A study committee formed to examine Mississippi’s state-owned alcohol distribution system could recommend keeping the status quo, transition it to a public/private corporation like the Mississippi Lottery Corporation or even completely privatize it.
State Rep. Trey Lamar, R-Senatobia, and chairman of the House Ways and Means Committee said all three possibilities will be scrutinized when the study committee meets in the fall.
“This is a large sector of our private economy and currently, we’re not doing as well as we can. We owe the citizens to look at how we can improve and what’s the best structure for doing that,” Lamar said. “We’ve got to get a handle on what the need is and look at all the possibilities. We’ll examine whether this is a business that government needs to be involved in or not.”
Mississippi is one of 17 states nationwide that are known as control states, which means government handles wholesale distribution of wine and spirits and even retail, like Alabama. The state owns a 211,000 square foot warehouse in Gluckstadt that contracts with a shipping company to deliver product to customers.
The committee’s work is even more relevant considering the problems with the state’s Alcoholic Beverage Control (ABC) warehouse and the task of distributing wine and liquor statewide.
The Department of Revenue (DOR) reported the warehouse has endured a 29 percent increase in case sales, shipping 1.3 million cases in the last four months. That’s an additional 300,000 cases from the same time period last year. The increase caused a backlog in orders being shipped.
The numbers for fiscal year 2020 show the strain on the system. For the fiscal year that ended June 30, the DOR transferred $88.62 million in ABC collections to the general fund compared to fiscal 2019, when $81.3 million was transferred to the general fund.
Proponents of reform of the state’s distribution system, such as Sen. Scott Delano, R-Biloxi, say the delivery issues are an admission by the DOR that it might not be able to run a multi-million wholesale delivery system.
“The state’s approach to handling alcohol is the same model put in place during the 1940s,” Delano said. “We need to explore a completely new model, a model where, as the ABC acknowledges, government is less involved. I’m open to exploring all options, for both warehousing and retail.”
As for a new model, the Mississippi Lottery Corporation (MLC) is one that could be emulated. This legislatively created corporation has a board of directors chosen by the governor with the advice and consent of the state Senate. It is subject to public records laws with a few exceptions and the board’s appointment of a corporation president is subject to approval by the governor.
A minimum of 50 percent of the lottery’s revenues are required by law to be awarded as prizes.
MLC board member Gerard Gibert, who is the former CEO of Venture Technologies, said the lottery model is excellent and that a similar setup would be a good fit for the ABC. The lottery has transferred $70.73 million to the state treasury in fiscal 2020 and these funds will go to transportation projects statewide, as required by state law. Any revenues above $80 million will be transferred to K-12 education.
Pure privatization would transfer alcohol distribution to private wholesalers, much as has been done with beer statewide. The downside of this possibility is the state would lose about $80 million annually in profit from the warehouse. Lamar said the committee will have to examine whether excise tax hikes would be required to recoup the revenue lost if the state completely divests the warehouse.
Mississippi and Alabama are the only control states in the region. The rest have alcohol distribution handled by the private sector.
Lamar also mentioned the committee will also examine whether warehouse upgrades and more staff might be a solution. In past legislative sessions, bond bills that would’ve raised funds for ABC warehouse upgrades have not made it out of committee.
The study committee will be led by Lamar and Sen. Josh Harkins, R-Flowood, who chairs the Senate Finance Committee. The group will have 13 other legislators chosen by July 31.