During campaign season, voters frequently hear the statement, “government ought to be run like a business.” How many businesses do you know would be willing to eliminate a profit center that realizes some $118 million per year in net revenue and another $120 million in taxes for a price that is speculative and which may come with some undesired consequences? Well, that is exactly what the Commonwealth is considering doing if it embraces Gov. McDonnell’s proposal to privatize the ABC stores.
While the precise proposal has not yet been outlined, the general principle is for Virginia, one of only 18 states that now run liquor operations, to sell or license the ABC retail operations to the private sector in exchange for cash up front. Estimates of the revenue from the sale range from $150 million to $500 million. That one-time influx of money would be dedicated to transportation, a critical need in the Commonwealth.
While I agree with many others that the liquor business is not a core service of government, we should recognize that the Commonwealth’s ownership of liquor operations has brought needed revenue into the General Fund, some of which goes directly to mental health, retardation, and substance abuse funding by statute.
The Virginia ABC presently operates 332 stores and employs 2,680 people. In Fiscal Year 2009, it deposited $248 million in profits, excise and sales tax into the General Fund, the Commonwealth’s primary funding source for public safety, education, and healthcare. It is not at all clear what will happen to this revenue stream in any privatization. Without raising the excise tax on liquor sales, it is very possible that the amount of money that the General Fund presently receives will be much less after privatization. Some argue that the only way to replace the lost monies is by increasing the number of stores and/or concentrating liquor sales into big box outlets like Costco and Walmart. In the end, then, any privatization proposal, independent of the ideological assertion that the private sector is the better outlet for this business, must be considered by comparing the risk of losing consistent General Fund revenue after the ABC sale against the benefit of receiving an undetermined amount of money for the sale of the operation that would go into transportation.