Governor McDonnell and Liquor Privatization

Governor McDonnell's proposal to privatize the sale of liquor is continuing to dominate coverage of Virginia politics (my earlier post is here).

Today's Post has an excellent comparative analysis (here) of Virginia's, Maryland's, and the District's liquor sales systems. 

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Although a fifth of scotch costs about the same in the three jurisdictions ($25.00), Maryland and DC each collect only about $2 on the sale, whereas Virginia's government gets $13 under the state-run system!

As I understand the analysis, the difference is in the distibution chain: Virginia cuts out the wholesalers and is thereby able to reap a much larger differential on each sale.

The aggregate result is dramatic.  Yearly state collections from taxes/sales of liquor:

• D.C. - $10 million
• Maryland - $24 million
• Virginia - $248 million

In light of these numbers and the ongoing refusal of Virginians to raise taxes, I just do not see how McDonnell's proposal goes anywhere: the money to run the state has to come from somewhere, and this proposal would eliminate a big (and, according to the Post article, reliable) chunk of revenue. 

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If not for this summer's newly found budget surplus, I'm not sure McDonnell would even be pushing this right now.  Privatization would simply take too much money out of the state coffers and -- politically -- would be viewed as an insider-boon to retail supporters of McDonnell.

It sounds as though McDonnell's aides are arguing they are going to craft a revenue neutral version of the plan, but the industry insiders quoted in the Post say that's not possible:

Experts with the Distilled Spirits Council of the United States, one of a number of industry groups that has been advising the governor, are skeptical about the state's ability to match the $248 million revenue stream it gets today. According to an analysis by the council, overall government collections on a gallon of liquor would have to reach $25 in Virginia to match the state's current revenue. That would make taxes in Virginia five times the average in other privatized states. "If you try to impose that kind of tax, you're never going to get the up-front revenue you need. You're taxing away everybody's potential profit," said David Ozgo, an economist with the council, which is neutral on privatization but generally supports modernization of liquor sales.

459. What kind of liquor is drunk by the most people worldwide?  What about in America?  Which is most remunerative?  I'd guess whiskey is the most popular in America, but perhaps gin.

460. How many states run their liquor sales systems similarly to Virginia?

461. I read that Kluge wine was served at Chelsea Clinton's wedding this past weekend.  Was it the primary wine, or just one of many?

Governor McDonnell's Proposal to Privatize Virginia's ABC Stores

Bob McDonnell wants to privatize the sale of liquor in Virginia. Anita Kumar has the story in this morning's Post, here.

When Prohibition ended, the General Assembly made the decision that beer and wine could be sold in private stores but that liquor would be handled by the state. 

There are now 332 ABC stores in Virginia, and several recent governors (including Mark Warner) have explored the idea of selling them off.

It sounds like the primary rationale for privatization is financial: there'd be a one-time boost to the state's coffers of $300-$800 million. This does not seem like very much money to me, and it makes me think this proposal probably will not go anywhere.

Currently, the ABC stores produce about $220 million for the state annually; this is from a combination of taxes and profits.  If they already bring in that much annually, then why bother selling them for only $300-800 million?

It sounds like that is exactly the argument being made by opponents of the plan.

Part of McDonnell's retort is a free-market-capitalism argument: government shouldn't be in the retail business (if that's right, then why is government in the retail business of selling lottery tickets?).

Here's the oddest part, though: McDonnell's goal, in selling the ABC stores, would be to generate extra money for the highway system. This illustrates the disfunctionality of our taxing/spending system: Virginia clearly needs money for its roads, but we are unwilling to raises taxes in order to generate the funds.  So instead of making the tough decision to raise taxes, we come up with strange disconnected sources of revenue (in this case, a one-time source of revenue, which is problematic given that roads require ongoing maintenance). It's like looking through your closet to find old stuff to sell on eBay rather than taking a hard look at your budget and making long-term decisions about income and expenses.

Virginia's Budget Surplus

This week I saw 2010's most surprising headline to date: Virginia actually has a budget surplus! The Progress initially printed an AP story and then editorialized its applause later in the week.

Virginia’s battered state budget ended a turbulent 2010 fiscal year on June 30 with a surprise surplus of about $220 million, government figures show ... The surplus ended a dire budget year in which official revenue forecasts were lowered three times and raised once as policymakers struggled to reconcile a nearly $2 billion shortfall.

I was extremely surprised: amidst all of the budgetary woes facing various states (Illinois is the one that's been in the national news recently), I thought that we'd be short at least a few hundred million, particularly since the projected deficit was so large as of this winter.

This is a huge feather in Governor McDonnell's cap in terms of his national political aspirations.  I feel like whenever I read a profile article about a governor with national ambitions, it includes a line to the effect of "while the politicians in Washington bicker, [insert name] managed to turn [insert state name]'s budget deficit into a surplus by making hard decisions and being willing to work across the aisle to actually get things done."

The question, of course, is how much damage has been done to the state's public education system in order to balance the budget without raising taxes.  It sounds like education was by far the biggest loser in McDonnell's cuts last winter.

Rush Limbaugh, Escape Massage, and the Stimulus

The Richmond Times-Dispatch reports this morning about a brouhaha in Richmond that involves conservative talk radio, federal stimulus funds, and a massage business!

Louis Llovio has the story, here.

Evidently, Mark Steyn (a stand-in for Rush Limbaugh) read through a list of stimulus recipients during the show. I assume the idea was to show how wasteful the stimulus program is.

At any rate, Steyn mentioned Escape Massage in Richmond, which is owned by Mike Vines and George Nuckolls. Escape Massage was immediately inundated with calls (I guess the callers were expressing their anger directly at the identified businesses rather than at the government? Rather bizarre, but I assume that's what was happening), and Vines had to explain that he had actually gotten a loan from M&T Bank which is -- in fact -- guaranteed by the Small Business Administration.

According to Llovio's article, Escape is a therapeutic spa; I assume that part of Steyn's point was to imply that the business was the other kind of massage parlor - thus doubling conservative outrage.

The message board at the bottom of Llovio's article is packed with comments from readers on both sides of the Limbaugh and stimulus divides. No one has yet made the stimulus/massage parlor pun, but I'm sure it's coming.

Development Controversy in Orange County

Wilderness Battlefield is in Orange County. I drive past it when I drive to Washington by way of Fredericksburg, but I have never actually visited it (or Chancellorsville, which is just close by).

The cover story of last week's issue of C'Ville, by Kathryn Faulkner, examines the controversy surrounding the possibility of a Wal-Mart being located just outside the Fredericksburg and Spotsylvania National Military Park (but within the "study area" of Wilderness Battlefield, according to military historians).

The 55-acre parcel being considered as the building site has actually been zoned commercial since 1973, but the coalition of preservationists opposing Wal-Mart's efforts is arguing that the zoning designation is "stale" because of the owner's failure to develop it to date.

In her article, Faulkner quotes Orange County's Comprehensive Plan, in particular its emphasis on preserving the County's rural heritage - the language is similar to that in the Comprehensive Plans for other central Virginia counties. Faulkner does a great job of balancing perspectives, with a focus on two County Supervisors on opposite sides of the issues: Mark Johnson (supporting Wal-Mart) and Teri Pace (opposing).

141. Who handles Wal-Mart's legal work in central Virginia? Do they have any local counsel?

142. Other than proximity to Richmond, what was the military significance of the land around Fredericksburg? It's so interesting to think that the future of the USA was decided, in part, in Orange County, considering it's such a quiet, peaceful place now.

143. Mom and Dad recently watched Ken Burns speak about his new PBS documentary which is a study of the national park system. When is this coming out? Does he include any of the battlefields?

144. There has been significant development controversy surrounding Gettysburg Battlefield in the past ten years or so... who's "winning" in the Gettysburg disputes - the preservationists or the more pro-development people?