Lawmakers: Don’t bet on governor’s plan to raise $17 million from ‘break open’ ticket sales

Senators on the Finance Committee say Gov. Peter Shumlin’s proposed tax on break open tickets is “a Hail Mary pass” that they’re not going to bet on.

A report recently issued by the Joint Fiscal Office estimates that a 10 percent excise tax on the lottery-like game would generate roughly $6.5 million worth of new state revenues in fiscal year 2014, far less than the $17 million the Shumlin administration has estimated.

Shumlin wants to funnel the $17 million into several areas: a $6 million allocation for the state’s Low Income Heating Assistance Program (LIHEAP), $6 million for thermal efficiency initiatives and $5 million for the Clean Energy Development Fund. All of those funds are supposed to come from this tax, according to the administration.

One of the major differences between the Joint Fiscal Office’s analysis and the administration’s is that the office takes into account the market response to the tax, which the administration did not.

“Because this is a new tax proposal, the data on current sales is unreliable, and the current system is loosely regulated,” the report says.

To meet Shumlin’s $17 million target, distributors of the tickets would have to sell more than 173.3 million tickets next fiscal year. That’s 277 break-open tickets per Vermonter at a face value of $1.

According to the National Association of Fundraising Ticket Manufacturers, which received numbers from 19 states in 2011, North Dakota had the highest ticket sales per capita at 202.7 — about 75 tickets less per person than the Shumlin administration is betting on. The Joint Fiscal Office used data from this association in its analysis.

Mary Peterson, commissioner of the Vermont Tax Department, said that her department’s estimate is based on tax records from the ticket-selling establishments.

The Tax Department’s original revenue estimate was $13.4 million, she said. The department found that 43,400 boxes are sold annually, with an average of 3,096 tickets per box. The number of tickets varies per box depending on the game, but Peterson said they chose a “conservative” average.

The Department of Liquor Control came up with a more generous estimate — $22 million — and the two departments arrived at a compromise. The $17 million figure assumes 56,000 boxes are sold, each with 3,096 tickets inside.

“We are sticking by our methodology,” Peterson said.

But the Senate Finance Committee is not sticking with the administration’s methodology, said Sen. Tim Ashe, who chairs that committee.

“The Legislature has a Joint Fiscal Office so that we get independent assessments from experts,” he said. “Our experts say (this tax will generate) $6.5 million. The administration, I think, truly believes that their proposal does raise $17 million. But our operating assumption is $6.5 million from this point forward until we’re convinced otherwise.”

Senators on the Finance Committee, Bob Hartwell, D-Bennington, and Peter Galbraith, D-Windham, were incredulous the administration would propose such a plan.

“Those projections were utterly unrealistic,” said Galbraith.

“Something was wrong from day one on this thing,” said Hartwell.

Galbraith speculated that the administration proposed this plan as a last-ditch effort to avoid public outcry over a potentially unpopular tax on fossil fuels for heating purposes. That tax was recommended by a state-organized task force to fund a program to improve thermal efficiency in buildings across Vermont.

“The issue here is whether we’re going to fund the thermal energy program,” he said. “I think what happened was that the discussion was about a fuel oil tax, and at the last minute they decided not to go forward with that.

“They didn’t want to take the heat, and they came up with a Hail Mary pass.”

Alicia Freese contributed to this report. This story was updated at 7:30 p.m. on Feb. 5, 2013.