Erica already posted an Afternoon Jolt, but this breaking news certainly qualifies as a jolt—to Costco anyway.

Governor Chris Gregoire just signed a Sen. Mike Hewitt (R-16, Walla Walla) bill that allows the state to accept bids from private contractors to lease the state-run liquor distribution system. The state is not obligated to go with any of the bids and can keep the system in state hands.

It's a jolt to Costco because (see this week's ThinkTank), they're backing an initiative that would privatize the whole state liquor system, I-1183. Partial privatization could dilute the public's enthusiasm for full-on privatization.

Proponents of total privatization—at least for big stores, as the Costco initiative has it—had at least hoped that Gregoire would veto one section of the bill, the emergency clause. The emergency clause—included because the expected revenue from leasing out the system has impacts on the budget—prevents the Costco side from trying to run a referendum on the law in tandem with 1183. (Citizens can't repeal emergency legislation.)

A referendum on the distribution lease plan, could have delayed the bidding process until after the November election and therefore, prevented the partial privatization plan from competing with Costco's larger scheme, 1183.

Not so anymore. "The public will get to see all of the alternatives to [full] privatization that exist for our liquor system prior to the November election," says Sandeep Kaushik, spokesman for the Washington Beverage, which intends to submit a bid on the distribution system. (Full disclosure: Kaushik co-founded PubliCola in January 2009. Kaushik currently has no role at PubliCola.)

Joe Gilliam, President of the Northwest Grocery Association, which supports full privatization, released this statement after Gregoire signed the bill:
[The bill] would simply trade a state monopoly on liquor distribution for a private monopoly held by a single company. It also would keep the state-owned liquor store monopoly in place,” said Gilliam.

This approach would result in less revenue for the state than the current system and provide no benefits to Washington consumers or taxpayers.

Fortunately voters will have the final say in November when they have the opportunity to pass Initiative 1183, which will privatize both the distribution and retail sales of liquor in Washington in a way that benefits taxpayers, consumers and Washington businesses while strengthening the regulation of liquor sales in our state.

The full privatization initiative would keep the current tax in place (generating about $8.5 million a year from retailers) and the retailers would pay 17 percent of gross liquor sales to the state.

Kaushik says leasing out the distribution system will raise money for the state too through the one-time lease fee and profit sharing. He says that new efficiencies will also increase sales and boost the state tax revenue, which also seems like an argument for full privatization, though.

However, the advantage of just privatizing the distribution system, according to Washington Beverage, is jobs. "This proposal," Kaushik's press release says, "would save the jobs of nearly 1,000 liquor system workers that would be lost under full privatization."

Before signing the bill today, Gregoire said, "I received a letter from the four corners [the Democratic and Republican leaders in both chambers], the first time since I've been governor. they urged me to sign the legislation and sign it in full" and assured me that it had been vetted in full by the house and senate.

She added: "The bill commits Washington state to nothing and just provides additional information" for the state.

This debate between full privatization and just privatizing the distribution system is the subject of this week's PubliCola ThinkTank, which includes an ThinkTank op/ed by NWGA President Gilliam.
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