Washington Voters End State’s Liquor Monopoly

Washington Voters End State’s Liquor Monopoly
December 5, 2011

Washington State voters in November approved Initiative 1183, ending the state’s monopoly on the sale and distribution of alcohol. The state expects to be out of the liquor business by June 1.

With 20,502 citizens per state-run liquor outlet, Washington’s monopoly system provides less convenient access to alcohol than any other Western state save Utah. The new, private liquor licensees will not only allow consumers more choices of where to purchase their alcohol but will also introduce competition ending what backers of the initiative say is a stagnant and inflated system of price controls.

The Washington State Liquor Control Board, joined by currently approved liquor wholesalers and labor unions, opposed the initiative. The main supporter of the proposal was Costco Wholesale.

New Revenue Potential

Last year’s failed attempt at privatizing Washington’s liquor trade, Initiative 1100, also would have allowed for increased choice and competition. Washington voters’ approval of I-1183 may indicate their interest in the referendum’s effect on state and municipal government revenue. Whereas the Washington Office of Financial Management had estimated I-1100 would have reduced the state’s General Fund revenue by more than $75 million and local governments’ revenues by more than $180 million, the same agency expects I-1183 to add at least $216 million and $186 million, respectively.

Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, said these dramatically different fiscal implications primarily stem from I-1183 indexing license fees to retailer and distributor revenues. This new fee structure will initially negate much of the retail price savings from privatization, said Mercier, but he nonetheless foresees competition steadily driving down the prices consumers will pay.

“It is exciting to see voters embrace the idea of focusing government efforts on strict enforcement of the public health, safety, and drinking-age laws related to liquor sales, while leaving the business of distributing, pricing, and selling liquor products to the competitive marketplace,” he said.

Entrenched Interests

I-1183’s promise of choice and value for consumers and increased revenues for the state and local governments, did not, however, ensure its universal support. Save Our Communities, the main political action committee opposing I-1183, was funded almost entirely by alcohol wholesalers and labor unions.

The wholesalers currently have the exclusive right to distribute beer and wine to businesses and, under a bill passed earlier this year by the Washington legislature, bid for the opportunity to run the state’s liquor warehouse as a private monopoly. They stand to lose substantial profits in a competitive market.

The state-run liquor stores’ union workers, far better compensated than their private-sector equivalents, knew their positions depended on the state maintaining uncompetitive monopoly pricing.

The Liquor Control Board issued a statement after the vote that read in part, “Weighing most heavily on our hearts and minds are the more than 900 Liquor Control Board employees who will lose their jobs” as a result of the passage of I-1183.

Ian Mason (ninthoption@gmail.com) writes from Chicago.