Auditor questions state’s role in liquor sales

State Auditor Doug Hoffer is questioning why the state is in the business of selling liquor, a substance that it also regulates.

Hoffer’s office issued a report Monday that examines the impact of privatizing the state’s liquor distribution system. The auditor’s report also suggested ways the Department of Liquor Control could increase its profitability without privatization.

Hoffer questioned why the state still distributes liquor 80 years after the end of Prohibition.

“We license and regulate tobacco, but we don’t sell it,” Hoffer said in an interview. “It’s hard to see how selling liquor is a core function of state government.”

Michael Hogan, commissioner of the Department of Liquor Control, said Hoffer’s report was “fair,” but he disagreed with the auditor on the benefits of privatization.

“There are some things in the report that we could do, and are doing,” Hogan said. “But time has proven [this system] works. I don’t think it’s a broken system.”

Hoffer’s report acknowledges that privatizing liquor sales would be revenue “neutral,” meaning it wouldn’t increase or decrease the state’s earnings from the sale of spirits in Vermont.

Hoffer said the state’s role in the distribution of liquor and in the enforcement of licenses constitutes a “dual mission.” The state is interested in the money generated through liquor excise taxes but at the same time is focused on regulating its consumption.

The state reported about $70 million in liquor sales in 2013, according to the auditor’s report. That resulted in $30 million of revenue for DLC, which sent about $18 million into state coffers after deducting its operating costs.

Hoffer’s report included recommendations that DLC perform analyses to determine the right number of stores and locations; study the size and efficiency of its warehouse; review its pricing policies; and examine its inventory control methods.

Hogan said some of those recommendations are underway and others require money for which the department has not budgeted.

DLC has budgeted $30,000 for a study of warehouse size and efficiency in FY 2016, if approved by the Legislature, Hogan said. He also said a new point of sale (POS) system will be rolled out in the spring that will help the department gather better sales information.

Hogan said much of his department’s work is focused on educating servers, inspecting licensees and protecting public safety, but acknowledged that those functions could continue regardless of whether the state controls the distribution of liquor.

Hogan and Hoffer agreed that privatization could lead to higher prices, and Hogan said it could lead to fewer choices for consumers. Hogan said an increase in liquor outlets, such as allowing sales in big box stores, could result in more retail theft and increase the access to liquor among minors.

Hoffer said privatization would create competition for liquor licenses, which are now virtually permanent.

“Store locations never go out for bid,” Hoffer said. “Periodic bidding can lead to different outcomes. As it is, stores take no risk … the state sets the prices and provides the inventory.”

Hogan said he was not aware of any planned legislation to privatize liquor sales.

Tom Brown

Comment Policy

VTDigger.org requires that all commenters identify themselves by their authentic first and last names. Initials, pseudonyms or screen names are not permissible.

No personal harrassment, abuse, or hate speech is permitted. Be succinct and to the point. If your comment is over 500 words, consider sending a commentary instead.

We personally review and moderate every comment that is posted here. This takes a lot of time; please consider donating to keep the conversation productive and informative.

The purpose of this policy is to encourage a civil discourse among readers who are willing to stand behind their identities and their comments. VTDigger has created a safe zone for readers who wish to engage in a thoughtful discussion on a range of subjects. We hope you join the conversation. If you have questions or concerns about our commenting platform, please review our Commenting FAQ.

Privacy policy
  • Paul Denton

    I don’t see anything wrong with the system we have now.

    If it ain’t broke, don’t fix it.

  • Rep. Tom Koch

    Auditor Hoffer has a good point, in theory. But in practice, the conflict of interest he perceives has not materialized. So to correct a merely theoretical problem, he proposes a system that he admits will result in higher prices. That, of course, will drive more people to New Hampshire, which already has consistently lower prices than Vermont. Leave it alone–there are other things in Vermont that truly need fixing!

    • It seems like everything in New Hampshire is cheaper. One has to wonder…

  • Glenn Thompson

    I have no problem with Hoffer questioning the state’s role in liquor sales. 18 states currently control liquor sales or monopolize jurisdictions. Arizona does not!

    From the article!

    “Hogan and Hoffer agreed that privatization could lead to higher prices, and Hogan said it could lead to fewer choices for consumers.”

    It appears liquor on avg is cheaper in Arizona than Vermont. But I can’t say for sure without doing specific comparisons? In Arizona, one can purchase liquor about everywheres including drug stores. Competition does exist. As for selection. Selections are limited in smaller outlets, but in larger outlets there is a very large choice and many liquors I’ve never heard of.

  • If it ain’t broke don’t fix it?

    What’s broken is government involved in distribution of a consumer product. State control of liquor is a relic of the reaction to the repeal of Prohibition back in 1933 – almost 81 years ago. If the government couldn’t prohibit the sale of alcohol they for sure wanted to control it – and government control of ANY public activity is something we all know is not good – do you like the NSA reading your e-mail? How about police searching your car because you have a broken tail light?

    It’s ridiculous that states like Vermont, with their otherwise progressive political climate, should still have the cold, dumb hand of government control over liquor sales.

    The arguments about ‘less consumer choice’ are ridiculous – how is a state-controlled agency going to have any sense of what people want to buy?

    Get a brain, Vermont, and kill this state agency – it’s costing the taxpayer’s money (yeah, it makes a profit – with, I’m sure, many hidden costs) that could go into the real economy – not the government’s ‘economy.’

    wb

    • Paul Denton

      That’s a silly ideological objection. Government sales work fine in both NH and Vermont. Why mess with it and end up with higher prices to boot?

      My question is; doesn’t the state auditor have better things to spend time and effort on?

      • What’s ‘ideology’ about demolishing reactionary State response to a US Constitutional change dating back 82 (now) years?

        If politics were all labeled ‘ideology’ we might as well have Joe Jughashvili running things.

        wb

  • Privatization usually leads to more competition and lower prices. Eliminates another Govt. agency with no incentive for efficiency and an incentive for private dealers to offer more diverse products and compete with NH which would generate more tax revenues for the State. As it is now a very few retailers have a guaranteed no competition money machine.

  • sandra bettis

    ‘Privatization usually leads to more competition and lower prices’?????
    Are you kidding???? Think out of state prisons, think the insurance industry – privatization NEVER works!!!!!!

Thanks for reporting an error with the story, "Auditor questions state’s role in liquor sales"