Four states — Washington, Virginia, North Carolina and Mississippi — are all weighing proposals that would reduce the powerful role they play in sales of liquor.
CHICAGO — With their finances on the rocks, states that control the sale of liquor to the public are looking at handing the job to private enterprise, a move that could raise revenue, streamline government, and prove a boon to the spirits industry.
Four states — Washington, Virginia, North Carolina and Mississippi — are all weighing proposals that would reduce the powerful role they play in sales of liquor, and in some cases wine, via state-owned distributorships and/or retail outlets.
The effort could take months to play out because lawmakers have to show how privatization would deliver significant revenue and cost benefits.
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It also faces stiff opposition from labor groups, religious communities and others who would prefer keeping the state in charge.
Eighteen U.S. states and some Maryland counties still have some form of a liquor monopoly, a relic of the Prohibition era.
When that ban was repealed by the 21st Amendment in 1933, states were given near-absolute power to regulate alcohol sales within their borders. Some chose a more active role than others, adopting the idea that state ownership would enable them to better control consumption and mitigate negative social consequences from drinking.
Bob McDonnell, Virginia’s new Republican governor, made privatization of his state’s liquor stores a key plank of his campaign last year. He insisted in his State of the Commonwealth address last month that selling Jack Daniel’s whiskey is not “a core function of government.”
McDonnell believes Virginia could reap a short-term windfall of $500 million by privatizing its liquor stores, money he’d like to spend on transportation projects. Virginia faces a budget deficit of $4 billion for the fiscal year that will end June 30.
A Virginia state senator, Republican Mark Obenshain, has introduced legislation that, if approved, would require the state to auction off licenses to sell distilled spirits to retailers. The state would continue to receive tax from liquor sales, along with the licensing fees. In fiscal 2009, the state liquor agency contributed $322.3 million to Virginia’s general fund from profits and excise taxes.
The privatization efforts in Virginia and other states rankle groups that argue alcohol-related problems would increase if stores are run by private businesses.
In Washington state, Tim Sheldon, a Democratic state senator from Potlatch, Mason County, has for years proposed turning over the state’s liquor distributorship and retail system to private industry. Last month, his bill earned its first-ever committee hearing. The reason, he said, is that the state faces a $2.6 billion budget deficit for the two-year fiscal period ending in mid-2011, and continued shortfalls in the years beyond.
Sheldon argues that state government needs to be more efficient, and getting out of the liquor business is one way to do that.
But his bill, which he says could add $350 million to the state’s coffers over five years, would not require the state to shut its stores until July 2012, too late to address the current budget crisis.
Washington Gov. Chris Gregoire, a Democrat, has signaled she would not support the proposal, at least in the current legislative session, which ends March 11.
“It doesn’t address the biggest financial crisis that we face at the moment,” said Viet Shelton, a spokesman for the governor.
He said that the governor also has some “serious questions” about whether privatization could result in more alcohol-related problems, such as an increase in sales to minors.
The move also is opposed by the United Food and Commercial Workers union, which represents about 700 liquor-store employees in Washington state.
In Virginia, the privatization effort is opposed by the Virginia Assembly of Independent Baptists, which represents about 500 Baptist churches and has helped defeat similar proposals in the past.
“We oppose anything that we think would expand the sale and use of alcohol,” said Jack Knapp, the group’s executive director.
Some retail groups, such as the Virginia Petroleum, Convenience and Grocery Association, which represents convenience and grocery-store operators, also have voiced concerns about the state doling out licenses to the highest bidders, fearing it would pit small shop owners against better-funded national retail chains.
In North Carolina, Democratic Gov. Bev Perdue has asked her independent Budget Reform and Accountability Commission to place a dollar value on the state’s 411 alcoholic-beverage stores and its distributorship, along with possible options for changing the system.
Mississippi’s Republican governor, Haley Barbour, has proposed turning over the distribution of wine to private industry, which could raise an additional $2.5 million each year for the state.
In Mississippi, beer, wine and spirits are all sold in privately run stores, but wine and liquor are distributed by the state.