I-1100 better option for privatizing liquor

This endorsement editorial appears in the Oct. 17, 2010, Yakima Herald-Republic.

Liquor interests have served up a double to Washington voters, and even long-time proponents of liquor privatization may have to swallow hard. The complexity of liquor measures Initiative 1100 and Initiative 1105 requires a clear head to make any decision.

We have long argued for getting the state out of the liquor business but are dismayed at the confusion sown by dueling initiatives. In starkest terms, Initiative 1100 is for the retailers and Initiative 1105 is for the distributors. We believe that the retailers offer a more market-oriented course. That leads us to ...

Initiative 1100: Yes

Initiative 1105: No

Either initiative would break up the state's monopoly on distribution and sale of liquor. This is one of 18 states that does it this way, a vestige of the Prohibition-era restrictions. Right now, those who like their liquor can go to 161 state stores staffed by state employees or 155 contract stores; the number of outlets could rise to more than 3,000 should one or both of these pass.

For years, the state Legislature has ignored calls to get out of the liquor sales and distribution business. Legislators seem more concerned about the 930 employees who could lose their state jobs (and state benefits) rather than the hundreds of thousands of consumers who would benefit from the lower prices and better selection that private companies could bring.

Issaquah-based Costco provided the language and signature gatherers to put I-1100 on the ballot. Also supported by Safeway and Walmart, it is viewed as a deregulation bill. It would close state liquor stores and end contracts with contract stores, though those stores could convert to liquor retail businesses. It would end price controls that would keep large retailers from competing with contract stores and would allow liquor to be sold wherever beer and wine are now sold, including grocery stores.

Initiative 1105 is less of a deregulation measure and more geared toward the distribution end. It is bankrolled by two large distributors. Like I-1100, it would close all state liquor stores. It would require retailers to purchase hard liquor through distributors, contrasted with I-1100, under which retailers could buy directly from manufacturers. It would institute a fee based on gross sales to be paid by distributors.

To us, putting a middleman -- the distributor -- into state statute ensures someone else will always take a financial swig of the booze, just as the state does now. This is another reason to go with 1100.

Consumers would save under both measures' provisions to eliminate the state's 51 percent markup -- up from 39 percent in this past year, a stealth tax that can be raised in tight budget times, which times are now. The measures take a different approach on state liquor sales taxes that are imposed separately from the markup.

I-1100 would eliminate the markup but keep the 10 percent state sales tax. Initiative 1105 would eliminate both the markup and sales tax but suggests the Legislature implement a new tax, which would be difficult should Tim Eyman's Initiative 1053 pass in November and require a two-thirds vote on all new taxes.

Cash-strapped municipalities worry about lost liquor revenue should these pass. The state Liquor Control Board says taxes, markup and fees provided more than $332.7 million in 2009. Of that, $199 million went to the state's general fund, almost $63 million went to cities and counties and $49 million went to help pay for the state's health insurance for the poor.

The state Office of Financial Management estimates less impact from I-1100 compared to I-1105. OFM sees I-1100 reducing state revenue by $76-85 million and local revenue by $180-192 million over five years. I-1105 would see a reduction of $486-520 million in state revenue and $205-210 million in local revenue over five years. OFM also cautions, "Fiscal impact cannot be precisely estimated because the private market will determine spirits' bottle cost and markup."

From this, I-1100 would have a softer impact on local government revenue, another reason to back it.

Contract liquor store owners say the competition from deregulation would drive them out of business, and a number of critics say a proliferation of liquor would lead to increased consumption and public-safety problems.

We're understand the concerns of small businesses trying to compete with big retailers on a high-profit item. But we like the concept of open markets and note that right now, convenience stores sell plenty of beer and wine despite the competition from big retailers.

Proponents offer statistics rebuffing public-safety concerns; for example, teenage drinking is lower in California, where booze can be grabbed in the grocery, than in Washington. They also claim privatization in other states has not led to an increase in problem drinking.

Another key issue is the impact on the local wine industry. Opponents fear these measures would lead to a "pay-to-play" system for small wineries and craft breweries to get their goods onto retail shelves. I-1100 proponents say rules imposed in the mid-1990s by the federal bureau of Alcohol, Tobacco and Firearms prohibit such a practice, and that small wineries and craft breweries are thriving in open states like California. I-1105 proponents say keeping the distribution system in place protects small wineries and craft breweries.

These privatization measures embody the best and worst of the initiative process. They're on the ballot because of legislative inertia; that's what the initiative process is for, to allow citizens to act when legislators refuse to. The flip side is business interests that would benefit sponsored these at-times competing measures, and those interests wrote language geared toward their interests. Should they both pass, either the state Legislature, by two-thirds vote, or the state Supreme Court would resolve differences between the two.

At least one of these needs to pass; we are not confident that the Legislature would come forth with a better plan should both initiatives fail; instead, the status likely would remain quo. I-1100 is not the best of both worlds, but it is the better of two options. We offer a qualified -- and right now heavily taxed -- toast to Initiative 1100.

Yakima Herald-Republicendorsements

* Sept. 24 -- Yakima County Board of Commissioners, District 3: Rand Elliott

* Sept. 26 -- Initiative 1053 (two-thirds legislative vote required to raise taxes): Yes; Initiative 1098, state income tax on high earners: No; Initiative 1107, repeal soda and bottled water tax: Yes

* Oct. 3 -- 15th District representative, Position 1: Bruce Chandler;15th District representative, Position 2, David Taylor

* Oct. 6 -- 13th District representative, Position 2: Bill Hinkle

* Oct. 7 -- Yakima County clerk: Kim Eaton

* Oct. 8 -- Yakima County prosecutor: Jim Hagarty

* Oct. 10 -- Yakima County sheriff: Ken Irwin

* Oct. 12 -- Yakima County District Court, Position 2, Brian Sanderson; Yakima County District Court, Position 3, Don Engel; Yakima County District Court, Position 4, Mike Everett

* Oct. 13 -- 14th District representative, Position 1: Norm Johnson

* Oct. 14 -- Yakima County auditor: Corky Mattingly

* Oct. 15 -- Referendum 52: No; HJR 4220: Yes; SJR 8225: Yes

* Today -- Initiative 1082: Yes; Initiative 1100: Yes; Initiative 1105: No

* Monday -- State Supreme Court, Richard Sanders vs. Charlie Wiggins

* Tuesday -- U.S. Senate, Patty Murray vs. Dino Rossi

* Wednesday -- Fourth District Congress, Doc Hastings vs. Jay Clough

* Oct. 24 -- Wrap-up of endorsements

* Oct. 31 -- Wrap-up of endorsements

* Members of the Yakima Herald-Republic editorial board are James E. Stickel, Bob Crider, Frank Purdy and Karen Troianello.