Gov. Tina Kotek withdraws request for 50-cent surcharge on alcohol for mental health services

UPDATED on Friday at 7:58 a.m. with Oregon Recovers statement.

Gov. Tina Kotek has dropped her request for the Oregon Liquor and Cannabis Commission to add another 50-cent surcharge to bottles of alcohol to fund mental health and addiction services.

She asked for the surcharge in her February budget. But on Wednesday, she sent a letter to the commission’s board, saying the tax was no longer needed.

“Since my recommended budget was originally released, there have been two revenue forecasts indicating there will be sufficient resources to fund essential services in the next biennium without the surcharge,” she wrote. “Additionally, I have been clear that I only support a new surcharge if the funds are directly allocated to behavioral health services. Without further specific action by the Legislature this session, any surcharge approved by the commission would go into the general fund with no designatedpurpose, undermining the purpose of the recommendation.”

The Legislature has yet to pass a budget due to the continuing Republican-led walkout in the state Senate, which has brought floor votes to a halt. They object to a bill to expand access to gender-affirming care and guarantee  abortion rights for minors. The session has to end by June 25, and a continuing stalemate will leave hundreds of bills on the table.

The surcharge would have doubled the tax on bottles of hard alcohol, raising $90 million over the next two years for behavioral health care and addiction services. The proposal was supported by advocates, primarily Oregon Recovers, a Portland-based group that supports people in recovery. The group’s executive director, Mike Marshall, said in a statement that Oregon Recovers was disappointed by the decision.

“Oregon must change its destructive relationship with alcohol and raising the price of distilled spirits is the single, most effective action the OLCC can take to end Oregon’s alcohol addiction crisis,” Marshall said. “The Liquor Control Act empowers and mandates the OLCC protect Oregon taxpayers from the economic damage caused by alcohol consumption and protect Oregon consumers from the devastating health consequences due to the current industry-friendly pricing structure.  OLCC commissioners must stop prioritizing their personal financial interests over what is in the best interest of all Oregonians.”

The tax was opposed by many in the liquor industry, who said it would have a major impact on their revenue.

The commission had been gathering public comments on the tax and was due to vote on it on Thursday, June 15. A spokesman also did not respond to a request for comment by mid-afternoon Thursday.

The pullback drew praise from the industry. Tom Burkleaux, president of the Oregon Distillers Guild, released a statement thanking Kotek for her decision.

“We appreciate the governor’s office has listened to Oregon’s craft distillers about how this proposed increase would disproportionately hurt our local producers that make higher-cost, premium products,” the statement said. “This surcharge increase would have had a detrimental effect on our smaller Oregon businesses, which cannot absorb a price increase compared to larger out of state brands.”  

Burkleaux said industry executives were willing to work on alcohol and drug addiction. 

“This is a multifaceted challenge that requires the commitment of many stakeholders, including those in Oregon’s craft alcohol industries,” the statement said.

A December 2021 nationwide survey showed that Oregon has the fifth-highest rate of alcohol addiction in the country, the second-highest rate for drug addiction and the second-highest rate of mental illness. 

Kotek said in her letter that improving mental health services remains a priority for her administration, and she called on continuing discussions with the commission on how it can “better support” behavioral health services.