Thursday, September 2, 2010

$#*! My Liquor Board Says, Episode 1

Unfortunately, LCB officials eager to hold onto "their" retail empire, have resorted to spreading false information about I-1100's alleged impacts in order to frighten voters into voting NO.

Perhaps the most outrageous $#*! the LCB says is that the state store "mark-up" is the sole source of funding for LCB operations, including licensing and enforcement.  Therefore, they claim, loss of the state stores would leave enforcement "unfunded".

In recent days, LCB spokesman Brian Smith has been quoted saying this to both the Seattle Weekly (here) and The Stranger, here:
"We pay for ourselves in the markup," says Brian Smith, spokesman for the WSLCB. "Without it, we can't run enforcement, licensing, alcohol-awareness programs, or the liquor control board."

Baloney. According to the LCB's own internal financial documents, which we've obtained, 100% of the board's funding for licensing, enforcement, education, rule-making (everything except merchandising) comes from a dedicated portion of the wine tax and from license fees and penalties. None of it came from store sales. The current funding sources are untouched and retained by I-1100.  Furthermore, I-1100 specifically requires all fees from new liquor licenses to be spent on licensing, enforcement and abuse prevention (See Sec. 1.9 of the Initiative Text) -- that's several million of dollars of additional funding a year, depending on the number of new licenses.

The Gory Details
See the Operating Statements for FY 2009 and FY 2010 respectively. Notice how the LCB strictly segregates revenues and expenses for Merchandise Function from those of the Licensing and Enforcement Function.  The LCB spent $18.6 million on licensing and enforcement  in FY 2009 and $16.8 million in FY 2010.  Everything having to do with Licensing and Enforcement is funded out of the total Wine and Beer Taxes and Licensing Fees and Penalties, with a large "Net Revenue" left over after the operations are funded. Other LCB documents we've reviewed show that the Licensing and Enforcement function is almost entirely paid for by the wine tax, with but a small portion coming out of license fees. The dedicated funding from the wine tax is confirmed by the OFM's Tax Reference Manual , specifically in the Wine Tax section.
"Basic tax of 20 cents per liter (3.59 cents for cider); receipts go to the liquor revolving fund from which expenses of the Board are first funded"
On top of this, other LCB documents also show that all of the Beer Tax (about $30 million a year) and nearly all of the Licensing Fees ($11 - 12 million a year) are distributed and advertised by the LCB as part of the "profit" from the state stores. Seriously. The internal documents seem credible, but in public issuances they're padding the numbers.

(We don't want to bury readers with too many details, but we'll provide additional confirmatory documents upon request)

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