Marin Institute

During an eight-city tour of his state, Virginia Governor Bob McDonnell appears to be using a fact-free approach to garner public support for privatizing alcohol sales, as several news outlets have reported.

In the Washington Post, McDonnell is quoted saying "he does not think his proposal to privatize the state's 334 liquor stores will result in an increase in car crashes, crime, or consumption." And that: "All the data shows there is no difference in drunk driving or crime whatsoever between control states and between privatized states." McDonnell has also said that "he does not think that Virginians will drink more alcohol if the state allows private companies to open a total of 800 stores, as is being considered."

Perhaps the governor’s office can longer afford fact checkers on staff?

The new Republican governor made privatizing the state's liquor stores a campaign promise, but his proposal is drawing skepticism even from his own party. Perhaps this is because all of the governor’s statements are easily debunked by actual facts, which Marin Institute has compiled and made available on its website for the past several months. Said facts were culled from scientific research that has been available for many years. Among the most salient data the governor either conveniently ignores or is unaware of:

• Consumption of alcohol is higher in privatized jurisdictions.
• States with spirits retail monopolies have a lower prevalence of drinking and binge drinking among people between 12 and 25 years old.
• States with retail monopolies over wine and spirits have a 9.3% lower death rate for people under age 21 killed by alcohol-impaired driving compared with license states.
• A comprehensive review and analysis by the U.S. Task Force on Preventive Medicine found that privatization leads to higher alcohol outlet density, greater physical availability, and a decline in the real price of alcohol.

Also, our fact sheet on the Privatization of State-Run Alcohol Sales explains the adverse consequences, such as reduced revenue, of privatizing the sale of alcohol.

The governor says Virginia could realize as much as $500 million in a windfall profit by selling its ABC liquor stores. Annually, ABC stores bring in an average of $220 million and in fiscal 2009, the state liquor agency contributed $322.3 million to Virginia's general fund from profits and excise taxes.

Meanwhile, for the fiscal year that ended June 30, 2010, Virginia had a projected budget deficit of $4 billion.

Why would a state forgo a steady revenue stream in the face of budget deficits and the prospect of greater alcohol consumption and increased harm to the general public and higher costs to the state? Perhaps Governor McDonnell should spend more time learning the facts and less time making them up in his quest to trash the state’s successful, revenue-generating 76-year old system of alcohol regulation.

Voters in Washington—a state that enjoys more than $300 million in annual revenue from the sale of spirits—are facing two ballot measures this November. Both seek to privatize the state’s government control system. According to a recent study, passage of these bills could mean revenue losses of as much as $500 million dollars over five years.

The potential loss of revenue to the state, which already projects a budget deficit of $3 billion over the next two years, could lead to catastrophic cuts in much-needed programs and services. Both measures are being funded by alcohol industry interests.

Initiative 1100, which big box retailer Costco has pumped nearly three-quarters of a million dollars into already, would, according to the study, "decrease state revenues up to $85 million through 2015 and cut into local tax sources up to $192 million."

Initiative 1105, which is funded by beverage distributors, could "decrease state tax revenues up to $520 million over five years and take up to a $210 million bite from local coffers over the same time period."

Backers of both initiatives claim that because the report was conducted by the state, is it "bogus" and that "privatizing spirits sales would be good for consumers and could bring the state even more tax revenue." But a recent poll in Washington showed that 65% of voters "trust the state more than the private sector when it comes to selling liquor."

Of course, the industries backing these initiatives stand to benefit the most by privatizing alcohol sales. If passed, money that would have flowed into state and local coffers to benefit residents instead will be diverted to these companies to fatten their bottom lines. Taxpayers will lose, not only revenue, but also with increased alcohol outlets, sales, and consumption. Research shows lower alcohol consumption and outlet density in control states, both of which lead to positive impacts on the public’s health.

Senators Charles E. Schumer (D-NY), Dianne Feinstein (D-CA), Amy Klobuchar (D-MI), and Jeff Merkley (D-OR) have joined forces in a recent letter to the U.S. Food and Drug Administration (FDA) calling on the agency to "immediately make public its findings from an investigation into possible health risks posed by so-called 'energy drinks' that combine alcohol and caffeine."

The senators also say that "alcoholic energy drinks appear to be marketed to underage teens, misleading parents and law enforcement by designing labels and containers so the products resemble non-alcoholic energy drinks." The senators want the FDA to complete its investigation and issue a report of the findings to the public.

Back in November of 2009 that the FDA announced it was investigating the safety and legality of alcoholic energy drinks. It sent letters to nearly 30 manufacturers of alcoholic energy drinks (also known as caffeinated alcoholic beverages) demanding that these manufacturers produce evidence within 30 days that their products were safe and indicated that the FDA would take appropriate regulatory action, including possible product seizures if these manufacturers could not could not provide adequate proof of safety. However, to date, no further action has been taken by FDA, which makes the senators’ letter all the more important.

Marin Institute has been at the forefront of the fight to get potentially dangerous alcoholic energy drinks off the market and commended the FDA last year the FDA for its actions in 2009. We also recently thanked  Senator Schumer for his earlier letter to the Federal Trade Commission on this issue. We hope that the addition of three more U.S. senators in this call to action will encourage the FDA to take action to remove these potentially dangerous products from the market place once and for all.

National retail chains have recently formed a coalition to push for privatization of spirits sales in Virginia, a preparatory step toward Governor Bob McDonnell's expected proposal to relinquish the state’s 76-year control of liquor sales. Called the ABC Privatization Coalition, the group includes retail and grocery outlets such as Costco, Safeway, Wal-Mart, Kroger, and Food Lion, all members of the Virginia Retail Merchants Association.

In a case of “same story, different state,” many of the same players comprise a Washington State coalition formed earlier this year to push for privatization via the passage of Initiative 1100. This ballot initiative would close Washington’s state liquor stores, eliminate state control over the sale of spirits, and ultimately cost the state millions in lost revenue. The retail chains listed in the Washington effort include Costco, Safeway, and QFC (a subsidiary of Kroger), all members of the Northwest Grocers Association. The group calls itself "Modernize Washington."

It remains to be seen what amount of monetary support the Virginia coalition will provide to the Governor’s privatization plan, but if Washington is a litmus test, funding could approach, if not exceed, the million-dollar mark in Virginia before it’s over. In Washington, Costco alone has spent nearly $1.2 million (and the use of its employees as signature-gatherers in its stores) to get 1100 on the ballot.

So what's going on here? The retailers in both states already sell as much beer and wine as they can stock on their shelves -- why the push for big retailers to take revenue these cash-strapped states need, in order to line their own pockets? The obvious answer is profit, and a never-ending effort to make more of it. But if privatization passes in these two states, the only chain these retailers will create will be the one around the kids and communities of Virginia and Washington, locking them more tightly in the grip of Big Alcohol's sales, advertising, and marketing machine.

Retailers should not be in the market to sell higher levels of alcohol at the expense of the state's finances and the public’s health. Maintaining state control of sales benefits public health by lowering consumption, underage drinking, and drunk driving fatalities.

Grocery chains such as Costco, Safeway, and others work hard to market themselves as health-conscious companies to the public. But by backing privatization plans, these retailers prove that serving themselves first is their top priority.

Marin Institute is on the record opposing the actions Costco and its coalition members are taking in Washington State. We call on retailers in Virginia to cease involvement in that state’s privatization push.

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