OPINION

Mar 7, 2010 — The Charlotte Observer

Jack Betts

Mar. 7, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- In 1907, temperance leader Carry Nation brought her verbal hatchet to North Carolina and, in the company of one Rev. Sylvester Betts, campaigned in Raleigh to shut down the sale of liquor. An imposing woman at six feet tall, Carry, as she spelled it, must have made an impression. In 1908, N.C. voters prohibited the sale of Demon Rum in a statewide referendum. That was more than a decade ahead of the 1919 Volstead Act and 18th Amendment to the U.S. Constitution that ushered in the Prohibition Era.

We North Carolinians have always been a little wary of liquor, though not always for the same reasons. Moonshiners and bootleggers, so they say, celebrated when the legal sale of liquor was halted. And a good many hardy old souls from Ireland and Scotland continued to brew up whatever concoctions they considered it their natural right to create.

A government monopoly

By the Great Depression, however, attitudes changed. The 21st Amendment in 1933 repealed the ban on alcohol sales, and according to a legislative history, in 1937 the General Assembly passed the "Alcohol Beverage Control Act." It gave state government a monopoly over alcohol sales, and out of that grew the system that now oversees the sale of alcoholic beverages in a host of different ways. There's a state Alcoholic Beverage Control Commission with about 40 employees overseeing administration of a state warehouse and the work of 163 local ABC boards that sell liquor in retail ABC stores as well as restaurants and clubs. The ABC commission also oversees about 25,000 permit holders who sell alcoholic beverages at some 17,000 sites across the state.

State law says the ABC system's purpose is to provide "a uniform system of control over the sale, purchase, transportation, manufacture, consumption, and possession of alcoholic beverages in North Carolina, and to provide procedures to insure the proper administration of the ABC laws under a uniform system throughout the State."

But the idea of a "uniform system throughout the state" is elusive. Michael Herring, chief administrator of the commission, says that of the 163 local boards and local ABC systems, no two are exactly alike. It is, he notes, "a mixed bag."

Now, after news that local ABC system officials in a few places were drawing huge salaries and reports of officials taking fancy meals from liquor suppliers in such systems as Mecklenburg, there's growing interest in significant reform of the system. The thinking so far ranges from merging more local boards to getting state and local government out of the liquor sales business entirely.

A hard sell on hard liquor

That would be a tough sell in some areas. State and local governments get a lot of income from ABC sales. The ABC system reports total sales of $716 million for the last fiscal year, including a net of $56 million for ABC local systems that provided $46 million for local governments. The state General Fund took in more than $184 million in excise taxes, sales taxes and mixed beverage taxes.

Last week Gov. Bev Perdue sent a legislative study commission her thoughts about changing the system, whose current operation she considers unacceptable. She has commissioned the hiring of a valuation firm to analyze the system and determine the value if the state decided to somehow privatize the system by selling the warehouse or granting concessions to private enterprise to sell liquor in stores. Either way, North Carolina would remain a control state, she said.

North Carolina is the only state that has a mix of a central state commission overseeing local ABC boards and systems. Most of the assets belong to the local boards, limiting the impact of any state government windfall.

It's up to the legislature to decide how to change the system, but I think the state first has to decide what it wants the ABC system to do in the 21st century. Among the choices:

Protecting the public from alcohol. The ABC system clearly was set up after Prohibition to limit alcohol sales and protect the public. But the state and the system have changed enormously. If the point of the ABC system in 2010 is to protect the public from exposure to alcohol, the state has missed the boat. It allows the sale of wine, beer or liquor in many thousands of places spread over 98 counties.

Providing r evenue for government. With ABC system sales approaching three-quarters of a billion dollars (and the sale of beer, wine and other alcoholic beverages accounting for hundreds of millions more) government takes in a lot of revenue from alcohol sales. Local areas also enjoy board appointments and jobs in local ABC operations. But some local ABC boards don't make money, according to a legislative study in 2008. If the point of the system is to provide revenue for local government, it has been ineffective in some cases. Structural changes should be made, such as merging smaller systems with larger ones to take advantage of economies of scale.

Serving consumers. While the ABC system offers much better service to consumers at many stores and allows more kinds of products than it did a generation or so ago, the existence of a government monopoly on liquor sales can deprive customers of product offerings, extended or Sunday hours and periodic sales. If serving customers becomes the main point of the ABC system, it should be privatized so the public finally can enjoy the full benefits of competition.

Jack Betts is an Observer associate editor based in Raleigh: jbetts@charlotteobserver.com.

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