More on McDonnell’s invented $500M from ABC privatization.

Further to Bob McDonnell’s plan to fund transportation, given the Post’s discovery of some deeply misleading math, see if you can follow this logical jujitsu in McDonnell’s plan. Tracing back this bit of the plan to its origins, the Wilder Commission report concluded:

We estimate that the dollar amount that could accrue from these streamlinings, outsourcings and eliminations, including the privatization of ABC, could total more than $500 million.

So that’s a result of a top-to-bottom reconsideration of how state government works—the ABC is just a sliver of that, small enough that the report doesn’t specify how much it would come to. So McDonnell’s plan says of that:

The Wilder Commission estimated that proposals to streamline and eliminate state agencies, including the privatization of ABC, could total more than $500 million.

Well, OK, that makes sense. But the next sentence is where things go off the rails:

Looking at other states’ experience in privatizing the distribution and retail aspect of alcohol sales and ABC’s annual profits, we estimate that Virginia could receive at least $500 million in the near term.

Whoa. What just happened there? A fraction of $500M just got turned into $500M in a passage so weak that that it would result in a quick [citation needed] on Wikipedia, followed by a deletion a short time later. The only other evidence provided is in the final sentence on the topic:

A study conducted by the Reason Foundation for divesting Pennsylvania’s Liquor Control Board found that privatizing could result in approximately $1.7 billion dollars from the initial divestiture proceeds.

That’s nice for Pennsylvania. But what it has to do with Virginia, I don’t know, and McDonnell doesn’t say.

What McDonnell has done here is taken a study about a top-to-botom government overhaul, taken a lump number of $500M, claimed it applies to just one change in government, and then claimed that money could be used to pay for a big chunk of the state’s transportation bill that’s coming due. It’s some fancy footwork that’s rhetorically interesting, I’ll grant him that. But the financial equivalent of that is check kiting, and I’m pretty sure Virginia’s not going to get real far funding our roads like that.

Published by Waldo Jaquith

Waldo Jaquith (JAKE-with) is an open government technologist who lives near Char­lottes­­ville, VA, USA. more »

20 replies on “More on McDonnell’s invented $500M from ABC privatization.”

  1. This notion that selling the ABC stores was going to bring a megamillion windfall started in Republistan, otherwise known as the Shenandoah Valley. Sen. Mark Obenshain introduced legislation in January 2009 with the claim:

    While the finer points are still being worked out, previous studies have found [that by divesting itself of its 331 ABC stores] the commonwealth could realize some $700 million in new revenue — or 23 percent of this year’s budget shortfall — every year […]


    Obenshain’s math, contained in his legislation –SB 1542 has apparently found its way to Bob McDonnell. The Industrial-Alcohol Complex loves them Republicans.

  2. “That’s nice for Pennsylvania. But what it has to Virginia, I don’t know, and McDonnell doesn’t say.”

    I’m not sure Pennsylvania is an appropriate comparative point, even in the narrow context of privatization. In Pennsylvania, you cannot even buy beer or wine in a grocery store. Privatization in PA would open up a lot more sales across a broader selection of alcoholic beverages than in Virginia, where I can walk into a CVS and buy “wine.” (Stay classy, Virginia. ;) )

    Liquor licenses, at least in Philadelphia, are also ridiculously expensive and hard to get, so a lot of locally owned or small restaurants don’t even bother, meaning you have to trek over to the Foodery and pay a ton of money for an admittedly awesome selection of beers, or an state store if you want anything but beer. (And at BYOs, the food can be pricier because they’re not getting you for the alcohol, OR the alcohol is just expensive because the bar’s paid a small fortune for the license.*)

    Loosening the laws up in PA would result in a lot of revenue** because the laws are so uptight, they make Utah look like Key West on New Year’s Eve.

    * Tangential note: For a while, this meant that, since you had to pay a ton for the license, you stocked really great beer. And while that’s still true in a lot of places, and there are some amazing bars in Philly, the hipster invasion has increased the amount of Pabst Blue Ribbon being sold in the city by a disgusting amount. God, I hate hipsters.

    ** Or the dissolution of Jersey. A lot of people go to Jersey for alcohol. I think that’s why the state exists. I can’t think of anything else the state is good for.

  3. The argument should really not be about whether this can fund our transportation needs or not. We have a many year need. And a one year sale unless it is $108 billion is not going to solve the problem.

    The argument should be about whether we want to get rid of the most insidious form of Socialism (Yes! The “S” word) in the state of Virginia. And, Genevieve’s description of Pennsylvania’s system is instructive, we should make sure the system is setup to encourage a free, competitive market in liquor retail. I would also encourage us not to repeat the Texas mistake of allowing counties to choose. The entire wet and dry county system is just silly. I want it all at the supermarket.

  4. 1. Claim you can turn the privatization of the ABC into a quick and easy $500M.

    2. Get elected.

    3. ???

    4. PROFIT!

  5. Yes, that privatization bill failed in committee 13-2. One of those two was Ken Cuccinelli. I assume the other 5 Repubs have come around.

    Frankly I’m not so sure why anyone would want to buy any of those little stores (actually it is unclear how many are owned by the State. I’ll bet most are leased). But why would you buy a little liquor store when it is likely that Sams Club et als, will end up dominating the biz. Good point on the difference with PA.

    But I do not wish to see them privatized. I believe the State should have an alcohol consumption reduction policy. And no that is not a return to Prohibition, but isn’t it pretty clear how destructive this product is to society (yea, I know most people handle it fine and have a lot of fun with it), but do we really want to enact policies that make liquor cheaper and more accessible?

    Isn’t there some downside to that?

    But this is only a small part of the McDonnell trans. plan funding. Here is the rest of it:

  6. Quasi-privatization of the ABC stores could produce significant revenue for the state. It would also be more likely to pass in the legislature and the full-on privatization that McDonnell has proposed. What would be required is for the state to retain control of the number of store, initially set at the same number the state operates now in each locality, and auction off the rights to operate franchises in a given locality. Perhaps for ten years at a time. New stores could be added as justified by population increases, that would create a continuing stream of revenue, although not a highly predictable one. Under that scenario I could see a first-time influx of $500 million and periodic smaller profits for the state. Of course that isnt’ what McDonnell has proposed.

  7. Sam,

    Or you could go the Deeds route:

    1. Have a non-existent transportation plan/”Elect me first, then I’ll tell you my plans” strategy.
    2. Acknowledge you’ll be raising taxes if elected/Move to an “Elect me, put up with higher taxes, and I’ll put together a committee to tell me what to do, I promise” strategy.
    3. ???
    4. Profit.

    Committees to study problems? Is Deeds running for Charlottesville City Council? He’d fit in great here. :-)

  8. Meri,
    Because examining the facts is wrong, right? I mean if you’ve got a perfectly good “no taxes ever” ideology you can just bend reality to fit your ideology, right? Then you don’t have to bother with the facts.

  9. Steve,
    No, examining facts is A Good Thing™. Saying, “here’s my plan” when said plan is to convene a committee isn’t much of a plan.

    “I have a plan to end world hunger and poverty. What is it? Oh, I’ll create a panel to figure out how to end world hunger and poverty.” (read, That’s not a plan.)

  10. To Robert Legge’s point above, the state can have an alcohol reduction policy without owning a segment of the market. In fact, the state owning these stores and relying on their revenue presents incentive to not really work that hard on controlling consumption of the product lest they be deprived of GF revenues.

    The current process does not inhibit abusers. In my view, it just serves to inconvenience responsible individuals. It is the same ridiculousness as with pseudoephedrine purchases. Though the latter is much more onerous.

  11. Meri,

    Does McDonnell have a plan to effectively alleviate congestion? How much would it cost the state to match transportation capacity with need? And if you have an ineffective set of proposals, is that not equivalent to having no plan at all?

  12. Actually it wouldn’t bother me for both candidates to admit that there are way too many cars for the amount of roads we have and that we simply don’t have enough money or available land for that matter to alleviate most of the congestion. But of course that’s no fun to have to admit that.

    But the McDonnell plan has a bunch of other proposals such as $1.6B (I think that’s his figure) from offshore drilling royalties and $6-8B from public/private projects (Is that privatized rest stops?)

  13. robert:
    There’s no way that privatized rest stops would bring in that much money, or much money at all for that matter. The benefit of privatized rest stops is that privatizing them keeps them open, not that it pays for anything else. I think the figure you’re siting is for McDonnell’s plan to privatize a bunch of highways and then toll them. Why anyone would think that was preferable way to pay for roads than upping the gas tax is beyond me. If you hiked the gas tax 10 cents a gallon, you could pay for everything proposed and consumers would hardly notice since these days the cost of gasoline jumps up and down 20 to 30 cents in any given week.

  14. I have no idea how state ownership of the ABC store is good for anything besides annoying me on Sunday evening, when I discover I’m out of vodka.* It certainly doesn’t do anything appreciable in terms of reducing the consumption of alcohol. I do suppose that it does provide a guaranteed purchaser for that horrid stuff called “Virginia wine.”

    *Thankfully it’s only a brief annoyance. One more upside to living in DC. If I were stuck in the middle of VA, or along any other border, I’d be even more annoyed.

  15. robert, offshore drilling wouldn’t produce revenue until 2012 at a minimum and that relies on a whole lot of assumptions (most have the same likelihood as being struck by lightning). The $6-8 billion for PPTA projects is a mystery. All he mentions are existing PPTA projects in his plan. And existing projects means existing money, not an additional $6-8 billion. Unless he means he wants to sell off the highways.

  16. We should just sell the entire state to North Carolina. Then we’d have no worry about money, and everyone could be happy.

    Plus, those bastards have had their eyes on us for some time now. Fuckin’ Carolinians.

  17. Meri, if you help me with my plan for NoVA secession (Fairfax, Alexandria, Falls Church, and Arlington*), I will help you with that one. Win/win situation, for sure.

    *And I guess Loudon, if they ask nicely, but PWC can bugger off.

  18. MB, I agree entirely on the matter of the wine. I miss living on the other side of the hills from Napa Valley, where the wine is not only superb, but the State wants you to be able to buy a bottle for your responsible enjoyment at just about any time day or night, so long as you’re willing to pay the tax (which as I recall is a fairly reasonable $0.20/gallon).

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