The push to privatize ABC

Brent Finnegan -- January 15th, 2009

Sen. Mark Obenshain is submitting a bill this session that would privatize Virginia’s state-run ABC liquor stores. From Garren Shipley’s story in the NVDaily:

While the finer points are still being worked out, previous studies have found [that by divesting itself of its 331 ABC stores] the commonwealth could realize some $700 million in new revenue — or 23 percent of this year’s budget shortfall — every year […]

In addition to collecting franchise fees, the state would be off the hook for retail leases, employee pay and retirement benefits.

Meanwhile, the commonwealth continues to collect the tax revenue from liquor sales just as before.

I see (via Virginia Conservative) that Obenshain has created a Facebook group called Virginians for ABC Store Privatization. As of 3:30 this afternoon, it has close to 100 members.

41 Responses to “The push to privatize ABC”

  1. Adam Sharp says:

    Here’s what’s going to happen:

    1) ABC stores will be privatized. It just makes sense.

    2) The owners of the new licenses to sell liquor will form a lobby in Richmond.

    3) The “Virginia Free Spirits Association” will lobby the General Assembly for decreased regulations on the sale of liquor.

    4) The new laws will prompt a backlash, ensuring liquor joins guns and abortion as perennial issues in Virginia politics.

    Yay.

    (Another possibility would be the ABC’s enforcement budget somehow being cut after a few industry lobbyists named Jack and Jim made their way to the GA office building.)

  2. Actually this is quite a reasonable proposal. In most states, liquor is not sold out of state stores. What is the purpose of doing so? We are indeed long past any idea that this is somehow some sort of regulatory measure to restrict drinking. It is just a leftover absurdity that costs the state money. Heck, what is the point of having hard liquor sold only in ABC stores when beer and wine are available in any grocery store. This existing setup has not made any sense for a long time.

  3. Bubby says:

    It may be a good idea, but this is more of that Republican math. Remember, these are the guys that ran the state budget into the red (for the second time since 2000), and never let a little hype get in the way of the truth.

    What the report actually said, if Obenshain had read it, was:

    We estimate that the dollar amount that could accrue from these streamlinings, outsourcings and eliminations, including the privatization of ABC, could total more than $500 million.

    Savings from privatization of the ABC store were only a small part of the saving estimate. Now you know.

  4. Joshua says:

    Barkley Rosser has a good point here. Why should beer and wine be treated as different from other alcohol? Are they somehow evil (or more evil depending on your point of view)? Aren’t they both used for the same purpose?

  5. Dorn Peterson says:

    Free market advocate that I am, I’m going to take the “wrong” side on this. Drive down a main thoroughfare of a city in a state where liquor sales are handled by private stores and half of the strip mall stores and 90% of the garish signs are for liquor stores. I can do without that.

    What I’d really like to see happen is to have all “recreational” drugs legalized and have the ABC stores sell them. That would cut down on the sales of such things by making the whole thing inefficient. I can’t think of a better way to make the process inefficient than to have the government running it. Since the profit motive would be largely gone we wouldn’t have drug recruiters going after our kids.

  6. Interesting comment, Dorn. But somehow I can’t see state selling weed to Virginians. Not now, not 50 years from now.

  7. cook says:

    Brent, 50 years ago you would have made the same statement about Virginians smoking in public buildings.

  8. seth says:

    drug recruiters aren’t going after your kids. that’s something that nancy reagan made up in the 80s.

    it’s going to take a critical mass to make something like that happen and i agree with brent that we’re still pretty far from it.

    i think it will most likely take something like this:
    http://www.elpasotimes.com/newupdated/ci_11444354
    to finally make us take an honest look at our war on drugs and realize that by complacently allowing the government to present propaganda as fact over the past 25 or so years we have done a great disservice to our society.

  9. zen says:

    I think Dorn does have a valid concern. An extension of the argument is not only signage for discount liquor on and within storefronts, but also packed into our mailboxes as junk, spread across newspapers (perhaps their revenue cash cow), — basically bombarding us with messages of consumerism for products that can be dangerous.
    Now, maybe some cheer the free-market and the freedom of choice in the midst of message pressure, but I fear for the greater good when there are those that do not have good judgement.
    Social services that deal with addiction and substance abuse are poorly funded now. This represents a real and present danger, a failure of responsibility of public welfare, and quite frankly a sad commentary on our social values. So how much of that new revenue is going to be spent dealing with the likely increase we’ll see from more easily acquired booze?

  10. David Miller says:

    Zen, I fully support the current limits on signage for alcohol. At my store it is illegal to post any sort of banner on the outside of the store that advertises alcohol. I think that the sale of liquor should be allowed by any valid licensee (though this would clearly represent a higher license fee within the proposed legislation).

  11. David Miller says:

    Cook, good point. Another would have been to tell me as a child that we would elect a democrat for senate and president (Virginia that is). It would have been laughable.

  12. David Miller says:

    Has anyone brought up the fate of the faithful employees of said ABC stores?

  13. Lowell says:

    No David, I don’t think I’ve ever seen it addressed.

  14. Lowell says:

    I’d also like to see someone address the supposed inefficiencies of VA’s ABC stores, and how privatization would be a gain for the state, and for the people. Where do Senator Obenshain’s numbers come from? Are they close to being valid?
    Seven hundred million dollars in new revenue, per year?!
    Can someone break that down? That certainly isn’t reflected in the Wilder Commission report. Or perhaps I’m not reading it correctly…

  15. Lowell,

    I do not know what those numbers are based on. Certainly if Obenshain’s numbers are not accurate, that could affect things. As it is, I suspect tha matter of the current employees is why we have not so far undone the current system, despite that fact that it basically does make any sense. One would hope that maybe they could get jobs in the new, private liquor outlets, whatever form they might take.

    As for signage and such things, I would agree that such matters should be dealt with by appropriate regulations.

  16. David Miller says:

    One thing about the employees situation, privatization will be bad for them.

  17. Bubby says:

    Do you think Obenshain’s idea for privatizing liquor sales has anything to do with the $10,000 he has received from alcohol manufacturers, brokers and distributors since in the last six years?

    As I remember there was huge controversy around this Commission finding because Doug Wilder’s son was part of consortium seeking to lobby for the state alcohol distribution franchise. Looks like the industry found a new player.

    • Jeff says:

      Yeah, don’t think for one minute that these politician don’t have there hands in some of big business pockets.
      I’m sure the Wall-marts and some other business biggies want some of the liquor action too. I’ve looked at this from every angle and it doesn’t add up. The assets of the ABC per the 2009 annual report are just over 2 million.The past five years the ABC has put 1.5 BILLION in the states pocket, where is that going to come from? Most of the numbers they keep tossing around come from a study done years ago in PA. We pay a road tax on every gal of gas that we buy, which should be enough to take care of the roads. I’d love to know just how much of those dollars actually go to highway maintenance.
      I would love to see a law that says,that when money is appropriated for a certain project, that it cannot be used for anything else. Prime example we had two mild winters with not much snow removal ,then this past years we run out,DUHH! there should have been plenty of money in that fund. Bet it got used for something else.

  18. Peppa says:

    Bubby,
    There’s “underhanded” stuff that goes on at all Govrenment levels. Are you saying that you’d like to see it stop? I’m with you, if you are.

  19. The Valley Progressive says:

    Anyone who has seen or taken Obenshain’s new survey can tell quite quickly what he truly supports (and it isn’t the average Virginian). There is, of course, the obigatory questions regarding abortion and gun control. But beyond that the survey concentrates primarily on just 3 issues. Offshore drilling, the privatization of ABC stores and school vouchers. Personally I think that the stacked and narrowly focused survey is just a desperate attempt of trying to drum up “public support” for his issues.

    All three of these issures benefit corporate america/and or the wealthy, not the average Virginian. Aren’t politicians supposed to be the voice of the people?

    While the country is reeling from an economic crisis largely due to GOP deregulation and weakening of corporate oversight, and the country has overwhelmingly rejected the disasterous wealthy gift giving policies of the Bush administration, Obenshain wants to continue giving.

    While America screams for federal and state governments to address personal issues like the healthcare, environmental and education crises, Obenshain is amorally and predictably silent.

  20. Renee says:

    I’m not sure how I feel about privatizing the stores, I would have to see a lot more data before having a stong opinion one way or another.

    I think the state could make hundreds of millions of dollars more per year in alcohol sales & taxes if they allowed grocery stores to sell alcohol until bar “closing time” and if the ABCs were open an hour later on Fridays & Saturdays.

    I was at a liquor store once just as it was closing, and they were turning people away that came less that 30 seconds after their clocks said closing time because apparently the registers start shutting down or something. I don’t think a private store would turn down several hundred dollars of sales they could get by staying open 5 minutes later – though I’m not sure how strict the state would be on private stores selling a few minutes past the cutoff time either.

    I also shop at Wal-Mart late at night and hate that I can’t pick up beer with my normal groceries during times they’re not allowed to sell it.

    At least it’s not as bad as the dry county in Tennessee where my mom lives, where people give a whole bunch of their money to the neighboring county that sells liquor. She said people in her retirement community go on “liquor runs” where someone will go and buy $1000 or more of alcohol at a time for the neighbors so they can all stock up since they have to go 45 minutes to get it. At the same time, they have some of the worst schools in the country there – you’d think they could use the revenue.

  21. Great discussion. I hope we can talk about and debate the merits in Richmond in much the same fashion.
    Dorn, I completely agree on signage. Believe me, the last thing in the world I want is to turn Virginia into “Potterstown.” The bill will require that the ABC Board retain its “control” or regulatory function, and that it will establish regulations restricting advertising.
    Lowell, on figures, there are 32 states that have privatized, and none are looking back. Two years ago, when Pennsylvania considered privatization, a Price Waterhouse study was cited to show that it could realize profit of $1 billion for divestiture of its wholesale structure and another $700 million for its retail operations. That’s about sixteen times or $1.6 billion more than we are making now in Virginia.
    Great questions. Join the Facebook group: Virginians for ABC Store Privatization

  22. Gene Hart says:

    On occaision, I have the opportunity to travel north of the Mason-Dixon Line. When I do, I always try to make time for a stop in Ellicott City, Maryland to visit a quaint little shop called “Carpe Vinum.” The owner (and as far as I can tell the only employee) is an older Brit immigrant/entrepreneur variety and has the finest selection of single-malt whiskeys and good wines that I have come across. He is always free with a wee dram sample and eager to spend a few minutes with a government-monopoly-deprived Virginian desiring to get the latest special offerings from Laphroaig (try the Quarter Cask!), Old Pultney, or Ardbeg (the Airigh Nam Beist is exquisite). This little shop, my friends, is what we can and will have if we privatize alcohol sales in the Commonwealth.

    I also sometimes pass stores in grittier towns like Atlantic City where you see “too many” corner liquor stores selling cheaper and larger bottles to people who drink too much, too often. Those stores could be called eyesores (the staff is often behind thick glass and don’t try to write a check) but they stay in business and the people find their way to them. Those less quaint stores are also what we can and will have if we privatize alcohol sales in Virginia.

    So, does the “good” outweigh the “bad?” And, who should be deciding what is “good” and what is “bad?” To me, this is one best left to the people and not state government. Controlling alcohol sales and private/safe alcohol consumption is not a core governmental function and state control should pass into history. Remember, our ABC stores are likely a legacy of a zealous minority trying to hold on to some remnant of Prohibition. You wouldn’t let someone tell you which radio station to listen to, why allow them to tell you what alcohol to drink?

    Lowell, some current ABC workers will surely lose jobs with a change. But, that may mean the state has more money to fully staff the allotment of state troopers for Rockingham County (don’t get me started tonight on that one!). In an budgetary era where we will have to set difficult priorities, I think teachers are probably more necessary (as government paid employees) than my friends at the ABC store downtown.

    Bubby, to date I have not received any money from the alcohol industry lobby groups, but if I do I hope you will know that such donations may follow policy/ideas but they will never drive them. I understand and applaud the question you raise; always ask which came first, it is important. However, in this case, let’s trust that Sen. Obenshain (and those on the Democratic side in the current General Assembly on the same side on this issue) has hit on a good idea. That will give us some hope that he may later come up with a second one!

  23. The Valley Progressive says:

    Gene,
    I like the thought process and comments of your blog but you raised a couple of very valid issue sthat I hadn’t thought of before. 1) you say “state control should pass into history,” why? You refer to the current “budgetary era” as if we haveto make a choice between a bottle of whiskey and a teacher pay raise. I still am not convinced that privatizing ABC will provide this wonderful “windfall” for VA, this comment smacks of alcohol distributors and their lackies like Obenshain.
    Corporations of all colors s have promised this many times before and in the long run it often comes at the expense of the taxpayer.
    2) Your comment about “grittier towns” is a good one. I travel a lot, all over this country, and I can tell you that one of the most common features of every run down neighborhood, black or white, is a local liquor store. This is especially true in unregulated states. In my mind this is every bit as evil as predatory check cashing stores. State run ABC stores don’t specifically target these depressed areas as you know darn well a profit-driven company would do.

    For the record, I am not some neo-prohibitionist. I enjoy a $800 bottle of limited edition “King George V” scotch as the next guy. (I’ve got 2 bottles by the way if you want to experience). But I must ask this…..why can’t the state run ABC’s be more user-friendly? Instead of some drastic financial change, why can’t the state lighten up and allow their ABC employees be more interactive? I was shopping in Martin’s today and they had an employee at a table offering samples of local wines. Don’t you think that the ABC could do that? I enjoyed your Carpe Vinum story but I do think that that is a rarity.
    With a little change in management thinking I think that the state run ABC’s could achieve the familiarity that you mention while maximizing profits for VA. Unless we get some sort of contractual aggreement as to the benefits and profits, its hard for me to support a privatization measure. And you know VA will never negotiate such an agreement.

  24. Valley Progressive.

    So, I used to live in Wisconsin and visit there, a state famous for clean and progressive government, heck, the ultimate home base of the old Progressive Party (“Fighting Bob LaFollette” and all that). Hard liquor is sold in grocery stores next to the beer and wine, just as beer and wine are currently sold in grocery stores here. Sure, if you go to certain poor parts of Milwaukee one will see too many liquor stores. But, do you think the poor in Virginia are somehow drinking less hard liquor because they have to get it out of an ABC store? Please.

  25. Bubby says:

    Surely Mr. Obenshain realizes that Pennsylvania’s alcohol industry has almost nothing in common with Virginia…save the State Stores. In Pennsylvania the state tightly restricts the industry by forcing beer sales through wholesale outlets that resemble tire shops, sell wine and distilled liquor only in State Stores, and absolutely nothing in convenient grocery stores. So, hell yeah they are suppressing sales and gov’t revenue.

    I wish Senator Obenshain was as concerned about the anti-free market monopoly of the beer and wine distribution industry in Virginia. In recent years a few large companies have amassed control of wine and beer industry, fixing prices without competition and successfully lobbying guys like Obenshain to unfairly restrict free trade in our Virginia wine industry. Instead, the General Assembly has thrown in with the alcohol warehousemen who lobby them lavishly.

  26. Lowell says:

    Thank you Senator Obenshain for taking time from what I know must be a busy schedule in Richmond to share a conversation on your proposal. I wonder if you would mind sharing some of the more relevant data on the state operation of the ABC stores?

    I’d like to clarify for everyone that at this point I don’t really have an informed opinion on the issue, this is what I am seeking.
    I don’t think it is good practice to push a button just to see what happens.

    Again specifically, does anyone have data to show that the state government divestiture of the alcohol retail sales business will result in more than a one time gain?

    Specifically, does Virginia operate the business at a profit? Or at a loss? There appears to be the claim of a potential profit, above the current operation, of some $700,000,000.00 per year if Virginia privatizes the business. Senator Obenshain refers to a study of operations in PA. The study referenced can be read here.

    This would be absolutely awesome if true. I’d simply like to be shown supporting data.

    With all due respect, once the sale is made, there is no looking back.

  27. I’m with Lowell here. I don’t have a strong opinion yet, but one question that comes to mind is wouldn’t the state actually lose money on this kind of proposition unless the sale of liquor skyrocketed under a private system? And in that case, wouldn’t enforcement costs rise?

  28. Gene Hart says:

    VP, first off: yes, I would like to share a taster with you at some point! I have a nice, older Talisker we could compare with the King George V.

    I don’t mean to suggest that current tight budgets force us to make a choice between teacher pay raises and a good bottle of whiskey. I do mean to suggest that times of tight budgets force reviews and decisions that legislators should be making all the time including in the best of times. Sure, the state may be able to improve the performance of the ABC stores, their attractiveness and products. But, should it? Really? Is this really a retail business that the state should run? For that matter, should the state run any retail business? I can’t think of one that it should, but I am open to suggestions. Think about it: tobacco shops aren’t government owned and neither are gasoline stations or grocery stores. If the Commonwealth could run such operations well or even better (again, what would that mean), would we really want that?

    I expect that privatizing alcohol sales would bring an initial burst of revenue to the state, not to the scale current proponents think but not at any loss. Later, taxes on sales would have to be set and adjusted to assure that promised revenue continued to flow to state coffers. That then will be the real test for our legislators: will they be willing to adequately tax the business they (re)created? After all, our friends on the right currently are ideologically incapable of accepting even a modest increase in cigarette taxes to pay for health care for the poor and elderly. Will they now assure us that their promise of a windfall will be met even if they have to explain the votes to Grover?

  29. While I have argued in favor on principle for privatizing the ABC stores, in the end I agree with Lowell and Jeremy. Especially given the tough budgetary situation the state is in, the bottom line is the bottom line. Which way ends up bringing in more money for the state? One would hope that if privatization does occur, there will be appropriate taxation and regulation to avoid potential problems of various sorts.

  30. Bubby says:

    Taking Gene’s point one step further: Governor Kaine has noted that the current $.30/pack of cigarette raises $167 million/yr. while tobacco diseases cost Virginia Medicaid $400 million/yr. And still the Republicans won’t support increased tax recovery for this injurious product. That is the triumph of ideology over common sense.

    Now Mr. Obenshain wants to increase the availability of distilled liquor from two carefully operated, well supervised outlets in the City to potentially dozens of stores? Have at it son, this is the land of the free and the home of the hard drinking. But you need to explain how you are going to recover the cost to the Commonwealth for the increase in drunk drivers, abused kids, sick derelicts, and lost productivity that come with it. Make sure that you factor in the increased number of state employees (ABC inspectors) your idea will require, and how permits for this lucrative commerce will be parceled out. Will the same legislators that are currently the recipient of so much alcohol industry money be the same legislators who will pick the winners in this gambit?

  31. Lowell says:

    “…the bottom line is the bottom line. Which way ends up bringing in more money for the state?”

    Well put Barkley, I look forward to Virginia specific data dealing with the issue. Before any change is made, your question should be thoroughly and convincingly addressed to justify the proposed change. I guess that’s just my fiscally conservative nature to expect such data driven decision making.

    “Look before you leap”, “Fools rush in where angels fear to tread”, “Haste makes waste”, “Measure twice, cut once”, “A fool and his money are soon parted”, “Don’t kill the goose…” all come to mind.

  32. Bill says:

    Bubby, this was not a Republican idea. Governor Wilder also suggested that the state get out of the alcohol business and privatize as other states have done. I agree with the Senator. The state will recieve a windfall of the initial sale of licenses, but it will continue to collect alcohol taxes. Localities will also be able to collect BPOL and property taxes. But to be sure, let’s have an open, transparent exploration and discussion of the facts before a final decision is made, which in Virginia may take more time than any of us writing on this blog will live to see, LOL!

  33. Lowell says:

    Bill,
    If what you say is accurate, then couldn’t you provide some real numbers to reassure folks? I think the number quoted several times so far has been $700,000,000.00 per year? Show me real data to affirm those figures and I’ll wave the flag from the rooftop for the proposal.

  34. Bubby says:

    Bill, I have read and linked to the Wilder Commission report up thread. The question isn’t the paterfamilias of the concept, it is the pie-in-the-sky windfall cash claim being made by Senator Obenshain and his buddies in the alcohol industry lobby. I think they’re all sipping the sauce.

  35. Phil says:

    I just ran across this article. I know the proposal was shot down, but I seriously hope it is considered in the near future. I definitely agree that there should be rigid guidelines as far as advertising and such goes, because I don’t want Virginia to turn into what RT.301 has just inside Maryland. I think we definitely demonize alcohol here in the Commonwealth and this is backwards considering we produce some of the finest wines in the States. I rarely drink, but would like to be able to go into a store and have a wide variety at hand and at competitive prices. I despise the fact that the prices are set. The $1 off sales they have for certain products once in awhile isn’t being competitive to me. To me, the only true obstacle besides government greed, is ensuring you don’t have liquor shops popping up unattractively like PayDay loan and Check Cashing places. Keep is respectable and I am in. I look forward to joining the Facebook campain.

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