Many of you, my constituents, have written to me asking about the Governor’s proposal to privatize the ABC stores. I serve on the sub-committee that will deal with this issue during session and, as a result, I have a great deal of information on this subject. I thought you might want the background information that is not adequately reported in the news.
Governor McDonnell does not believe the government should be in the business of selling alcohol. I agree with him. We both believe that a government that governs least governs best. However, it’s more easily said than done when it comes to the state’s ABC stores. In order to privatize the sale of alcohol, you have to unravel 80 years of laws and 80 years of business relationships that have been based upon government control of liquor. When Prohibition ended, there was a referendum in Virginia. The people voted to have government control of liquor. It has been this way for 80 years. Even if we come up with a plan, many people, including myself, believe that the government cannot invalidate the citizens’ vote for government control without another vote by the citizens. Therefore, I support a referendum on this if we move forward.
First, in order to understand how this would work, you need to get out of your head the picture of a private company operating a stand alone ABC store like you would see in DC. What would essentially happen is the current ABC stores would be shut down, thus saving on expensive strip mall rent and saving on labor because these new stores would no longer need the state employees. The shelves would be relocated into grocery stores, big box retailers and small convenience stores. These new liquor proprietors would make money because they would be able to eliminate most of the cost of the ABC stores. They would have the liquor sold on existing floor space with the shelves and cash registers operated by existing employees.
Currently, revenue from the sale of alcohol is used to support funding for our government. The funds raised by taxes on liquor and the profit margin go the state’s General Fund. The General Fund is spent on all aspects of running government. Around forty-five percent of the General Fund is spent on education, around twenty-five percent on health and human resources, including Medicaid, ten percent on public safety, and the remaining twenty percent is spent on everything else government does. For FY 2009, the total raised by taxes and profits was over $322 million.
The Governor’s Proposal
The Governor has presented a first draft of a plan to privatize Virginia’s ABC stores. In short, his proposal increases the number of ABC licenses from just over 300 to about 1,000. These licenses would be auctioned off to the highest bidders. According to the proposal, there would be, “… 600 licenses for large establishments such as grocery stores; 150 for smaller establishments such as package stores and wine and beer shops; 250 for convenience stores/retail pharmacies.” (See http://www.governor.virginia.gov/news/viewRelease.cfm?id=361)
The Governor’s economists estimated that this auction would yield between $400 and $500 million in one-time revenue. However, the same economists estimated that it would bring $47 million per year less than the state is currently making on the profit and taxes on liquor.
Delegate Albo’s Current Position on the Sale of ABC Stores
In a time where the Commonwealth of Virginia is already short funding, I believe it is not in our best interest to succumb to the temptation of a one time hit of money when in just 11 years, we would be losing money. Sure, we may make $500 million right now for transportation, but at a $47 million loss per year, in 11 years, we would have lost more than we made. I’m not a legislator who looks for short-term gains at the cost of my constituents’ kids.
Where Do We Go From Here?
I am still open-minded on the idea of privatizing the sale of liquor if the Governor can find a way to make this at least revenue neutral. Once a plan is submitted that is revenue neutral, then we will need to look into the intricacies of dismantling an 80 year old system. Just a few things that we will need to look at are: eligibility to bid on the licenses, the number and location of the stores, the design of the stores, what effect the new stores will have on access to underage users, and the list goes on. Then there is always the issue of where the money will go. I am NOT going to vote for a bill that sends most of the $500 million to roads in southern Virginia. Northern Virginia must get at least the amount of money we contribute in ABC taxes and profits.
If you have any additional concerns, I would appreciate hearing back from you on this important issue. I have been assigned by the Speaker to be on the “ABC Privatization Work Group.”
Yours for Good Government,
David B. Albo