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The ABCs of privatized liquor sales

The General Assembly

Two bills were introduced into the General Assembly last week calling for the privatization of Virginia's ABC stores, which are now operated by the Virginia Department of Alcoholic Beverage Control. In prior years, both Democrats and Republicans quickly have rejected plans for privatizing alcohol sales, but this time around, the possibility of a more moderate form of privatization is provoking a variety of responses that cut across party lines and touch on a wide range of issues, from alcohol use on college campuses to transportation funding.

"Talking about alcohol, the devil is in the details," said Isaac Wood, communications director of the Center for Politics and former Cavalier Daily opinion columnist. And these details - dealing with the potential economic, political and social effects of privatization - could make a big difference to senators, voters and perhaps most of all, drinkers.

Suppliers and sellers \nThe first bill concerns both wholesale and retail alcohol sales; privately owned stores would sell liquor stocked by private suppliers. The second bill only concerns retail stores. Under this plan, permits would be auctioned off to vendors while the state maintained profitable control of wholesales, a move which Gov. Bob McDonnell has supported since his election campaign last year.

Sen. Mark Obenshain, R-Harrisonburg, who is sponsoring both bills this session, has been pushing the first - the one calling for full privatization - for several years now.

But other senators have questioned the economic sense of Obenshain's first bill. Sen. John Miller, D-Newport News, said full privatization could cause the state to lose anywhere from $22 to $47 million because it would only make up for decreased tax revenue with the auction of vendor permits, cutting off the steady stream of wholesale and retail level profit.

"I'm never going to support an arrangement that loses money for the commonwealth, especially at this time when we're hard-pressed," he said.

Sen. Toddy Puller, D-Mount Vernon, agreed with Miller, adding that it was widely shared in the General Assembly and explained why Obenshain's previous attempts at privatization failed. One was voted down in committee in 2009, and another he withdrew on the governor's request last year.

Even though Obenshain admitted that the bill would amount to a tax reduction - the state would receive wholesale and retail taxes totaling 69 percent rather than the current 89 percent - he said research has shown that his plan for full privatization this year would break even.

But it is clear that few are willing to risk the possibility that his favored plan could sell Virginia's treasury short, especially when the status quo is a state-owned liquor business. "Selling liquor may not be a core service [of the state]," Miller said, "but we're in the business, and we're good at it."\n\nModeration?\nMiller said the second bill, proposing the privatization of retail stores, is a much better option than changing the whole system. Although he had not yet finished reading the massive bill, he thought it might prove profitable for a state government that needs to be streamlined - that is, a government that cannot afford to expend unnecessary resources or efforts.

According to the governor's plan, the state does, in fact, stand to gain from the change, said Taylor Thornley, McDonnell's deputy press secretary.

The state could expect to get $13.1 million more annually than the current amount of annual General Fund revenue generated by ABC stores by saving on the operating costs of retail stores and raising money auctioning licenses to private retailers, according to a VABC study. This would raise a minimum of $200 million that would be used to improve transportation infrastructure in Northern Virginia, a project that McDonnell has been promising to voters since his election, according to the same report.\nBut Puller found it unlikely that the change would be profitable, since in the past, privatization has been shown to lose money.

"There's no gain to be had by fiddling with the system," she said. "And in any case, it's implausible that many will be convinced of its profitability."

Meanwhile, Del. Bob Brink, D-Arlington, who is introducing McDonnell's plan - an exact copy of Obenshain's more moderate bill - for discussion in the House of Delegates, said it is too early to know if the bill is right for Virginia - I'm bringing it up because I think it's a serious issue that deserves serious consideration," he explained. "But that doesn't mean I don't have reservations."

And the only way to ease these reservations, he added, was to look carefully at the bill and assess its potential economic and social effects.

The only thing that seems sure is that if alcohol sales are privatized at all, it will be on the level of retail outlets. "That's the only way senators who support [privatization] philosophically can justify it economically," Wood said. But, he added, not everyone would support the bill, even if they could be convinced of its economic sense.

Livelier liquor\nThe fact that Obenshain has introduced several bills calling for total privatization, even though the transition would not be profitable - and might even prove detrimental - could indicate an allegiance to privatization having little to do with the state's treasury. Obenshain has said his plan to fully privatize liquor sales is preferable to a more moderate plan because it exceeds the state's role in governing its citizens:

"Government was never intended to compete with private businesses, much less to establish itself as a monopoly provider where private businesses are more than willing and able to do the job," he said.

And although Puller accused Obenshain of pursuing an extreme, albeit unrealistic, goal, his ideological position is shared by McDonnell's office.

"Ultimately government has nothing to do with alcohol sales," Thornley said. "That belongs to the free market."

But neither Puller nor Brink see this as a good argument for privatization, saying that just because selling alcohol is not a core service of the government does not mean the state cannot be part of it. In other words, the commonwealth might not have a responsibility to keep hold of liquor sales, but it does not have a responsibility to let go of them either. And it is not just profitability that makes some hesitant about taking liquor sales out of state hands. It also is about potential social ills that the state is undoubtedly responsible for protecting its citizens from.

"It sure is the state's job to make sure young people aren't drinking distilled whiskey," Puller said.

Wood said this kind of objection is important for those opposed to privatization from both parties, making the age-old face-off between Democrats for big government and Republicans for big business more complicated than it may seem. Some Republicans have come out against the privatization of liquor sales because they see a widening the availability of alcohol as a liberal goal, he explained, adding that this would particularly be true of more religious politicians and voters.

From politicians to drinkers\nThe potential ill effects of privatization on Virginia's citizens - drinkers and non-drinkers alike - are much debated. Although no politician denies that alcohol is a dangerous substance, some argue that, with careful planning and oversight by the state, it can be safely distributed by private retailers, while others maintain that the state is best equipped to minimize its harm.

Different studies reach a variety of conclusions about which claim is true. Research by the Virginia College Alcohol Leadership Council, published last year, found that privatization poses a serious risk of increasing social ills, including violent crime, accidental self-injury, motor-vehicle accidents and child abuse.

Brink pointed out that because the bill calls for a tripling in the number of locations selling hard liquor, it is logical that privatization risks causing these problems to become more widespread.

Economic issues also come back into the picture because if local government is forced to remedy problems such as drunk driving and child abuse with more social workers and police officers, profits made by alcohol sales could be offset, Brink said. "Public safety can take a big chunk out of a local government's budget," he added.

But Thornley said the study did not take into account that licenses would not be distributed randomly but instead with careful attention to each locality. And Miller said the plan would only bring Virginia into line with the nation's current average of liquor outlets, adding that if the bill were to be approved, the state would have to give adequate attention to its potential detriment.

Susan Bruce, director of the University's Center for Alcohol and Substance Education, said the center is aware of the possibility of privatization and plans to be ready to deal with its effects, if it should become law. But she is confidant that alcohol and substance education could contain any difficulties privatization might cause with University students.

"If privatization does occur, we'll continue our current efforts to educate students about how to drink in a manner that minimizes the risk of harm to self or others," she said.

David Replogle, chairman for Public Relations of the Inter-Fraternity Council, agreed with Bruce's assessment, that despite the temptations that privatization might pose - by making liquor more widely available, later into the night - he hoped that University students would treat one another with respect, even while drinking.

Furthermore, he noted the bizarreness of the situation: the General Assembly - with its atmosphere of coat and tie sobriety - seems almost absurdly incongruous with the University's Rugby Road on a Saturday night. Yet when it comes to the issue of alcohol privatization, the two are undeniably related.

"From a student's perspective, the law always seems strict, and the authorities always seem to be cracking down," he said. "It's funny that they might change sides now"


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