privatizing idaho’s liquor stores: what’s the harm? ted r miller, phd pire [email protected]...
TRANSCRIPT
Privatizing Idaho’s Liquor Stores: What’s the Harm?
Ted R Miller, PhD
PIRE
410-381-1197 or 240-441-2890
NO CONFLICTS OF INTEREST
Funding: Robert Wood Johnson Foundation Public Health Law Project
State-Owned & State Contract Retail Stores (11 States & Arguably AL)
Per Adult Apparent Consumption of Alcohol(Alcohol Gallons per Adult)
AK30
CA2.52
ID34
IN26
MI29
IL35
WI34
LA37
AR28
MO32
IA22
MN30
VT2.96
NH4.57
CT 2.52RI 2.77
MA 2.78
ME28
NY28
PA34
VA36
WV34
OH30
NC30
FL29
GA28
AL33MS
34
KY24
TN 32
ND46
SD29
NE27
KS38
OK33
TX38
CO32
NM29
AZ28
UT17
MT40
WY42
NV33
OR33
WA354
AK3.14
CA2.52
ID2.44
IN2.39
MI2.43
IL2.60
WI3.25
LA2.98
AR2.11
MO2.67
IA2.57
MN2.71
NJ 2.55
DE 3.46
MD 2.48
DC 4.21
ME2.72
NY2.30
PA2.43
VA2.37
WV1.99
OH2.41
NC2.25
SC2.64
FL2.80
GA2.27
AL2.26MS
2.57
KY2.04
TN 2.11
ND3.44
SD2.93
NE2.73
KS2.23
OK2.19
TX2.55
CO3.00
NM2.81HI 2.87
AZ2.56
UT1.52
MT3.08
WY3.12
NV3.87
OR2.81
WA2.58
Private Stores
State ContractMixed
State Owned
Source: Spirits volume, DISCUS; Wine and Beer, Adams Handbooks.
Arch-Conservative Governors Want to Privatize Everything They Can
Budget crises serve as an excuse Privatizing WA cost Costco $27M ID, OH, PA, VA, AL actively in play History of bargain-basement prices 3 libertarian analyses claim state
control has no effect on consumption or harm
Refuse to disclose their funders
Those Analyses Are Shell Games
All 3 analyze “control” states including states with state monopolies only on wholesale sales to retailers
All 3 use language & testimony & op-eds that cause readers to assume control states have retail sales monopolies
They do not
6 of their 18 “control” states have no retail controls
Of their 8 “full control” states, PA & UT really are; they have stores run almost entirely by state employees; 3-4 contract out retail sales to a few tightly controlled outlets, & 2-3 exercise no control over retail sales or contract with all comers
In 2 of their “moderate control” states (NC & VA), all spirits are sold at retail by government employees. They class ID as moderate control.
Why Does the Private Sector Want to Buy Idaho’s Liquor Business at Fire Sale Prices
Annual Sales Profits
$143 M
$50 M
Objectives of My Idaho Study
Estimate Consumption impact of privatization Resulting harms Costs of those harms to state
government
METHODSModified a privatization model I helped develop for Sweden (Norstrom et al, Addiction, 2010)
New CDC Community Preventive Services Task Force systematic review
44.4% rise in consumption of a beverage (e.g., wine) when sales of that beverage are privatized
No effect on sales of other alcoholic beverages
48% Is Too Simplistic & Mainly Based on Wine
States are starting from different places Some states dictated how much to increase
the number of alcohol outlets; outlet density affects consumption
Consumption rises because private stores are more numerous, open more days/hours, advertise more, run price promotions
Some states still regulate that
To Estimate Effects on Outlet Density
Gruenewald et al. (ACER, 1992): likely outlet rise of 314% once the dust settles
How Does Density Effect Consumption Gruenewald et al. (US, ACER, 1992, 1993):
spirits consumption rises by 1% for every 10% rise in outlet density
Implicitly includes rise due to change in sales hours, advertising, & prices
State employees are incentivized to enforce; private vendors profit from lax enforcement
Retail monopoly on liquor reduces underage binge drinking and impaired driving deaths
(Miller et al., Acc Anal & Prev 2006)
Binge Drinking Alcohol-Involved Fatal Crashes
9.9%
5.5%
% Alcohol Consumption = Spirits
ID US
26%
32%
5.6% Alcohol Consumption Rise If Privatize (21.6% Rise for Spirits)
Adult Underage
5.0%9.9%
19.0%
37.6%All AlcoholSpirits
% Consumption Increase
Underage22%
Adult78%
Drinks per Year Consumed in Idaho by Underage Customers
Before After
100 M110 M
That’s 60 More Drinks/Year per Youth Aged 14-20
Legal Drinker Underage
1.8
4.7
Why Does Hard Liquor Appeal to Kids?
Tall 6-Pack
Wine Liquor
7.7 6.6
21.1
Standard Drinks per Container in ID
What’s the Harm?
Alcohol Abuse Cost $704B in 2009
Other Injury28%
Public Order/Supply0.3%
DWI18%
PropertyCrime
1%
Violence17% Illness
36%
Alcohol Abuse Cost $704B in 2009
Other Resource3%
Work24%
Medical9%
Criminal Justice3%
Quality of Life61%
Underage Drinking Cost $62B in 2009
Violence57%
DWI Crashes16%
Property Crime 8%
Risky Sex 8%
Other Inj3% Poisoning 1%
Treatment4%
FAS2%
Assumed average societal harm per drink consumed applies to increased consumption
Separate calculations for adult & underage consumption
Conservative; assumes the added drink is no more likely to be over the blood alcohol limit than the average drink when less was consumed
$195 Million Annually in Societal Harm If Idaho Privatizes
Other Injury27%
Public Order/Supply0.3%
DWI17%
PropertyCrime
1%
Violence17%
Illness36%
Risky Sex1%
Crime-Related Costs Dominate the $9 Million State Government Bill
Medicaid17%
Income & SalesTaxes 13%
Criminal Justice70%
Costs of Retaining Privatization
Govt: loss of liquor & corporate income tax revenue from all private sales & sales tax from added sales
Society: loss of pleasure from consuming additional alcohol – used an upper bound estimate: cost = the purchase price of all added alcohol that adults would have drunk when their BACs were less than .08
Legal Drinker Underage36% >.08
100% (21.6% of
all added)
% of added drinkingthat is legally questionable
Other consumption lacks standing Cost = 50.2% of the purchase price
of sales foregone Coincidentally that equals the 50%
profits a privatized alcohol industry would have earned on the legal and illegal sales
Societal Return on Investment if Retain Monopoly Liquor Sales = 12.6:1
Costs Benefits
$15.5 M
$195 M
Each $14 bottle of spirits not sold saves $88
Medical Other Re-
sources
Work Quality of Life
$9 $6
$21
$52
Ethanol tax rates on beer & wine are equalized in Idaho
If ethanol in liquor was taxed at the same rate as in beer & wine, tax would be $1.40/gallon
With privatization, ID legislature would choose a tax rate
Gov’t Return on Investment from Retaining the Liquor Monopoly, by Tax Level Legislated
Alcohol Tax (also pay 6% sales tax)Per Gallon Per Fifth
Return on Investment
$1.50 (= beer & wine) $0.30 5.65
$2.25 $0.45 4.7
$3.00 $0.60 4.0
$5.00 $1.00 2.9
$10.00 $2.00 1.7
$15.00 $3.00 1.2
$18.93 $3.97 1.0
Limitations
Model has not been validated Conservatively assumed mean harm per
drink applies Except for underage drinking, used national
harm rates rather than state-specific rates; did adjust to state-specific prices, tax rates, & Medicaid cost matching rates
Conclusion
Since Idaho’s retail liquor sales are run by state employees and contractors whose profit does not rise as sales rise, privatization will greatly increase alcohol consumption
If the state privatizes, Idaho residents will suffer $195 million/year of harm and the state budget is likely to suffer