Matthew Mann
September 20, 2012 | Compliance | Matthew Mann

Privatization – Oregon Goes Its Own Way

An interesting series of articles recently ran in the online edition of the Oregonian newspaper, www.Oregonlive.com, discussing how the issue of privatization has caught life in Oregon after the recent transition to private sales of distilled spirits in Washington state.

Of particular interest to me are the reader comments that follow the articles, as they give more insight into the concerns, attitudes, and deeply held moral and economic philosophies of the general public driving the debate as the political battle moves forward.  Despite the divergent motivations on which the parties’ positions hinge, in part arising from the historical context surrounding the regulation alcohol after Prohibition, I see some common ground in an area fraught with contention.

Historical Context
I’ll spare you the history lesson on the 21st Amendment.  You already know that stuff.  Suffice it to say, coming out of Prohibition and the real and imagined “evils” of drink that led to it, most states’ laws regulating alcohol were designed to place restraints, of varying restrictiveness, on the production, sale and distribution of the product.  The manner and degree covered a broad range based on local customs, morals, political will, and as reaction to the public health impact alcohol had on local society while legal.  The common thread, and the core of the 21st Amendment, was that the type of regulatory system chosen, whether control or licensed, should be decided at the state and local level based on the desired goals of the local populace.

Uniquely Oregon
Oregon is rightfully proud of its widely-recognized fine wine reputation and its increasingly successful craft brewery and distillery industries.  When reading through the reader comments nearly all agree, either explicitly or implicitly, that how to deal with privatization requires is a distinctly Oregon solution.  It is of little consequence that the privatized market of California to the south, and transition model of Washington to the north, offered distinctly different approaches to modifying the Oregon control system to bring it into the 21st century.  This is a local issue requiring a local response and Oregonians are not interested in emulating the open California model or repeating the perceived mistakes made by Washington.  The articles and comments make clear Oregonian’s view their system as distinguishable from their neighbors.  Simply forcing either model onto the Oregon system will not properly address the unique needs of Oregon.

An example of the unique nature of the issue is the status of workers at state-controlled liquor stores.  It was a primary concern in Washington but seems less so in Oregon due to a significant difference that could dramatically impact the ultimate resolution.  Unlike Washington, Oregon retail liquor stores are privately owned by “state agents”, who operate within narrowly defined rules and purchase spirits directly from the state distribution system.  While Oregon Liquor Control Commission (OLCC) employees are state workers, retail store employees are not, and are not represented by the public employees’ union or participate in the state pension system.  In Washington, a large state employee constituency was highly impacted by the result of privatization and mobilized to fight it.  In Oregon, privatization could potentially affect Oregon liquor store employees, but does not directly impact the state payroll and pension systems.  The result is a diminished employee opposition to privatization in Oregon and the decision-making process will occur in an environment much different than Washington’s.

Archaic, but Effective?
There is also common ground in acknowledging the 80 year old laws governing alcohol are archaic.  Even supporters of the status quo admit times have changed since the end of Prohibition.  Both agree that it’s time to review and modernize the law.

Where the sides come apart is whether the laws are still effective, and the answer for each depends on what the laws are designed to address.  Control supporters argue the laws have, and still do, effectively address issues of criminal infiltration, ameliorated or fraudulent product, public health and drunkenness, and taxation.  Privatization advocates claim such issues, once of importance, are no longer a serious problem.  They argue the laws are based on outdated moral codes, impinge on individual freedom and, particularly regarding taxation, could be better addressed by loosening the restrictions and creating market efficiencies.  They seek broader and deeper reform, directed not just at the laws themselves, but the fundamental purpose and mission of the OLCC.

Control supporters aren’t looking for a full-scale reform of the system, preferring a measured review of each regulation and reforming those clearly out-of-date.  Of note they point to a test program wherein select grocers currently selling only beer & wine could also sell distilled spirits in a segregated area of the store.  Privatization advocates will likely argue the program doesn’t go far enough, as grocers are still required to purchase the spirits from the state-controlled distribution system.

Interesting Viewing
In a world of complex issues of great import, alcoholic beverage regulations are pretty inconsequential.  Still, Oregon will be interesting to watch.  Whether imbiber or teetotaler, access to and use of alcohol touches on personal social perspectives beyond the mere issues themselves.  They are contentious because they reflect on deeply held views on moral, social and economic philosophy. As with all things, change is inevitable.  That both sides recognize this basic truth is the primary common ground necessary for a resolution of the competing ideologies.  Somewhere in between, they will likely find the answer that is the best fit for Oregon.


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