Appropriations committee hears plan to zero out Liquor Control Fund deficit amid falling alcohol sales

At a meeting of the Vermont Senate Appropriations Committee, Wendy Knight, commissioner of the Department of Liquor and Lottery, outlined a budget adjustment intended to zero out a deficit in the Liquor Control Fund and to change how future transfers to the general fund are calculated.

Knight told the committee, “For the record, my name is Wendy Knight. I’m the commissioner of the Department of Liquor and Lottery,” and described multiple factors that have reduced liquor-store receipts, including lower alcohol consumption, growth in nonalcoholic products, inflation and the statewide floods of 2023 that temporarily closed stores.

The adjustment responds to what Knight said has been an “ongoing deficit” in the fund that began after a period of unusually high home consumption during the COVID years. Knight said transfers from the Liquor Control Fund to the general fund — the department’s “direct application” — exceeded true net profit in recent years and contributed to the negative balance. She told the committee the last direct application figure she had on her sheet was $21,200,000 for FY24 and that finance and management recommended using available surplus to reduce that deficit.

Committee members and staff discussed the precise amount of the budget adjustment during the session. One participant summarized the adjustment as taking about $11,000,000 back; Knight characterized the corrective amount as approximately $9,000,000 when describing the accounting approach recommended by finance and management. Knight emphasized that future transfers would be based on a clearer calculation of net profit — revenues less operating expenses and long-term liabilities — and that her office has reduced operating expense growth under her tenure.

Knight also provided projections for the coming year, saying projected FY26 liquor sales are about $101,000,000 and that the estimated direct application transfer to the general fund would be $14,800,000 under those projections. She said the department is projecting flat sales compared with current-year estimates and does not anticipate a reversal of the downward consumption trend.

A committee member asked for additional trend data as the department prepares next year’s budget; Knight said she has developed FY26 projections and will provide further information. Knight also offered to send a written sheet explaining which alcohol-related taxes and fees flow through the department and which go directly to the Department of Taxes.

No formal vote or motion on the adjustment was recorded in the transcript excerpt provided. The committee requested follow-up materials on revenue trends and the mechanics of liquor-related taxes.

Ending

Committee members thanked Knight for the briefing and for the department’s stated plan to avoid operating in a deficit. Knight said staff will provide additional documentation to clarify the tax flows and the revenue projections cited in the presentation.