'A Billion Here, A Billion There'

Contact: Lynn M. Walding, Administrator 515.281.7402 / 515.229.7777

“A billion here, a billion there, and pretty
soon you’re talking about real money.”
- Senator Everett Dirksen

Ankeny, IA (May 20, 2005) – The Iowa Alcoholic Beverages Division reached a major milestone in the agency’s history today. Administrator Lynn Walding announced that the Division topped the $1 Billion mark with this morning’s May transfer to the general fund. Reorganized on July 1, 1987, when the last state liquor store was closed and the state became the exclusive wholesaler of distilled spirits, the Division generated that revenue contribution in a span of less than 18 years.

“Senator Dirksen’s (R-Illinois) famous adage, ‘A billion here, a billion there and pretty soon you’re talking about real money,’ may have referred to excessive government spending,” Lynn Walding noted, “but his words seem equally applicable to the Division’s revenue contribution.” “The ‘billion here’ generated by the Division, for instance, translates into $342 for every man, woman and child in the state. In terms of taxpayer services, a billion dollars is equivalent to a thousand miles of new paved four-lane Iowa highways or, alternatively, three-and-a-half years of state appropriations to the University of Iowa.”

The revenue generated by the Division was derived chiefly from liquor sales, accounting for $594.7 million or 59 percent of the total revenue transfer. Beer and wine excise taxes accounted for $231.9 million (23 percent) and $ 66.7 million (7 percent), respectively. License fees added $103.3 million (10 percent), with civil penalties contributing less than 1 percent of the total at $3.4 million.

“Liquor sales, in particular, have become increasingly robust over the past decade,” Walding noted, citing ten straight years of annual growth. “Judging by the market trend, it doesn’t appear that spirit sales will decline any time soon.”

Walding attributed several variables for the increase. “A primary factor has been consumer trade-up as ‘top-shelf’ premium goods continue to do well in the Iowa marketplace,” he added. “Dollar sales are up 9 percent thus far this fiscal year (July 1, 2004 to present), while gallonage sales trail with only a 5 percent increase.”

The explosion of flavors is another contributing factor. “New flavored spirits – primarily in the vodka and rum categories – are expanding consumers’ horizons while, at the same time, appealing to a broader audience,” Walding explained. “The martini’s return to fashion, for example, has been aided by the growth of the flavored vodka category and the resulting explosion of drink menus.”

Sales have also been fueled by demographics. “The 21-to-29-year-old age group, the largest consuming segment, has been growing at the rate of 2 percent per year and is expected to continue to do so until 2010,” observed Walding.

Finally, the liquor industry has made inroads into the dominant U.S. beer market. (The average per capita consumption of beer in Iowa is 33 gallons of beer versus 1 gallon of spirits.) “While the shift is slight, aggressive advertising campaigns by the principle liquor suppliers have had an influence on consumer preference,” Walding said. “At the same time liquor sales have been on the rise, beer sales in Iowa have been flat throughout the current fiscal year.”

While the majority of liquor profits are transferred directly to the general fund, Iowa Code mandates that the greater amount of $9 million per year or 7 percent of annual liquor sales be set aside for substance abuse programs, subject to appropriation. “When dealing with a product that carries the potential for adverse societal costs, it is important that sufficient funds be earmarked to redress and even prevent those problems,” Walding added.

While a 50 percent mark-up is applied to the wholesale price of spirits, a flat gallonage tax of 19 cents and $1.75 is levied on beer and wine, respectively. The trend line for wine in Iowa has been on a steeper incline than that of beer in recent years. Beer sales this fiscal year have increased less than 1 percent, while wine sales have exceeded 7 percent during the same period. Those numbers are consistent with national trends for each category. The slight growth in the beer market has been aided chiefly by imports and the emergence of new low-carb beverages.

Nine different categories of licenses for liquor, wine and beer are available in Iowa. The Division collects an annual fee for more than 10,000 licenses and permits for the various types of alcohol sales – both on- and off-premises. The majority of the license fee, however, remains with the local licensing authority.

If licensees are caught violating the terms of their permits or engaging in illegal sales, the Division receives money from civil penalties collected from violators. Civil penalties, however, account for less than 1 percent of the Division’s revenue. The civil penalty fund is transferred to the state’s general fund, while license fees are divided between the state and local governments.

A billion dollars, by anyone’s accounting is no small sum. Today’s milestone – ‘a billion here’ – was reached in just under 18 years. “Judging by the current sales trend, the Division will likely reach the second billion – ‘a billion there’ – in less than half the time it took to reach the first billion,” Walding said, conservatively estimating a 5 percent annual growth rate. “Knowing that, the Iowa Alcoholic Beverages Division is certainly ‘talking about real money.’”

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Click to view a pie chart that breaks down the Division's principle revenue sources.

Click to view a graph that breaks down the $1 Billion transferred by yearly totals.

Click to view a printable version of the commemorative Iowa Alcoholic Beverages Division replica $1 billion bill (above).

Click to view the Division's yearly liquor sales reports.