Where does the money from ABC stores go?

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There has been a lot of talk about the sale of and taxes on alcohol, but not as much discussion of where the money goes once it is collected.  There are federal excise taxes on different types of alcohol that go to the federal government, but on top of those there are also state excise taxes on alcohol.  Beer, fortified wine, unfortified wine, and spirituous liquors all have state imposed excise taxes.  The money from these taxes goes to local governments, the civil penalty/forfeiture fund, as well as the State’s General Fund.  In fiscal year 2011-12, there were $321.6 million in state alcohol excise taxes collected.  That total was distributed in the following ways: $34 million or 10.6% to local governments, $102,000 or 0.03% to the civil penalty/forfeiture fund, and $287 million or 89.4% to the General Fund.  That is just the excise taxes.  Through the sale of liquor in ABC stores, approximately $829 million is generated in revenue each year.  See the chart below for the total revenue collected by ABC stores in North Carolina and the breakdown of the distributions for 2013.

There is a vocal group that wants to privatize the ABC Commission, an idea that would allow private businesses to sell and distribute alcohol in the state.  After the 1960s, many states started to loosen their monopoly on alcoholic beverage sales, and some states even sold all their state liquor stores to private owners.  Today only 18 states use a control or monopoly system over the sale of alcoholic beverages, North Carolina being one of them. 

There are many arguments that support each side, but in North Carolina, there is one argument that needs more attention.  The majority of money collected from the local sale of alcohol doesn’t stay in the community where the alcohol is purchased.  If the ABC Commission was privatized, the profits from the sale of alcohol wouldn’t be tied to any state budget and would instead stay in local economies.  Allowing private sector entrepreneurs to sell alcohol would improve efficiency and drive down prices.  Private business owners would use the profits to hire more employees or invest within the local community — thus keeping all the money earned and collected from the sale of alcohol local instead of sending it to Raleigh for politicians to use.

If privatization isn’t an option, local governments should have more control of the money collected in their local ABC stores.  The local boards are established and operated with no state funds, yet they are required to turn over almost 90% of their collections to the state’s general fund with no promise of getting any of the money back.  A recent example was in 2002, when there was a budget shortfall.  Governor Easley signed an executive order to take the local distribution amount from ABC sales and put it into a special reserve fund to offset the budgetary shortfall.  That year, local cities and counties then had to manage their own budgets in the midst of a recession without revenue generated within their own jurisdictions.  If the distribution was changed and legally protected, then the tax revenue from alcohol sales would stay in local communities and out of Raleigh.

In advocating for more local control of alcohol sales, one must understand where the money currently goes.  Each county has its own ABC board and it, along with local elected officials, decide where to distribute the money from ABC stores.  Each county distributes its money differently.  Below are examples of counties from different parts of the state to demonstrate the differences.

Privatization is the best solution for the consumer.  The next best option is to rework the distribution formula and allow more money to be kept in the local communities where alcohol is sold.

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