Announcements
 

November 3, 2015

Decision to Close ABC Stores Fiscally Sound, Protects Consumers

The recent decision by the Alabama Alcoholic Beverage Control Board to close or consolidate 15 state-run liquor stores at the end of the year because of budget cuts has generated a great deal of discussion in the media – and commentaries critical of the decision.

Unfortunately, some of the opinions expressed are based on misinformation or a lack of understanding of the ABC Board’s operations.

As administrator of the ABC Board, I want to help clarify the issue.

I will start by pointing out the Alabama ABC Board does not cost Alabama taxpayers one red cent. Through the operation of its liquor stores and warehouse, the ABC Board generates millions of dollars in badly needed revenue to not only pay for its functions, but to help fund other state agencies as well. Only those who purchase spirits pay anything to the state to help it or the ABC Board.

Last year, the ABC Board contributed $215 million to the state – after paying for the costs of its operations. This year, that figure should top $225 million. This money supports the General Fund, Department of Human Resources, Department of Mental Health, the Alabama Law Enforcement Agency, public education, cities and counties.

To get an idea of the size of the contribution the ABC Board makes to the General Fund, note that the General Fund budget passed by lawmakers in September totaled about $1.75 billion. The $215 million from the ABC Board accounted for nearly 13 percent of that amount.

The decision to close or consolidate 15 stores came after the Legislature arbitrarily reduced the ABC Board’s spending authority by transferring $5.5 million from our budget to the General Fund. The Legislature appropriates nothing to the ABC Board, but sets the amount we are allowed to spend from the revenues we generate.

The reduction left the ABC Board – similar to other state agencies facing decreases in their budgets – with difficult decisions to make in order to ensure that our costs do not exceed our spending authority. In making those decisions, the ABC Board had to balance the needs of the residents we serve against those cuts.

Not every ABC liquor store makes money. Some operate to meet the needs of local residents, even if the operation of the store – say, in a rural community – does not result in a net profit. It would be unfair to rural residents to deny them a service that Alabamians who live in urban areas receive.

That is why some stores which have not been profitable will remain open.

It is true that some stores which have been profitable will be closed. Some of these stores will be consolidated with other stores or reopened in areas where traffic patterns and population centers have shifted, thereby reducing costs and making them even more profitable.

Unfortunately, some writers compared the decision by ALEA to close some driver licenses offices in rural counties to the ABC Board’s decision to close some of its stores and keep some open. They noted that some counties without a driver license office will continue to have a state liquor store.

The operation of ABC stores has nothing to do with the operation of driver license offices. The decision by the ABC Board and the decision by ALEA were made independently of each other.

The decision about what stores to close and what stores to keep open was based on sound business practices and our responsibility to meet the needs of residents, wherever they live. That decision was made by the ABC Board.

In other words, the State of Alabama didn’t “choose liquor over driver licenses.” Each agency made difficult decisions based on its needs and finances.

Finally, I want to address the matter of taxes and the price of liquor.

Much has been made of the fact that Alabama’s liquor taxes are high compared to those of other states. It is true, Alabama’s liquor tax of $18.23 per gallon is higher than neighboring Georgia’s $3.79 per gallon, Tennessee’s $4.46, Florida’s $6.50 and Mississippi’s $7.41 (Tax Foundation figures).

But it is the Alabama Legislature, not the ABC Board that sets tax rates. The Legislature can lower the rates, if it chooses to do so. Of course, that would reduce revenue to the already challenged state General Fund.

I realize some of the negative commentaries directed toward the ABC Board are from those who want to see all ABC stores closed. Some have even suggested that the private sector would do a better job with price, quality and selection.

Anyone who has shopped at ABC stores and private package stores knows that is simply not the case. ABC stores are well known for providing competitive prices, premier service and greater selection. And, ABC stores’ well-trained employees do an extraordinary job of not selling to underage buyers and those who already have had too much to drink.

The Alabama Legislature created the ABC Board in 1937, after the repeal of Prohibition, to regulate the sale of alcoholic beverages, promote temperance and protect public safety and health. It is doing just that, while at the same time generating much needed revenue for the state and helping keep Alabamians’ overall tax burden low.

 

H. Mac Gipson is administrator of the Alabama Alcoholic Beverage Control Board, which controls the sale of alcoholic beverages in the state through distribution, licensing, compliance enforcement and education. Email: mac.gipson@abc.alabama.gov.