Schapiro: ABC privatization redux

It's not a big issue in the legislative elections, unless you're reading mailers from John Watkins, who started pushing to get the state out of the liquor business in the early 1980s, when Bob McDonnell was still in business school.

Watkins, a Republican senator from Powhatan County, declares that he "wants to modify the Alcoholic Beverage Control program in Virginia to provide a free-market system that will efficiently serve citizens and consumers, and not be artificially subsidized by a high tax."

That's a mouthful. But it's probably music to the ears to David Trone. The Maryland beer-wine-and-distilled spirits retailer — you know him as Total Wine & More — continues pressing for a cause that seems all but lost for the McDonnell governorship.

Trone is quietly circulating what's labeled a "white paper," an attempt to kick-start the ABC privatization debate that the General Assembly never had because McDonnell's fellow Republicans in the House wanted to spare him the humiliation of a huge, public defeat on an idea that he claimed — to snickers from both parties — could reap a windfall for transportation.

Trone's four-page memorandum makes many of the points advanced last year: Privatization can be more lucrative for the state; that it won't lead to more drinking. It means greater variety for consumers and could generate bigger profits for business because Virginians could buy suds, plonk and booze in one stop. "In today's busy world, with both spouses working, this benefit cannot be underestimated," the missive says.

Paired with continuing conversations between pro-privatization lobbyists and the McDonnell policy shop, the document keeps alive, just barely, an issue many legislators and candidates consider dead and incapable of resuscitation — regardless if Republicans take back the Virginia Senate, completing their takeover of state government.

That's because, lawmakers and lobbyists say, there isn't enough time between the November election and the January start of the legislature to fashion a plan that allays the concerns mostly of House Republicans. If they didn't make clear to McDonnell this past winter, they are — because of this fall's wobbly economy — even less inclined to trade the sure thing of a government monopoly for a capitalist crapshoot.

McDonnell, in legacy mode, faces a tough decision. With his 60 percent-plus approval rating, is a guy who loves to be liked prepared to risk good will to push anew for what his old campaign polls showed was a good idea? Further, having finally acknowledged that the only full two-year budget of his term could be particularly austere, will McDonnell have no choice but to protect, for purposes of erecting a modest monument to himself, what few revenue sources pass for reliable, including liquor sales?

The administration's latest revenue report shows that ABC profits are better than robust and expected to far exceed a General Assembly mandate that they grow 0.9 percent in the current budget year. Between July and September, profits from state package stores have ballooned 7.9 percent. Nothing like some Early Times to get through hard times.

The bounty of liquor sales isn't just profits, though they account for the largest share of the annual cash harvest. In 2010, profits were $120.4 million. Throw in $111.4 million from a 20 percent excise tax, the state's markup, and $26.9 million from the 5 percent sales tax, and Virginia's take reaches $258.7 million. It hits $333.7 million by including $30.6 million in wine taxes and $44.4 million from the beer levy.

Trone's memo — neither he nor his company's government-affairs VP returned an email and a phone call seeking comment — attempts to enlist as allies beer and wine wholesalers, many of whom have been adversaries in the privatization battle. It argues that their warehouses, sales and distribution networks and retail outlets are logically poised to add spirits to their product mix, absorbing duplicate systems that support ABC.

"These two synergies make it possible to create greater efficiencies for the commonwealth, enabling the state to keep all of the … revenue that it currently generates and combine two distribution systems into one, resulting in significant savings to the taxpayers."

But privatization isn't a practical issue; it's a political one.

Contact Jeff E. Schapiro at (804) 649-6814. His column appears Wednesday and Sunday. Watch his video column Thursday on Times-Dispatch.com. Follow him on Twitter.com/RTDSchapiro. Listen to his analysis 8:33 a.m. Friday on WCVE (88.9 FM).