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McDonnell vows trims to make up for money lost by privatizing liquor monopoly

 Virginia Gov. Robert F. McDonnell.
Virginia Gov. Robert F. McDonnell. (AP)

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By Anita Kumar
Tuesday, October 5, 2010; 12:16 AM

RICHMOND - Gov. Robert F. McDonnell vowed Monday to use dozens of government reform proposals to streamline government to replace the $47 million Virginia would lose from privatizing the state's 76-year-old liquor monopoly. But it's still unclear exactly how he will do that.

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State officials have approved about four dozen proposals to trim state government, but have not said how much most of them would save.

Fred Malek, chairman of the Governor's Commission on Government Reform and Restructuring, estimates that the proposals would save more than $100 million by December, but only a handful of financial estimates are available so far.

They include having employees at 25 agencies work 10-hour days four times a week, for a $3 million savings; eliminating the Rail Advisory Board, $10,000; and changing the way transportation departments send mail, $714,000.

"There are numerous other government reforms we are advocating simultaneously with ABC privatization and those reforms will make up much more than the $47 million,'' McDonnell said at news conference. "We will make up $47 million plus some."

McDonnell (R) has proposed doing what no other state has done - privatize sales of distilled spirits from wholesale to distribution to retail - to provide a one-time windfall of at least $458 million for transportation.

He wants to auction 1,000 licenses to the highest bidders, which would allow Virginians to buy liquor for the first time at private liquor stores, grocery and convenience stores, and big-box stores such as Wal-Mart and Costco.

The governor made significant changes to the proposal last week, eliminating a 1 percent tax on annual sales by wholesalers and a 2.5 percent fee on restaurants that choose to buy their liquor directly from wholesalers, producing less for the state on an annual basis.

The changes garnered significant support from conservatives who were worried about the appearance of raising taxes, and industries that did not want to pay more, including restaurants, but some legislators of both parties remain skeptical.

"At this time, I'm just not convinced this is something we need to do," said Del. Chris Jones (R-Suffolk). "I've been willing to keep an open mind. But if it's not revenue-neutral, it's likely not something I can support."

McDonnell's handpicked commission voted 22 to 3 on Monday in favor of his proposal to privatize the state's liquor system - the final hurdle before it faces the General Assembly.

"I think there are a lot of things we can do to make this revenue-neutral pretty darn quickly and pretty darn simply,'' said Sen. Mark D. Obenshain (R-Harrisonburg), a commission member who in the past two years has unsuccessfully introduced legislation that would allow 800 private liquor stores to operate in the state.


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