McDonnell Disses Referendum on His ABC Obsession

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    It seems that Bob McDonnell  doesn’t see the need for a referendum on the issue of privatizing the state’s ABC stores. Most other decisions about state control of alcohol sales have been put to referendum, but he thinks his plan should be different. Why? Is McDonnell afraid that the voters won’t agree to his scheme to give away a large revenue source? Does he think he is somehow above putting radical changes in state policy to referendum? Maybe he agrees with George Bush, who once declared that a dictatorship is better…if he is the dictator. (We all saw how that turned out.)

    He told the Washington Post, “If the General Assembly insisted on a referendum then it’s something certainly I’d consider.” Excuse me, but if the legislature insists on a referendum, it’s not up to McDonnell to “consider” it. It will be done, unless he wants to veto any chance of privatizing alcohol sales by refusing to sign a bill containing a referendum.

    In the next sentence of his remarks to the Post McDonnell assured us that he wants “to make sure that we have money dropping in the bottom line on all our government reform issues as fast as possible.”  Now, I don’t think I can adequately intepret that Palin-esque statement. Does he mean he wants the bottom line of the budget to “drop,” i.e., show lower revenue and expenditures? Or, is he saying he wants to assure that the money from ABC sales isn’t lost to the “bottom line.” Hard to say, huh?

    Since ABC profits amounted to $112 million of the $322 million returned by ABC stores to the General Fund last year, Mac and his acolytes must be counting on a whopping price tag for those licenses to sell spirits. After all, he did say that, magically, he won’t change the money the state gets from those sales, money that supports education, law enforcement, social programs, etc. The last time we got a “promise” of that sort was the lie Jim Gilmore told us about the cost to the state of that “no car tax” we still pay every year. I don’t know about you, but I simply don’t trust any Republican promise that when they take away revenue for government, there will, miraculously, be no loss in revenue. GOPers might think that they can work that sort of fiscal hocus pocus, but I’ve lived long enough to see how miserably they fail at handling things like money and budgets.

    That $112 million in profits from 332 stores is about $340,000 per store. (Of course, as is true with all other forms of state revenue, northern Virginia and Hampton Roads provide the bulk of profit from the stores.)

    I cannot conceive of any Republican-initiated scheme that would tax profits from those new wholesale and retail liquor establishments or increase taxes on liquor (Haven’t they all sworn in blood not to raise any taxes, ever?) So, annual licensing would have to bring in that $112 million.

    I checked again the cost of licenses under McDonnell’s four proposals: With 300 licenses, each  would have to cost about $373,000 annually. With 800 licenses, the cost drops to about $140,000 each per year. If every existing beer and wine license also included the sale of liquor – 3,000 of them – the license cost drops to $37,300.

    If people in retail have to pay that kind of money for a license, where are their profits going to come from? It will be from lots more volume. Lots more. Plus, their employees will likely be paid Walmart wages and benefits, i.e., slightly above minimum wage with no retirement benefits. Before too long, I know what we will have. Mom and Pop liquor stores – including those licenses for women and minority businesses -will be pushed out, and ultimately an oligopoly of a few wholesale and retail players will collude on prices and purchase “access” to legislators with campaign contributions.

    If McDonnell actually wanted to protect the General Fund, he would propose some alternative tax or revenue source to guarantee continuation of the amount the state was deriving from ABC store profits. That won’t happen.

    Twice before, governors and the legislature have looked at the sale of the ABC stores. Both times, no one could find a way to assure the General Fund wouldn’t take a huge hit. Does Bob McDonnell actually think he can change basic arithmetic, or is he lying, just like Gilmore did?

    • Dan Sullivan

      Isn’t that enough?

    • Bumble Bee

      This is another Republican scheme to reward their buddies and corporate fat cats with what amounts to state contracts to sell liquor.  Gonna work just about as well as privatizing highway crews such as was done on I81. It’s getting about time to put on your walking shoes, vote with your feet and walk right out of this state ’cause it is going to hell in a hand basket.  

    • Colston Newton

      I hope it’s plain that I am a great supporter of the public schools. Since I don’t own any real estate to play taxes on and Virginia’s liquor stores’ profits all go the schools I do my best to support education by patronizing those stores as often as my wallet and liver can stand. But now, Gov. Bob McDonnell is trying to mess that up. He wants to sell the ABC stores which, from what I’ve seen so far, is a terrible idea.

      McDonnell’s flunkies have begun easing their plans for taking Virginia’s liquor sales private and, so far, the plans, which do not include directing any liquor sale money to the schools, look more like fairy dust than real plans.

      One of the governors’ assumptions about hard liquor as opposed to beer and wine is a mistaken one that the non-bibulous such as the governor would easily make. Brother McDonnell and his minions say it is inconsistent to allow the private sale of beer and wine but not hard liquor. In fact, while the substances have alcohol in common, their essential uses are quite different, certainly with wine and to some extent still with beer. Wine, and, at least in part, beer, are to a great extent sold to accompany meals. Their presence in grocery stores makes sense. Hard liquor is purely recreational. It’s meant to fuddle the brain pure and simple. The three types of drinks are not fungible and stricter control on hard liquor, such as current limits on purchase in ABC stores, should be kept. With privatization, it would be no burden to slip down to the next store and buy more than the law currently allows. Drinkers know the difference in the sorts of alcoholic beverages, but the governor and his people apparently don’t.

      Virginia has about 300 liquor stores and a major warehouse that the governors’ geniuses figure might bring in from $300 to 500,000,000 in a sale. The governor would use that money would be used on transportation needs. Now, that’s all well and good, and while state would still collect the taxes on liquor sales, what about the actual profits the stores provide the state annually, $121 million in 2009? After four years the sale money would be gone and so would that $100,000,000 in annual revenue.

      The governors’ bean counters don’t think so. They figure the profits would come back via increased sales and licensing fees from up to 1000 private liquor sellers. There are a couple of problems with that. First, the simple availability of more retail outlets may marginally increase the amount of liquor sold, but not all that much. Everybody in the state who drinks hard liquor already buys it at the state stores. More outlets won’t increase their numbers. Availability through private sellers would remove the buyers’ need to calculate their supply or know a bootlegger in order to assure they don’t run out after 6 p.m. and have to wait until the nest day to resupply, but that’s all. No additional  liquor would be sold. Some of it would simply be sold a few hours sooner. (That ‘advantage’ if you want to call it that, would have the downside consequence of putting drunks who don’t know a bootlegger, on the road to the nearest whiskey shop if they ran out during the evening.)

      A second problem is that if the program is drafted to assure the collection of the profit now made by ABC stores, the private retailers would have to increase their prices to get a profit for themselves. That would particularly hurt in Northern Virginia where the governors’ calculators project increased sales. Folks up there already slip over into Maryland and the District to buy their booze at cheaper prices than the ABC stores offer. Higher prices at Virginia private stores would just make that worse.

      There’s a philosophical problem in increasing the prices of liquor, too.  McDonnell and the rest of the GOP are firm for “no new taxes”. Increased liquor prices to give the retailers a profit above the state’s skim, would in all ways except name, be a new tax on liquor. Since it would be a “sin tax”, it likely wouldn’t bother the non-sinners, but it would surely make a lie out of the “no new taxes” promises.

      Finally, there is the aesthetic problem. Anybody who has driven up Route 301 in Maryland has seen the seedy looking places and the tacky signs on the booze shops up there. Virginia really doesn’t need that.

      As the governor and his minions fiddle with the idea of selling the ABC stores, a line from a Brother Dave Gardner story comes to mind. “James Lewis, get away from that wheelbarrow. You know you don’t know nothing about machinery.” And, then, there’s some tale about a goose that laid golden eggs.

    • Elaine in Roanoke

      GOPers try their best to portray themselves as the “party of business.” What tripe. They are the party that sold out to whatever business wants as it grasps for ever more money, ever less regulation, ever less taxation.

      No one in the other party can explain to me how any level of government can eliminate a stream of revenue and still end up with the same “bottom line.” When revenue is eliminated, one of two things will result. Money will have to be borrowed in order to allow the same level of government services to occur, or government services – which benefit most the most vulnerable among us – will have to be cut.

      If citizens want someone in charge who understands Economics 101, they better pick the Democrats. At least we can add and subtract.

    • Jim B

      Yeah, the car tax did not work out either, but repugs never learn. The Wash Post article the other day spelled out exactly how much the state earns from alcohol sales and no amount of skulduggery will allow the state to replace the revenue. As a youngster and not concerned about paying for services I thought the state should not be in alcohol sales as it inconvenienced my purchases on weekends. As an older and hope wiser person I don’t want to see the schools go down any further.