Disposing of State Stores : Iowa Will Swear Off Retail Liquor Trade

Iowa’s post-Prohibition effort to discourage drinking is coming to an end.

Many details remain to be worked out, but officials say they are confident that by next spring, Iowans will be buying their liquor in grocery stores instead of from the state.

That will end a 50-year-old, $125-million monopoly that has pumped $50 million into Iowa’s treasury each year.

Already, 45 businesses have applied for licenses to sell bottled liquor since Iowa joined Kansas in liberalizing liquor laws. (Kansas voters this year approved a county-by-county option to allow sales of liquor-by-the-drink, following a century of tight liquor control.)

“Just think how far forward this state has moved,” said legislator Ed Parker, a sponsor of the measure to sell the state liquor stores. “We were considered rather backward. Now we’ve got pari-mutuel betting and a lottery, and we will no longer be retailing liquor.

“It more or less reflects the trend in the state,” he said. “People’s attitudes about all that have changed.”

Post-Prohibition Law

Iowa reluctantly began allowing liquor sales after Prohibition was repealed in 1933. The first state-owned stores were in remote places, and customers had to line up at a counter and place their orders--no browsing allowed.

“They were put (in remote locations) intentionally, to keep people from drinking. That was the philosophy,” said Rolland Gallagher, who headed the state Department of Commerce for more than 10 years.

When Gallagher took them over in 1972, only a handful of the stores had self-service, but he acted to modernize the operation. He added locations and upgraded the stores.

Until the early 1950s, Iowa customers carried punch cards and clerks kept track of how much liquor each individual purchased. It became something of a custom for parents to inspect the cards of their children’s suitors.

“I really am sad,” Gallagher said. “I realize that a lot of people think it’s a trend in the right direction, but I can’t see who it’s going to benefit. It’s going to hurt us all in the state. Our taxes are going to be higher, and we all know prices are going to be higher.”

Pat Cavanaugh, who now heads the Department of Commerce, said some details of the transition remain to be worked out, but the state is making progress:

‘More Convenient’

“I think, overall, there’s no doubt it will be more convenient,” Cavanaugh said.

Before legislators agreed last spring to end the state monopoly, the arguments for and against selling the 220 state-owned stores were clear.

Those who wanted to get rid of them said the state should not be in the business of selling liquor, making a profit from it, while it passed tougher drunk-driving penalties and spent millions on treatment for substance dependency.

They added that selling the stores could reap a one-time profit to balance this year’s state budget. Higher liquor taxes and licensing fees would keep revenue flowing in future years, they said.

Opponents of the change argued that the liquor monopoly was a steady source of income for the state, and questioned how much revenue private sales would bring in.

The legislation calls for the stores to be sold beginning in March, for the state to be out of the retail liquor business by July--it will remain in the wholesale liquor business.

“I suspect we will have more outlets, as a result,” Cavanaugh said. “We expect them to at least double from the current 220. Most of those, I believe, will be in the urban areas.”

Wholesale Monopoly Remains

Parker, the legislation’s sponsor, said there is likely to be a move, within a couple of years, to take the state out of the wholesale business as well.

The sale isn’t written in stone. In setting the date to begin selling the stores, lawmakers gave themselves time to consider any revisions in the law that might be needed.

Craig Walters, lobbyist for those who lease the current stores to the state, seeks repeal of the law or delay in enacting it, but legislative leaders have said there is virtually no chance of a repeal.

Iowa is one of 18 states in the direct liquor sales business, according to Lisa Tate of the Distilled Spirits Council of the United States. Mississippi and Wyoming sell only at the wholesale level, and Iowa will become the third state in that category.

States that control both wholesale and retail liquor sales are Alabama, Idaho, Maine, Michigan, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington and West Virginia. Some of them control sales at retail level through “agency” stores, a system under which the state awards private contracts to operate retail outlets.

As to whether the other states might also stop selling liquor, Tate said: “There are discussions in a lot of states. Is there a trend toward that? No.”