Though less than revenues derived from property taxes, local governments across Oregon depend heavily on state-shared revenue streams. Two of these streams in particular, alcohol and marijuana, bear mention as sales within these industries have risen even during a global pandemic.
These funding streams help counties deliver essential services for addiction and recovery treatments, and broadly, counties are mandated to provide public safety and public health services. Unfortunately, the need for these services outpaces the funding due to an antiquated formula that has not been increased since the ’70s.
According to the latest report from the Legislative Revenue Office, current excise taxes on beer and wine manufactured and distributed within the state sit at $2.60 per 31-gallon barrel for beer, $0.67 per gallon for table wine, and $0.77 per gallon for dessert wine. It is worth noting that Oregon ranks lowest in the nation, sitting at 51st place (Washington D.C. included) for its tax rate on beer and 50th in the nation for its rate on table wine taxes. Neither rate is indexed for inflation. Of these excise taxes, two cents of the wine tax goes to the Oregon Wine Board, 50 percent of the remaining beer and wine taxes go to mental health and drug abuse prevention, and the balance goes into the OLCC account.
The OLCC exclusively imports and distributes beverages with 21 percent or more alcohol by volume. Net revenue from sales gets deposited into the OLCC account. Revenue in the OLCC account is distributed according to the following formula:
- 56 percent to the State General Fund;
- 10 percent to counties by population;
- 20 percent to cities by population; and
- 14 percent to cities by formula
Oregon voters legalized recreational adult marijuana use through Ballot Measure 91 in 2014. House Bill 2041 (2015) changed the tax on marijuana products from $45 per ounce to a statewide 17 percent point-of-sale tax with a three percent optional tax for local governments. Marijuana revenues are distributed as follows:
- Five percent to drug abuse and prevention;
- 10 percent to cities and 10 percent to counties(then distributed among different cities and counties that do not prohibit marijuana based on statutory specified formula);
- 15 percent goes to the state police;
- 20 percent to mental health account; and
- 40 percent to the state school fund
Another hurdle in county funding for treatment and recovery services is Ballot Measure 110 (2020). This measure capped distributions at $11.5 million per quarter with the remainder of funding going toward a new Drug Treatment and Recovery Services Fund. Due to this cap, cities and counties are slated to take a 72 percent hit to their discretionary marijuana revenues in the 2021-2023 biennium and beyond.
Several bills in the 2021 Legislative Session would impact these shared-revenue streams if passed. For alcohol, increasing distillers’ compensation, increasing Oregon Liquor Control Commission (OLCC) agent compensation, and paying for a new OLCC warehouse would all take away funds that would otherwise be distributed by formula. For marijuana, increasing the optional local government tax rate and passing a wholesale tax on cannabis products could alleviate some of the budgetary impacts of Ballot Measure 110.
AOC staff remains engaged in these conversations with a sharp eye toward protecting county distributions and paving the way for long-term revenue solutions.
Contributed by: Tyler Janzen | Legislative Affairs Manager