Politics & Government

State weighs privatizing booze

Thousands of cases of whiskey, vodka and rum zip along three miles of conveyor belts inside a massive distribution center in industrial south Seattle, the sole location for shipping booze to liquor stores across Washington state.

The 250,000-square-foot warehouse is the nexus from which all of the state’s liquor is imported, processed, and moved out to the 315 state and contract stores, the only places in Washington that can sell hard liquor for home consumption.

As states scramble to deal with gaping budget deficits, many are looking for any opportunity to increase revenue, and Washington is one of a handful of states weighing whether privatizing liquor sales is the way to get back into the black.

Some lawmakers in Olympia want to sell the distribution center – bringing the state a one-time boost of about $33 million – and let the private sector step in to sell liquor, which some say will reap long-term cost benefits.

“To me this isn’t a core function of government,” said Sen. Rodney Tom, a Medina Democrat who is a chief budget writer for the Senate. “It’s a retail operation. Private companies can do it as good or better.”

Tom has introduced a bill that would have Washington get completely out of the liquor business, allowing an unlimited number of people to buy licenses to sell liquor, as is done in California. Others have introduced measures taking smaller steps toward privatization, including bills that would auction off franchise agreements for stores, such as Costco, or which would allow a limited number of smaller contract stores to sell booze.

“When states are struggling around revenue, the idea of privatization often rises,” said Steven Schmidt, spokesman for the National Alcohol Beverage Control Association, the Alexandria, Va.-based group that represents states who are directly involved in the sale of liquor. “This year we’re seeing more efforts to privatize than we have in the recent past.”

In Virginia, which is facing a $2 billion shortfall this year, recently elected Republican Gov. Bob McDonnell ran, in part, on a pledge to privatize liquor stores as a way to raise transportation money.

While privatization bills have been introduced by lawmakers in the current session that runs until March, McDonnell is working on putting together a commission on government reform and restructuring that will look at liquor privatization. His staff said that while McDonnell isn’t opposed to the current bills, the issue is most likely to come up later this year, possibly in a special session.

“Liquor sales just don’t fall under the category of top government functions to be providing to the taxpayers,” said McDonnell’s policy director, Eric Finkbeiner.

In Mississippi, bills to privatize wholesale wine business have been introduced. In Vermont, a bill has been introduced to disband the Department of Liquor Control and permit second class licensees to sell spirits. And in North Carolina, a state task force is studying various types of government reform including liquor privatization.

The five states are among 18 so-called “control” or “monopoly” states, which exercise broad powers over wholesale liquor distribution. Of those states, only eight – including Washington, Virginia and North Carolina – also are involved in retail alcohol sales, Schmidt said. Thirty-two states are license states, where the private sector handles wholesale distribution.

Currently, liquor brings in about $320 million in revenue to Washington each year, but a recent report by Washington state Auditor Brian Sonntag found that the state could increase revenue by as much as $277 million over five years if it changed its current liquor model.

In a year when Washington lawmakers are looking to patch a $2.6 billion deficit, Tom said privatization just makes sense.