Capital Goods - May 2010

Last call for state-sold alcohol?
By Scott Mooneyham

The General Assembly may get the chance this year to perform that rarest of legislative feats — shrink government and promote free enterprise. For conservatives, it’s an opportunity they would relish, right? Maybe not. It would meanending state and local government’s monopoly of the liquor business in North Carolina, which began 77 years ago as Prohibition came to a close. Intended as a check on the evils of alcohol, its demise would be due to other evils.

Since last year, the scent of scandal has hovered like a whiff of whiskey breath about the local Alcohol Beverage Control boards that operate liquor stores in the state. In New Hanover County, the entire ABC board resigned amid revelations that its administrator was making nearly $280,000 a year — roughly five times the state average for ABC supervisors. In Mecklenburg County, a liquor supplier treated local ABC officials, employees and family to a $12,700 dinner that included 10 shots of Don Julio tequila that bumped the bar tab $600. The 32 attendees tossed back 71 mixed drinks, 11 beers and 14 bottles of wine. It took the resignation of the chairman and administrators before heads stopped pounding from the public outcry.

In calling for the resignation of the Mecklenburg officials, Jon Williams, the new chairman of the state ABC Commission, decried the “culture of entitlement” around some local ABC boards. Gov. Beverly Perdue instructed him to have a consultant put a price tag on the business, indicating that she was open to the idea of some privatization. Legislative leaders announced that they would begin looking at reforms during the upcoming legislative session. But for all the talk and indignation, any plan to wean government from the bottle has some high hurdles.

Liquor is a big, lucrative business in North Carolina. In 2008, sales state-wide totaled more than $700 million. The state controls those sales through a three-member ABC Commission appointed by the governor. The commission sets prices for booze sold in package stores, determines what brands are sold and oversees a state warehouse in Raleigh from which all liquor is distributed. Local boards, formed by counties, cities or towns, operate local ABC stores and hire employees who work in those stores. Money from those sales pour into state and local tax coffers.

No other state does it quite this way. Thirty-two license privately run package stores or allow grocers and other retailers to sell liquor as beer and wine is sold here. Eighteen states, including North Carolina, are so-called control states. Some dole out contracts to private vendors to run package stores, while setting prices and controlling distribution. No others give such free rein to local governments when it comes to retail sales.

Changing the system might cause a barroom brawl. Local-government representatives recently trooped to Raleigh to tell legislators to leave their realm of spirits alone. They weren’t alone in defense of the status quo. Mark Creech, the Baptist minister who heads the Christian Action League, argued that the present system doesn’t promote profit over public safety. Privatization, he warned, could lead to more alcohol abuse by adults and more illegal use by teens. Any free-market conservatives in the legislature who get behind an effort to privatize liquor sales can expect a tussle with family-values conservatives who like state control.

Liberals and moderates don’t seem any more unified. Even before the latest scandals erupted, bills were filed to allow local ABC boards to contract out package-store operations and require mergers of local boards under some circumstances. The bills never got a vote before a House or Senate committee. State Rep. Pryor Gibson, an Anson County Democrat and co-chair of the powerful House Finance Committee, says the current system is flexible, allowing local attitudes to dictate local practices. “It is the product of 75 years of incremental change. You don’t redo that overnight.”

If Gibson is resistant, other legislative leaders and regulators such as Williams are embarrassed by what local flexibility has wrought. Both Senate President Pro Tem Marc Basnight and House Speaker Joe Hackney say the system and those operating it, at the very least, require more accountability. They didn’t shy away from the concept of privatization, including it as a part of the review they have ordered. Williams, meanwhile, has recommended allowing private retailers to sell liquor in places where there is not enough business to support a profitable package store. Remarkably, the state’s chief alcohol regulator seems to be the loudest voice for letting commerce be conducted by the private sector. Soon enough, we’ll see how many allies he has.

Scott Mooneyham is the editor of The Insider, www.ncinsider.com.