2010 Control States Executive Forum

Control states faced many changes and challenges this year. The trying times aren’t over yet, but the officials StateWays contacted for the twelfth-consecutive Executive Forum are optimistic about the future. The officials promote responsibility, embrace technological advances, detail expanding their departments’ role in education and compliance, and publicize achievements of new business initiatives.


The recession is still impacting revenue in many states, but the industry is weathering the storm surprisingly well. Many states saw revenue increase in 2010, and commissioners found creative ways to maximize efficiency and improve sales. The greatest challenge for control states may be a swell of support among state legislators, governors, and voters for privatization. Nearly half of the states we surveyed face the possibility of privatization, to varying degrees.


Another common theme expressed by the control state officials is the need to upgrade technology and digitize records. By moving licensing online and adding in-store kiosks or state-of-the-art POS systems, states are realizing their constituents expect a seamless experience across channels.


Thank you again to the control state commissioners, chairpeople, administrators, and other officials who provided a snapshot of their jurisdiction. These comments paint a picture of the health of the industry, and provide a roadmap for moving it forward.


 


IDAHO


Jeff Anderson, Director, Idaho State Liquor Division


The past year saw significant changes at the Idaho State Liquor Division (ISLD).  Long time Director, James M. “Dyke” Nally, retired on April 30th after guiding the division for over 15 years.  Dyke leaves a lasting legacy and a strong foundation from which to build for the future.  He served the people of Idaho, ISLD Associates, and NABCA with distinction.  He will be missed by all.


I’ve assumed a dual role as Director of both the ISLD and the Idaho Lottery.  This wouldn’t be possible without the great teams we have at both agencies and I look forward to working with my colleagues at NABCA.


The ISLD executive team was reorganized in May 2010 to include four deputy director levels of accountability.  The new deputies are:  Bill Applegate, Deputy Director for Procurement & Distribution and Chief Deputy; Tony Faraca, Deputy Director for Finance & HR and CFO; Keven Lowe, Deputy Director for IT & Security; and Tom Legerski, the newly appointed Deputy Director for Retail Operations.  The reorganization coincided with the completion of a legislatively-mandated reduction in force that required a permanent elimination of positions.  A same-store total personnel cost reduction of 3% for FY10 was borne largely by retail operations.  An additional 2% for FY11 came from the central office. 


Sales for FY10 increased 2 percent, with distributions to the people of Idaho up 3 percent.  Premium brands generally followed national trends and continued to lag in sales, while consumers traded down to popular and value brands.  Case sales are stable.  Some border locations saw marked increases in sales, up an average of 20 percent due to our statewide uniform pricing. 


This November, Washington State voters will be deciding on whether to privatize the spirits business in their state.  Consequently, we’ve reconsidered an expansion project in Post Falls, Idaho pending the outcome of ballot initiatives 1100 and 1105.


We successfully completed our distribution center upgrades.  The new Automated Storage and Retrieval System (AS/RS) allows the ISLD to improve efficiencies while we scale our facility for the years to come.  Particular kudos goes to Deputy Directors Bill Applegate and Keven Lowe and their teams.  It’s been a gargantuan project for Idaho.  Thanks also go to Interlake Mecalux and Intek Integration Solutions for their help in making it a reality.


As Always – Idaho, “Esto Perpetua”


 


IOWA


Stephen Larson, Administrator, Iowa Alcoholic Beverages Division


Even though I just began my term as Administrator of the Iowa Alcoholic Beverages Division in May, I have over 25 years of experience in state government. I have spent much of my time at Iowa ABD getting to know the staff and learning the alcoholic beverage industry. Although there is much more for me to absorb, my staff and I are ready to fine-tune the division’s focus on four main areas: public service, efficiency, accountability and transparency.


The Division plays many roles within the state of Iowa. It is charged with licensing, regulation, enforcement, and compliance of alcohol laws, as well as generating revenue for the state through the sale and distribution of spirits and collection of taxes on beer and wine. We are committed to providing a valuable public service for our partners including, but not limited to licensees, industry members, and the citizens of Iowa.


Looking to the future, a new focus on education and outreach is vital. The Division is seeking partners in providing valuable education on the dangers of over-consumption, driving under the influence, underage drinking, and other societal issues regarding alcohol. Additionally, we will be renewing our outreach efforts to licensees and stakeholders to help them follow the law while running a successful operation on a level playing field.


Preliminary sales numbers for fiscal year 2010 are projecting to continue the trends we’ve seen in Iowa over the last few years. Spirits sales rose 2.9 percent and wine sales were up 5.4 percent.  Beer sales are projected to be flat. The Division expects to transfer nearly $100 million in profits to the State.


While talk of privatization seems to be sweeping the control states, the idea of transferring spirits wholesaling into the private sector didn’t make it into legislative discussion in Iowa. However, budgetary constraints and a less than booming economy have renewed the state’s focus on efficiency.  The Iowa ABD is in the process of automating the liquor ordering system by adding online ordering as well as Electronic Data Interchange (EDI) for larger chain outlets. The system will greatly improve inventory management, which will free up limited warehouse space by more efficiently using existing storage locations. The system is expected to increase warehouse worker productivity by using task interleaving.


One legislative issue that we expect to see back on the table next session is liquor sales in convenience stores. If passed, the number of off-premises liquor outlets could double from the current 700 stores. We are presently analyzing the prospective increased revenue versus the potential logistical and societal costs in order to give lawmakers necessary information to make an informed decision.


In the few short months since I came on board, the staff has addressed past issues and completed reorganization of the division. Currently, we are focused on transparency and accountability while ensuring a level playing field for the industry. Moving forward, the IABD will be dedicated to providing valuable public service in the areas of education and community outreach and increasing efficiency. The Iowa Alcoholic Beverages Division is working hard in the present to positively reshape its future and image.


 


MAINE


Dan Gwadosky, Director, Maine Bureau of Alcoholic Beverages and Lottery Operations


The Maine Bureau of Alcoholic Beverages works in cooperation with its wholesale liquor distributor and 380 privately owned agency liquor stores across the state. The Bureau works daily with the Department of Public Safety on issues of enforcement and advertising. We also collaborate with the State Attorney General’s Office to evaluate our distilled spirits listing process, initiate programs to further educate the public on the issues of furnishing alcohol to minors, and more generally the challenges of illegal consumption on college campuses.


Year-to-date case sales in Maine are up 3.4 percent, while total sales are up 3.3 percent. The top 20 products in 2010 account for 27 percent of overall sales. Allens Coffee Brandy continues to be our number-one selling product, which represents 13percent of overall sales (all sizes combined). We have seen some trending to value brands, however in Maine not in all cases. For example, Jim Beam combined case sales decreased, while Jack Daniels increased by 1.96 percent.


This year Maine will be looking to eliminate the existing restriction that distilled spirits must be placed in a predetermined and confined area while beer and wine can be marketed almost anywhere in an agency store. This provision is a relic of the past and is no longer consistent with evidence-based research that suggests that alcohol is alcohol and polices that treat beer, wine and distilled spirits the same when it comes to tastings, sampling and product placement on the floor allow for greater consistency for consumers, ease of administration for regulators, and enhanced marketing and predictability for industry.


In addition, the Bureau is working in conjunction with the Department of Public Safety and other state agencies to create an online offering of a certified seller/server training program. Recent legislation allows the Department of Public Safety to consider seller/server training as a condition of licensure, and the need for a more accessible training option is in high demand from business owners across our state.  It is our collective goal to ensure all sellers/servers have the training they need to reduce the irresponsible sale or use of alcohol beverages.  An online, readily accessible resource will tremendously help obtain that goal.


Maine continues its mission to effectively regulate the beverage alcohol industry, ensure responsible business practices, and create a favorable economic climate while prohibiting sales to minors.


 


MICHIGAN


Nida Samona, Chairperson, Michigan Liquor Control Commission


The hospitality industry in Michigan is one that brings jobs to the state and contributes to economic growth. Holding a license to sell alcoholic beverages can be considered an important component of being competitive and profitable within the industry. The Michigan Liquor Control Commission (MLCC) prides itself as being a high performance agency excelling in customer service, revenue generation and public safety.


This past year, the MLCC has been working closely with Michigan Business One Stop (“MBOS”). MBOS is a Web portal that will provide the opportunity for over 650,000 businesses doing business in Michigan to access a secure online (one stop, one service) system.  In addition to accessing a wide variety of resources and links to information to assist them in starting, operating and expanding their businesses in Michigan, registered businesses will be able to use the Web portal to complete a wide range of business tasks including obtaining new licenses and permits, renewing licenses and permits, filing annual reports, paying taxes, and paying unemployment insurance.  The system is designed to store information among multiple state departments, thereby eliminating the need for businesses to provide redundant information to departments and agencies.


MBOS began its evolution with the departments and agencies that have simplified licensing and permit systems.  The MLCC licensing system is about as intricate as it gets, with a variety of complex licenses and permits.  MBOS and the Department of Technology, Management & Budget (DTMB) are now embarking into our world, and we’re working with DTMB analysts to develop the MLCC licensing structure within MBOS.  Ultimately, through MBOS, our customers will be able to generate task-specific applications that will be electronically submitted to MLCC along with any necessary attachments and fees.  This process also involves the creation of new online applications, which we are using as an opportunity to work with MLCC staff to review and update our current applications to ensure that we are capturing the information necessary for today’s Commission and for future Commissions, as well as looking to make the applications more user-friendly for our customers. 


We are also very excited to introduce the newest feature to our website, an application status-checking database. This feature will help check the status of new applications, outdoor permits, special licenses, and add-ons. It is anticipated this feature will eliminate a majority of the more than 2,500 status calls answered monthly by the Commission Licensing staff.


The MLCC licensing division processed over 4,000 licensing transactions, and issued over 2,000 Special Licenses for non-profit charitable organizations. In 2009 this division mailed almost 19,000 retail, non-retail and escrow renewal applications. We are encouraged by this year’s results and look forward to continued success in the years to come.


 


MISSISSIPPI


Alice Gorman, Deputy Commissioner, Mississippi Department of Revenue


The Mississippi State Tax Commission no longer exists!  No, we didn’t shut the doors and stop collecting taxes and selling alcohol down here, we just restructured and changed our name.  At our request, the legislature spun off the appellate group, or The Commission, who held hearings for aggrieved taxpayers and ABC permit holders into a new body named the Board of Tax Appeals.  To avoid confusion with the name, the agency became the Department of Revenue on July 1, 2010, and the State Tax Commission ceased to exist.  The Office of Alcohol Beverage Control, which includes the permitting, sales, enforcement, and general ABC administration, continues to be a part of the DOR.  J. Ed Morgan was reappointed by Governor Haley Barbour for a six year term as Commissioner of Revenue beginning July 1.  He had just completed 18 months of the unexpired term of the former commissioner.


Privatization discussions affect many control states, and Mississippi is no exception.  During our 2010 legislative session, a bill was introduced to privatize a portion of our wholesale operation – our wine business.  Mississippi’s retail wine and spirits stores are already privately owned, but the state is the wholesaler for all spirits and all wine above 5 percent by weight in Mississippi.  The proposed legislation would have allowed us to contract for the wholesale distribution of wine.  It did not generate much public interest.  Mississippi is still a ‘dry’ state, with local option to vote wet, and about 40 percent of our counties are dry.


Agency funding was critical this year.  We operate on a general fund appropriation for the entire Department of Revenue, which includes ABC.  The Governor mandated budget cuts during FY 2010 totaling 9.48 percent of our overall funding.  This drastic cut required us to take radical action to operate within our limited resources.  In addition to a self-imposed hiring freeze, we discontinued mailing ABC price books to permittees, furnishing them online instead.  We now issue purchase orders on special orders electronically and will extend this to bailment purchase orders soon.  Our bills of lading are sent electronically to our contract shippers and we post permittee invoices online during the month, mailing only a month end summary.  We were able to upgrade our scanning system for receiving product in the warehouse, and we completed the resurfacing of our truck yard.


Despite the economy, the total number of cases we sold in fiscal year 2010 (spirits and wine) was up 2 percent, or 52,000 cases over fiscal year 2009, and dollar sales figures were up slightly.  We ended fiscal year 2010 with eight more package retail wine and spirits permittees than in the prior year, and 46 additional on-premises (restaurant) permittees.


Our award-winning ABC Enforcement team continues to put special emphasis on criminal violations of state law; in particular, sale of alcohol to minors, detection of illicit distillery operations, and sales in the dry areas of our state.  In an effort to thwart underage drinking, we conducted special details in college towns to help prevent the issues which come from underage drinking, making over 700 arrests for various offenses relating to this, including usage of fake identification. 


We continue to have a good relationship between the ABC staff and the brokers and industry representatives and appreciate this association.  We believe open and honest communications to be in the best interest of everyone involved in the business, and look forward to a productive fiscal year 2011.


 


MONTANA


Shauna Helfert, Administrator, Liquor Control Division, Montana Department of Revenue


New developments seemed like the only constant in the past year for the Montana Department of Revenue’s Liquor Control Division. We have made significant improvements to our wholesale operations, customer service, and educational outreach programs. And as always, we continue to ensure that liquor is available to those adults who choose to drink responsibly. 


Overall Sales


We provide liquor wholesale distribution services to 97 contracted agency stores that service more than 1,400 licensed establishments and the general public. Montana’s citizens directly benefit from liquor sales, with nearly $35 million in liquor revenues going into the state and local government coffers to help pay for services. 


 Fiscal Year 2010, which ended on June 30, was a respectable sales period considering today’s economy.  Total sales showed an increase of less than 1 percent over FY2009, with our gross sales at $102.7 million.  Our volume of sales also increased, up 1 percent from FY2009.  


Improvements


We were fortunate to receive funding from the 2009 Montana Legislature, which will help modernize our warehouse and keep it viable for decades to come.  Major renovations are under way to improve energy conservation, streamline work flow, and provide space for the next 20 years.  We are focusing on operational effectiveness through a barcode scanning system, gravity flow racking, and optimized warehouse layout.    


The project started in April and is scheduled to finish up at the end of November.  Going forward, we will be a leading example of green business in Montana and will continue to look for opportunities to reduce energy consumption.


Responsibility


With Montana liquor sales continuing to increase year after year, it is important that we help ensure consumers are using alcohol responsibly.  Our educational goals are to promote the responsible use of alcohol beverages by adults, reduce underage demand, prevent underage access, and positively mold community norms.  


We have placed a direct focus on responsible alcohol sales and service training, and we are gaining momentum in this area.  We’ve added more than 200 certified trainers to our ranks in the past year, growing to 329. We have a large area to cover in Montana, and these volunteers make it possible to educate servers and sellers across our vast state.  


 


MONTGOMERY COUNTY, MD


George Griffin, Director, Department of Liquor Control, Montgomery County, MD


“Well, we made it!” That statement – an expression of both relief and survival – captures the sentiment of the Montgomery County Department of Liquor Control management team as we look back on the fiscal year that ended June 30, 2010. This past year was the most difficult and challenging one in memory for those of us charged with directing public agencies here in Maryland. After meeting the challenges of a tough previous year, we began the fiscal year on July 1, 2009, with an austere operating budget and knew we would again have to operate in a harsh economic landscape. The county’s revenue situation continued to deteriorate throughout the course of the year, however, and we were forced to craft two major additional “savings plan” reductions to our budget, along with instituting numerous operational cutbacks throughout the course of the year. Even though Liquor Control is an “enterprise fund agency” and is not tax-supported, we were not immune from participating in the necessary belt-tightening.  All the while we kept a wary eye on our sales results to see if the marketplace would provide us with the revenue necessary to allow the DLC to make our target contribution of net profits into the County General Fund.


Improving sales figures in February 2010 signaled a relatively strong second half of the fiscal year and we were able to meet our projected gross revenue figures. Our gross sales totaled $226,894,083, representing a total sales increase of 3.63 percent over the previous year. Of this total, $106,250,464 was generated in our DLC retail stores (an increase of nearly 6 percent over last year!). Our total wholesale revenue, representing sales to all licensees in the County, was $120,643,619. This represented an increase of 1.64 percent over last year, reflecting the nearly universal weakness experienced by the hospitality industry.  We also feel fortunate to have achieved our goal of maintaining the gross profit margin for all revenue at the level of 28 percent.  For the year that ended June 30, 2010, DLC made a contribution of $29,043,280 to the Montgomery County General Fund. We also provided debt service payments (to cover the costs of the Montgomery County Liquor Control Revenue Bonds used for capital projects) in the amount of $3,659,532. That means that for FY2010, DLC transferred $32,702,812 into the Montgomery County treasury.


We started the new fiscal year on July 1, 2010, with an extremely lean budget, mindful that the serious fundamental economic pressures of the past two years remain with us. We eliminated twelve positions from our workforce, and our employees are required to participate in a furlough program this year to further reduce workforce-related overhead costs.  The total FY2011 Montgomery County Operating Budget is lower in real dollars (total actual spending) than last years’ budget. This represents the first actual decline in total annual spending ever, and Liquor Control has been required to contribute our part to help keep the County fiscal house in order. This has required us to defer or eliminate some plans for expansion and program enhancements. We are still on track, however, to successfully implement the deployment of our new point of sale retail system, and to prepare for our relocation into our new warehouse facility in early 2012. I am also proud to say that, through hard work and wise allocation of resources, our Licensure, Regulatory and Education division continues to be a national leader in community-based alcohol educational and regulatory programs. Montgomery County DLC was honored to recently receive accolades for our Keeping It Safe Coalition on Under 21 Alcohol Use Prevention program. Both the National Association of Counties (NACo) and the National Liquor Law Enforcement Association (NLLEA) recognized our program with major national awards from their respective associations, and have cited this Montgomery County program as a “Best Practice.”


 


NORTH CAROLINA


Jon Williams, Chairman, North Carolina Alcoholic Beverage Control Commission


For North Carolina in the most recent fiscal year, the emphasis has been on legislative changes to governance of our state’s ABC system and new leadership of the commission.


In October, I was sworn in as chairman and a new commissioner, A.D. “Zander” Guy, also joined John Lyon to form our three-member Commission.  Since then, a thorough examination of North Carolina’s unique system of state-controlled distribution and independent authority of local government-controlled retail sales was prompted by embarrassing revelations about local board employee salaries and industry entertainment.  Modernization and reform of the state’s ABC system had been topics of study and conversation in North Carolina for several years.  Our Governor’s emphasis on transparency and accountability on the part of all governmental agencies led to action.  Lawmakers passed new legislation (HB1717) designed to increase the oversight authority of the cities and counties that appoint the members of the state’s 167 ABC boards, as well as increase authority of the state ABC Commission. New standards outlined in the bill also encourage clean, modern stores and efficient business practices.


The North Carolina ABC Commission, as the chief alcohol regulator for the state, also remains active in issues of public safety, public health and commerce across the alcohol industry. 


Public Safety:


The ABC Commission launched the Last Call Initiative in the spring to make local law enforcement agencies across the state aware of a tool available to them through the ABC Commission – summary suspension of alcohol permits for businesses with a recent history of violence. The Commission announced the Last Call Initiative at a meeting of the Metro Police Chiefs – the law enforcement leaders of our state’s largest municipalities.   The Commission is working with local governments to be more responsive in addressing local permit issues.


Public Health:


The Commission is reaching out to leaders in the state’s public health community and has addressed local groups concerned with issues of underage drinking, outlet density, binge drinking and other issues related to children and young adults in particular. Representatives of a number of public health and mental health advocacy groups participated in the public hearings related to the ABC reform legislation.


Our education and training programs continued strong and measured increases over the previous fiscal year. Data for Responsible Alcohol Seller Programs July 1, 2009 through June 30, 2010:


Responsible Alcohol Seller Programs    1,790                    


RASP Participants        7,184                  


School Programs (College and grades K-12)    123                    


Student Participants      12,524                 


Community Programs (adults, non-industry members)    140                     


Community Participants            1,723                     


 


Commercial Interests:


The ABC Commission is in the process of evaluating its administrative code and updating the three sections that relate to the Commission’s commercial regulatory a

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