Privatizing State Liquor Stores

Privatizing State Liquor Stores

by Rep. Ryan D. Wilcox (R-Ogden)

It’s time to get the State of Utah out of Retail.

As a citizen of the state, they seemed an oddity. As a child I wondered what the people had done to warrant condemnation in the little gray cinder-block buildings with the jail-cell bars on the windows…the buildings themselves sending the unspoken message to patrons:

You are one step away from a prison sentence.

As a newlywed one random Sunday, a disheveled stranger sat next to me in our chapel. He reeked of alcohol. So naturally, we became friends. Over time, he would join our church. He told me he was finally ready to give it up, for good. We talked for hours about all that he had lost, all that he had given up as a direct consequence of his addiction. As he sobered up, he began to see clearly the consequences of his behavior, and the pain his choices had caused his family. He spent the rest of his life clean…and testifying to those still struggling…of the freedom he had gained from turning to a higher power, and giving it up.

But the damage had already been done. Decades of ignoring his addiction had taken its toll, not only on his family, but on his body as well. My friend Steve died from cirrhosis of the liver less than two years later. Before he died, he asked me to sing at his funeral.

I hate alcohol abuse. I hate what it does to those who suffer with addiction. I have watched it destroy families and lives over and over again.

But that’s not the issue.

Turns out, this isn’t a moral issue at all.

This is economics.

Years later, as a newly elected State Representative I was excited to receive my new committee assignments. With my background in retail I was told that it was hoped I might provide valuable insight on the committee that oversees the state’s own retail operation run by the Division of Alcoholic Beverage Control, (DABC) specifically the Utah State Liquor Stores. As I delved into this assignment of pouring over budgets, listening to testimony, visiting the new state of the art warehouse, and taking notes while visiting locations, I became increasingly uncomfortable with both the state’s, and my personal role, in the entire operation. The last thing I expected to be doing as an elected official was contributing to, profiting from, and providing in the least, a tacit endorsement of the sale of liquor. Each of us, every Utah citizen, whether we want to or not, profits from the sale of liquor in our state.

But that decision was made long ago, in a different time, and under different circumstances.

Last year, liquor sales in the state of Utah through the DABC totaled over $280,000,000.00, (two hundred and eighty million dollars) with a net profit, after expenses returned back to the state in excess of $100,000,000.00 (one hundred million dollars). Today, it funds (among other things) Utah’s Parents Empowered program, an award-winning anti teen drinking campaign that has been duplicated around the country. Additionally, funds from the sale of liquor are directly funneled into our School Lunch Program, and other valuable services citizens across the state rely on.

The DABC has spent millions modernizing, and updating our retail outlets. By in large, they no longer resemble the “community jail cells” I recalled from my childhood. They are more efficient, more friendly, offer more products, and are more profitable than they have ever been.

The DABC is currently proposing that in order to deal with necessary budget cuts, we close ten profitable stores. In addition to inconveniencing customers, it enhances the concerns of both the tourism and commerce industries, and costs the citizens of the state tens of millions of dollars.

In the end, like it or not, you and I are in the liquor business.  And, we are tripping over ourselves doing something that government was never meant to do.

Government is not a business. It is a heavy hand. It carries the weight of law. Government performs best when it is left to its basic functions of “providing for the common defense, and preserving the blessings of liberty.” When it endeavors to perform a different role, one left to those whose rights it was designed to protect, it simply doesn’t work.

As it stands, Utah and Pennsylvania are the only two states in the nation with a complete monopoly on the wholesale and retail sale of liquor.

Just today, with the Governor’s support, the Majority Leader in the Pennsylvania House of Representatives announced his own privatization initiative. In the words of Rep. Turzai, (R) Penn.: “Who honestly thinks we in state government should be in the sale of wine and spirits?”

And yet, while I agree with Rep. Turzai and what I have heard about his proposal, this is not Pennsylvania, and as we have heard before, we are looking for a Utah solution.

Much speculation has been made in the media recently about what this proposal is, and is not. I hope to provide some clarity here:

I am proposing that we divest ourselves of our retail outlets; that we move toward truly limited government, and that we allow the market to determine the success or failure of retail stores, the fate of communities who depend on the services, tax revenue, and jobs they provide, and NOT politics and budget cuts at the state.

Currently, in smaller communities throughout Utah, the DABC already licenses what are called “package agencies” (similar to a franchisee) to essentially run privately held “State” liquor stores. In fact, this model is the norm, for the majority of “control” states. In Utah, this is primarily done in areas where there is less demand for the larger, more expensive stores we are familiar with along the Wasatch Front.

Under this bill, the DABC would be required to sell each of the state-owned liquor stores to private operators. Just as with any other business, these so-called “package agencies” would be allowed to succeed or fail, based not on whether or not the State of Utah was experiencing a downturn in the economy and was forced to cut their budget, but rather whether or not they offered excellent customer service, and on how they responded to market demands and customer needs.

Financial Considerations:

As a control state, the state of Utah would remain as distributor, and as such, would also retain the 85% markup that currently provides the bulk of the profit margin. Both the state and the communities who depend on sales tax provided at the register would retain those revenues, just as they do now. Additionally, we anticipate a small windfall, as properties and stores are either leased or sold outright, and as the additional state employees are removed from the payroll.

I have heard, as I have answered questions on the radio and in email, the concern that this might lead to increased consumption; that privatization means proliferation of additional stores. The truth is that under this proposal, every standard and restriction currently in place for the placement and density of State owned and operated liquor stores, would remain in effect.

We are simply proposing to use the free market, to solve a problem created by government intervention, by removing government from the equation. A solution that, in the end, recognizes Utahans’ commitment to limited government and practical solutions. A solution that recognizes the economic realities without backing down. And a solution that preserves the freedom to choose for every citizen, regardless of personal or religious considerations.

A little freedom goes a long way.

It’s time to get the State of Utah out of Retail.

Rep. Ryan Wilcox represents House District 7 (Ogden) and has served in the Utah Legislature since 2009.