Liquor Commission cites cloud-based system costs, transfers to health fund and evolving sales patterns in budget briefing

The New Hampshire Liquor Commission outlined budget changes tied to a recent enterprise software migration, transfers to health accounts, staffing changes and evolving retail trends during a briefing to the House Finance Committee.

Joseph Malika, chairman of the Liquor Commission, and CFO Tina Demers reviewed the agency’s presentation and answered questions about differences between the commission’s proposed reductions and the governor’s numbers. Demers said some positions counted in the governor’s budget are statewide DOIT positions or shared DOIT positions, not direct Liquor Commission headcount, creating apparent discrepancies between the agency’s requested cuts and the governor’s proposed budget.

System conversion and contracts: The commission reported a major migration to Microsoft Dynamics 365 (D365) last April. The agency said the new cloud‑based system requires ongoing maintenance and vendor contracts that DOIT cannot provide; the budget therefore includes higher contract service lines for system maintenance and outside support. The commission said it launched D365 to replace a 40‑year old system and that near‑term expenses reflect the first‑year maintenance and implementation costs.

Transfers to HHS and Granite Advantage: Commission leaders explained large increases in the transfers (Class 49) line are due to two statutory transfer obligations: (1) a transfer of 5% of prior‑year gross profit to an alcohol abuse prevention fund (RSA 176:16) and (2) the Granite Advantage transfer for Medicaid expansion (referred to as 126‑AA in the presentation). The commission said the 126‑AA transfer is driven by HHS needs for the non‑federal match and can vary; those transfers have been previously processed after revenues but were included as a budget line for transparency.

Personnel and enforcement: The commission said enforcement salaries and benefits rose in part due to pay raises, benefit changes, and new part‑time loss‑prevention staff in stores. The commission described a decline in overall alcohol volume sales related to national trends, premiumization (higher‑price bottles sold in smaller quantities), and competition from cannabis legalization in neighboring states. The commission also noted a direct‑ship “John Hunt” tax on out‑of‑state shipments into New Hampshire was about $1.2–1.4 million in recent years.

Tobacco contract and federal funds: The commission said federal funds increased for tobacco compliance work through a contract with the FDA and that the agency has a position tied to that contract. The commission said it had been pragmatic about consultants used to support the D365 transition and has curtailed those consultant costs following go‑live.

Licensing and regulatory questions: Committee members pressed the commission about license fee levels, enforcement workload and whether THC (cannabis) beverages are being taxed or regulated. The commission said THC beverages are not regulated by the commission and recommended any oversight or tax policy changes would require state legislative or regulatory action; the commission said some THC products are being shipped into the state and that there could be potential revenue if the state chose to regulate and tax such products.

Stores and operations: The commission said it has consolidated lower‑performing stores in past years and continues to evaluate marginal stores (identified examples included Walpole and Woodsville) for possible consolidation. The agency said sales are shifting toward fewer case sales and more premium single‑bottle purchases, affecting store operations and merchandising.

Follow up: Committee members requested additional materials including a breakdown of license fee comparisons with neighboring states, a short list of low‑performing stores, and more detail on direct‑ship and THC shipment figures. The Liquor Commission agreed to supply that information.