Audit aside, why is government in liquor business?

Thank you for being one of our most loyal readers. Please consider supporting community journalism by subscribing.


State Auditor Beth Wood has found a big problem with the state’s wholesale and retail liquor distribution agency. Nearly $14 million worth of problem.

And if this state’s leaders are as business-savvy as they’d have us believe, that apparent failure on the part of the state Alcoholic Beverage Control Commission should open the door to a much larger question: Why in the world is North Carolina still in the retail and wholesale booze business?

The problem Wood’s auditors found was in a contract the ABC Commission has with a Maryland-based company that runs ABC’s warehousing. In each of the past 13 years, the auditors said, the politically appointed ABC commissioners have approved price increases in excess of what the contract allows. The commission also violated state purchasing policy, Wood said, by approving contract renewals longer than three years without getting permission from the state contract office. And the audit found that the commission had leased unneeded warehouse space, wasting $2.1 million over seven years.

The warehouse space is needed to hold shipments of liquor from distillers and distributors before it is shipped out to the state’s county ABC stores. In North Carolina, each county runs its own network of liquor stores and also sells wholesale liquor to bars and restaurants within the county. County ABC commissioners are also political appointees, chosen by the local county commissioners.

Although the Maryland warehouse operator has protested that Wood’s auditors got several things wrong with the investigation, state ABC Chairman A.D. Guy vowed to carefully oversee the contract, which expires in 2021. He said a new contract will be put up for bid in 2020.

All of that is fine, if it means there will be better oversight and the taxpayers’ money won’t be wasted. Wood’s office has generally done excellent work and has saved North Carolina taxpayers a lot of money.

But if state leaders end the audit discussion with a vow to improve ABC oversight, they’re missing a big forest for one sapling. We need to have a robust public policy discussion here about the reasons why we continue to operate a liquor distribution system that is an artifact of another time. Why, exactly, is the state retailing, wholesaling and distributing liquor? As far as we know, this is the state’s only foray into retailing. While alcohol does need to be controlled in some ways — it is a potentially dangerous substance, often abused — the state doesn’t act as a retailer and wholesaler for, say, prescription drugs, which can be even more dangerous than alcohol. The state doesn’t sell gasoline or firearms either.

Local ABC boards take pride in adding what can be millions of dollars in revenue to their county coffers, but we’re not sure they’re doing all the math. What would private liquor stores do to the economy? Would there be more of them, providing more jobs? Would they compete with each other on pricing, thus offering consumers and wholesale customers better deals? Couldn’t a simple county excise tax on liquor put just as much revenue in the bank for local government?

And consider this, in a state whose legislature leans strongly to the right: Do we feel comfortable with socialism? That’s what we’ve got in the government operation of a large-scale liquor business. Here’s Merriam-Webster’s first definition of socialism: “Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.” The state may not be producing the liquor, but it’s surely distributing it — and profiting from it.

Is that what an otherwise conservative state should be doing? The answer seems clear: No.

If Phil Berger and Tim Moore are comfortable wearing socialist labels, well, OK. But if they’re not, we’d hope they’ll convene a serious study about privatizing the ABC operation. State government doesn’t belong in what should be private enterprise. A more competitive environment might save the taxpayers some money.