• Alcohol adversaries juggle the numbers when it comes to privatization

When prohibition ended, states created liquor control agencies to cut bootleggers out of the distilled spirits business. Oregon and 17 other states opted for state control of buying, warehousing, pricing and selling hard liquor. The state also is responsible for licensing the sale of beer and wine.

Liquor profits from the state's 100 percent markup on wholesale prices returned $104 million to state coffers last year, Oregon Liquor Control Commission officials say. Oregon allows private retailers to sell liquor, but they must be approved by the state, and the OLCC regulates their profits, hours of operation, promotions and inventory.

All states oversee alcohol sales to some degree. Some, such as California, have privatized their operations, retaining only liquor law enforcement and tax collection features.

California spends nearly the same amount as Oregon on liquor control Ñ $75 million per biennium Ñ but presides over a populace 10 times the size of Oregon's. The state's budget is covered by license fees, allowing $138 million per year in excise tax revenues to return to the state.

Washington, like Oregon, buys, warehouses and sells liquor, but it also runs liquor stores with state personnel. As a result, its budget is higher: $157 million per biennium, or more than double the Oregon budget. But the state also made $217 million in liquor profits last year.

Oregon lawmakers championing the privatization of the OLCC say Oregon could save Public Employees Retirement System costs while creating a vital private-sector industry that would result in payroll and property taxes to state and local government.

Liquor retailers are on board with the idea. John Feuerstein, vice president of the Associated Liquor Stores of Oregon, says retailers have been screaming privatization for years but have gotten nowhere.

They argue that the state can still make money off alcohol by simply imposing taxes on it as California does. The state's warehouse could be sold to the private sector, putting it back on the property tax rolls, and the state no longer would have the cost of 'owning, protecting or managing millions of dollars in inventory,' according to one retailer's privatization proposal.

The retailers say the state's 10 district offices could be closed and the enforcement duties of the department, generally about $14 million of the OLCC budget, could be bought Ñ on contract Ñ from law enforcement agencies. Moreover, they say, Oregon's OLCC markup would be reduced, making it possible for dealers to compete with California and Nevada for sales.

Jon Stubenvoll, spokesman for the OLCC, calls the idea 'ludicrous,' saying the state runs a lean operation that offers state and local governments money to pay for anything they need.

'We are one of the few departments that gives back to the general fund,' he says. And import sales from other states are so small, they're virtually insignificant, he says.

Budget frugalists are rooting for the state to use this opportunity to return government to what they consider to be core functions.

Oregon has never tried to prioritize its roles and, as a result, finds itself 'cutting state police so we can keep the Cultural Trust,' says Steve Buckstein, spokesman for the Cascade Policy Institute, a Portland free-market think tank.

But Rep. Ben Westlund, R-Bend, rejects the notion that full programs must be cut to buy survival for core functions:

'You can't stack everything against law enforcement. That's specious reasoning. If you take that to its logical extreme, we would then spend every dollar on the most likely killers of Oregonians. The challenge is to come up with the most balanced approach to keep and create an Oregon we are proud to call home.'

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