LANSING – While many of the state’s license fees, especially for alcohol permits, may no longer be considered sustainable revenue streams for their respective programs and so need to be increased, a portion of those increases also is expected to pay for IT upgrades, an official with the Department of Licensing and Regulatory Affairs said Wednesday.

One of the most controversial items in Governor Rick Snyder’s proposed LARA budget for the 2015-16 fiscal year is a 50 percent increase in certain license fees that would then be halved after three years. The Senate Appropriations LARA Subcommittee has questioned the department about the decision to reduce the overall increase down the line, asserting that if legislators must vote for a fee increase, they’d prefer to only have to tend to the issue once.

And on Wednesday, LARA Deputy Director Al Pohl told the committee exactly why: “If we get the IT systems fixed, we won’t need that extra money.”

Sen. James Marleau (R-Lake Orion) asked if the fee increases as proposed would allow the department to replace COBOL, the ancient computer system used by the department and the Liquor Control Commission for its administrative functions. Pohl responded in the affirmative.

Liquor Control Commissioner Andy Deloney said the commission has been working with the Department of Technology, Management and Budget to design a better system, and currently it is in its second of three phases. Deloney said the technology upgrade is necessary because currently the day-to-day operations of the commission are a “paper mill.”

“With an upgraded electronic licensing software database, we’ll be able to access, manipulate and work with licenses and documents,” he said, adding that one of the most common complaints his division hears is that an applicant already submitted information being sought. “This will make the process faster.”

The current COBOL system is used to sell and purchase liquor in the state, making it necessary to have for the sale of alcohol. Deloney told the committee if the system goes down, a $1.15 billion enterprise will “be in limbo,” he said.

Although most have acknowledged the system’s age as a thorn in the side of state government (and the fact that there is currently only one programmer hired by the state who can still fix it), the revelation added fuel to the fire of critics of the increases, including the Michigan.

Licensed Beverage Association, Michigan Restaurant Association and Michigan Grocers Association.

Scott Ellis, executive director of the MLBA, said he can understand the need for the technology updates and the potential improvements in customer service that can be had from them, but did not understand the logic behind using money from fee increases to fund the upgrade.

“The upgrade for technologies should come out of the revolving fund,” Ellis said, referring to the Liquor Purchase Revolving Fund. “It is the cost of doing business.”

Ellis provided the subcommittee with a chart detailing that, in fiscal year 2012-13, the state of Michigan turned over about $169 million net income to the General Fund. That came by way of about $1.1 billion in total alcohol sales and $912 million in proceeds from the sale of liquor, less $666 million for the cost of goods sold and $77 million in operating expenses.

Or, in short, “We are generating our revenue,” Ellis told the committee.

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