The Bureau of Revenue Estimates, in a policy report to the Maryland Department of Legislative Services, has put the price tag of a proposal to remove the Field Enforcement Division from the purview of the Comptroller’s Office at nearly $50 million over the next five years, a cost that would be borne directly by taxpayers.
Legislation to move licensing and regulatory functions for alcohol, tobacco and motor fuel from the Comptroller’s Office to a newly created Alcohol, Tobacco and Motor Fuel Commission (ATM) would result in significant operational costs for both the agency and the commission. In addition, Senate Bill 703/House Bill 1052would lead to increased administrative expenses, inefficiency and lost revenues, according to the BRE analysis.
The report, prepared in advance of bill hearings on Friday, states that the disruption of longstanding tobacco enforcement policies and procedures could jeopardize up to $750 million in tobacco Master Settlement Agreement (MSA) funds over five years. The bill’s passage could also undermine efforts to preserve taxpayer security at a time when the Maryland Comptroller’s Office has been nationally recognized for its work to prevent tax fraud and as the agency is transitioning to a new, state-of-the-art tax processing system.
The costly and damaging impacts of the proposed legislation will be further outlined during a media briefing to be held Thursday, February 21 at 11:30 a.m. in the Assembly Room of the Goldstein Treasury Building, located at 80 Calvert Street in Annapolis. Comptroller Peter Franchot will be joined by BRE Revenue Policy Analyst Kevin Ross, Field Enforcement Division Director Jeff Kelly and several of his agents to explain the fiscal analysis and the impact to enforcement operations.
“The impacts of this reckless political power grab are plainly obvious and it has nothing to do with good government,” said Comptroller Franchot. “On the contrary, it would cost Marylanders tens of millions of dollars, weaken our regulatory enforcement laws, jeopardize tobacco settlement funds that the state relies on, endanger taxpayers’ security and potentially impact the job security of dozens of hardworking enforcement agents who protect consumers at the pump, crack down on cigarette smuggling, regulate alcohol and go after tax cheats.”
The report describes how removing FED from the Comptroller’s Office would strip it of access to sensitive tax information, which is fundamental to its enforcement power. Under the bills, FED could no longer review tax audit reports, and its status with federal agencies through Memorandums of Understanding could result in requiring subpoenas for tax information from the Comptroller’s Office, which could cause delays or even hamper criminal investigations and prosecutions.
“Removing FED from COM would result in a significant unseen cost to the State,” asserts the BRE report. “The cost of this loss to the State’s efforts at eliminating tax fraud, identity theft, criminal and terrorist funding, etc., cannot be overstated.”
FED also would lose the administrative, functional and technical overlap it currently has and would require the hiring of eight new positions for information technology, human resources, public health liaison, external communications, attorney general and administration and finance. In the first year alone, the cost of duplicating these eight positions would be nearly $795,000; over five years, the cost is almost $4 million.
Additional costs would be incurred from the need for new computer hardware and software, as well as new office space for the newly created commission that includes secure storage and a loading dock for confiscated alcohol and contraband tobacco products. Government efficacy will also suffer with the separation of the State licensing bureau, wherein the new commission would have authority over alcohol, tobacco and motor fuel licenses, while the Comptroller would retain enforcement authority over merchant licenses and tax compliance.
“My team has earned the respect of both those they regulate and those they serve and protect,” said FED Director Kelly. “Not a single comment has been made during this debate about the quality of our work, the need to change what we’re doing or how moving our division would improve our outcomes. This legislation seems like a solution in search of a problem.”
The potential loss of hundreds of millions of dollars of tobacco settlement funds is particularly concerning. FED agents work with the Attorney General’s Office to ensure the State remains a beneficiary of the 1998 settlement agreement between Maryland and large tobacco manufacturers. To receive the fund, states must show they are diligently enforcing tobacco compliance. If the State is found to have not diligently enforced in any given year, it will forfeit the money. The Attorney General’s Office uses FED for enforcement. If that is affected, the state risks losing $150 million annually and $750 million over five years.
“It’s okay for Annapolis insiders controlled by big beer distributors to disagree with my advocacy on behalf of Maryland’s craft beer industry, but it’s not okay for them to use innocent hard-working state employees as pawns in their political games and make Maryland taxpayers and consumers foot the bill for this nonsense,” Franchot said.