By L.A. Williams, Correspondent
Christian Action League
RALEIGH — Nearly a year after the Legislature’s Program Evaluation Division labeled the state’s Alcoholic Beverage Control system “outdated” and “in need of modernization,” the Budget Reform & Accountability Commission is considering how to best tackle the issues and whether or not to even get involved.
Among the options on the table for BRAC members, who met early this week, are plans for giving the state ABC Commission more authority over local boards, leaving wholesale endeavors only in the hands of the state or completely embracing privatization, which would put liquor in all kinds of stores. The Commission is expected to vote, possibly as soon as Nov. 6, on whether to pursue ABC changes.
“There is room for improvement within every government agency and we are glad to see officials looking for efficiencies. We just hope they will keep the C in ABC — Control — first and foremost in their minds as they do so,” said the Rev. Mark Creech, executive director of the Christian Action League. “Remembering the importance of controlling this risk-laden commodity should steer the Commission away from any privatization plans.”
A number of possible ABC scenarios were presented by the Office of State Budget and Management at the BRAC meeting Tuesday. Among them were: modifications to the current system based on PED recommendations, a wholesale model that would allow the state to keep control over wholesale distribution but allow private business to handle retail liquor sales in exchange for annual license fees or auctioned licenses and a licensure model that would bring full wholesale and retail privatization.
As suggested by the PED study, the first option would give the ABC Commission the authority to enforce minimum standards for operation and profitability on local boards and to facilitate mergers of local boards to improve operations. State economists project that this would make the least profitable ABC Boards move up to at least the 25th percentile. They say it would not have an effect on prices or consumption, but would generate about a half million in additional state revenues and that some jobs would be cut.
As for impacts of the wholesale and full privatization models, the OSBM presentation showed an estimated $200 million that could result from the sale of retail stores and space, the sale of inventory and working capital with the licensure (privatization) model bringing in another $10 million to $15 million from the sale of the state-owned warehouse. In both plans, severance for local employees would cost the state some $5 million to $10 million.
State budget experts say under the wholesale model, retailers would pay an annual fee to sell liquor in North Carolina. They expect prices would go down, consumption and employment would go up and the state would bring in $5 million to $20 million in extra revenue at the expense of local governments, which would lose $60 million. If the state opted for the wholesale model, but used a bid auction process for longer duration licenses to sell liquor at the retail level, first-year revenue could be as high as $150 to $500 million, the analysts estimate, but again local governments would lose their $60 million. Plus, liquor prices would fall and consumption would rise. A revenue neutral wholesale model with license auction would not be expected to change prices or consumption but would, according to economists, bring a first-year windfall of $150 million to $500 million without taking revenue from local governments.
The OSBM report further predicted that prices and consumption would remain similar with first-year revenues up to $700 million in a full privatization scenario. Jobs would likely increase, but again local governments would lose out.
“Unfortunately, this state budget report included only one tiny mention of the issue of the increased difficulty of enforcing alcohol laws as an impact of transitioning to a wholesale or privatized system,” said the Rev. Creech. “And that is simply the one-line admission that annual increased enforcement costs are ‘possible.'”
In truth, he said every scenario that would lead to falling prices and the resulting rise in consumption would also bring increased costs for law enforcement and social services, not to mention growing numbers of alcohol addicted youth in a state that already battles a high rate of underage drinking.
“The purpose of control is to make liquor available to those adults who choose to drink responsibly — but not to promote the sale of liquor,” wrote Paul C. Friday, chairman of the Charlotte-Mecklenburg Drug Free Coalition, in a recent Charlotte Observer editorial. “Privatization will only promote alcohol consumption through advertising, and it is well-known that advertising is especially effective with youth.”
“Do we really want the shelves of every grocery store, drug store or convenience store filled with spirits?” he added.
Creech said he agreed with Friday’s commentary that once you take away the commitment to the community of the local ABC boards, there is “nothing in privatization that builds accountability into the sales process.”
While current statutes require that 5 percent of local ABC profits go to law enforcement and 7 percent to alcohol education, that would not be the case with privatized sales. So towns would be left with more alcohol problems and less money to hire enforcement or treatment help.
“We trust that these 11 members of the Budget Reform & Accountability Commission will keep all the aspects of alcohol control in mind as they consider what to do in regards to ABC,” Creech said.
The commission serves at the pleasure of the Governor and will likely be seeking her input before moving closer to a vote.