be willing to put forward other ways to fund those programs, or to decide which programs they think are a priority for funding.”
Administration Secretary Jeb Spaulding said that won’t be necessary, because it’s the Joint Fiscal Office that has it wrong.
The administration is telling lawmakers that more than 173 million tickets are sold annually in Vermont, an estimate Spaulding said is based both on reported sales and on interviews with ticket manufacturers. Two additional analyses conducted by the Department of Taxes, Spaulding said, pegged annual revenues from the tax at anywhere from $13.5 million to $22.5 million.
The game is for the most part unregulated in Vermont, and while proceeds from the lottery are supposed to benefit nonprofits or charities, there’s little oversight to ensure the money isn’t diverted elsewhere.
“I think our estimate is realistic,” Spaulding said. “And I can’t possibly see how it could raise less than $13.5 million.”
The joint fiscal estimates doesn’t put much stock in the administration’s annual estimate for ticket sales. According to the Legislature’s analysts, that would mean that all 626,000 Vermonters are spending an average of $124.30 every year on break-open tickets — nearly three times the per-capita rate in New Hampshire, 11 times the rate in New York and 35 times the rate in Massachusetts.
The Joint Fiscal analysis also accounts for what economists call “elasticity” — the downward trend on demand that tends to accompany any new tax. According to the JFO, Vermont would see a 25 percent dip in ticket sales as a result of the proposed assessment.
The Legislature and administration have a process for reconciling differing revenue projections, wherein representatives from both branches come together to develop “consensus” estimates. But when the Joint Fiscal Office approached the administration to work toward that consensus, the administration declined.
Asked why the administration turned down offers to work toward a consensus number, Spaulding said, “I don’t have a good answer for that.”
“And maybe we should talk with them more,” Spaulding said.
Key lawmakers say the Joint Fiscal numbers are the only ones holding weight in the House and Senate.
“At end of day, it means we’re going to take the estimate from our Joint Fiscal staff as our assumption,” said Rep. Janet Ancel, a Calais Democrat and chairwoman of the House Committee on Ways and Means. “That means in the governor’s budget, which proposes increases in spending of $17 million for these programs, there isn’t actually enough money to spend that amount. And we can’t spend money we believe isn’t there.”
Shumlin has earmarked the money for three programs: $6 million for low-income heating assistance, $6 million for low-income weatherization programs, and $5 million for renewable-energy subsidies.
“If the Legislature decides that it believes it’s appropriate to fund these proposals, then we would need to find the most equitable and intelligent way to raise the money, because we cannot at present count on anything more than what our own analysts are telling us to expect,” said Sen. Tim Ashe, a Chittenden County Democrat/Progressive and chairman of the Senate Committee on Finance.
Ancel said she’s concerned chiefly about an inability to reach common ground on a revenue projection, something without which, she said, will make it difficult to have a rationale debate about the merits of the proposal.
“We have always been able to come up with a consensus estimate between the tax department and Joint Fiscal Office working together,” Ancel said. “It concerns me we aren’t able to do that this year.”