States suffering through tough times are reaching for a tonic.
Lawmakers in several states with tight control of liquor sales are considering legislation that would shift the job to private industry, saving money and raising revenue.
Associated PressBill Oldenburg stocks shelves at a Seattle state liquor store in June. One bill calls for Washington’s liquor board to improve revenue and efficiency.
Some states are seeking a windfall by auctioning licenses to private companies to run the retail operations. Others are considering selling distribution centers. Also, privatization would remove costs including paying employees and overhead such as energy bills.
Virginia, North Carolina, Washington, Vermont and Mississippi are all weighing proposals that would reduce the powerful roles they play in the distilled-spirits or wine businesses through state-run distributorships or retail stores.
Alcohol is a potential remedy to revenue-hungry states because such sales usually remain relatively stable in economic downturns, and expanding sales outlets can lift tax receipts.
Colorado began permitting private retailers to sell distilled spirits seven days a week in 2008, adding an extra day of sales for the shops, and potential revenue for the state.
As soon as this spring, Pennsylvania plans to start letting consumers buy wine at automated kiosks within grocery stores, another potential tax-revenue boost for state coffers.
The privatization faces resistance from religious groups, labor unions and mom-and-pop shops, suggesting how economics are trumping other concerns in the struggle to overcome the recession.
When Prohibition was repealed in 1933, the federal government gave states the power to regulate sales. Some states chose more-active roles than others, believing that operating distributorships or stores could help control consumption and mitigate social consequences.
Liquor companies, perhaps wary of getting into a public fray with anti-alcohol forces, have avoided lobbying on the issue. Some liquor-company officials say privately that privatization might result in more outlets, helping them level the playing field with beer and wine.
The Distilled Spirits Council of the United States, representing giants such as Diageo PLC, said it is neutral on the proposed bills. So, too, did the Wine & Spirits Wholesalers of America, which represents major liquor distributors.
It is typically more difficult to buy spirits than beer in states in where the government dominates liquor retail sales.
Virginia’s Republican governor, Bob McDonnell, made the privatization of state liquor stores a key plank of his campaign last year. He said Virginia could generate a short-term windfall of $500 million by privatizing its liquor stores. Virginia faces a budget deficit of $4 billion.
Virginia Sen. Mark Obenshain, a Republican, has introduced legislation that would require the state to auction off retail licenses to sell distilled spirits. The state would continue to collect taxes on liquor sales, along with annual licensing fees.
Virginia’s effort is being 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 and lobbyist.
Proponents in Virginia and other states also face opposition from lawmakers, labor groups and others who are reluctant to see state jobs eliminated.
In Washington, Tim Sheldon, a Democratic state senator, is pushing for the state to turn over its liquor distributorship and retail system to private industry. He said state government needs to become more efficient, and getting out of the liquor business is one way to do that. Washington faces a $2.6 billion deficit for the two-year fiscal period ending in mid-2011.
But Mr. Sheldon’s proposal, which he said could raise about $350 million of revenue over five years, was watered down in committee. Now, the bill only calls for the state liquor board to study ways to increase efficiency and revenue. Mr. Sheldon said he will continue his push.
Washington’s Democratic governor, Christine Gregoire, has signaled she won’t support various privatization proposals, at least in the current legislative session ending March 11. “It doesn’t address the biggest financial crisis that we face at the moment,” said Viet Shelton, a spokesman for the governor, referring to the state’s $2.6 billion budget gap.
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 the state’s wholesaler, 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 annually.
In Vermont, Democratic state senator Claire Ayer has proposed legislation that would turn spirits distribution over to private industry, potentially saving a few million dollars annually.