Privatizing Idaho’s Liquor Stores: What’s the Harm? Ted R Miller, PhD PIRE or NO CONFLICTS OF INTEREST Funding: Robert Wood Johnson Foundation Public Health Law Project

State-Owned & State Contract Retail Stores (11 States & Arguably AL)

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

Objectives of My Idaho Study Estimate Consumption impact of privatization Resulting harms Costs of those harms to state government

METHODS Modified 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)

% Alcohol Consumption = Spirits

5.6% Alcohol Consumption Rise If Privatize (21.6% Rise for Spirits)

% Consumption Increase

Drinks per Year Consumed in Idaho by Underage Customers

That’s 60 More Drinks/Year per Youth Aged 14-20

Why Does Hard Liquor Appeal to Kids?

Standard Drinks per Container in ID

What’s the Harm?

Alcohol Abuse Cost $704B in 2009

Underage Drinking Cost $62B in 2009

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

Crime-Related Costs Dominate the $9 Million State Government Bill

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

% of added drinking that 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

Each $14 bottle of spirits not sold saves $88

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) $ $2.25 $ $3.00 $ $5.00 $ $10.00 $ $15.00 $ $18.93 $

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