Late last year, the legislative auditor general released an audit that was highly critical of the Department of Alcoholic Beverage Control (DABC). The audit revealed mismanagement and possible criminal malfeasance by the former department director, Dennis Kellen.
The governor asked for Kellen's immediate resignation and appointed Francine Giani, currently the executive director of the Department of Commerce, to temporarily head the DABC and clean-up the department. Subsequent legislative audits released earlier this year have suggested the need for greater internal audit controls. The Legislature also commissioned a study by Bonneville Research, which presented suggestions in November 2011 on how the DABC could more efficiently manage its operations by applying retail principles.
The question of how to best run this department has spawned several bills and a great deal of investigation into the best practices for alcohol policy. The House has tasked Reps. Gage Froerer, R-Huntsville, and Ryan Wilcox, R-Ogden, with being our point people on the issue and to work on consensus legislation.
Moral judgments on the consumption of alcohol aside, the department is a significant revenue generator for the state. Liquor sales netted $62.3 million in profits for the state last year, which helps fund other programs. Twenty-nine and a half million dollars from the profits goes directly to school lunch programs for needy children as an earmark. As legislators, we must weigh a variety of factors when considering how to best manage the state's alcohol policy. We always want the state to run lean and efficient operations. It can be a fine line between lean and sloppy and as the audits revealed, we have had sloppy management as of late. This is a unique area because the state operates as both the control agency and the retail outlet. We need to consider proposals that will provide the proper controls and retail savvy to ensure this is a safe enterprise.
We have heard from a variety of businesses and individuals about the extreme difficulties in obtaining liquor licenses for restaurants (on-premise consumption) and also the merits of considering additional or private outlets for off-premise consumption. On the other side there have been concerns about whether new proposals would have the proper controls in place to ensure under-age drinking and drunken driving incidents don't rise, but shrink.
I won't support any proposal that would lessen the control aspects of the state's responsibilities with regard to alcohol policy. However, I do believe that some changes might be necessary regarding the department's organization. The current commission system doesn't provide nearly enough oversight of the day-to-day operations and the department's director. Some proposals would place the DABC under the Department of Commerce; others would give the commissioners greater power and authority over day-to-day operations. Any option should provide for internal auditors so that we better track and manage inventory, receipts, and package agencies.
There is no room for favoritism of vendors or lack accounting principles in any state program or agency.
Based on the feedback from the Bonneville Research study on retail principles, I am convinced that we need to better apply retail principles to our operations going forward.
This could mean privatization of some functions in order to gain efficiencies. At a minimum we need to apply retail principles to the building, placement, and distribution of state liquor stores.
The Bonneville Research data revealed that in some areas, state stores are grouped too close together and in other areas there's no reasonable access to a state store. A merchant or restaurant in a commercial setting puts quite a bit of research into store location, access points, competitor concentration, store design and layout.
If the state is going to be in the business of retailing alcohol, we need to do these same things to ensure we are getting the biggest return on our investment in liquor stores.
I am interested in your views on how we strike the right balance on this issue. To review the various bills on topics like liquor licenses, privatization, and agency organization visit the legislative website at www.le.utah.gov .
Brad Dee is the House majority leader. He represents House District 11, which covers portions of Davis and Weber counties.