Virginia’s governor wants to get the commonwealth out of the liquor business. For 76 years, the state has had a monopoly on liquor sales, and McDonnell is moving to fulfill a campaign vow to privatize the stores.
After the fall of Prohibition, 18 states opted to put liquor sales under government control. In Virginia, this has resulted in just 332 stores across its 42,774 square miles. (In D.C., there are more than 500 liquor vendors in 68.3 square miles.)
If McDonnell gets his way, liquor would be available at stores like Wal-Mart and Costco, and at supermarkets. They have been pushing for the change. McDonnell also says privatization would bring in quick cash needed to fix Virginia’s roads.
However, McDonnell faces pressure from both left and right. State Senate Democrats worry that after that initial cash influx, privatization would cost the state much of the $220 million per year that comes from government ownership. And while some social conservatives would be pleased to see the government out of the booze biz, others think privatization would lead to more drinking and more alcohol abuse.
It’s also a hard sell for McDonnell because right now, that $220 million is dedicated mainly to schools and public safety. Trading that funding for an investment in roads could meet resistance.
There are also sticky issues that would arise if the state tried to shut down its liquor operations. The stores’ 2,600 employees could be entitled to up to $40 million in severance pay, according to the Washington Post, and there are also leases and delivery contracts that would be broken -- at a price, of course.
One of McDonnell’s arguments is that many in Northern Virginia cross into D.C. or Maryland to buy liquor, rather than make the long slog to the closest Virginia vendor. But his office acknowledges that privatization would not necessarily bring prices down -- the 20 percent excise tax on liquor would be maintained – so a cross-border price war could ensue.
Ultimately, McDonnell’s best argument is the one closest to his heart. He said recently, “For 70 years, we've distributed beer and wine in every 7-Eleven, every Food Lion. But we've controlled the distribution of spirits. From a free-market standpoint, it doesn't make sense to continue to control only one part of the distribution.”
The governor simply does not think the government has any reason to hold a monopoly on the sale of a legal product, especially when private vendors are eager to get into the act. While the budgetary issues are compelling, for McDonnell it’s mainly a matter of principle.
And in that, he is right. There is simply no reason for the government to be involved in any venture that private enterprise and private individuals could do as well or better. There is especially no reason for the government to grab a monopoly -- which essentially concedes that the private sector would best the state operation in open competition.
The millions in income that McDonnell predicts are a great incentive, but the best reason for Virginia to privatize liquor sales is because this is a free country.