In February, the state reduced the amount he and every liquor store makes from each bottle.

At $2,362.95, the price of the Remy Martin Louis XIII cognac will bump up another 50 cents once a new state surcharge takes effect April 1 at the East Medford Liquor Store.

Despite the increase on every bottle of liquor, store agent Herb Heier said he doubts it will help pull him out of the financial hole Oregon officials have put him in.

In February, the state reduced the amount he and every liquor store makes from each bottle. At Heier's store, he said the net effect is that his revenues have been slashed by 25 percent over the past year.

"I'm here working seven days a week for a loss," said Heier.

At first officials from the Oregon Liquor Control Commission Monday said the state hadn't yet reduced the compensation to liquor stores in February, but after additional review they said Heier was correct.

"We did start taking it out of the February check," said Christie Scott, spokeswoman for the OLCC.

She said that initially the reduced compensation was going to be taken out from April to June, but the OLCC then decided to start in February to soften the financial blow to liquor stores in any given month.

The Legislature ordered a 5 percent reduction in compensation to help balance the current state budget, resulting in a $3.8 million cut to all the liquor stores during the remainder of the fiscal year ending in June.

The OLCC negotiated a $1.5 million inventory reduction plus added a 50-cent-a-bottle tax on liquor, or 25 cents for the small travel bottles, to help lessen the hit.

As a result of all the efforts the commission has made, Scott said, liquor stores will probably see a $500,000 to $1.9 million reduction in compensation (depending on total volume sold) instead of the $3.8 million through June.

Scott said the OLCC had hoped to avoid these cuts to liquor stores.

"We only did it because the Legislature told us," she said.

Workers at East Medford Liquor were busy this week putting new prices on liquor bottles, including the 250-year-old cognac, in anticipation of the 50-cent increase.

Heier said he's seen the state's math, but thinks it doesn't add up to the kind of losses he's now experiencing.

"They're trying to make it sound like we aren't getting hit," he said.

In addition, the 50 cents extra per bottle doesn't start until April 1, so he doesn't think his bottom line will improve until he sees the state check in June.

"Maybe it will work out," he said. "I don't put a big hope in it."

All he knows right now is that the revenue he takes in doesn't cover his expenses, the bulk of which are made up of salaries and rent.

Heier said he used to make a good living when he averaged almost 9 percent revenue for every bottle of liquor sold, but he now figures he makes about 5 percent.

"It's a drastic reduction," he said. "To be honest, you're going to see some liquor stores fold."

He said he experienced a 5 percent drop in sales in February that partially accounts for his reduced revenues. But he said that most of the overall decline can be attributed to the state cut. Between the state cut in compensation and lower sales, he said his revenues dropped by about 30 percent.

Heier said most of the reduction in sales in February is likely attributable to less demand from local bars because of new no-smoking laws.

Serena Ruth, an agent with the Eagle Point Liquor Store, estimates her losses at about 25 percent as a result of the state cuts.

"I do know of several stores that have had to lay off people," she said. "But I have two employees I cannot afford to lose."

To retain her employees, Ruth said she's been pinching pennies everywhere she can. "I've turned off the heat and I'm wearing a sweater," she said. "The customers have been saying it's cold in here."

Her sales were up about 5 percent in January and February, and last year sales were up 17 percent over 2007.

Rep. Dennis Richardson said he has opposed the idea of cutting the compensation for liquor stores, which he views as essentially breaking a contract.

"The idea is they had an agreement," he said. "Then, the state came along and unilaterally changed the terms."