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Privatizing ABC Makes Sense

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Elected officials do well when they stand for basic, common sense principles. This is why Governor Bob McDonnell’s concept to privatize the ABC stores makes sense. The principle in this case is free enterprise. Simply put, the role of government should be the enforcement and regulation of alcohol and not its retail sales or distribution.
Governors Allen, Gilmore, Warner and Kaine have all agreed that selling liquor is not a core function of state government. If the financial numbers work, as we expect they will when the final plan is made public in early September, then the opposition to privatizing our ABC stores should disappear quickly.
That the state makes a tidy profit on selling liquor, is not a compelling argument for continuing the current the monopoly. By this logic, the state should monopolize other industries such as convenience stores, print shops, etc. That doesn’t make sense and neither does the state-owned monopoly of selling liquor. Existing retail stores here in Virginia – large and small – have experience selling beer and wine in a responsible manner. They also have policies and procedures in place to guard against underage sales and they are held accountable to existing, stringent enforcement policies from ABC officials – an enforcement system which will remain in place under the privatization plan.
With existing stores and employees in place – at both current ABC stores and those already selling beer and wine today – virtually no new personnel or capital expenses associated with selling distilled spirits will be required. The savings derived from this more efficient sales network will help generate the additional state revenue (from liquor taxes and taxes on store profits) to make the plan at least provide the same income to the state and possibly more. The state will further benefit from capturing some portion of the estimated 20 percent of liquor and wine sales in Northern Virginia being lost to Maryland and the District of Columbia.
Furthermore, consumers will also benefit from the ABC privatization. People are busy and none of us like making an extra trip for a single product. Having more retail choices where we shop in order to buy spirits will reduce these extra trips so we can spend more time doing the things we enjoy.
There is also confusion over the number of stores that will sell liquor under a privatized plan. Based on public reports, it appears that the number of stores where liquor can be purchased will increase from the current 334 to at least 800 or 1,000. One of the benefits of privatization is that Virginia already has a large number of retail stores that sell beer and wine – around 6,500 – so increasing the outlets for liquor is largely a matter of selecting from existing facilities. Therefore, the public won’t see a proliferation of new liquor stores, just spirits being sold alongside beer and wine largely at local grocery and other retail stores. Moreover, the public needs to realize that issuing 800 licenses is a very cautious approach. Such a move would still place Virginia under the average number of outlets for control states (states controlling ABC retail sales in a manner similar to Virginia’s current arrangement) and significantly below the amount in privatized states.
Another misconception is that privatization will increase social problems such as alcohol related deaths and binge drinking. The facts from other states give us a different answer. Several studies show that government-controlled retail sales have virtually no impact on alcohol-related deaths and incidents of binge drinking when compared to states with privatized liquor sales.
Finally, privatizing ABC stores can provide funding for transportation. Revenue estimates will be disclosed with the release of the final plan being crafted by the McDonnell Administration, but estimates range from $300-$700 million in up-front income from the sale of the ABC licenses. While this is clearly just one piece of the puzzle in terms of addressing transportation needs, every bit helps. The bottom line is that these dollars would be additional funds for a top state priority.
So stick to your principles, Governor, and hope that the General Assembly follows your lead.

Michael Thompson is the president of the Thomas Jefferson Institute for Public Policy, Virginia’s premier independent public policy foundation.

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