Privatizing state-run wine and spirits stores: What's the harm?

Current state budget shortfalls have prompted at least 5 state legislatures to debate getting out of the retail spirits or wine and spirits business. A referendum urging privatization was defeated in Washington State in 2010, while Idaho, Ohio, Pennsylvania, and Virginia have begun vigorous debates. Much of the information powering the debate has been funded by the alcohol industry and uses a magician's trick of misdirection, analyzing “control states” which often do not have retail sales monopolies but making it seem as if they did. We are correcting their misleading harm counts. We also used existing literature to develop a model that estimates the effects that selling the state stores would have on alcohol outlet density, hours of sale, alcohol consumption, associated harms (underage drinking, violence, impaired driving, alcohol-attributable disease, etc.), and associated costs to state government and to society. We used widely accepted business valuation models to estimate the fair market price for the state wholesale and retail sales monopolies. We applied these models in Ohio, Pennsylvania, Virginia, and Washington. In Ohio, the retail monopoly is so weak that harms would be modest. In the other states, consumption would rise by 6%-7% when selling off a spirits monopoly and 13% when selling off a two-beverage monopoly. Resulting state costs would exceed $50 million for spirits monopolies and $150 million for a two-beverage monopoly.