As I tell my customers, I don't have enough time in with the state to worry about my pension and other such nonsense. Furthermore, I'd love to see a privatization of the system. You may recall me telling a story about the first time I went to a liquor store in Washington at 8PM at night and found it closed. I was pretty ticked off. To this day I find it ridiculous that we have as few outlets as we support and that the hours are so all over the map. Truth be told, I think liquor stores should be available 24/7, 365 if they want to be.
Having said that, let me address a couple of myths perpetuated by these discussions:
- State employees have cushy jobs. I'm not going to argue that all of us are hard working, caring employees. Those in purchasing have cushy jobs, for instance. I hear take that the distribution center employees often have cushy jobs. But at retail, we work our butts off. I defy the initiative lobbyists to come and spend a day in the retail employee's shoes on a load day and see how cushy our jobs are. We move anywhere between 300 and 1200 cases during an 8 hour shift, deal with customers - retail and restaurant, stand and walk most of that time, have to deal with idiotic regulations from on high, do inventories, displays, etc...and take abuse from those fired up about the initiatives. Not everyone at retail is easy to defend, either, but I don't know a chain that can say that. All I can say is that if you work for me and many other managers that I know, then you care about the service and you really don't get paid much for it. Indeed, one reason I'd like to see privatization is because I'd like to be paid more for the work I do as a manager.
- The state will not be selling it's stores for a windfall. It will sell off it's distribution center (in these times it is hard to say how much that is worth...the equipment it uses is not that useful to many industries) for a one time windfall. But the stores are leased and the leases are written that if the state goes out of the business, then they will close the stores at no penalty. I've read me lease and it is standard for the entire system.
- The state will save money by not employing these workers. Unlike other areas in state government the liquor board functions similar to a private business (I say "similar" as it depends upon the business....if you're talking inefficient like Microsoft, then the comparison is apt; if your talking streamlined like Google or HP, then it is less so). We actually earn enough in the mark up of the product to cover the entire costs of operating the business. The money in the markup covers the rents, the shipping fees, the employees and their pensions at all levels of the retail enterprise. Under either bill, once the state gets out of the business, no savings will occur because those costs were covered under the pricing. Instead, there will be a cost to the state via unemployment, buy outs (for long term employees), and payments to keep someone around to turn off the lights.
- Employees will find jobs in the private sector. True, though not right away. And some of these government employees are going to seek jobs in the public sector by bumping other government employees. However, Costco, Wal-Mart, QFC? They already have managers and clerks to ring up customers and stock those spaces. They won't need to hire replacements unless those positions open up. Sure, private entrepreneurs, like myself, will come about in time and want to open shops to employ these folks, but that's not going to come overnight, so there will be unemployment for some for quite a while.
- The liquor board will hire because it will need new enforcement people. Nothing in 1100 covers that cost. The liquor board hires as many enforcement people as it can given the beer and wine tax and 1100 keeps that in place. However, it eliminates the mark up and offers no revenue stream to hire these enforcement folks and, even if it did do that, has no one thought that enforcement folks cost more than clerks and warehouse operators? They do. If, as 1100's lobbyist proposed during the Town Hall meeting, we hired another 850 enforcement officers to patrol the new numbers of private sector stores, then it would cost the state far more money than the 900 or so people that they hope to lay off. Does that make sense?
- One final bit about the mark up: yes, some of it is a hidden tax. Operating costs for the liquor board are far less than the 51% mark up. Over a year ago the liquor board's mark up was 39% and we operated just fine. In fact, we were instructed by the legislature to increase the mark up to 51% in order to bring in more revenue to the general fund. At the same time, stores and operating budgets have been slashed. So, we've raised taxes and decreased service. Operating costs for the retail business account for about 12% of the mark up. The rest is a tax in large part imposed by the legislature to increase money in the general fund. Both initiatives make it sound as if the mark up is that high because the state is inefficient at delivering the goods. That's a lie. The state would make you think that the mark up is a reasonable charge to operate the business. That's also a lie.
Next up revenue. State government has cut $5.2 billion from it's budget during the past 2 years. Services are being cut everywhere, including the liquor board (though, because we're revenue positive, we've felt fewer cuts). The governor has just ordered another $4.5 billion in cuts. 1100 would cost the state somewhere in the neighborhood of $250 - 300 million over the next 2 years even with the one time windfall of selling the distribution center. These are state numbers and they are conservative. Supporters of 1100 say that some of that money will be made up via increased B&O taxes, but ask them how much and they can't answer you. Hence, it's fictitious money. Not even the state's Office of Financial Management could take on that number. The city of Tacoma expects to lose $1million. Pierce County says that they will lose $770 million, the city of Sammamish $66,000, Edmunds, $60,000, etc. Budget cuts will occur at all levels of government. That likely means layoffs. Now, one could argue whether or not those layoffs should come from law enforcement or teachers, social services, or parks and recreation, but it means layoffs. So, now we're talking more than just 930 liquor board people laid off. Probably a lot more. Last time I heard, Costco is not going into the private police business, so they won't e hiring those cops back as they seek to sell at 7-11s. To my progressive friends who, like myself, want to see privatization, I ask the same question I ask every Republican during tough times: where do you want to see the cuts - specifically - and how deep should we make them? Initiative 1100 is irresponsible because it does not address the revenue stream as to where the replacement should come from or where the cuts should come from. The reply from the 1100 folks is that government is free to raise taxes, but given our legislature (both the current one and the one with more Republicans in it) and the potential for Eyeman's latest initiative to pass, do you really think that is going to happen and, if it does, then I ask where? And if the answer to where is through an increase in the liquor tax, then the price savings for the consumer is likely to evaporate and I'll ask again why we went through this process? Just to line Jim Senechal's pockets?
Now to 1105. I actually learned something at that Town Hall debate, but it was all about 1105. 1105 is the dog of the two and it should be viewed that way because it leaves the distribution monopoly in place and just eliminates the state jobs. One thing that I've often noticed when confronted by folks who tell me what they pay at Bevco in California for, say, a bottle of Jack Daniels, is that the price they pay is less than what the state pays. In other words, we couldn't sell it to them at that price unless we lost money on the booze. Why is this? Because in Washington the distribution monopoly sets the prices that they want to fetch for the alcohol. They never lose money. They know what the state formula is for configuring the price. Take the price the distributor charges the state, add to it federal tax and state tax, add to it the 51% mark up and come up with your retail price. So, if they want the retail to be $29.95 then they charge the amount that will produce that in the state formula and often times that is more than what the consumer pays in California. Don't believe me? Look at the store tags. They list the cost to the state plus the taxes and so on. And these distributors take what the market will bear. When we went from a 39% mark up to a 51% mark up many companies raised their prices for 2 - 3 months only to find that their market share was falling and their competitor's was increasing. So, they lowered the price to counteract the market forces against them. Initiative 1105 leaves this in place for beer, wine, and liquor. The distributor will set the price and it will be the same price for Costco as for the mom and pop stores. No discounts for volume sales will exist and no direct purchases will be legal. So, no competition for the consumer and the distributors continue to get their guaranteed profit.
From a revenue standpoint 1105 eliminates all state taxes as well as the mark up. 1100 keeps the state taxes (which pay for enforcement) in place. So why the more radical position for 1105? Because it "recommends" that the state legislature start with a blank slate and write a tax that makes up for the lost state revenue PLUS $100 million more. Why "recommend"? Because the initiative, according to the Eyeman ruling by the Supreme Court a few years back, cannot seek to change more than one law at a time. This was the interesting part of the Publicola debate I attended.
Let's say that the state follows the recommendation. They would make up the entire amount that they lost plus $100 million. Where, pray tell, is the savings for the consumer? The consumer gets no discount for buying at big retailers and, in fact, the prices go up. All the consumer gets is more outlets (1105 does allow the Liquor Board to decide how many licenses to issue, so it's not zoning, but it's better than nothing...assuming that they allow something reasonable - no guarantee of that either) and perhaps longer hours (again, no guarantee, depending upon how the Liquor Board writes the license).
But, as state above with 1100, does this or any future legislature have the will to pass those tax increases? Will they even be able to do so if the Eyeman initiative passes? The spokeswoman for 1105 stated that they "think" the Eyeman initiative allows a simple majority to keep taxes at current levels. If that's true, then the $100 million increase is just a mirage and shouldn't ever be considered reasonable.
So, bottom line for 1105 is it leaves the worst of a bad system in place (kind of like Medicare not being able to negotiate drug prices) and it shares with 1100 the revenue stream issues. Those are the reasons I oppose both initiatives.
What I'd like to see happen is the legislature convene and negotiate a privatization bill. Such a bill would allow for a reasonable transition process that would take place over 2 - 3 years in order to provide cities and counties to prepare and debate zoning laws. It would instruct the Liquor Control Board to transition first into selling the distribution center and move to direct distributorships to stores and work out the bugs of taxation and enforcement before that is turned over the private sector. It would determine the revenue streams and how they are to be comprised and where so that we don't put our state and local governments in further financial straights that cause greater grief to our most needy citizens. It would provide a transition plan for the 900 or so workers at the liquor board who would lose their jobs including a couple of months of pay (or a week for every year of service) and job training options. It would provide what a reasonable price would be for licenses, one that allowed for mom and pop stores, but also allowed for some more revenue to be made up. And, I'd (of course) like to see current liquor store managers and other, independent citizens, to be eligible to buy a license early on before the Costco's and Wal-Marts - perhaps a year earlier with the opportunity to open private stores 6 months before the state ones close. Give the small companies a head start and let them establish distribution processes with new specialty products and northwest craft distillers, so we can keep both on a lifeline. And finally, I don't want the legislature to drag their heels on this. It needs to be addressed and right away.
Thanks for asking. Let me know what your thoughts are and if you have any concerns or questions feel free to air them.