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For
months now we’ve heard from elected
officials about Virginia's impending transportation
funding crisis. But are we really doing everything we
can to find more money for our roads?
Facing
similar financing challenges, Pennsylvania has
opened up its books and looked for all types of
assets it can sell. Perhaps one of the biggest
opportunities for Pennsylvania -- and Virginia,
too -- would be selling or leasing the state’s
interest in the liquor business.
Pennsylvania
looked at that very idea last week. In a hearing
in Harrisburg, state senators questioned whether
divesting the wholesale and retail liquor
operations would generate enough revenues to help
close a transportation funding gap. Sen. Jake
Corman actually went a step further, suggesting
that the legislature should review all of the
state’s assets to see how they can best be
utilized to benefit taxpayers.
It’s
estimated that Pennsylvania would generate as much
as $1.7 billion in one-time revenue from the sale
of its liquor business. Yet privatization would
not much hurt the state’s long-term financial
outlook. Taxes on wine, beer and spirits
wouldn't ’t go away with privatization; indeed,
they would rise with increased sales. Revenues
from licensing bars and restaurants would continue
as well.
The
loss of retailing profits could be offset to some
degree by revenue generated by licensing retail
stores as well as the income and property taxes
that private establishments pay.
The
same financial outlook would hold for Virginia. Given the Old Dominion's continual search
for new transportation revenues, maybe it's time we
too considered getting out of the liquor business.
Privatization
of
state ABC stores would offer benefits to more than
just taxpayers.
If
you’re a consumer, you’d benefit from
increased customer choice, convenience and lower
prices. Adult Virginians who visit neighboring
states can shop for beer, wine, and spirits in
stores that offer more convenience, better choices and
lower prices. Without a government monopoly
protecting them, stores in Virginia would have
more freedom to innovate and greater incentive to
respond to customer tastes. Private merchants
might well offer more
convenient hours and locations, provide a broader
selection and put more creativity into displays
and presentation.
With
this said, however, the state would retain
significant control over the sale of alcohol. For
example, the state would retain regulatory
oversight, setting standards and requirements for
private ownership and operation.
One
might legitimately ask whether privatization would
stimulate alcohol sales, leading to more social
problems. Since the end of Prohibition, government
policy has had little influence over the consumption of
alcohol. The old southern dispensary has been
replaced with private licensed resellers — bars
and restaurants — as intermediaries with
customers. As a result of this change in industry
structure, the state’s ability to affect alcohol
problems through its distribution system has
effectively diminished to zero.
Despite fears, there have been no dramatic shifts
in consumption, underage drinking, drinking and
driving and alcoholism attributable to
privatization in three recently privatized systems
in Iowa, West Virginia, and Alberta, Canada.
In addition, a forthcoming study from the Reason
Foundation finds that there are no dramatic
differences between control states and license
states.
Virginia is conflicted in its
mission. On the one hand the state is
responsible for enforcement and enforcement
funding, but under public operation it is also
responsible for maximizing revenue from the sale
of alcohol. Separating enforcement from its
liquor-sales funding source could improve both
enforcement and revenue generation. As one
Iowa state legislator noted in considering
privatization, “It strikes me as hypocritical to
have Iowa all uptight about drunk drivers and also
sell the stuff.” Indeed, this
disconnection prevents the state from pursuing the
best opportunities to meet its public health
mission and promote responsible drinking.
The bottom
line: Privatization would be a good
thing for the Commonwealth. It’s an idea
whose time is overdue. Customers would
likely see increased choice and better prices.
Taxpayers and commuters would benefit as
untapped value is extracted to invest in our
infrastructure without raising taxes. The
Commonwealth would benefit by focusing its
efforts on awareness, education, and enforcement
rather than operating liquor stores.
--
April 30, 2007
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