Bob McDonnell has put the issue of privatizing ABC stores and liquor sales on the front burner in the gubernatorial campaign. He suggests that it could provide $500 million dollars in the short term that could be dedicated to transportation needs while continuing to generate $179 million in tax revenue for the state on an annual basis.
I think that McDonnell is probably right about the numbers.
But the politics of it may be even more complicated than the transportation problem he is trying to fix.
I should begin by disclosing my own involvement in the matter.
I served as Executive Director of the Wilder Commission that proposed ABC privatization and advanced the $500 million figure as a reasonable estimate of the potential benefit to the state. McDonnell cites the work of the Commission extensively in his statement.
The Commission believed that it is almost impossible to justify alcohol sales as a core function of government.
I remember that a number of Commission members were shocked when we looked at the top twenty suppliers of goods and services to the Commonwealth and saw how many were liquor companies.
Look it up sometime. It’s pretty amazing to see the total amount of “spend” on alcohol by the state.
And it is my recollection that both Doug Wilder and Nigel Morris, the business savvy Vice-Chair of the Commission, were convinced that a genuine privatization of ABC sales would yield substantial economic benefits to the state.
But to obtain these benefits, it would have to be a real privatization, not a partial or sort of privatization.
For example, you couldn’t just sell the existing stores in the existing locations.
Or you couldn’t just sell off the stores that currently aren’t making money.
Yes, you can probably ensure that there isn’t a liquor store on every corner.
But you would have to allow major retailers such as WalMart, Walgreen’s, Costco, etc. to become involved in selling liquor and permit them to use their marketing and sales expertise to make a profit here just as with any other product.
Sounds like a no brainer.
But the opposition actually comes from a wide variety of angles.
First, there are suppliers and distributors who are currently involved in what they perceive to be a workable, effective and profitable system. They prefer the regulatory regime under which the state presently operates to the unpredictability and uncertainty of an alternative system. They argue that there is nothing terribly wrong with Virginia’s approach and we would be foolhardy to substitute what they consider to be an unproven and potentially more problematic method.
Second, moralists on both the left and the right and groups such as MADD (Mothers Against Drunk Driving) tend to oppose the privatization of liquor sales.
Their argument is not very different than the one used to oppose any expansion of gambling, be it privately owned or state run.
Won’t private liquor sales result in heavy advertising directed at the poor and those who already have alcohol problems?
Won’t it harm families who have enough trouble staying intact in contemporary culture?
And won’t there be negative public safety implications for all kinds of innocent people if we promote alcohol sales more aggressively?
Seven years ago, the Warner administration decided that this wasn’t a fight they really wanted to take on.
Bob McDonnell says that he will.
He maintains that it time to reconsider the Wilder Commission’s recommendation. And he claims that recent experience in other states demonstrates that ABC privatization can be both profitable and not socially destructive.
Politically, this is a fascinating development.
Democrats plan to argue that the problem with McDonnell is just a puppet for the social conservatives who are pulling his strings.
But I can’t imagine that there are many faith-based groups (on the right or the left) who are very enthusiastic about privatizing liquor sales.
In fact, it will be interesting to see how much support Bill Bolling and Ken Cuccinelli will offer to the head of the ticket on this matter.
i say do it.
and while he’s at it, he should legalize marijuana & TAX it. Virginia needs the revenue.
no, i am not being sarcastic.
There’s a smart way to do this. And it would ensure a future revenue stream as well as a one-time cash windfall. The state should maintain control of the number of outlets, initially set at the same number in each locality that the state now operates. It should sell — at auction — the right to operate an outlet for 20 years. New facilities can be added as population in a locality increases, keeping the current citizen/liquor store ratio. Since the state leases most of it’s locations, the licensees would not be required to use the same locations. The state gets a cash windfall from the initial auction. Saves money on the leases. And gets a periodic infusion of new money from re-auctions of rights and the auction of rights to new facilities that become available. And the state maintains “control” of the liquor industry, making “moralists on both sides” happy.
First off, and I know this is self-serving, but I am opposed to the privatization of Virginia ABC because it would cost me my job. I’ve been an ABC employee for the past 2 years since getting out of the Army. It has been a stable and decently-paying job and I am proud to be counted as a state employee. No one ever talks about the thousands of ABC employees that will lose their jobs under privatization. There has been no reason presented so far to lead me to believe myself and my co-workers would be kept on. Furthermore, I all but assure you that if we were to stay, our pay would fall to the minimum wage. Many of the workers at ABC don’t view this as a simple part-job; this is a career for many people. It’s an organization that offers advancement. Thus far, I’ve worked in two stores, have been promoted once, and am on track to become an assistant manager elsewhere. That all disappears for thousands of commonwealth employees. Then there are the employees who have nearly been there 20 years who have all but earned their state retirement benefits and would likely lose out in the switch.
Then there’s the revenue the state would be shortsightedly giving up. I honestly don’t even understand how this makes sense to people… McDonnell claims that the one-time sale of ABC locations (which are mostly leased, not owned by ABC) would generate a one-time influx of five-hundred million dollars. Let me start by saying this…. ABC is the ONLY state agency that generates pure revenue for the state. THE ONLY ONE. That’s like Google getting out of the web-advertising business. You don’t cut out your cash cow. It’s been pointed out that the hundred million that the state generates annually isn’t that much but actually in the last 6 years ABC has handed over over a billion dollars to the treasury. Also, right now the state makes money both on the revenue that ABC generates and the standard 5% taxes that are made off each sale. So let’s say that the taxes stay the same, how does the state make up for the loss of revenue? It’s impossible. You would have to RAISE taxes to make up for that loss. The only other hope would be that the number of drinking Virginians increases exponentially so that an increase in sales would lead to a de facto increase in tax revenue.
Finally, MADD is right in one regard - private liquor stores, Wal*Mart etc would never be able to provide the customer service and level of security that ABC does. Do underaged kids get their hands on liquor right now? Sure. If liquor stores went from being state supervised, controlled, and operated by state employees? Even moreso. As it stands, the state-run enforcement that polices up ABC stores and restaurants/bars is spread pretty thin. The agency would have to expand rapidly (and do so in a budget shortfall not helped by the loss of ABC revenue which currently supports it) to supervise the operation of privately owned liquor stores.
So in closing, my main points:
1 - I want to keep my job
2 - Thousands of state employees would likely be out of a job and well-deserved benefits under McDonnell’s plan
3 - Privatization means the rug being pulled out from many ABC workers who see it as a lifetime career path
4 - A one-time influx of a half-billion dollars that would go toward roads does not make up for the long-term loss of billions of dollars in revenue that helps funds multiple state agencies
5 - Virginians would have to drink more or taxes would have to be raised to offset the loss of ABC revenue
6 - An increase of liquor store locations not run professionally at a minimum wage scale would operate less professionally and safely than the current agency that observes the state’s own laws to the letter as best it can and works EXTREMELY closely with enforcement7 - I want to keep my job