Hot Button: Spirited Debate

Two measures that would allow Washingtonians to buy bourbon and bacon in the same establishment—and take the state government out of the $849 million–per-year business of selling and distributing hard liquor altogether—are headed for the November ballot. Depending on your persuasion, the initiatives, if passed, will either end the state’s Prohibition-era monopoly, thus giving consumers more choice and potentially lowering prices on alcohol, or they will be a recipe for social calamity that would devastate mom-and-pop grocers as well as the local beer and wine industries.

Public debate over the issue is already ramping up. Is the core issue alcohol use or free enterprise? Is government intervention in the liquor business un-American? Shouldn’t we be able to buy our Scotch in the same stores where we buy our steaks? Will there be a liquor store on every street corner? Will kids have easier access to booze if it becomes available at the supermarket?

The questions aren’t exactly new. They’ve been buzzing for decades—almost since Washington began its role as a liquor-sales watchdog upon the repeal of Prohibition in 1933. Since then, there have been governor-appointed committees, audits of the state liquor board and even proposed state legislation, but any effort to loosen the state’s tight grip on the bottle so far has failed. That changed earlier this year when the movement gained new momentum with the filing of two ballot measures—Initiatives 1100 and 1105—that present privatization as a way of providing relief to taxpayers and business owners in a slowly recovering economy, plus revenue to help the state overcome a projected $3 billion deficit.

“There are entrenched interest groups that don’t want change and have been unable to make a clean break from Prohibition,” says Seattle political consultant Sharon Gilpin, who is spearheading I-1100. “It’s going to take the public to do this. Initiative 1100 is a basic consumer movement.” Sponsored by Modernize Washington, a coalition of citizens and businesses, and backed by Costco and other big retailers, I-1100 would allow businesses that already sell beer and wine to sell hard liquor obtained from suppliers of their choice, thus eliminating state-mandated price controls and allowing for volume discounts.

Initiative 1105, on the other hand, stops short of complete deregulation and allows the state to set price controls. Backed by Washington Citizens for Liquor Reform and liquor distributors, it would link licensing fees to the amount of liquor sold and would prevent massive volume discounts. “Everyone is in agreement that the state needs to get out of the liquor-sales business, but we want to make sure it’s done responsibly,” says Charla Neuman, a former aide to U.S. Senator Maria Cantwell. “It’s a win-win for the taxpayers.” Neuman, a Tacoma public relations consultant, says passage of I-1105 would generate at least $100 million for the state over the next five years through new licensing fees and sales and liquor taxes. It would let retailers—from corner stores to large supermarkets—obtain retail liquor licenses and sell packaged booze. Low-volume sellers would pay less for their licenses than large retailers.

Opponents of privatizing liquor sales—mainly labor unions, community groups and some alcohol distributors—say the current system works well and reduces the potential for alcohol abuse. In testimony this year before a state Senate committee, Washington Public Employees Association president Greg Parker said: “Turning such a critical social function as the sale and distribution of alcohol over to the private sector is a recipe for social disaster.”

Nevertheless, most states already use that recipe. Washington is one of 18 states that still manage the distribution of hard liquor, and one of only eight that also control the retail sale of hard liquor through government-run stores, according to Brian Smith, a spokesman for the Washington State Liquor Control Board. The liquor board was created in 1933 and tasked with protecting against illegal, unregulated and untaxed liquor sales; educating the public about alcohol abuse; and generating income for the state. Since its inception, Smith says the liquor board has returned more than $4 billion in revenue to support public education, law enforcement services for local communities, research projects such as an alcohol and addiction study at the University of Washington, and other state and local services. In fiscal year 2009, it issued liquor licenses to more than 15,800 qualified businesses, including grocery stores, restaurants, taverns, wineries, breweries and distributors.

Today, all liquor distributed in Washington is selected by the three-member liquor control board and then shipped to a state-run, 220,000-square-foot warehouse in south Seattle. Roughly 18,000 to 30,000 cases of liquor per weekday—5 million cases per year—are trucked from the center to the 315 state-run liquor stores across Washington. Of those retail locations, 155 are small contract stores in rural areas. If voters OK either ballot measure, the state would have to sell its distribution center and put 930 of the liquor board’s 1,200 employees out of work, according to a state auditor’s report.

Gross liquor sales in Washington totaled $848.8 million in 2009, including taxes and license fees. Of that, the state returned $332.7 million to the state and local communities. A January 2010 report by Washington state auditor Brian Sonntag concluded that the state could increase its revenue by $277 million over five years if it changed its current model. However, liquor board spokesman Smith says the $277 million figure was based on the state’s auctioning of licenses to the highest bidder and that much of that revenue would only be available every 10 years when licenses are up for auction.