A $47 million hole in Virginia's liquor plan is unacceptable

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Thursday, October 7, 2010

FOR MONTHS, Gov. Robert F. McDonnell (R) led Virginians to believe that his plan to privatize state liquor sales would not drain the state's budget of badly needed and plummeting revenue. Now we know the truth: In return for the windfall the state would get from selling off liquor licenses (and tripling the number of outlets selling hard liquor), Mr. McDonnell is willing to strip Virginia of $47 million annually -- in perpetuity. What a bad deal.

The governor is trying to sell his plan on the basis of the one-time cash infusion of $458 million that selling the licenses would supposedly generate for the state's stressed and buckling network of roads and rails. Sure, a $458 million shot in the arm would be nice, although it's a pittance compared with the $100 billion in new transportation funding the state needs in the next 15 years. And the governor is right that there's no compelling reason for Virginia to be in the liquor business.

But as it's now structured, Mr. McDonnell's proposal is a rip-off. The math is simple: In just a decade, the state will lose more money than it gains from privatization. And in the years that follow, those losses will mount into hundreds of millions and then billions of dollars.

By pushing such a program, the governor is raiding the state's general fund, which provides revenue for education, public safety, health care and other services, in return for a short-term money grab that might pay for a couple of intersections and a few road improvements around the state before the cash is gone. That's not exactly the "revenue-neutral plan" Mr. McDonnell promised Virginians during his gubernatorial campaign. And it's certainly not the long-term, sustainable and ongoing source of transportation dollars that the governor acknowledges the state needs.

In a rational political world, the governor would not eliminate one stream of income (like the $100 million in annual profits the state nets from liquor sales) without replacing it with another of roughly equal size -- certainly not after several years of plummeting revenue. But Mr. McDonnell's own Republican Party is captive to those who, opposing any new taxes regardless of circumstances, would further starve the state of funding in lean times. They helped kill an earlier version of the governor's plan that was closer to being revenue-neutral.

Mr. McDonnell campaigned on a platform that promised that transportation dollars would rain on Virginia like manna from heaven. Remember the billions his plan would provide from offshore drilling, interstate tolling, public-private partnerships and other sources that haven't materialized, and won't materialize, anytime soon? Now, desperate to drum up some new funding, he's throwing his weight behind liquor privatization and the short-term cash it would yield, while pretending the state will hardly notice the cost: $47 million in annual revenue that goes down the drain.

The governor has promised "long-range ideas" to drag Virginia's transportation system out of the mid-20th century, where it's currently stuck and crumbling, and into the future. Virginia is waiting.


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