State Liquor Stores: 20 Years Removed

DES MOINES (February 27, 2007) – A major milestone in the history of Iowa’s liquor distribution system will be commemorated on March 1st.

On that date 20 years earlier, the State of Iowa made the first major revision to its liquor control system since the end of Prohibition. All retail liquor sales, prior to that date, were distributed through state-operated liquor stores. On March 1, 1987, the 220 state liquor stores began closing their doors and, in their place, 256 private Class E licensees opened for business.

By July 1 of that year the number of private liquor retailers had expanded to 410 – nearly double the number of state stores that had operated just four months prior. Today, the number of outlets continues to grow with 551 licensed retailers, located in all but one county (Van Buren County), currently licensed to retail spirits.

While the public-private venture that emerged 20 years ago placed the retail tier in the hands of private business owners, the Division retained the exclusive right to wholesale liquor to the new operators. The transition afforded greater convenience for Iowa consumers – more locations, easier access, longer hours, credit card purchases, etc. – while, at the same time, the state maintained a significant revenue source. Lynn Walding, Administrator of the Iowa Alcoholic Beverages Division, said the public-private partnership gives both sectors a share of the profitable distilled spirits industry.

“The distilled spirits industry has experienced over a decade of continuous growth,” Walding said. “As consumers and retailers benefit from the open retail market, the State of Iowa maintains a major source of revenue.

“The Division’s liquor wholesale operation accounts for approximately 2% of all state revenues. By imposing a 50% wholesale markup to distilled spirits, revenues continue to grow as the price of spirits increase. As liquor sales have increased annually for 11 straight years, so, too, has the Division’s annual revenue contribution.”

All told, the Division has transferred $1,121,821,000 to Iowa’s coffers, supporting state programs, funding substance abuse programs and financing local projects. The Division’s total revenues, which also include beer and wine excise taxes and civil penalties, eclipsed the $1 billion mark on May 20, 2005, after 18 years of operation under the new system. Judging by the upward curve in liquor sales, conservatively projecting a 5% annual increase, the Division predicts that it will eclipse $2 billion in the year 2013 – a mere eight years.

The Division’s revenue contribution, this fiscal year, July 1, 2006 through June 31, 2007 (FY07), is expected to surpass $86 million. In terms of taxpayer services, the annual revenue generated from the sale of distilled spirits would equate to 2,100 teacher salaries, 2,860 state patrol cars or the entire FY07 appropriation to the Iowa Department of Economic Development.

“As liquor sales continue to climb, the Division’s revenue contribution to state coffers will mirror that trend,” Walding said. “It’s a win-win scenario. Iowa consumers win. Iowa taxpayers win.”