Aside from its popular lottery games, Virginia doesn’t engage in state-sponsored gambling. But Gov. Bob McDonnell’s proposal to generate some quick cash for transportation by privatizing liquor sales in the state is shaping up to be a serious numbers game for state legislators.

 

Do you go with $458 million, the one-time windfall for transportation that McDonnell claims will be generated by handing the state’s post-Prohibition monopoly on the sale of distilled spirits over to the private sector?

 

Or do you stick with $260 million, the current amount the state’s General Fund receives each year from taxes and profit generated at the 332 state-owned liquor stores?

 

McDonnell says that most of the latter figure—$229 million to be exact—will be made up through his plan’s new revenue streams, including a new $17.50 per-gallon excise tax on wholesalers—well above the national average—plus a 2.5% drink tax on restaurants and bars that purchase liquor directly from wholesalers.

 

Critics counter that those projections are overly optimistic, particularly given the precarious nature of the current economy, and that the record of states opting to privatize liquor sales is mixed. Many political leaders are also wary of anything that even resembles a new tax.

 

McDonnell, who promised to address Virginia’s transportation needs without tax hikes during his campaign for governor last year, calls the new revenue sources “new points of collection.”

 

It should be noted that McDonnell considered, and dropped, an additional 1.5% per drink fee for restaurants to his plan. Meanwhile, Virginia's 19.5-cent per-gallon tax on gasoline has remained unchanged for more than a quarter-century.

 

You can’t blame several transportation groups for endorsing the proposal. Certainly $458 million would be a welcome windfall, particularly since the Virginia Dept. of Transportation has trimmed $4.6 billion from its current six-year budget.

On the other hand, it’s a one-time infusion that, under McDonnell’s plan, will be distributed across multiple congestion-relief projects in the form of grants and loans through a new transportation infrastructure bank. Long-term funding sources remain as uncertain as those of other states.
 

The state’s General Assembly will consider the privatization proposal  at a special session that McDonnell has scheduled for after election day, even though no seats in the legislature are on this fall’s ballot. As the debate proceeds, legislators will have to ask themselves whether the rewards are worth the risks, and vice versa. 

 

Or more simply, do they feel lucky?