The Alcohol-Related Services Act (AB 1019) is a bill authored by Assembly Member Jim Beall (D - San Jose). The legislation establishes the Alcohol-Related Services Program (ARS Program) within the California Department of Alcohol and Drug Programs. AB 1019 will be reconsidered by the California Legislature in January 2010.
WHY AN ALCOHOL FEE?
- Published research has shown that alcohol causes more than $38 billion in harm annually. Of this amount, approximately $8 billion is paid for by the California government (by both state and county agencies).
- The ARS Program is specifically designed to mitigate the enormous social and economic harm caused by alcohol sales in California. The bill would assess a mitigation fee (not a tax) on spirits, wine and beer, equivalent to 10 cents a drink for beer, wine, and spirits.
- Because the bill creates a fee program, only a majority vote of both houses is required, with the Governor’s signature. This mitigation fee, or charge for harm, will generate approximately $1.44 billion to pay for alcohol-related services in California.
- Currently, the alcohol industry bears no economic responsibility for the problems its products cause. California lags in charging for alcohol harm compared to the progress made in tobacco control over the last 40 years. Most of the fees will be paid by the heaviest alcohol producers, which are foreign corporations such as Anheuser-Busch InBev, SAB Miller, and Diageo.
The ARS Program consists of five equally funded alcohol-related component services to mitigate the harm of alcohol sales in the following categories:
1) Treatment and Recovery
2) Emergency Room and Trauma
3) Hospitalization and Rehabilitation
4) Criminal Justice and Enforcement
5) Prevention, Education, and Research
The Department of Alcohol and Drug Programs will hold public hearings and create guidelines for component services through grants or contracts within four months of the bill’s passage. New or existing programs will be funded.
For instance, the ADP might create a $288 million annual program for hospitals to be reimbursed for uncompensated care to indigent people for alcohol-related emergency room admissions. Many treatment and recovery programs will be fully funded. Criteria of need, effectiveness, and best practices will be used by ADP as guidance in creating service components.
HOW WILL THE FEE BE ASSESSED?
The California Board of Equalization will assess and collect a mitigation fee for beer, wine, and spirits from licensed wholesale alcohol beverage companies doing business in the state. Fees from the Alcohol-Related Services Program Fund would be available exclusively for the use of the ARS Program, after ADP and BOE administrative costs. Fees will be adjusted annually for inflation, interest will accrue to the fund, and programs will be funded on two-year cycles independently from legislative appropriations. More than $1.44 billion in fees will be collected annually.
WHAT DOES THE PUBLIC THINK ABOUT THIS IDEA?
There is overwhelming bi-partisan support for increasing alcohol taxes and fees. A whopping 85 percent of California residents including likely voters, Democrats, independents, and Republicans, were in favor of the Governor’s proposal to raise alcohol taxes in January 2009. See Statewide Survey: Californians & Their Government (Public Policy Institute).
WON’T THIS HURT CONSUMERS IN HARD ECONOMIC TIMES?
This is a mitigation fee on industry, not an excise tax or consumer-based sales tax. It’s completely up to industry to decide to what extent, if at all, they wish to pass the cost of the fee along to consumers. Assessing fees on the alcohol industry is more equitable than increasing excise taxes on gasoline (many people must drive to work) or general sales taxes, which are by nature regressive. Even if industry does pass the fee along to consumers, it would primarily be felt by those who drink heavily and thus cause most of the problems. Also, alcohol is a discretionary item, not a necessity.
WON’T THIS HURT CALIFORNIA BUSINESSES IN HARD ECONOMIC TIMES?
The alcohol industry will claim job losses as a result of this reasonable fee. There is no evidence to support industry’s exaggerated claims. Alcohol is a relatively inelastic good, which means that people will still drink even with slightly higher prices. After the federal alcohol tax increase in 1991, the Bureau of Labor Statistics of the U.S. Department of Labor reported that beer-industry wholesale trade employment actually rose by 8,000 jobs. Moreover, the increased funds created by this fee program will result in numerous additional jobs, in healthcare and other much-needed services.
You can also download a PDF of the AB 1019 Q&A here.
WATCHDOG VIDEO
ADDITIONAL RESOURCES
The Alcohol-Related Services Act Shelved Until 2010
Assembly Bill 1019
Industry Claims vs. Reality on AB 1019
