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States find mixed success with privatized liquor sales

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Local,Virginia,David Sherfinski

Cash-strapped states such as Virginia have been privatizing their liquor operations for the last 20 years, with mixed results.

Iowa, for example, took its retail side private in the 1980s, converting its 207 state stores into 256 private stores overnight, said Tonya Dusold, a spokeswoman for the state's Alcoholic Beverages Division. The state is making more money than it did when it ran the stores, and the number of locations has swelled to about 770.

Privatization "often comes up when states are cash-poor and looking for revenue," said Sarah Mart, research and policy manager of the Marin Institute, a California-based alcohol industry watchdog group.

In West Virginia, the 1990 sale of state-owned liquor stores and conversion of inventories brought in $26.5 million for the state's general fund.

That revenue pales in comparison with Virginia Gov. Bob McDonnell's proposal, which would generate at least $458 million in one-time funding for transportation projects, according to staff estimates. McDonnell's plan involves auctioning retail licenses, selling wholesale licenses, and selling the state-owned ABC warehouse and 19 state-owned outlets.

Washington state also is trying to bring in some cash by replacing its state-run system, which residents will vote on through two ballot initiatives in November.

Washington, Iowa, West Virginia and Virginia are four of 18 "control" states that directly manage at least part of their alcohol sales.

Ohio, another control state, began scaling back its operations in the early 1990s. The state, which had 257 stores in January 1991, ran none by July 2001, replacing them with 389 contract agencies.

Ernie Davis, Ohio's acting superintendent of liquor control, said the state didn't "privatize" its system.

"We cut costs," he said. "All we did was contract out.

"We've obviously seen a significant cost savings from getting out of that side of it," he said. "That's a cost savings that we enjoy that many other states don't."

Still, he said, "No two control states are exactly the same."

In fiscal 2010, liquor sales from the state's 453 contract liquor agencies reached a record high of $742.7 million, $167 million of which was sent to Ohio's general revenue fund.

dsherfinski@washingtonexaminer.com

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