Gov's Commission OKs ABC Plan; On to Legislators

By Stephen Groves, of Virginia Statehouse News Tuesday, October 05, 2010

ALEXANDRIA - Republican Gov. Bob McDonnell’s plan to get Virginia out of the hard liquor business passed the Government Reform Commission on Monday, giving the governor the go-ahead to push the plan to legislators.

With three dissenting votes, the commission passed the plan that puts a $460 million pricetag on the 76-year-old monopoly Virginia holds on hard liquor. McDonnell would raise the money by selling licenses to sell hard liquor, increasing the number of liquor retailers in the Commonwealth from 332 to 1,000.

“We’re looking at hundreds of millions of dollars more for transportation,” said Eric Finkbeiner, McDonnell’s policy adviser.

But opponents of the plan see a money hole. The plan would garner $47 million a year less than the state-owned Alcoholic Beverage Control (ABC) stores currently bring in. McDonnell presented several changes to his original plan last week that made the plan more small-business friendly, but also less profitable.

Del. Bob Brink, D-Arlington, said there has been a long-standing effort to privatize the ABC business, but “it’s so difficult to make the numbers work,” to make up for the money that ABC makes.

McDonnell made an appearance at the meeting, and said, “Every time a big idea comes down the pipe, there is natural resistance to change.”

Members of the commission said they were told from the outset that McDonnell’s plan would bring in the same amount of money that the ABC makes now. But Finkbeiner reasoned that although the liquor privatization loses money, other cost-cutting measures from the commission are making up that money.

That answer didn't quite satisfy several commission members.

Another objection to the plan is that it doesn’t adequately address enforcement of the drinking age.

Sen. Mary Margaret Whipple, D-Arlington, said that in undercover investigations by the ABC, state-owned stores were in compliance with the law 98 percent of the time, but private businesses that sell beer and wine were in compliance only 90 percent of the time.

She is also concerned that ABC agents will be overwhelmed by the increase in liquor retailers. The plan will add 22 agents to the current 82-agent force.

But the 1,000 new retailers “is a lot of stores for ABC agents to try and enforce,” Whipple said.

Although the proposal moved forward, the commission recommended that McDonnell’s aides examine ways to beef up the law enforcement element, as well as the profits. Such changes may be necessary for legislators to adopt it.

The debate appears to be boiling down to conservatives saying that the state should not be in the booze business and Democrats saying the plan’s revenue shortfall doesn't help the state budget.

“This really is a debate about the proper role of government,” said Sen. Mark Obenshain, R-Harrisonburg.

“It was a state-run monopoly that should not have been generating this money to begin with,” Finkbeiner said.

This argument is not likely to convince Democrats though, many of whom want to see the money that the new plan will generate. Sen. Edd Houck, D-Spotsylvania, requested that the Joint Legislative Audit and Review Commission, the research arm of the legislature, review the numbers behind the plan. A report is expected by the end of October.

McDonnell said that he would like to call a special legislative session in November so the reform measures can get rolling, but said last week he would make sure the necessary support is there before calling the General Assembly back to Richmond.

The commission has approved several measures in the past months, including plans to allow inmates to work on highway cleaning, making the Department of Motor Vehicles a one-stop place to complete all Virginia government forms and making more forms available online.