It should come as no surprise that after achieving a victory in the State of Washington, proponents of privatizing liquor sales have set their sights on Oregon. Major corporate interests behind the privatization effort were able to convince the citizens of Washington that divorcing government regulation and control of the alcohol market would result in lower prices, increased access and greater product diversity (through a competitive market). The reality, and fallout from the change they passed is something very different from what was promised and should be closely scrutinized as the same arguments are being made in Oregon.
The first issue has to do with the price of alcohol, and is probably the largest (and loudest) argument privatization proponents are using to justify their cause. It isn’t hard to sell this message to consumers, who doesn’t way to pay less for their booze? Their tag line is this, remove government controls over the price structure and allow competition to dictate what the price of alcohol will be on the shelves. In reality however, this concept has not penned out for Washington as prices have actually increased because the costs of goods, operations, and profits are now all dictated by what the retailers believe the market can bear. When government structure and controls defined these concepts, the price of alcohol was set as the subcontractors who operate liquor stores ultimately have their profit margins regulated (similar to publicly owned and operated utilities). When that regulation is removed, retailers account for the cost goods and operations by setting the price of alcohol to a number that produces a subjective acceptable amount of profit. This number can vary between retailers and as seen in Washington has produced alcohol prices higher than when the state set the regulated profit mark-up percentage. It should be noted that taxes on alcohol sales are still in place, but have not changed since privatization – so although the government still obtains tax revenues from alcohol sales, it is not the mechanism which has driven higher prices. Details on the cause and effect of the price of alcohol in Washington is being closely followed by the media, but the bottom line is the state has lost around $10 million dollars in liquor sales as consumers have crossed the border over to Idaho and Oregon seeking lower prices. Washington legislators considered a bill this past legislative cycle to cut the amount of taxes received from alcohol sales in order to try and drive down the overall price at the shelf. The fallout of such action would result in an estimated $68 million loss to the distribution of funds used from alcohol taxes which include state general funds (general state wide services), cities and counties (community services, local law enforcement and local programs to educate and diminish alcohol abuse), state wide education and alcohol abuse prevention programs (including programs or initiatives to reduce under-age drinking) and research programs to reduce alcohol and substance abuse. Oregon has a very similar program for the distribution of funds allocated from alcohol taxes as demonstrated by this graph:
Editors Note – I have included some graphics courtesy of OLCC in this post which make take up the full view, please make sure to read all the way to the bottom.
Suffice to say, the unintended consequences of undercutting these programs through the reduction of alcohol taxes (which again, didn’t go up after privatization) may have a negative overall outcome that Washington voters didn’t take into account when they voted to privatize. Oregon voters should certainly take this information into consideration when the price and taxes of alcohol is debated. Another graphic detailing how liquor dollars are spent is below.
The second point being made by the privatization lobby is greater or easier access to alcohol products. The main argument being that if grocery stores are allowed to carry alcohol on their shelves (not be tied to the current alcohol stores that are run as independent contractor arms via the state) then the public is better served. Speaking personally for a moment, I can’t say that I’ve ever been inconvenienced getting to a liquor store in my local area (there are 246 stores state wide). I know where they are, and I can also use the OLCC store/liquor search website to find a specific alcohol brand sold therein. This searching system is accurate down to the bottle if you have a need for a special or specific brand. It should also be noted that the current stores, though run under the supervision of the state, do provide jobs to local store operators and staff. Privatizing liquor sales will put these jobs at risk as large chain grocery stores will greatly cut into the market. Here is a story about a small, family run local liquor store in the City of Sisters which has been in business for over 20 years and the possible fallout effects that would occur if the a privatization measure passes.
The final argument from privatization supporters is the need for greater diversity of product. I have to take this point from them with a very large grain of salt as I’m fairly certain that allowing large chain grocers to sell alcohol will actually have the opposite effect. Thinking about this from the perspective of the grocery store for a moment, they are most likely going to devote the most shelf space to the products that sell the most – as one would expect. Looking at current alcohol store shelves, there are over 2,000 different products available. This number includes a growing and thriving local to Oregon Distillery market which has been able to work with OLCC to get shelf space provided for their locally produced products. This industry would be likely negatively impacted should privatization efforts succeed. It should also be noted that OLCC does have a method for folks to request new or exotic products, all you need to do is talk to the staff of your local liquor store.
With the liquor market revenue to climb to over $1 billion over the next couple of years, it isn’t surprising to see that corporate interests wanting to move in on the profits. Oregonians may be given a chance to decide, based in part on some of the factors above if privatizing the alcohol market is in our best interests. It is my sincere hope that voters take into account all pertinent information when making this decision in November, and remember the possible consequences should the current system change.