Unless you purposely avoid the news these days, you are probably aware that there is a 60-day legislative session going on in Santa Fe at present. As in years past, there are bills moving through the system that could have a significant impact on breweries, and keeping track of everything can be a wee bit difficult.
Thankfully, we have Tractor brewing co-owner Skye Devore available to catch us up on what is going on, what is still to come, and where the New Mexico Brewers Guild and other craft alcohol groups are focusing their energies right now. She reached out to us over Zoom this morning to try to clear up the fuzzy picture from the state capitol.
“It’s insane,” Devore said of the 2023 session. “Yesterday (Tuesday) was probably one of the craziest days yet. I feel like there’s a lot of misinformation floating around the universe and what they do. I wanted to take a minute to chat about all that.”
The main bill that caught the attention of the brewing industry and its supporters was House Bill 230, which called for a significant increase in the state excise tax. Instead of paying between 1 to 4 cents per pint, breweries would be asked to pay 25 cents. And, it was even potentially more impactful than that.
“It’s not really 25 cents a drink at the manufacturing level,” Devore said. “By the time everyone adds in their margins, it ends up being 45 cents a drink for certain things. That is super messy and I think that messiness is why we’re hoping it won’t be brought back up in the omnibus tax package.”
Yes, the good news is that bill was tabled in the Taxation & Revenue Committee. But, most bills tend to be tabled, and they can be brought back at any point until the session is over.
“We’re still working on making sure that doesn’t get rolled into that (omnibus) package,” Devore said. “That is not truly dead. It’s just just temporarily tabled. Anyone who voted to table the bill has the option to bring it back up for discussion anytime.”
The bill was pitched by its sponsors as a way of essentially pricing out certain people from buying alcohol, but it encountered skepticism in the committee that it could accomplish such a goal. Some committee members also expressed reservations about the impact on local breweries and distilleries, and it was tabled without opposition.
While HB230 is “dead-ish,” Devore said there is another bill looking to move out of committee and into the other chamber.
Senate Bill 61, dubbed the Liquor Tax Domestic Violence Fund, wants to increase the excise tax and use that money to pay for domestic violence treatment programs. However, it is not quite as simple as that sounds, and it also includes language that the Guild has seen before, in that it will allow each individual county to create their own excise tax in addition to the state and federal excise taxes.
“I think that that’s definitely a point that we’re nervous about,” Devore said. “Also from the craft perspective it doubles our current excise tax. It puts money into the domestic violence fund, rather than going to treatment programs, which is our preferred way that things would go.”
Now, if you have not followed our past stories about the relationships between breweries and the legislature, some of this terminology might be flying past. Devore explained how the excise tax currently works, and what changed with it in more recent years.
“What it does is right now the excise tax, half goes to the general fund,” she said. “The whole reasoning behind excise tax and why we pay it in addition to general sales and gross receipts taxes is to pay for the sins of the industry. That money is supposed to go for underage drinking programs and treatment programs. (But) back in 2008 they swept half the tax to the general fund and away from these programs, when they were struggling to fund the budget.”
The Guild is now throwing its support behind Senate Bill 220, the Alcohol and Substance Abuse Prevention Fund.
“SB220, what that bill does is it takes the 50 percent of the excise tax that goes to the general fund and it sweeps it to the Health and Human Services Department,” Devore said. “Then in turn, it brings extra federal money into the state, where they match the contribution. For us, without raising taxes at all, it can see an increase in treatment programs.”
Devore said that if the money from the excise tax is going to clearly defined programs that benefit New Mexico, breweries and other craft producers might be more willing to consider future tax increases.
On another note, recent reports from the state’s major liquor distributors have sales down as much as 10 percent since cannabis was legalized. This is something that they are also trying to share in order to show that consumption rates are dropping even without anyone raising taxes to increase the cost of beer, wine, and spirits.
Another issue returning to the forefront involves the ability for breweries to deliver their products directly to consumers. While that was technically legalized in 2020, few have taken advantage of it. Now there are new bills on the table, and one of those is not quite the potential financial boon that some in the industry seem to think it is, Devore said.
On the federal level, direct shipments of wines were created to help out-of-state wine clubs deliver to their members. Now comes House Bill 343, which seemingly would further help breweries ship directly to customers, but it comes with a price.
“The way this bill is written is that out-of-state breweries are allowed to ship into our state direct to consumers,” Devore said. “If Miller-Coors under the name Blue Moon wants to start a beer of the month club, if they want to send that to your doorstep, they can. To say that it is a home delivery bill for New Mexico breweries is a false representation of what the bill does.”
Devore said that the official position of the Brewers Guild is one of neutrality, since many of the breweries themselves are not on the same page.
“Our industry does not have one cohesive opinion,” she said. “As we’ve seen in the past in Colorado, it’s best for a Guild to stay neutral rather than cause a chasm in the industry and have members split off.”
A different bill, SB364, might be more beneficial in that regard.
“That loosens up the requirements about how in-state liquor licensees can facilitate actual home delivery,” Devore said. “That is something that has restrictions on large, big-box stores with how the big breweries can pay for preferential treatment. It allows for different third parties to deliver, which I think accomplishes the goals that 343 promises.”
Entering this session, the Guild had no idea exactly how many bills it would be facing, but once things got rolling, one aspect in particular caught Devore by surprise. While many breweries were trying to point out how they do try to regulate consumption, as a way to stave off an excise tax increase based around reducing consumption, other breweries have suddenly begun to champion more alcohol delivery.
“We’ve always worked as an industry about self-imposed drink limits,” she said. “There’s a balance I felt in the tax bills and the delivery bills, but not this time. I feel like that’s a little bit strange and hard to manage from our perspective. For me it’s we’re responsible, don’t raise our excise tax. I feel like all of our energy should be focused on excise tax. I guess I just wasn’t imagining in my brain on moving forward on so many fronts.”
Devore explained it further as a case of where some breweries might be looking towards other states and how they handle things like alcohol delivery, without taking into account the unique challenges faced here in New Mexico.
“I think the hard thing about New Mexico is you see things working in other states, and you think it’s going to work in New Mexico,” she said. “I feel like that gets really hard. When you look at New Mexico, because our population is not growing, you look at a pie and that’s not growing. When you look at the pie and you look at intrastate shipping, thinking I’ll grow my business with that. (But) are you getting a bigger piece? No, you’re cutting it up smaller and getting different pieces.
“Maybe you’re reaching an audience you wouldn’t reach normally. But, when you’re letting out-of-state breweries in, you’re reducing the pieces. Let’s go work in Colorado and get direct-to-consumer shipping for New Mexico breweries, versus allowing them in (our) state. We have had local delivery for almost two years under HB255, and I don’t know of any breweries (using it). I think it’s a very small percentage that are using the home delivery system right now. Delivering more high-end beers similar to a wine are a very niche market and revenue stream.”
There are other bills that the Guild is monitoring, but not taking an active role with, preferring to let other groups handle things like the sick leave bill. After all, the Guild represents the 98 active breweries in New Mexico, and many of those in the smaller towns do not face the same challenges as those in Albuquerque and Santa Fe.
The legislative session will end on March 18, and yes, things will get even crazier than what Devore and the Guild’s lobbyists have seen so far.
“Right now there’s generally a 24-hour rule for committee agendas to be presented,” she said. “That goes out the window the last two weeks. I rented a house up here so we can stay on top of it. We have our lobbyists following things in the building every day. It could be our bill has been heard in two hours. As has happened before, our bills were a maybe on the agenda when I went to bed at midnight, I woke up at 5, and learned they were heard at 2 in the morning. You put in the groundwork now and in the interim so people know where you stand on those bills. This is a long game, and you don’t want to fatigue your legislators. There’s some good lessons to be learned.”
One thing that Devore would ask of the general public is to hold off on pestering legislators about any of the bills. If the Guild needs outside support, it will put out the call, but in the interim, let everyone in Santa Fe do their jobs for now.
“HB230 was a good testament to how we do things well,” she said. “We didn’t reach out to everybody. We looked at who’s on the committee and who’s in their district and worked that way.”
With so much time left on the clock, we are sure that this will not be the last time we talk about the legislature this year. A huge thanks to Skye for reaching out to set this up. I can only hope I captured the essence of what she wanted everyone to know, both those in the industry and the folks that support it.
We know that many of these bills can bring a strong emotional response, so please be kind in the comments. Finding the balance between creating a thriving and responsible craft brewing industry, while also exploring meaningful ways to deal with New Mexico’s many issues with the over-consumption of alcohol and its serious consequences, remains a difficult one for everyone to achieve.
Keep supporting local, but please, do it responsibly.