Liquor sales in state could still go private

Voters rejected two ballot measures this year that would have taken the State of Washington out of the liquor business, but supporters of changing the state's current system of selling booze are already looking to make legislative changes.

While it’s unlikely full privatization will be seriously considered by lawmakers, a few lawmakers plan to introduce bills on the issue again. And officials with the state Liquor Control Board say they are working with Gov. Chris Gregoire to address frustrations over the current system, short of removing the state from the equation.

Rick Garza, deputy director of the liquor board, said the liquor board officials will be meeting with lawmakers, stakeholders and others in the coming weeks to see if there can be some agreement on possible changes.

He said that November’s vote indicated two messages from voters.

“I honestly believe the public said, ‘I want to treat alcohol different than other commodities because it’s a product that people abuse,’” he said. “At the same time I think they’re looking for improved convenience.”

Currently, beer and wine are sold in thousands of grocery and convenience stores, but customers can buy hard liquor by the bottle only in the 324 state and contract stores.

The Senate Labor, Commerce & Consumer Protection Committee is holding a work session Tuesday morning to discuss what, if any, changes the Legislature should make, as lawmakers prepare to return to the state capital for the 105-day legislative session that begins next month.

Sen. Jeanne Kohl-Welles, a Seattle Democrat who is chairwoman of the committee, said that while voters gave a double rebuke to complete privatization, lawmakers can’t “ignore the concerns people have about the system.”

“We still need to modernize the system more, and I’m very optimistic we can do that, but I want to do it the right way,” she said. “I think there will be a lot of proposals before us, and we should consider them seriously.”

Last month, voters rejected two competing privatization measures. Initiative 1100 was a Costco-backed measure that would have not only abolished the current state-run system and removed the state price markup, but would have gone further by dismantling the current distribution model, allowing retailers including Costco to buy beer, wine and spirits directly from manufacturers instead of going through distributors. It was rejected by 53 percent of voters.

Initiative 1105, backed by distributors, would have kept in place state laws that protect beer and wine distributors. In addition to removing the markup, it also would have removed all additional liquor taxes. It was rejected by 65 percent of voters.

Rep. Gary Alexander, R-Olympia, said that lawmakers shouldn’t interpret the vote results as a lack of interest in privatizing liquor sales, noting that hundreds of thousands of voters signed petitions to get the measures on the ballot.

Alexander said he was going to reintroduce a prior bill he sponsored that would ultimately change the state model to that of Oregon’s, where all liquor stores are private stores that contract with the state.

About 800 union jobs exist at the state’s more than 160 state stores, and Alexander said that the costs of those jobs should be shouldered by the private sector.

“To me, government should be a supportive function that takes care of the responsibilities the private sector cannot do,” he said.

Earlier this year, the Legislature directed the state Liquor Control Board to prepare a plan to convert at least 20 state liquor stores to contract stores between July 1, 2011, and July 1, 2013, and to assess the cost benefit. However, in a recent report to the Legislature, the liquor board said it does not recommend implementing the plan and that other options should be explored.

“The concern we have is not about the concept of conversion, but rather the financial viability,” said the state Liquor Control Board’s director of business enterprise, Pat McLaughlin.

He said that the main concern is that they wouldn’t be able to find private businesses willing to take on the costs of running the stores compared to the commission they would receive from the state. McLaughlin said that most contract stores are more rural areas, and that state stores are usually located in urban – and generally, more expensive – areas. He said that under a prior plan to convert 10 contract stores this year, they’ve had difficulty attracting private owners to three locations in the greater Seattle area because of that.

Garza said they may have to consider offering higher commissions to independent businesses to entice them to take over state stores, a tough sell heading into a legislative session where the state faces a projected $5.7 billion budget hole.

“Why would you want to do that if you’re not going to see a financial benefit for the state?” he asked.

Sen. Tim Sheldon, D-Potlatch, sponsored a bill earlier this year that would have closed all state liquor stores and the state distribution center, and auctioned off franchise agreements to the highest bidder, opening the door for grocery sales. His bill was ultimately turned into a study bill that didn’t go anywhere. Sheldon said he’ll also reintroduce his bill in the next session.

“Privatizing liquor shows the public we can reform state government,” he said.

Washington is among 18 “control” or “monopoly” states that exercise broad powers over wholesale distribution of hard liquor. Of those states, 12 – including Washington – are also involved in retail alcohol sales through either state-run liquor stores, outlets operated by private contractors, or both.