General Assembly Update (10/16/10)
I have been skeptical about the ABC privatization proposal advanced by Governor McDonnell from the beginning. In my view, we need to run government more like a business by making it more sensitive to customer service, more results-oriented, more entrepreneurial and more efficient. A business would not jettison a branch of operations without a good economic reason to do so. Yet, Governor McDonnell proposes that we sell the ABC operations, a service which few people have complained about and which brought in $248 million of profit and tax revenue to the Commonwealth last year. Nonetheless, I remain open to being convinced; after all, the sale could raise needed money for transportation, a core service of government.
In the last few weeks, additional information has emerged that makes the proposal even more problematic. First, under the current proposal there will be less revenue available to the state’s General Fund following privatization. Initially, the Governor proposed additional taxes on restaurants to make up part of the shortfall, but bowed to pressure from the anti-tax wing of his party, with the result that there will now be significantly less revenue collected after privatization than before.
Second, making the numbers work probably means more liquor consumption, more liquor stores, or possibly both, a prospect that concerns the faith communities in both liberal and conservative circles. Currently Virginia’s hard liquor consumption is 21% lower than the national average; the Governor’s plan to replace the profit the state now receives with tax and fee collection, relies on increased consumption, which can pose additional public health and safety concerns.
Finally, I have just received a study conducted by Robert Cook, an economist at the University of Richmond, which concludes that the cost of liquor will rise 16% after privatization under the Governor’s plan.
I have received numerous comments from constituents, which I am posting below to show the diversity of perspectives on this issue in our community. Please share your own opinions by emailing me at email@example.com or calling my office, (434) 220-1660.
“Although I support [privatization] in principle, I oppose this in practice…
There is nothing in the proposal to help independents. The one thing every independent retailer should say is, “I cannot support this without the repeal of the despicable and discriminatory COD provision. If you want liquor privatization, you should support privatization in other areas. The decision on whether to extend credit to restaurants and retailers should be left to the discretion of the wholesalers, not the government. The government has no business telling a wholesaler it cannot extend credit to me. This would be unconstitutional except for the 21st Amendment. Why can furniture or grocery retailers get credit, but not me.”
R. H. (local small business owner)
“I don’t mind ‘sin’ taxes, but when I pay $50 for a bottle of scotch in Virginia, and $33 for the same bottle in another state, where, I can buy 24/7 instead of adapting my schedule to the ABC Board, it is just another argument for privatization.”
“The proposal to privatize state liquor business is a classic case of “if it ain’t broke don’t fix it.” I have lived in Virginia for 53 years and do not recall ever having heard any significant complaints about ABC stores. Certainly I do not have any myself. They are well lighted, clean, controlled, and run by competent and helpful personnel. They are free of the sleaze that sometimes creeps into private liquor stores in other states. They can control sales to underage drinkers better than private liquor stores. They present no significant policing problems or complications of licensing and enforcement. Moreover, they make millions of dollars for the state. The main motivation for dismantling a system that has worked so well for decades that I can discern is an abstract ideological notion that the state should not be in the liquor business. Other than constitutional constraints (not applicable here), there is no fixed principle or rule that specifies what a state may or may not do. A state may do whatever serves the public well, works effectively, and violates nothing in the Constitution. Let us hope that there is enough common sense in the Senate and House of Delegates to cause them to abandon attention to this non-problem and turn to the real problems besetting the Commonwealth of Virginia.”
“Philosophically, I agree with the governor that the state ought not be running businesses which should be left to the private sector of the economy. That would mean ending the ABC function of the state and letting commercial retailers have the business. If Virginia were to do that, and charge reasonable excise and/or sales taxes, the state would experience a significant drop in revenues. That appears to be unacceptable. The governor’s plan to maintain state revenues by increasing taxes on restaurants and by increasing taxes (fees) on retail liquor by various subterfuges would result in higher retail prices for liquor. That is a price I don’t want to pay to satisfy the governor’s (and my) philosophical yearnings.”
“The name of the Department of Alcoholic Beverage Control tells the whole story with the word “control” being the key. The purpose behind the ABC stores is to allow, but to control the sale of liquor. The purpose of any private company selling liquor would be to make as much money as possible. The huckstering of liquor, the exploitation of vulnerable populations and the degradation of our communities will all follow from private greed taking over liquor sales. Greed poisons everything it touches and costs society much more in the long run than it ever gives. I urge you to oppose the privatizing of the ABC stores as yet another Republican scam to make money for their friends and allies.”
“I am fundamentally opposed to the idea of the government selling alcohol. BUT, according to the details I’ve read of the Governor’s plan it doesn’t generate the same annual revenues for the Commonwealth that are currently contributed under the ABC system. In fact, I’m guessing the numbers won’t even be as close as what the Governor is claiming. Despite the one-time profit that would be generated by the license sell-off, we would end up with less money down the road. This is not the time to throw away money in exchange for ideology.”
“I have to ask about the motive of privatizing Alcoholic Beverage Control. The most obvious reason is to allow companies to profit from having another area of available business. As can be seen from Social Security, government can manage things at a much lower cost to the citizen than business tends to, and when government does the job, it has less incentive to cheat or oversell the customer.
I think that corporations already make plenty of money off of alcoholic beverages. I feel no need to give them even more, and I dread the effects of even more advertising and other marketing manipulations to convince even more people to drink more.
I’m also quite disinterested in a short-term surge of revenue that chops off a long-term revenue stream for the state…”