Appropriations committee reviews Liquor and Lottery fund shortfall, OPEB liability and sports-wagering projections

House Appropriations Committee members heard an update Thursday from Wendy Knight, commissioner of the Vermont Department of Liquor and Lottery, on the department’s enterprise fund, long‑term liabilities and recent revenue projections for the new online sports‑wagering program.

“For the record, my name is Wendy Knight. I’m the commissioner of the Department of Liquor and Lottery,” Knight told the committee, describing the agency’s portfolio as running the Vermont Lottery, the Division of Liquor Control and the state’s online sports wagering program. She said the department has a “dual mission … which is commerce and, public safety.”

The discussion focused on why the Liquor Control Fund has shown a deficit on the books dating back before 2017, how accounting changes for pensions and other post‑employment benefits (OPEB) altered the fund’s net position, how earlier policy changes affected revenue flows and how recent market trends and sports‑wagering payout patterns are changing near‑term transfer projections to the general fund.

Knight told legislators that if the state had not begun recording long‑term liabilities differently following new accounting rules, “the net position for DLL for FY24 would have been a positive $1,900,000.” She said the shift in accounting for pension and OPEB obligations that began with guidance implemented in 2018 contributed to an $11 million buildup in long‑term liabilities referenced during the hearing.

Committee members pressed for detail on amounts. Knight reported FY24 totals for the Liquor Control Fund of roughly $102,816,703 in revenue and about $82,000,000 in expenses; finance staff recorded a direct application (a budgeted transfer) of about $21,200,000 in FY24, and the department’s FY24 operating income was roughly negative $1,000,000. Knight said the department began FY25 with a roughly $6.9 million deficit after accounting for the prior balance and projections.

Knight and committee members traced part of the history to two policy changes: an excise‑tax change that reduced a distillers’ tax rate (described in the hearing as a move from 25% to 5% for certain manufacturers) and a later legislative negotiation that moved ready‑to‑drink (RTD) low‑alcohol cocktail products into the private sector. Knight said those shifts, together with direct transfers the administration took in high‑revenue years (including large direct applications during COVID), increased the pressure on the Liquor Control Fund’s net position.

The committee also discussed the timing and mechanics of the “direct application” transfer. Knight said the Liquor Control Fund transfer is set as a direct application at the beginning of the fiscal year based on a projection developed during the budget cycle; unlike the lottery’s monthly net transfers, the liquor fund’s direct app does not automatically “true up” during the year, which can produce a deficit if projections turn out high.

On sports wagering, Knight said Vermont launched online wagering in January and that for FY24 (six months of operation) the department recorded roughly $3.5 million in revenue share. Based on activity and higher‑than‑expected winning payouts, Knight said the department revised its FY25 projection downward from $7,000,000 to about $6,100,000. She told the committee that calendar 2024 gross handle for sports wagering was about $198 million, with roughly $140 million wagered by in‑state bettors and $58 million from out‑of‑state bettors; Knight added that the average bet value was roughly $29 for out‑of‑state users and $20 for Vermonters.

Committee members asked for additional documents and calculations. Representative Rob Stevens asked for multi‑year totals of revenues, expenses and transfers; Knight agreed to provide a five‑year breakdown back to 2017 and related spreadsheets from the department’s finance director for committee review. The committee chair indicated staff from the Joint Fiscal Office and Finance & Management will be asked to explain enterprise‑fund and direct‑application policy and practice in a future session.

No formal votes or motions were taken during the briefing. Members and department staff said the committee would follow up with agency financial detail, and Knight said she would provide the requested spreadsheets and supporting figures.

The hearing underscored tensions in the Liquor Control Fund between the department’s public‑safety responsibilities and its role as a revenue source for the state, and it signaled further committee scrutiny of transfer projections and long‑term liability accounting going into the budget process.