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Should Vermont Control Its Liquor Industry? State Auditor Says 'No'

State Auditor Doug Hoffer says shortcomings in project management at the Department of Buildings and General Services have led to cost overruns on major construction projects.
Peter Hirschfeld
VPR file
A new report from State Auditor Doug Hoffer suggests that perhaps it's time to privatize Vermont's retail booze industry.

Ever since the repeal of Prohibition, the state of Vermont has had control over the sale of hard liquor. But a new report from the state auditor suggests that perhaps it’s time to privatize Vermont’s retail booze industry.

Judging by the statistics at least, finding the holiday spirit apparently involves a trip to the local liquor store. 

The 35-day period between Thanksgiving and New Years will be responsible for about one-quarter of annual profits for the distilled-spirits industry, according to data from the national Distilled Spirits Council.

And here in the Green Mountains, whether they’re aware of it or not, consumers will be buying that booze directly from the state of Vermont.

Here in the Green Mountains, whether they're aware of it or not, consumers buy their hard liquor directly from the state of Vermont.

It’s been that way ever since the repeal of Prohibition in 1933. The so-called “control” model – in place in 16 other states – was originally designed to limit access, and therefore moderate consumption, of heavier-proof liquors. But State Auditor Doug Hoffer says he isn’t so sure it makes sense anymore.

“The justification for the system we have now is there generations old,” Hoffer says. “I think it’s appropriate to have a discussion today about whether this in the best interest of the state. I don’t see any justification myself.”

Hoffer’s office has just released a performance audit of the Department of Liquor Control. The report doesn’t find anything terribly out of order at the 57-person division. But Hoffer says that after exploring the department’s operations, he’s not so sure the public is well-served by having government bureaucracy oversee its retail liquor industry.

State Auditor Doug Hoffer says that he's not so sure the public is well-served by having government bureaucracy oversee its retail liquor industry.

For one, Hoffer says the department is in the awkward position of both promoting and regulating sales of spirituous beverages.

Hoffer says the state could generate as much government revenue in a privatized model as it does in the state control approach – about $20 million a year. And Hoffer, a political liberal who isn’t generally a proponent of privatizing government functions, says a private system would probably operate a lot more efficiently.

Under the existing system, the state of Vermont sells liquor directly to customers through its 78 registered liquor agents, who take an 8.2 percent commission. The agents sell the booze at liquor outlets scattered across the state.

“But I just don’t see, personally, and this is not my place, because ultimately the Legislature gets to make this decision, but I don’t see the value or the importance or the necessity … of having this function within state government,” Hoffer says. “I just don’t see it.”

Mike Hogan, commissioner of the Department of Liquor Control, says the department is open to having the privatization conversation. But he says privatized industries in other states haven’t necessarily yielded the desired results. Washington State recently moved from a control model, like in Vermont, to a privatized one.

The state control model, which keeps liquor stores from being open late at night, for example, promotes safer behavior, says Department of Liquor Control commissioner Mike Hogan.

“And what the state got was more stores, longer hours, higher prices and not much else from it,” Hogan says. “I think the taxpayer didn’t get the whole story of what was actually going to happen.”

Longer hours at more stores, Hogan says, mean easier access to liquor. Easier access to liquor, according to Hogan, can have negative social consequences. And he says the state control model – which keeps liquor stores from being open late at night, for example – promote safer behavior.

Hoffer, however, says that even in a privatized model, the state would retain its ability to regulate the hours during which liquor could be sold. And he says there are better ways to mitigate the adverse social impacts of liquor consumption. Hoffer also says he doesn’t see the logic behind separate regulatory systems for beer and wine on one hand and liquor on the other.

“I’m not as concerned as some others are about an increase in consumption, because we already have excessive consumption of beer and wine, which leads to the same nasty social impacts as liquor does,” Hoffer says.

Legislators are likely to resume a long-running debate over the merits of privatizing the retail liquor industry when they convene next year.

Legislators are likely to resume a long-running debate over the merits of privatizing the retail liquor industry when they convene next year.

Vermont sells about $72 million worth of liquor annually, according to Hogan, who says his department has an approximately $4 million operating budget.

Hoffer estimates that the cost of liquor in a privatized model would increase by about 15 percent. The auditor says the higher cost might reduce consumption, and benefit some of the safety goals of DLC.

Hoffer says the existing model has also prevented would-be business people from participating in the retail liquor market. The Liquor Control Board, which approves or denies requests to open liquor stores, generally doesn’t allow for the opening of new outlets in areas where one already exists.

“Is more better? Not necessarily,” Hoffer says. “But if access is an issue, certainly in rural parts of the state, why not let people let the market decide, which is not something you’ll always hear me say, but in this case I think it makes sense.”

This story was edited at 12:44 p.m. on 11/25/2014

The Vermont Statehouse is often called the people’s house. I am your eyes and ears there. I keep a close eye on how legislation could affect your life; I also regularly speak to the people who write that legislation.
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