Idaho officials released a report in January that analyzed privatization of liquor sales. Clearly, the State of Idaho has a lucrative liquor monopoly. The question is; should it?
Here are some highlights:
The Legislature established the Idaho State Liquor Division in 1935 with the federal government's repeal of prohibition. All liquor imported into Idaho is subject to regulation by the division. The division centrally warehouses all liquor, applies a product markup, and in fiscal year 2010, distributed liquor for retail sales to 66 state-operated and 100 contract liquor stores.
The division's sales in fiscal year 2010 were the highest ever, exceeding $137 million, with a net profit of more than $46 million. Since fiscal year 2006, liquor sales have increased 16.3 percent beyond the rate of inflation. Over the same period, expenses have increased at a faster rate than both net profits and sales.
On average, an Idaho adult consumes less than two alcoholic drinks (liquor, beer, or wine) each day - a slight decrease from 2009. For liquor specifically, an Idaho adult consumes on average less than one-half drink of liquor each day.
OPE estimates that completely converting the state to a private system and establishing a liquor tax could generate about the same amount of revenue each year as the state currently receives. This option would make Idaho the first state to convert from a direct-control state to a completely private-market state.
Where the money goes
Liquor fund distribution, fiscal year 2010:
Total: $47.2 million
• Cities: $15.5 million (32.8 percent)
• General fund: $13 million (27.5 percent)
• Counties: $10.3 million (21.8 percent)
• Court services: $3.3 million (7 percent)
• Substance abuse treatment: $2.1 million (4.4 percent)
• Public schools: $1.2 million (2.5 percent)
• Cooperative Welfare Fund: $650,000 (1.4 percent)
• Community colleges: $600,000 (1.3 percent)
• Court Supervision Fund: $440,000 (.9 percent)
Where the money comes from
Idaho's state-owned stores accounted for 83 percent of liquor sales in Idaho in 2010; the contract liquor stores - private retailers with an agreement to sell the state's liquor - sold about 17 percent. (In south-central Idaho, there a three state-owned stores in Twin Falls and one each in Jerome, Rupert, Burley, Hailey and Ketchum. There are contact stores in Gooding, Buhl, Filer, Kimberly, Castleford, Glenns Ferry, Wendell, Bliss, Hagerman, Fairfield, Bellevue, Shoshone, Carey, Albion, Paul and Hazelton).
By providing a lower rate for contractors who sell more than $400,000 of liquor, the state's compensation structure might create a disincentive for exceeding this threshold. Because contract stores are permitted to set their own profit mark-ups for other alcoholic beverages, they may choose to limit their shelf space for liquor once the compensation for liquor sales is less than the profit margin for other products.
Revenue collected for liquor, wine and beer:
Year Liquor Beer Wine
2010 $47.2M $4.4M $3.6M
2009 $45.2M $4.4M $4M
2008 $40M $4.6M $3.1M
2007 $39.1M $4.5M $3M
2006 $33.5M $4.2M $3M
Although Idaho liquor sales, expenses and net profits have increased each year since fiscal 2006, sales and net profits have increased at a diminishing rate. Sales increased 1.4 percent, expenses grew 3.5 percent and the state's net profit by less than 1 percent.
How much drinking?
Average Idaho alcohol consumption, by number of drinks sold :
Year Liquor Beer Wine
2010 160 295 190
2009 160 295 205
2008 160 310 155
2007 155 310 155
2006 150 300 155
How Idaho compares
Percentage of alcohol consumed for each beverage type, by state:
State Liquor Beer Wine
Idaho 28% 57% 12%
Nevada 34% 55% 7%
Utah 30% 60% 10%
Oregon 30% 52% 17%
Wyoming 38% 55% 8%
Washington 30% 52% 18%
Montana 28% 61% 10%
Percentage of revenue collected from liquor, beer and wine:
State Liquor Beer Wine
Idaho 62% 25% 8%
Nevada 38% 48% 12%
Utah 44% 40% 12%
Oregon 88% 5% 5%
Wyoming 55% 32% 10%
Washington 58% 28% 12%
Montana 78% 14% 8%
Who sells liquor nationwide
• Privately operated retail - Alaska, Arizona, California, Nevada, Colorado, New Mexico, Hawaii, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Minnesota, Iowa, Missouri, Arkansas, Louisiana, Wisconsin, Iowa, Illinois, Kentucky, Tennessee, Georgia, South Carolina, Florida, New York, New Jersey, Connecticut, Rhode Island, Massachusetts.
• State-operated retail - Pennsylvania, Virginia, North Carolina, Alabama.
• State and contract-operated retail - Idaho, Washington, Utah, Maryland, New Hampshire, Maine.
• Contract-operated retail - Oregon, Montana, Ohio, Vermont.
• State-licensed privately operated retail - Wyoming, Michigan, Mississippi, West Virginia.
The case for privatizing distribution and sales
• Liquidating the Liquor Division would yield revenue for about $18 million.
• Auctioning10-year liquor licenses would earn about $41 million.
• To maintain the current, $47 million annual revenue, the state could increase the number of liquor stores, institute annual license renewal fees or establish a liquor tax.
The case for privatizing liquor sales
• State liquor stores could be closed and sold, earning the state about $6 million.
• The number of full-time Liquor Division employees would be reduced from 203 to about 36.
• Auctioning 10-year liquor licenses would earn about $41 million.
• To maintain the current, $47 million annual revenue, the state could increase the number of liquor stores, institute annual license renewal fees or continue applying a product markup.
Other money-making ideas
• Raise liquor markup to cover increasing fees from credit and debit card transactions. Currently, that costs the liquor division about $1 million a year and has increased 79 percent since 2006.
• Allow liquor tastings at distilleries or in liquor stores.
• Create an electronic system that would allow bars and restaurants to place weekly orders online. As it stands, innkeepers and restaurateurs must go to a liquor store and purchase the products.
• Track liquor inventories by invoice, not by stickers placed on bottles for bars and restaurants.
• Eliminate the 5 percent discount given to purchasers of cases of liquor. Bars and restaurants - the primary purchasers of case of liquor - account for about 22 percent sales in Idaho.