Eighteen states are involved in wholesale or retail liquor sales. Insulated from the competitive marketplace, state monopolies over alcohol distribution tend to be inefficient since they have few incentives to contain costs." In some of the states now controlling liquor distribution, income from the operation of liquor control systems has been declining. In Pennsylvania, for instance, from 1985-1990, the state liquor control board's net income after taxes declined by 2.3 percent per year." States furthermore have had little success in accomplishing what is presumably one of the main reasons for being involved in selling alcohol: lowering per-capita alcohol consumption.
Government officials in nearly all of these states are questioning whether their state should be in the business of selling alcoholic beverages. Bills calling for government divestiture are being considered in seven of the 18 states that operate liquor stores.
The momentum for privatization seems to be gaining in recent years, especially for selling off the retail operations of liquor distribution. A 1992 survey of constituents by Pennsylvania state representative Greg Fajt found overwhelming support for liquor store privatization. Over 77 percent favored privatizing liquor stores. Moreover, several states recently have actually privatized some state liquor operations. West Virginia reaped $20 million in 1990 by selling its retail liquor stores. Iowa netted revenues from liquor store privatization in 1987. Ohio began privatizing state liquor stores in September 1991. The 14-month plan to privatize 75 stores is expected to raise at least $10 million.
Privatization can also lead to lower prices for consumers. Competition from newly private retail outlets has driven prices down by 10 percent in West Virginia since privatization, according to Ron Moats, the deputy commissioner of the West Virginia Alcohol Beverage Administration.
Liquor sale privatization also generates a steady stream of new revenues from business taxes paid by private liquor stores. A June 1991 study from the Commonwealth Foundation, a public policy organization in Pennsylvania, found that with appropriate licensing fees and business taxes, the state would generate the same revenues from private liquor stores after privatizing alcohol distribution as was being taken in under state control. In addition, according to the report, consumers would not pay higher prices.