The ABC's of Liquor Privatization

Facing tight budgets, some states are seeking a hot tottie. Eighteen states still operate some form of a liquor monopoly, but a blend of fiscal woes and changed ideology have several seriously considering privatizing liquor sales for cash.

Many lawmakers don't see liquor sales as a core function of government.

Virginia Governor Robert McDonnell, a Republican, has proposed selling 332 existing state owned stores and auctioning up to 1,000 liquor licenses to retailers like Costco (NASDAQ:COST), Giant, and Total Wine, which are already licensed to sell beer and wine. The governor also plans to get rid of the state liquor warehouse.

The plan would raise up to $500 million, with the money slated to go to fund transportation projects. But Virginia takes in some $260 million each year from liquor sales and losing control would reduce that amount by some $50 million. That potential for lost revenue has both Democratic and many Republican state lawmakers skeptical of the plan.

Pennsylvania's incoming Republican governor, Tom Corbett, is a strong supporter of privatizing liquor sales in the Keystone State. A plan introduced in the state house promises to bring in almost $2 billion by selling retail store and distribution licenses to private companies.

North Carolina Governor Beverly Perdue, a Democrat, is looking into how much money the state might get for its liquor interests.

Even though voters in Washington state rejected a ballot initiative to privatize liquor sales, Democratic governor Christine Gregoire has said she is "open to ideas" on improving the current system.

States looking for big bucks may be disappointed. Privatization plans in Iowa and West Virginia weren't big money makers, and there are concerns about the impact of an increasing number of liquor outlets on public health and safety. Trading a one-shot windfall for less money each year is a hard sell, too.

Author of ”The Prohibition Hangover," Garrett Peck says, "money trumps everything, that's why these 18 states still continue to hold on to liquor control."