Gov. McDonnell, GOP lawmakers split over liquor plan

By Anita Kumar and Rosalind S. Helderman
Washington Post Staff Writers
Wednesday, October 13, 2010; 8:32 PM

RICHMOND - A split between Gov. Robert F. McDonnell (R) and members of his party could derail the governor's ambitious plan to privatize the state's liquor system and recently led McDonnell's top political adviser to threaten the political future of Republican delegates, according to several state legislators.

In a conversation with Del. Timothy D. Hugo (R-Fairfax), Phil Cox, who heads McDonnell's political action committee, called leaders in the GOP-controlled House of Delegates "spineless," and he warned that the governor might not support Republicans in next year's elections if they vote against the proposal, according to lawmakers who spoke on the condition of anonymity because they did not want to anger the governor.

McDonnell and his staff have grown frustrated that fellow Republicans have been unwilling to back a plan that was part of his gubernatorial campaign last year. And House Republicans have become annoyed that the administration expects them to fall in line behind a proposal many of them believe is flawed.

"What am I supposed to do? Lay down and die for the administration, and do whatever they say?'' said Del. Thomas D. Gear (R-Hampton), who chairs a key legislative subcommittee that will consider privatization. "I can't help it that they don't have a good plan. They will remember who their friends are? That's a two-way street."

Legislators and Republican staffers said they expect McDonnell to announce soon that he will call off plans for a special session in November to consider the plan and instead ask the General Assembly to consider the proposal during the annual session that opens in January. The measure would privatize the wholesale and retail distribution of distilled spirits to provide a one-time windfall of at least $458 million for transportation.

In an interview Wednesday, McDonnell said he counts many House leaders as good friends as well as legislative allies. "I have a great relationship with the House Republican caucus,'' said McDonnell, who met with the Republican caucus on Monday about a variety of issues, including the proposal. "There are times when we don't agree on everything. ...They need a little more time to look at what the issues are with ABC. I'm making a big change. It's going to take the legislators, frankly, a little more time to take a look at this."

But tensions have been rising over the liquor plan for weeks and boiled over in a recent call between Cox and Hugo, chairman of House Republican Caucus. Cox told Hugo that McDonnell was a popular governor who could raise millions of dollars to use against dissenting Republicans, said legislative sources familiar with the call.

Hugo responded by shooting off a sarcastic Sept. 30 e-mail to Cox; Martin Kent, McDonnell's chief of staff; Eric Finkbeiner, McDonnell's director of policy; and Mike Reynold, McDonnell's deputy director of policy.

"First, I appreciate the Administration candidly voicing their concerns about the 'weak leadership' in the House and requesting that the House members 'get some backbone,' " he wrote in the e-mail, obtained by The Washington Post. "As GOP Caucus Chairman, I have conveyed the Administration's 'weak leadership' concerns directly to the other leadership members and will inform the Caucus members of the Administration's request regarding spinal generation. Lastly, I will also issue a cautionary note to the Caucus reminding them that next year the Administration will 'remember their friends' during the election season."

In an interview, Cox said that he did not recall the e-mail and that he has conversations with legislators routinely and would not comment on them. "Why should I share private conversations with the media?'' he asked.

Hugo declined to comment on the phone call. He said that "conversations I have with the governor's staff are private.''

House Speaker William J. Howell (R-Stafford) said in an interview that most members of his 61-member caucus get along well with McDonnell, even though some may have specific problems with the proposal. "To suggest that there's a great wall between Bob McDonnell and the caucus, that's just not true,'' he said. "I don't think it's fair to say."

Howell said some of his members, who have served with two Democratic governors during the past eight years, are having trouble getting used to working with a Republican governor. "They can't reverse gears,'' he said.

Delegates who were interviewed about the incident said McDonnell, a former delegate, has had a good relationship with the caucus. But other delegates, none of whom was contacted directly by Cox, were unhappy to hear about the exchange between him and Hugo.

"I wish he'd stay out of policy. It's not his job. And he obviously doesn't know what he's doing," Del. David B. Albo (R-Fairfax) said of Cox, who ran McDonnell's campaign last year and remains close to the governor's strategy team. "Bob has a great relationship with everyone in the caucus. He's a wonderful man. If Phil said those things, he might need to put a muzzle on him. It's time to legislate, and Phil's still in campaign mode."

McDonnell spokesman Tucker Martin said Cox is not broadly lobbying legislators on behalf of the governor. "Phil Cox is the governor's political adviser," Martin said. "He's not part of the policy team, and he's not lobbying lawmakers."

Some Republicans said they still believe McDonnell can pass the proposal because most GOP delegates support privatizing the liquor system in concept.

"The governor will make certain changes to address the problems, issues, questions,'' said Del. Terry G. Kilgore (R-Scott), who said he is generally supportive of the plan. "I think we can make it work. The folks will come to the table, and I'm optimistic we can get the changes made we need."

But in recent weeks, a number of leading Republicans have voiced concern over the specifics of the complicated proposal that McDonnell advanced Sept. 8.

Many have said they worry the governor's office has become too consumed with the proposal and fear the legacy of McDonnell's four-year term now depends on its success.

Delegates have privately complained that the plan was developed with too little input from legislators and too much from lobbyists for retail and alcohol interests.

After months of building up the plan, the governor's staff briefed the House GOP caucus about the proposal in a conference call on the eve of its unveiling last month. The plan included new fees on liquor that many delegates think voters would perceive as tax increases.

Their opposition forced McDonnell to alter his proposal twice in five weeks, dropping new fees he had proposed for restaurants purchasing liquor from wholesalers in a newly privatized system. As a result, McDonnell is now pushing his party to support a plan that would result in a one-time windfall for state roads but an annual loss of $47 million in revenue for core services such as schools, health care and public safety.

But some conservatives are still opposed to the plan.

Del. Robert G. Marshall (R-Prince William) said that he cannot keep track of all the changes that have been made in recent weeks and that he still has concerns about the proposal. He said McDonnell's staff is not doing enough to persuade delegates to back the proposal.

"It's not a prudent way to engage your friends,'' Marshall said. "It's a democracy, not a dictatorship."

Delegates also said they did not understand why McDonnell is pressuring Republican members of the House to vote for the plan when the Democratic-led state Senate does not favor the idea.

"If there was no chance in the Senate, why would you expose House members?'' asked Del. Charles W. Carrico Sr. (R-Grayson), who is not supporting the proposal because, he says, he is worried that it would make alcohol more accessible. "I wouldn't see why you would push an agenda that wasn't good for Virginia as a whole."

Lt. Gov. Bill Bolling (R) said in a recent interview that Republican legislators should stop publicly opposing the plan and instead approach the administration privately if they have concerns. "It would be more helpful if they would keep their powder dry,'' Bolling said. "It's a work in progress. If they have problems, they should let us know."

McDonnell, Bolling and the governor's policy staff have met individually with legislators over their concerns. The lawmakers, Bolling said, are contacted immediately after they make unfavorable comments about the plan to alleviate concerns and shore up support.

"We're open to discussing the proposal,'' he said. "We just want an opportunity to discuss it privately."

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