Illinois: IL: Rauner’s proposed liquor commission changes could be win for distributors

 

Source: Chicago Tribune

By Heather Gillers

November 23, 2015

 

Gov. Bruce Rauner is considering an overhaul of the state liquor commission that could boost state revenue but also would more closely align the agency’s mission with the interests of some industry groups.

 

Rauner spokesman Lance Trover said legislators could see a bill early next year that would divert resources away from the local level to focus on larger-scale trade violations, such as merchants illegally bringing alcohol into the state without paying taxes. Alcohol distributors have long urged action on that issue, which puts them at a competitive disadvantage. Under the current setup, the commission devotes significant resources to inspecting thousands of Illinois bars and liquor stores.

 

An April memo also proposes abolishing the liquor control board – made up of seven commissioners with no financial interest in the alcohol industry – and replacing it with an advisory panel heavy on industry representatives. Changes to state rules regarding the manufacture, distribution and sale of alcohol would no longer require a sign-off from the commissioners.

 

Rauner officials declined to comment on whether the idea of abolishing the board is still on the table.

 

The memo was sent April 16 from an employee of Rauner’s Department of Revenue – where liquor commission staffers are housed – to Revenue Department Director Connie Beard, whom Rauner this summer appointed chairwoman of the liquor control board.

 

Meeting minutes show no discussion of the proposed changes in an open meeting of the liquor commission, even though Rauner officials and industry representatives have been talking about them for more than six months.

 

“If in fact the governor’s office is proposing a change in the way the liquor commission does its business, then it’s kind of surprising that (board) members aren’t aware of that change,” said Commissioner Bill Morris. “If the commissioners have been left out of the picture, obviously the public’s been completely left out of the picture.”

 

Others on the seven-person board, which is appointed by the governor, either declined to comment or could not be reached.

 

Morris said that after the Tribune began contacting commissioners, the commission’s executive director sent out an email asking commissioners to notify her if they were contacted by the media. The email said “press-related inquiries” would be handled by spokespeople for the governor and the liquor commission, according to Morris, a Democrat who has served as a state lawmaker and as mayor of Waukegan.

 

Liquor commission spokesman Terry Horstman said in an email that the memo “was intended to foster internal brainstorming discussions by (commission) staff” and that staff members are doing research and talking with industry representatives before publicly presenting “final recommendations.”

 

In addition to policing safety and health issues at the local level – inspecting bars and enforcing underage drinking laws, for example – the liquor commission interprets and enforces complicated trade laws governing how alcohol is distributed and sold.

 

Better compliance with those trade rules could help boost the state’s revenues. The state misses out on tax dollars when retailers illegally sell alcohol purchased outside the state rather than from licensed Illinois distributors. Revenues also go uncollected when out-of-state wineries selling wine on the Internet illegally ship it to Illinois customers without collecting taxes or obtaining licenses to do business in Illinois.

 

Illegally importing liquor from outside the state – often referred to as bootlegging – is an important issue to the Wine and Spirits Distributors of Illinois and the Associated Beer Distributors of Illinois. Stepped up enforcement would mark an important win for the state’s alcohol distributors, who are at a competitive disadvantage when retailers and customers illegally buy cheap, untaxed alcohol from other states.

 

Bob Myers, president of the beer distributors trade group, said he often alerts liquor commission staff when distributors spot beer purchased out of state being sold in Illinois stores, but “because of the fact that they (the liquor commission) don’t have the adequate manpower, they may not get to it for a little while and by that time the beer is gone.”

 

Myers said nine liquor store operators charged with evading sales taxes by the state in September are the tip of an iceberg.

 

The Wine and Spirits Distributors of Illinois earlier this year conducted its own investigation that showed hundreds of cases of wine and liquor entering Illinois illegally. The group calculated that the state had lost $20 million to $30 million in tax dollars over the course of a single year.

 

Alcohol distributors give generously in Springfield. The Associated Beer Distributors of Illinois ranks fourth among businesses and business groups in contributions to legislative and statewide officer political committees, according to an analysis by Kent Redfield, a campaign finance expert and professor emeritus at the University of Illinois at Springfield.

 

“I’m not sure what you could do to not get a contribution from the beer distributors, other than be in favor of prohibition,” Redfield said.

 

The beer distributors group gave $1.19 million in contributions in 2013-2014, Redfield said. Records show those donations included more than $20,000 to former Gov. Pat Quinn during the 2014 gubernatorial primary and $10,000 to Rauner during the general election.

 

More manpower would be reallocated to bootlegging and other violations – and away from local infractions – under the bill Trover said could come before the legislature early next year.

 

The April memo provides some detail about how that might work. It proposes the state’s 15 liquor control agents turn over to local public safety authorities the task of inspecting the 28,000 Illinois establishments licensed to sell alcohol, checking for problems such as not having clean taps or failing to display a sign warning against drinking while pregnant.

 

Local governments that took over inspections would receive “a share” of the revenues from fines collected, the memo said, and the state would still perform spot checks. According to the memo, the state doesn’t have the resources to visit every establishment anyway.

 

The memo proposes no change in resources devoted to enforcing underage drinking laws.

 

The liquor board that the memo proposes abolishing serves two key functions: It rules on legal questions – such as a long-running dispute over whether Budweiser maker Anheuser-Busch could own a share of a Chicago alcohol distributor – and it approves administrative rules that govern alcohol-related commerce in Illinois. (They also pass through a legislative committee.)

 

Topics covered by the rules range from home-brewing to the sale of alcohol on boats to “happy hour,” which Illinois recently legalized.

 

In the absence of a board, the memo proposes sending legal questions to an administrative law judge. It does not say who would sign-off on rule making. Horstman, the commission spokesman, said current law allows the board to delegate rule-making power to commission staff.

 

A third role – offering advice to commission staff – could fall to the advisory board proposed in the memo. Suggested advisory board members listed include representatives of five public safety or health agencies and nine industry groups.

 

The Illinois Liquor Control Commission is created by state statute, and abolishing it would require a bill. It would also save a little money: The state currently pays more than $204,000 in combined salaries for the board’s seven commissioners – 2 percent of the commission’s $9.8 million budget – plus travel expenses.