Privatization of ABC Sales May Be Dead

Record profits chalked up by Virginia ABC stores may have sounded the final death knell for Gov. Bob McDonnell’s proposal to privatize the state’s liquor stores. While the plan to turn over liquor sales to the private sector appealed to some who wanted to reduce the size of government, the proposal was a loser for the state budget.

The Virginia Department of Alcoholic Beverage Control reported recently the agency has seen retail sales increase to record levels for the past 13 years. The agency said it saw a record profit of $121 million in the past fiscal year that ended June 30 and has contributed more than $1.5 billion to the state’s general fund during the past five years.

McDonnell spent months lobbying lawmakers last year for his proposal to privatize liquor sales. The General Assembly let the bills die without a vote. Members of the House, where Republicans held a comfortable majority, declined to let the measure be considered because they expected it to be killed.

Members of both parties feared that the plan, which included tripling the number of retail outlets that sell alcohol, would lead to an increase in alcohol consumption, a loss of state revenue and a rise in liquor prices for consumers.

It was the potential loss of state revenue — rather than the gains the governor had touted — that sealed the fate of last year’s measure. Under his plan, some 330 state-owned liquor stores would be sold and replaced with 1,000 retail outlets. The state was expected to reap a $200 million windfall from the sale of new liquor licenses, money that McDonnell pledged to the state transportation fund.

But the profits from sales at state ABC stores, which go into the general fund, would end. State Sen. J. Chapman Petersen, D-Fairfax, summed up the bipartisan opposition to the plan last year when he said, “We’d be taking a state asset that’s been producing revenue for years, that’s generally well known, and effectively we’d be selling off half of it, for what? To capture $200 million, which is frankly a small piece of change in the big scheme of things?”

McDonnell told The Washington Post last week that he’s still committed to the idea of privatizing liquor sales, but not sure whether he will resurrect the measure during the current Assembly session. “There are a lot of ways to get this done,” he said. “At some point, it’s going to happen in Virginia. I just can’t tell you when.”

Returning to the sales figures for the past fiscal year, officials said the number of cases of wine, spirits and nonalcoholic mixers sold increased more than 3 percent to nearly 4 million cases. That translates to more than 49 million bottles or nearly 10 million gallons.

That’s a lot of liquor sales the state can count on to benefit the general fund. There doesn’t seem to be anything broken along the sales and revenue trail. So if it ain’t broke, as they often say in Richmond, why fix it?