2016 Policy and Budget Preview

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Governor Cuomo gave his State of the State address and released his proposed Executive Budget for Fiscal Year 2017 last week, announcing his priorities for the year and setting the stage for important budget and policy discussions. One of the Governor’s goals for this fiscal year is to expand New York’s craft beverage industry, and he has proposed a number of investments and legislative changes to facilitate that expansion. Perhaps the most intriguing item for the wine industry is the modernization of the 81-year-old Alcoholic Beverage Control (“ABC”) Law, including by addressing e-commerce. Read on for a summary of a few of the Governor’s proposals. As always, refer to the Division of the Budget for complete information.

Modernization of the ABC Law: E-commerce and Beyond

In November, the Governor established an alcoholic beverage industry working group “to review existing statutory provisions and explore approaches to clarify and modernize the 80-year-old statute.” You may recall that when the Governor vetoed Assembly Bill 5920A (the “Empire Wine bill”) last month, he cited the need to amend portions of the ABC Law to reflect current business practices, suggesting that he planned a comprehensive update of the law rather than a narrow amendment. The Governor announced that this year, he will propose legislation to modernize the ABC Law by clarifying the licensing provisions, eliminating Prohibition-era restrictions, establishing a clear legal framework for Internet sales, and addressing other issues identified by the working group. The New York State Liquor Authority (“NYSLA”) will hold a series of roundtable discussions with industry stakeholders beginning in March to suggest amendments.

Tax Cuts for Craft Beverage Producers

Building on his commitment to growing the State’s craft beverage industry, the Governor proposes to extend the existing craft beer tax credit to craft cideries, wineries, and distilleries. Under this proposal, cideries that produce less than 60 million gallons annually, wineries that produce less than 20 million gallons annually, and distilleries that produce less than 500,000 gallons annually will be eligible for tax credits that will save them an estimated $2 million. In addition, the Governor’s plan includes an exemption for breweries, cideries, distilleries, and wineries from alcohol taxes associated with free tastings. This is projected to save craft beverage producers an additional $10 million.[1]

Minimum Wage Increase

The Governor’s hotly debated minimum wage proposal would have a significant impact on every industry in the State, so I’m including a quick summary even though it’s not a wine-specific policy. As you probably already know, the Governor has raised the minimum wage for fast food workers and State employees, and the State University of New York system will soon follow suit.[2] These workers will see a phased-in minimum wage increase to $15 per hour by 2021. The current minimum wage for other workers outside of New York City, which took effect December 31, 2015, is $9 per hour. This year, the Governor will push for a phased-in increase to $15 per hour for all workers by 2021. The table below, taken from the State of the State Policy Book, shows the timing of the proposed across-the-board State increase.

New York State Certified High Quality Initiative

Building on the work of the newly created Advisory Committee on Safe and Healthy Foods, Governor Cuomo proposes to launch the New York State Certified High Quality Initiative, “a comprehensive plan to restore consumer confidence in New York products, ensure that products are accurately labeled, and identify New York producers who adhere to best practices in food handling and environmental stewardship.” [Built to Lead: 2016 State of the State Policy Book.] This proposal has five components:

  • Certification and marketing: The State will create a “New York State Certified” seal for producers who “maintain a certified Good Agricultural Practices (“GAP”) plan and demonstrate good environmental stewardship. The State will also implement an advertising campaign to raise consumer awareness of the new certification. Note that the U.S. Department of Agriculture has a protocol for GAP and Good Handling Practices (“GHP”) voluntary audits. 
  • Enforcement: Enforcement will be targeted at misbranding and deceptive business practices.
  • Monitoring: Inspectors from the State Department of Agriculture & Markets will conduct “improved, risk-based” on-site food safety inspections and increase the number of food samples tested.
  • Training and Industry Support: The state will invest more than $4 million to train farmers in safe food handling practices and environmental stewardship through the Agricultural Environmental Management Program and the Integrated Pest Management Program.
  • Investment: The State will invest in local food distribution “hubs” to improve access to fresh, healthy food and promote local products to restaurants and other institutional buyers. The State will also invest in farms that opt to convert to organic grain production.

Environmental Protection

The Governor will continue the State’s existing investments in protecting farmland in the Hudson Valley, supporting agriculture in the Southern Tier, promoting environmental stewardship, and mitigating the effects of climate change. He proposes an allotment of $32.5 million for a new Climate Change Mitigation and Adaption category in the Environmental Protection Fund.

Taste NY

Taste NY is a marketing initiative that was created in 2013 to promote New York-produced foods and beverages. The Governor proposes to expand the Taste NY program with an investment of $1.1 million in 2016. He has laid out a plan to launch four new Taste NY stores, increase concession partnerships at sports and entertainment locations, and expand sales displays at high-traffic transportation hubs and other venues. The plan includes recruiting 100 new producers to join the program.

Other proposals include:

  • A 100 percent nonrefundable credit, regardless of usage, for farm vehicle use on the Thruway, beginning on January 1, 2016, and ending on December 31, 2018
  • Authorizing the Empire State Development Corporation (“ESDC”) to administer agricultural and dairy marketing orders. Marketing orders are agricultural marketing programs that are currently administered by the Department of Agriculture and Markets. The ESDC is considered to have more extensive marketing expertise than the the Department of Agriculture and Markets.
  • Increasing the use of renewable energy by providing $150 million in technical and financial support to install solar panels on 150,000 additional homes and businesses and 300 additional wind turbines by 2020, along with other initiatives

The Year Ahead

The coming year could be one of significant change for New York’s alcoholic beverage industry. As the Governor points out, this sector has experienced remarkable growth over the past five years:

Since 2010, the number of farm wineries in New York has increased by over 60 percent and the number of microbreweries has increased by 233 percent. Since Governor Cuomo took office, farm-based beverage licenses have more than doubled and the new Farm Brewery Law has already resulted in 106 new licensees. In 2015 alone, the State Liquor Authority issued 141 new manufacturing licenses, including eight cidery licenses, 35 distilleries, 25 winery licenses, and 73 brewers.

The industry has, of course, experienced growing pains. The Governor’s proposals are intended to relieve those pains, and they are worth watching as the legislative session and budget process get underway. The Legislature will now deliberate on these proposals and offer many of their own.

For complete information on all budget and State of the State proposals that affect the wine industry, including proposed appropriations and policies, visit the Division of the Budget website.

 

[1] According to the Policy Book, the craft beverage industry paid $10 million in these taxes last year.

[2] None of these increases was legislated, and lawsuits are almost certain to follow. The National Restaurant Association has already challenged the fast food minimum wage increase before the New York State Industrial Board of Appeals.