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Sobering reality: N.C. may privatize booze retail
Opposition contends state control is best
Published Thursday, January 13, 2011 10:12 am
by Sommer Brokaw, For The Charlotte Post

N.C. Gov. Bev Perdue is considering taking the state’s Alcohol Beverage Control system private in order to save money. Opponents cite the potential loss of revenue and less control over retail accountability.

N.C. special interest groups are pledging to fight any proposal to privatize the state-run system for selling and distributing liquor.

The controversy stems from Gov. Beverly Perdue announcing she would consider privatizing the state-run ABC system to deal with a projected $3.7 billion budget shortfall.

The North Carolina Alcohol Beverage Control System has commissioned the Valuation Research Corporation, a financial advisory firm based in Chicago, Illinois to evaluate how much privatization could possibly save, which could be back later this month.

State Sen. Josh Stein, D-Wake, said that he still needs to be convinced that it’s in the state’s interest to privatize.

“I have trouble understanding where the revenue is for the state,” he said. “The state currently ranks third out of 50 states in revenue per gallon, but 48th in per capita consumption of liquor and those are where we want to be in the rankings.”

While some conservative and pro-business interest groups like the John Locke Foundation, a nonprofit with a vision of limited, constitutional government, and the N.C. Retail Merchant’s Association, a nonprofit trade organization, have come out in favor of privatizing the ABC system, several other groups have come out publicly against it.

The N.C. Association of ABC Boards, the N.C. League of Municipalities, the N.C. Association of County Commissioners, and the N.C. Association of Chiefs of Police oppose privatization.

“The Mecklenburg County ABC Board is against privatizing the system because we believe the current system works to the benefit of the community both with dollars returned locally, and the way that a limited system discourages consumption,” said Mary Ward, community spokesperson for the Mecklenburg ABC board.

Ward maintains having a controlled number of retail outlets benefits communities because liquor profits are mandated for local programs ranging from drug abuse to libraries. That wouldn’t happen with entrepreneurs “maximizing profit for the benefit of the individual owner.

“In the control system, all profits return back to the state or locally to City Council, local law enforcement, and a substance abuse and prevention program,” Ward said. “Currently we have 20 grant partners that receive half a million dollars from this Mecklenburg ABC board.

“If we didn’t have this board, that funding stream to those nonprofits would be cut because if it’s owned by independent businesses they have no regulation to return any profit that goes in their pocket just like any other for-profit owner. Regardless of whether you chose to drink or not, if your child checks out a book from the library it affects you because 5 percent of our profits return back to the Mecklenburg County Library.”

Christian Action League of North Carolina, a public policy organization representing conservative evangelicals from 17 denominations, recently added its voice to the opposition.

“There’s no effort on our part to bring back prohibition,” said Rev. Mark Creech, executive director of CALNC. “We recognize that day has come and gone, but our concern is alcohol is not an ordinary commodity. Very few things affect more life, liberty, and property of people, and we continue to address it with hope we can convince lawmakers or policymakers to enact public policy that best protects the public’s health from abuse of alcohol. We believe that the N.C. ABC system best provides that protection for the public’s health. It has proven to be superior in that it strikes a critical balance in keeping dangerous consumption levels down and keeping revenues up for state and local coffers.”

While both sides agree that there would be some revenue from privatizing in the short-term from selling off ABC stores and its stock to individual owners, they still disagree on if it could potentially provide any long-term benefit at all. 

John Hood, president of the John Locke Foundation, defended Perdue’s consideration of privatization.

“The government shouldn’t be in the liquor business, and I think in this kind of budget situation, selling underperforming assets is a reasonable way to raise revenue,” he said. “With a system of government-owned stores, there is inventory and land that would be valuable to private vendors so you make the property available and split the proceeds between the state and local government.

He continued: “In the long run, consumers will be better off with private vending of alcohol. Most states operate under a private system, and there’s no good evidence that North Carolina should keep its government dominated system.”
However, Creech said there is no long-run benefit to privatizing ABC.

“This system works exceedingly well,” he said. “Some of arguments made for privatization are not based on science, but philosophical ideas about free markets. The same principals of free market don’t apply to alcohol, it’s not an ordinary commodity.”

The 21st Amendment to the U.S. Constitution repealed prohibition in 1933, releasing control of alcohol laws in regard to the sale and distribution of alcohol to the states. The central principles of post-prohibition adopted by almost every state legislature were first laid out in a report sponsored by John D. Rockefeller called the Rockefeller Report.  

Creech said the report summed up the best reason that North Carolina should remain a controlled system when it argued:
“Only as the profit motive is eliminated is there any hope of controlling the liquor traffic in the interest of a decent society. To approach the problem from any other angle is only to tinker with it and ensure failure.”


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