Washington State I-1100 and I-1105

Although this blog is probably the last place anyone should go for political news or opinions, I feel compelled to weigh in on the two state initiatives being considered on the ballot here in Washington that will affect the way distilled spirits will be sold.

Currently, the state controls all liquor sales through state-run stores. While our liquor tax is at a set rate, the state enjoys a 51.9% markup on the products sold at these stores, money that the state depends on in addition to the tax to provide funding for many services. Both I-1100 and I-1105 propose to wrest the sale of spirits from the Liquor Control Board and open it to private retailers currently licensed to sell beer and wine, albeit in slightly different ways.

I-1100 is being framed as both pro-business and pro-consumer by its advocates. Although the rate at which spirits are taxed by the state will not change, the markup will now go to individual businesses while opening the market up to “fair competition” will drive prices down for the consumer. Painting current liquor laws as a de facto monopoly held by the state, supporters hope that the allure of cheaper, more easily accessible liquor coupled with the general distrust of largesse in government fomenting at an all time high will entice people to vote yes.

Looking a little deeper, the initiative is being largely funded by Costco, whose senior vice-president, Joel Benoliel, is quoted as saying "part of what we are known for is being pro-consumer, and when we identify places where they are being gouged, we think it's incumbent on us to stand up for our consumers.” Costco is a corporation whose sole purpose is to make money for its shareholders. They may eventually drive prices down to a 25-30% markup, surely passing on what looks to be significant discounts to the consumer. But you would be woe to forget that all of that is income they do not have now and desperately want to get their hands on.

With the passage of I-1100, the Office of Financial Management estimates that over five fiscal years, total state revenues would decrease $76-85 million and revenues dispersed to local municipalities would decrease an estimated $180-192 million. As most of the revenue that comes from spirits is earmarked for educational services and infrastructure maintenance and expansion, it is not a large intuitive leap to think that the state will be hurting without these funds. I am not a fan of large government, but essential services require funding. Considering that the state recently introduced a tax on candy, soda pop and bottled water (although under reconsideration under a separate initiative), if we vote to take away the state’s ability to receive income from liquor sales, they will be asking to take it from us somewhere else in the near future.

Let us also consider the market being opened to “fair competition.” With the passage of I-1100, retailers will begin price wars that will drive down the cost to the consumer, which is not necessarily a bad thing. However, they will achieve those relatively lower prices by buying in bulk, a measure strictly defined within the initiative. Translation; large box stores with massive buying power (looking at you Costco) will be able to receive bulk discounts and smaller stores will be priced out of the “fair market.” I appreciate my little bottle shops both here in Spokane and when I visit Seattle. Forcing them to compete with a behemoth like Costco hardly seems fair.

There is also the argument of access. Under our current system of state-run stores and well trained employees, it is nearly impossible for a minor to purchase distilled spirits in Washington State. The initiative, if passed, would allow over 3,300 more stores to sell spirits statewide, opening a veritable can of worms for enforcement. Reports from other states that have passed similar laws are a bit conflicted about the impact on sales to minors and overconsumption. I am by no stripes a Puritan and my major gripe is with the economic impact on the state, but it is a point that should be considered.

Finally, I think some thought should be paid to the work force. Although I-1100 does not require state-run liquor stores to close their doors (I-1105 does), by forcing the state to compete with large corporations that have advantages to their sales paradigm built into the new laws, it isn’t a stretch to imagine a number of state-run stores closing and hard working people losing their jobs. Sure, as the Liquor Control Board transitions to a body of enforcement there will be opportunity to transition along with them and there will be retail openings at all those other stores that would then be selling spirits. However, making a living wage and receiving benefits is a far cry from making minimum wage working a register.

Thirsty Zymurgist score: NO on I-1100

I-1105 has received less publicity, but will alter the sale of spirits in similarly drastic ways. Unlike its counterpart, I-1105 would completely shut all state-run liquor stores and distribution centers. There are measures within the initiative that would guarantee a percentage of revenue made by retailers be paid to the state, apparently reducing the fear that the state’s coffers would run dry. However, according to a study by the Office of Financial Management, total state revenues would decrease an estimated $486-520 million and total revenues going to local municipalities would decrease an estimated $205-210 million over five fiscal years if I-1105 passed. That is a large chunk of change that the state will sorely miss.

Most of the points I made for I-1100 apply to I-1105, so I will not belabor them here. Except to say that I-1105 is being largely funded by two private distributors who stand to make money that the state stands to lose. Clearly, I am not a fan of either initiative.

Thirsty Zymurgist score: NO on I-1105

Washington State does have some antiquated liquor laws and reconsidering them as our society changes shows wisdom and prudence. However, the current initiatives do not fully pay service to the major economic questions for the state that they themselves raise. Future initiatives should be considered more along sound economic lines to make sense for all parties (state, private business, consumers) involved.

In closing, I will state again that this is all my opinion based upon the fair amount of research I have done. Thanks for slogging through it and now go reward yourself with a nice craft beer!