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News State / Region Governor opposes ABC privatization

Budget analysts support decision

The decision to oppose the privatization of alcohol sales in North Carolina is a sober one, suggest researchers and budget anaylsts.

On Jan. 20, Governor Beverly Perdue declared her opposition to privatizing the Alcohol Beverage Control system at the North Carolina Association of County Commissioner’s Legislative Goals Conference in Durham.

Because of state budget challenges, Perdue said that all options of alcohol sales were considered, including privatization, however she eventually concluded that it was not in the best interests of North Carolinians to privatize.

Perdue’s decision came after an independent review over the past year of the potential profitability of selling the state’s ABC system, as well as the potential affects such a sale would have on the health and safety of North Carolina residents.

Following an initial report by an independent consultant company, Perdue decided to only consider options that would protect local and state tax revenue, and keep N.C. as a “control state.” Additionally, the value of the sale would have to significantly offset the risk involved in the state’s health and safety.

It turns out the option to privatize alcohol sales could jeopardize the health and safety of state residents. According to a recent study performed by the University of Victoria, the privatization of liquor sales relates to increased alcohol-related deaths.

The study looked at various kinds of alcoholrelated deaths including liver diseases, cancers, injuries and suicide in 89 local health areas of British Columbia during a rise in the number of private liquor stores between 2003 and 2008.

The number of private liquor stores increased by 40.3 percent to 977 while government store numbers decreased by 10.4 per cent to 199.

The study found that areas with more stores in private rather than government hands had significantly higher rates of alcohol-related deaths involving local residents. In fact, there was a 27.5 percent increase in alcohol-related deaths for every extra private liquor store per 1,000 British Columbians.

Independent revenue estimates for a one-time sale have been valued at about $300 million.

The only way to raise enough money to make the sale practical for the state – one billion plus dollars – would be to open North Carolina up to liquor sales to a much broader range of stores, from neighborhood drug stores to large retailers.

NC Budget & Tax Center director Alexandra Forter Sirota said Perdue’s decision was wise, in a statement released on the same day. Sirota expressed that privatizing the Alcohol Beverage Control system could turn out as a fiscal blunder for the state. “Even without considering the potential social consequences, it would be a mistake to privatize the ABC system based on a small revenue boost in the short-term,” she said. “Governor Perdue is right to think about what’s best for North Carolina in the long run.”

All budget decisions, Sirota added, must be evidence- based and carefully consider the results beyond just the next few years. Continuing the state-run ABC system would likely minimize alcohol abuse while preserving a stable revenue stream to fund vital public investments.

“Privatizing state services often has long-term fiscal consequences that aren’t properly accounted for,” said Sirota, “Policymakers must ensure that in their efforts to close the shortfall that [they] are not creating problems for the state down the road.”

Perdue said that privatizing alcohol sales was contrary to the culture of North Carolina. “I don’t want to be the governor who has to hold my granddaughter’s hand as we walk past the liquor bottles on our way to the toy aisle in WalMart, or towards the cereal in Food Lion,” she said. “That isn’t North Carolina. That isn’t who we are or what we want to become.”

Right now, North Carolina is tied for 44th in per capita liquor consumption, one of the lowest in the nation. According the ABC Commission statistics, the state made a profit to the general fund of $200 million and local governments a profit of $51 million in 2010.

Franklin ABC Board member Pat Pattillo said on Wednesday that even though sales were down 2 percent for the 2010 fiscal year, that the board was still profitable, and that a closure of the board would mean the loss of local revenue for Franklin. “I really hope they don’t go private,” he said of Raleigh’s ultimate decision on the matter this year. “It wouldn’t be good for us.”

North Carolina’s ABC Commission is compiling its final data now, which will be shared with the General Assembly, according to the Commission.

“I invite our Legislative leaders to sit down with me and my staff to hear a presentation from the valuation company to learn firsthand what options are available. But I suspect they will find what I did: the juice isn’t worth the squeeze,” Perdue said.

In making a decision, Perdue also considered the incidents in Charlotte, Wilmington and Greensboro over misuse of funds and acceptance of gifts which exposed a problem within the ABC system.

Following those incidents and as part of her Setting Government Straight initiative, Perdue signed legislation last session to bring a new ethical- standards charge to those serving on local ABC boards. The legislation was in sync with recommendations made by the General Assemby’s Program Evaluation Division, which proposed the ABC system adopt ethical standards.

“The current ABC system, especially with the new ethical standards in place, is well-run, and gives us the 3rd best excise revenue in the country,” Perdue said. “I am still looking for new and innovative ways to set government straight and tackle our budget issues, but for me, today, selling the ABC system just isn't the right way.”

2010 gross sales of ABC stores in WNC

Waynesville $2,107,992
Bryson City $1,751,508
Sylva $2,610,265
Franklin $2,434,888
Highlands $1,567,570

Source: North Carolina ABC Commission


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