by James Graham

The economic conditions in California have deteriorated so quickly and so harshly since the annual Budget was set that Governor Arnold Schwarzenegger has been forced to put forward an emergency budget to counter the State’s multibillion-dollar budget shortfall.

A seven-fold excise tax increase will see a rise from $0.20 per gallon of wine to $0.05 a drink, the equivalent of $1.48 a gallon. Official assumptions consider a gallon contains 25.6 drinks.

“Economic conditions have deteriorated dramatically since the Governor signed the 2008 Budget Act on September 23,” said a State government spokes person. “This deterioration was reflected in revenue collections for September that came in $923m below forecast. As a result, California faces a revenue shortfall of $11.2bn this year,” The excise tax is expected by the California Department of Finance to raise $293m during the 2008-09 fiscal year and $585m in 2009-10. Revenues generated would be used to pay for alcohol prevention and treatment programmes.

The Wine Institute, a California wine industry trade body, said in a statement: “Wine Institute is opposed to any increase in excise taxes that would single out California’s vintners and wine grape growers to bear the burden of the state’s budget shortfall. The California wine community is willing to do our part to support broad-based approaches to address our State’s fiscal challenges.”

Governor Schwarzenegger was reported as saying said that since he signed the Budget Act 2008 “the mortgage crisis has deepened, unemployment has increased and the stock market has lost almost 20% of its value.”