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Perdue opposes privatization

January 20, 2011

Gov. Bev Perdue said Thursday she opposes privatization of the state's liquor sales, which is the announcement county leaders hoped for.

The Catawba County Board of Commissioners adopted a resolution in December opposing efforts to privatize the state- and locally controlled system, and the county manager's office also voiced its opposition.

Perdue spoke Thursday at the North Carolina Association of County Commissioners (NCACC) annual legislative conference in Durham and told county leaders she thought privatization wasn't the right option for North Carolina.

"I don't want to be the governor who has to hold my granddaughter's hand as we walk past the liquor bottles on our way to the toy aisle in Wal-Mart or towards the cereal in Food Lion," Perdue said. "That isn't North Carolina. That isn't who we are or what we want to become."

Privatization allows businesses to sell liquor, making it possible for bottles of vodka, whiskey or other spirit to be sold without local control.

Catawba County receives about $1 million each fiscal year from ABC funding.

"That's a revenue source that comes without any strings attached," said County Manager Tom Lundy.

ABC funds for Catawba County aren't earmarked for any one expenditure, and commissioners can allocate those funds as needed. Losing that revenue source, Lundy said, is the equivalent of two-thirds a cent increase on the property tax.

Opposing privatization of the ABC system is one of the county's legislative goals, and Perdue's opposition announced Thursday makes that privatization possibility less likely.

"It's a system that works well," Lundy said. "It's a system that controls the number of outlets where liquor can be contained, but it's also run by a local board. There's always an advantage to having those decisions made locally, instead of in Raleigh or in Washington."

North Carolina has 168 local ABC boards that own or lease property and manage 422 retail stores and their staff.

The ABC system distributed more than $25 million during the previous fiscal year to the state's General Fund and to local governments where liquor is sold, according to the North Carolina ABC Commission. In 2010, the state's general fund profited by $200 million from the ABC system, and local governments received $51 million.

North Carolina ranks 44th in per capita liquor consumption, which is one of the lowest ratings in the United States, according to a press release from Perdue's office.

After the economic downturn, however, lawmakers look to any possible outlet for potential cost-savings and additional revenue — such as selling the ABC system, which is estimated at $300 million.

North Carolina faces a more than $3-billion budget shortfall for fiscal year 2011-12, forcing state leaders to find additional ways to cut spending. Discussion surfaced that ABC-system privatization might be one way for budget-makers to close the multi-billion dollar gap.

Perdue hired a consulting company in 2010 to examine the pros and cons of privatization. On one hand, the possible sale represents a source of income for North Carolina. However, the ABC system sale allows many additional retailers to join the liquor-sales business, and according to critics, that could endanger North Carolina's residents.

Ultimately, Perdue decided privatization isn't the right option for North Carolina.

"I invite our legislative leaders to sit down with me and my staff to hear a presentation from the valuation company to learn firsthand what options are available," Perdue said. "But I expect they will find what I did: the juice isn't worth the squeeze."

But the battle against privatization isn't finished, yet.

North Carolina Senate Republican leader Phil Berger shared Perdue's concerns about privatization, but isn't disregarding the privatization possibility.

"Our state is facing a massive $3.7-billion budget deficit and a nearly 10 percent unemployment rate," Berger said. "Our No. 1 priority must be to balance the budget and foster and environment where the private sector can create jobs. I believe that we should continue to look at opportunities for privatizing governmental functions and continue to consider privatizing the ABC system."

North Carolina's Budget and Tax Center also expressed its agreement with Perdue's privatization opposition.

"Even without considering the potential social consequences, it would be a mistake to privatize the ABC system, based on a small revenue boost in the short-term," said Alexandra Forter Sirota, N.C. Budget and Tax Center director.

Sirota said policy makers must consider the state's future when choosing to privatize the ABC system, and privatization has long-term fiscal consequences that aren't accounted for.

Representatives from the state ABC Commission are compiling data about liquor sales and consumption and will present those findings to General Assembly members after the group's long session starts Wednesday.

"The General Assembly hasn't even opened yet, so we still want to be very careful," Lundy said. "We're certainly aware of the difficult position they're in as stewards of the state system."

County Commissioners approved a list of 2011 state legislative goals, which included privatization opposition.

"A locally controlled Alcoholic Beverage Control System allows operational decisions regarding the procurement of alcoholic beverages to be done at a local level," the county's legislative agenda states.

"These decisions are not based on profit, but are made with the best interest of the community at heart."

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