Alabama is facing a budget crisis. The state’s General Fund budget – which funds nearly every non-education item – has a projected deficit of roughly $250 million for fiscal year 2016, which starts on October 1.
How did we get in this fiscal mess? Unfortunately, over the decades many politicians chose to kick the fiscal can down the road instead of doing the hard work of cutting government spending. But budgets, whether for a family or a state, are not that complicated: expenses have to be lower than income to be fiscally sound.
In 2010 and again in 2014, the people of Alabama elected solid Republican majorities to the state legislature. Their message to us was clear: get Alabama’s fiscal house in order. Since 2010, the legislature has cut a total of $1.2 billion in annual state spending. But a dramatic increase in Medicaid and prison expenses, coupled with an antiquated budget system that earmarks roughly 91% of state taxes, has led to the $250 million deficit we now face.
As part of the process to solve our state’s deficit, the state should privatize its ABC retail liquor stores. Government shouldn’t fund competition to the private sector. That is why I have proposed legislation that requires the state to exit the retail liquor business by October 2018, and creates a study commission to provide recommendations on the state’s exit strategy from the retail liquor market.
This is a responsible, incremental approach. The ABC board will still exist and regulate the wholesale distribution of liquor. It will still be in charge of licensing private retail stores to sell alcohol to the public. But the state will no longer compete with private businesses in the retail sale of liquor.
The non-partisan Legislative Fiscal Office, the agency tasked with providing the state legislature advice on fiscal matters, has stated that privatizing the ABC retail stores will result in annual savings ranging from $16 to $19 million. Hundreds of millions of dollars will continue to flow to state agencies like Mental Health, Department of Human Resources, and to education. This proposal does not completely solve the deficit, but the legislature has a duty to pursue every avenue possible to cut spending and right-size government.
Some object that privatizing the ABC stores could lead to an increase in alcohol consumption. But study after study shows there is no statistically significant difference in alcohol-related deaths, binge drinking, or drunk-driving fatalities between “control” states like Alabama and license states with lighter regulations on retail sells. In fact, a 2009 study by the Commonwealth Foundation examined data from 48 states, and argues that states with the highest degree of liquor control laws experience higher DUI-related fatality rates than states with less regulation. In 1987 and 1990 respectively, Iowa and West Virginia deregulated their liquor markets, and a 2007 study by the Reason Foundation found no evidence of increased alcohol consumption in either state. In 2011, Washington state passed a privatization law and DUI collisions and arrests were lower the year after privatization than the year before, according to a study by the Washington Policy Center.
As with many debates in the Alabama legislature, the message delivered to sway lawmakers is not the actual problem a group has with the bill. Consider it window dressing under the guise of “safer streets” or “protecting children” to more nicely protect the status quo.
No, those who object to our state saving money by privatizing the ABC retail stores are the usual suspects: special interest groups lobbying hard to protect their cash cow. Did you know the state does not own the property on which a single ABC store sits? Instead, a group of well-connected businessmen (some of whom live out-of-state) make over $10 million each year from the incredibly long-term leases they charge to the state of Alabama. This special interest group is spending tens of thousands of dollars on lobbyists and public relations consultants in an attempt to preserve their lucrative contracts.
Now is the time for Alabama to privatize its ABC stores. We cannot afford for the state to continue to own and operate stores that compete with private small businesses. Privatizing the ABC stores will save up to $19 million a year: that may not solve the entire deficit our state faces, but it is a step in the right direction.
Senator Arthur Orr is Chairman of the Senate General Fund Budget Committee.