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November 16, 2008

Albany Times-Union

Wiggle room in tax crisis

While Governor Paterson is trying to coax billions in budget cuts from a reluctant Legislature, he also is asking us to stoop for nickels.

As in deposit bottles and cans. For the first time in memory, passage seems plausible for a Bigger Better Bottle Bill that would add bottled water, iced tea and other noncarbonated beverage containers to the existing short list of soda and beer containers that require a deposit. In the past, the state Senate has stonewalled any effort to expand the bottle bill, and especially to pry the unclaimed deposits from the fingers of the beverage industry.

Bottlers and wholesale distributors keep $144 million a year in unclaimed deposits, so those beer cans do add up. Industry keeping unclaimed deposits has been a tradition for 25 years. An expanded bottle bill would raise the unclaimed amount to as much as $218 million a year, according to the New York Public Interest Research Group.

But that's purely speculative. In any case, it's a lot of money. Naturally, the industry doesn't want to part with those nickels because, after all, unclaimed deposits have become an established contributor to its bottom line.

But confronted as the state is with a desperate need for new revenue sources, necessity may trump the Senate's traditional defense of the soda and beer folks. The operative word remains "may." In the past, the Assembly has passed the bill, but always when the Senate signaled it would not. Come January, the Republicans will lose their majority grip on the Senate, barring any Democratic defections to their side. Then, in theory, the stars could align in the bottle bill's favor. We'll see. It may come down to how much of a bottle bill we get.

There are two distinct elements to the Bigger Better Bottle Bill. The beverage industry has fought expansion of what qualifies for deposits tooth and nail. But it has fought far more ferociously the notion of turning over the unclaimed deposits to the state. Not surprising.

Given the state's needs for gobs of new money, though, it stands to reason the governor will goad the Legislature into going beyond just expanding what requires a deposit. A mere expansion would offer the benefit of cleaning up the environment and reducing the landfill waste stream. In most years, that would be pretty good. This year, it's not enough.

If the Legislature goes after the unclaimed nickels, as it needs to do, the question becomes whether or not the money is shared with the beverage industry.

Arguably, it should be. Otherwise, taking all the nickels away from Pepsi and Coke and the beer companies is a thinly veiled tax on them, and certainly does nothing for our reputation as a business unfriendly state. So maybe we split it with them, or give them a third. There's wiggle room here.

Regardless, the fate of the Bigger Better Bottle bill remains speculative, as does the exact amount it would raise year to year.

So the governor's idea of substituting on an escalating scale the revenue raised by the iffy bottle bill for the sure thing of the existing state real estate transfer tax to finance the critical Environmental Protection Fund is the wrong approach.

Understandably, the governor's budget division is dying to get its wolfish paws on the real estate transfer money for the general fund.

Even this year, with all the financial difficulties we've faced, the real estate transfer tax is bringing in a healthy $800 million. During the Cuomo years, the so-called locked box that is supposedly the EPF was funded by this sure-thing tax to guarantee its inviolability. In reality, the EPF needs only $255 million because that's all the Legislature said it could have.

So there's wiggle room there, too, in terms of sharing the transfer tax.

The governor proposes to reduce the $255 million by $50 million in the current budget, and another $89 million in the next budget year.

These cuts are of concern because they fall unevenly. Farmland protection, zoos and botanical gardens take a much greater proportional hit, for example, than they should. At the same time, the governor has wisely cut land acquisition funds in the EPF only minimally. That's proper and sensible, keeping the long view in mind.

Similarly, the environmental community has to recognize that shared sacrifice is exactly that. So far, what the governor proposes in terms of EPF cuts is not outlandish.

Still, what we need to hear from both the governor and Legislature, even in the midst of our crisis, is that the Environmental Protection Fund is a necessity, not a luxury. It is the source of our clean water and clean air, our capped landfills, and a prime pump for New York's two major industries, agriculture and tourism.

Cutting off our nose to spite our face comes to mind, if these cuts go any deeper or become permanent.

Fred LeBrun can be reached at 454-5453, or by email at flebrun@timesunion.com.


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