Virginia's Current ABC System Doesn't Need to Be 'Fixed'

As the 2011 General Assembly begins to examine Governor Bob McDonnell’s latest proposal to privatize Virginia’s Alcoholic Beverage Control operation, it’s worth remembering that JLARC, the Joint Legislative Audit and Review Commission, found that the Governor’s first plan on the subject was undermined by faulty arithmetic and unrealistic assumptions.   I believe that we as lawmakers have a responsibility to ensure that this latest plan receives serious scrutiny.

The architecture of the latest ABC privatization plan is based on a report from the consulting firm the Governor hired: Public Financial Management, Inc. (PFM), a company with deep experience working with the Commonwealth.

And I must give some credit to PFM for being straightforward when it points out that the new ABC privatization plan is, indeed, based on numerous assumptions.  (In fact, the words “assumption” and “assumed” appear no fewer than a dozen times in just the Executive Summary of PFM’s report of January 10, 2011.)

Addressing the Administration’s prediction that the auction of 1,000 new retail liquor licenses to private interests would generate $300 million, PFM notes, “there is significant risk associated with this estimate, which we believe to be in the range of $100 million high or low.”

And, regarding the Administration’s prediction that there would be no significant change in retail prices for consumers of spirits in Virginia, PFM reports, “there are an infinite number of possible price variations that could result from privatization.  On any given day, in any given store, on any given item, the price could be significantly higher or lower than it is today.”

Here’s my point: even the consultants hired by the McDonnell Administration essentially agree that privatizing Virginia’s successful and very profitable ABC system is a gamble.

ABC has worked well for Virginians for nearly 80 years.  The system makes a wide variety of products available in clean, reasonably-located and safe stores statewide.

The operation is transparent and free of the corruption that has plagued other states.

And ABC has been profitable.  In good times and bad, ABC generates badly-needed revenue for critical state services, including public education, law enforcement and mental health.

In an uncertain economy and with budgets still under great stress, why would we want to risk a fruitful and effective operation?

Virginia's decision to get into the business of controlling and selling spirits was no accident.  After Prohibition, the General Assembly carefully and deliberately created an ABC system that helps to fund vital public services and safeguards Virginia's quality of life, and those are “core functions” of state government.

The ABC has won numerous awards and is completely self-supporting. If ABC privatization occurs, many State employees working there will lose their jobs. The State would have to compensate displaced employees for severance and unemployment benefits, estimated to cost about $36 million.   

As the old adage puts it so well, when something's not broken, it doesn't need to be fixed. Virginia's ABC is not broken and doesn't need to be fixed.

Editor's Note: Senator Linda 'Toddy' Puller (D-36)  is chair of the Senate Committee on Rehabilitation and Social Services. Governor McDonnell's ABC privatization bill will be presented before this committee.