SEATTLE — Thousands of cases of whiskey, vodka and rum zip along three miles of conveyor belts inside a massive distribution center in industrial south Seattle, the sole location for shipping booze to liquor stores across Washington state.
The 250,000-square-foot warehouse is the nexus where all the state’s liquor is imported, processed and moved out to the 315 state and contract stores, the only place where Washingtonians can buy hard liquor for home consumption.
As the state deals with a gaping budget deficit, it is weighing whether privatizing liquor sales is a way to get back into the black.
Some lawmakers want to sell the distribution center — bringing the state a one-time boost of about $33 million — and let the private sector sell liquor, which some say will reap long-term cost benefits.
“To me this isn’t a core function of government,” said Sen. Rodney Tom, a Medina Democrat who is a chief budget writer for the Senate. “It’s a retail operation. Private companies can do it as good or better.”
Tom has introduced a bill that would have Washington get completely out of the liquor business, allowing an unlimited number of people to buy licenses to sell liquor, as is done in California. Other lawmakers have introduced measures taking smaller steps toward privatization, including bills that would auction off franchise agreements for stores like Costco, or would allow a limited number of smaller contract stores to sell booze.
Liquor brings about $320 million in revenue to Washington each year, but a recent report by Washington state Auditor Brian Sonntag found that the state could increase revenue by as much as $277 million over five years if it changed its current liquor model.
In a year when Washington lawmakers are looking to patch a $2.6 billion deficit, Tom said privatization just makes sense.
A part of the potential savings is the loss of about 800 union jobs, which means the state would save on long-term pension and health costs for those workers. Tom knows the union issue is the most controversial aspect of privatization, but he said union jobs are at risk either way.
“I would rather cut jobs at the state liquor store than to cut jobs of teachers,” he said. “We have a decision to make.”
One privatization bill introduced in the Washington state House by Rep. Gary Alexander, R-Olympia, would change the state model to one like Oregon’s, where all liquor stores are private stores that contract with the state. Another bill by Alexander, along with a companion Senate bill by Sen. Tim Sheldon, D-Potlatch, would auction franchise agreements to the highest bidder, which would open the door for grocery sales.
While the Senate bill received a public hearing, it was ultimately turned into a study bill. Neither House bill got public hearings, and both are likely dead, despite the support of at least one prominent Democrat, Rep. Kelli Linville, D-Bellingham.
“We need to reduce the footprint of government,” said Linville, who as chairwoman of the House Ways and Means Committee, is tasked with writing the House budget proposal.
But Democratic leaders, including Gov. Chris Gregoire, have come out strongly against privatization, saying it’s not a viable budget solution for the immediate problem the state is facing. Under the auditor’s report, the state wouldn’t start seeing savings from the change until 2012.
“Our focus is on solving the budget crisis,” said Senate Majority Leader Lisa Brown, D-Spokane.
The last time privatization was seriously considered was in 2000, when a citizens review committee determined that costs in turning over the system, as well as public health and safety issues, meant the state should remain a monopoly.
Those same concerns over public health and safety are noted by Rick Garza, deputy director of the state Liquor Control Board.
He said the state has a nearly perfect no-sale-to-minors compliance rate, and he said he fears that privatizing would significantly worsen that number.
“Why take the risk of allowing for more youth access to alcohol because you think the state shouldn’t sell the product?” he asked.
Tom called those arguments “a bunch of baloney.”
“Every retailer knows that if I sell to an underage kid and that kid gets in an accident my business is gone,” he said. “No business is going to take that risk.”
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