Cascade Policy Institute

This proposal is one of ten winning reports from the 1994 Oregon Better Government Competition. The 1994 and 1996 Competitions were organized by the Portland-based Cascade Policy Institute. Opinions expressed are those of the author(s) and not necessarily those of Cascade staff or advisors, nor should they be construed as an attempt by Cascade Policy Institute to influence any election or legislation.

Controlled Privatization:
Progressive Alcohol Management for Oregon

by The Oregon Retail Liquor Association
Reo Clark, Joe DeLillo, Bruce Hochstein, Tom "Tiny" Matthews

Portland, Oregon

Executive Summary

Oregon taxpayers could save an estimated $100,000,000 initially and $60,000,000 each biennium thereafter if the state government removed itself from the wholesale and retail liquor business. This report outlines a controlled privatization plan to achieve that savings.

Customer service would improve immediately if the Oregon Liquor Control Commission (OLCC) were privatized. Individual liquor agents would be able to respond to their customers needs, as opposed to merely obeying OLCC dictates.

The implementation of a straightforward, equitable pure-alcohol-gallon (PAG) tax for all alcoholic beverages would generate higher revenues for the state than does the present discriminatory method of taxing distilled spirits at a dramatically higher level than beer and wine. The proposed PAG tax would place liquor taxing authority with Oregon's elected officials, where it appropriately belongs.

The proposed reforms would stem the flow of out-of-state liquor purchases, and bolster Oregon's sagging liquor tax revenues. The nationwide trend of state governments ceasing involvement in the retailing of liquor has reached Washington state, where privatization is a question of when, not if. Washington's change will exacerbate Oregon's worsening problem of lost liquor sales to other states.

Oregon's liquor retailers, consumers and Oregon's Treasury will continue to suffer under the antiquated OLCC, a relic of Prohibition. This needless suffering is caused by counterproductive OLCC policies, high liquor taxes and associated lost liquor sales to other states. The status quo is not an option. this report outlines a positive, responsible plan for the privatization of the Oregon Liquor Control Commission.

About the authors

This report is the product of the collective efforts of many people who work in the liquor industry. The Oregon Retail Liquor Association (ORLA) provided the forum that allowed the plan to develop. Credit for authorship must be shared equally by concerned liquor store owners and ORLA leaders Reo Clark, Joe DeLillo, Bruce Hochstein, and Tom Tiny Matthews. Credit for content goes to ORLA member agents, liquor industry representatives, state legislators, and interested citizens.

INTRODUCTION

The proposals and analyses presented herein are offered by the Oregon Retail Liquor Association (ORLA). ORLA's membership consists of private individuals (Retail Sales Agents) with whom the Oregon Liquor Control Commission (OLCC) has contracted to provide retail outlets for the sale of distilled spirits. ORLA members sell approximately 80% of the distilled spirits sold in Oregon. Nonmember agents sell the rest. We bring hundreds of years of experience in the distilled spirits industry to this discussion.

ORLA is pursuing alternatives to the OLCC and modification of the alcohol distribution system in Oregon. ORLA has watched the distilled spirits industry in Oregon deteriorate to the point that neither the citizens of Oregon, the distilled spirits consumers of Oregon, the temperance groups, the distilled spirits industry, nor liquor agents are adequately served. ORLA is also driven by its belief that citizen dissatisfaction with the OLCC has reached the point that an initiative petition is imminent.

ORLA recognizes that any alternative to the OLCC must be responsible and politically viable. No one interest group can be served to the exclusion of others. Such a solution would be self-serving and short-lived. With that in mind, ORLA presents "CONTROLLED PRIVATIZATION," a proposal which reduces government bureaucracy, reduces citizen tax burdens, enhances control of alcoholic beverages, increases service levels to the public, stabilizes alcoholic beverages as a revenue source, and provides new and better opportunities for private businesses. This balancing of interests is critical to political success.

ORLA's pursuit of these goals began in September of 1993. Since that time representatives of ORLA have met and continue to meet with the various interests cited. Each proposal has been reviewed to make them more responsive and effective. The result of this ongoing re-assessment is that some of the proposals presented herein vary slightly from their original specifics. Any revisions evident reflect a considered decision that CONTROLLED PRIVATIZATION is made more viable by the change.

In the pages that follow, ORLA will describe the OLCC, evaluate its performance, review privatization efforts nationally and locally, and describe ORLA's plan to restructure the alcohol management system in Oregon. Last, ORLA will describe the steps taken and the steps planned to successfully bring CONTROLLED PRIVAT-IZATION to Oregon.

THE OREGON LIQUOR CONTROL COMMISSION

National prohibition ended in 1934. Regulation of alcohol was left to the individual states. Oregon and 17 other states chose to establish state-operated distilled spirits distribution systems. The underlying philosophy of these "control" states was that only through state control could the prohibition era bootleggers be excluded from the market. Initially the OLCC established rigid control over individual purchases of distilled spirits and prohibited the sale of distilled spirits for on-premise consumption. The latter restriction was eliminated by initiative petition in 1956.1

Although its original mission was well-intentioned, the OLCC has outlived the social conditions which prompted its creation. Modern alternatives exist which are less expensive, more efficient, and more responsive to the needs of Oregon's citizens and its alcoholic beverage industry. The OLCC has grown into a bureaucracy of over 200 state employees and is budgeted at approximately $60,000,000 for the 1993-1995 biennium.2 The OLCC main office and warehouse are located at 9201 SE McLoughlin Blvd., Portland, Oregon, 97222. The OLCC is the only wholesaler or retailer of distilled spirits in Oregon. The state owns all the distilled spirit products in the OLCC warehouse and in the retail stores. The average inventory cost to the state on any given day is approximately $19,000,000.3 The OLCC also administers liquor licensing, enforcement, hearings, and a number of other regulatory programs. It maintains extensive fiscal and management information systems to support its wholesale, retail, and regulatory activities.

The wholesale activities of the OLCC are relatively simple. The state purchases distilled spirits products from suppliers, warehouses the products, and ships them to retail outlets statewide. State employees perform all these activities, except that common carriers are used for delivery to retail outlets. Distillery representatives present products to the OLCC Listing Committee for inclusion in Oregon's product selection. This committee is composed of 4-5 OLCC staff members and 2-3 retail sales agents. They vote upon whether to "list" the product or not. The staff members have one vote each. The retailers are allowed one vote collectively. Retail prices are determined by the OLCC.

The OLCC's retail activities and its relationship to its retailers is much more complex. Oregon phased out state stores in the early 1980's. Independent contractors called "Retail Sales Agents" were employed to operate "agencies" for the state. In the words of the OLCC, "The thinking was that real merchants should be running the stores because they could do it more efficiently than the state could. This was philosophical; it was not efficient or flexible enough to have the state running the retail stores."4

The OLCC, however, continues to run the retail stores. The contract utilized by the OLCC, its Retail Operations Manual (incorporated by reference into the contract), and the OLCC's ability to alter the contract by administrative rule or policy decision combine to allow the OLCC to control every aspect of the day-to-day retail operations of the stores.5 Agents are required to work full time in their store. They cannot be absent over 3 days without written notification to the OLCC. They cannot operate any other business, unless the market for liquor in their area is so small that they are designated "non-exclusive" agents. Non-exclusive agents incorporate liquor sales into an already existing business, i.e., a hardware store, office products store, etc.

Agents are restricted to selling liquor and those items considered "related" to alcohol con-sumption. OLCC Administrative Rule 845-15-045 specifically lists the limited number of related which items agents may sell. The agent owns the related items inventory and sets his own prices on those products. Dispenser licensees (bars, restaurants, etc.) are required to purchase distilled spirits from retail sales outlets, but agents are prohibited from actively soliciting this business. Agents are prohibited from delivering distilled spirits or related items to their existing bar and restaurant customers.

Agents cannot change their hours of operation without OLCC approval. They cannot change exterior signage, store location, or the interior design of their store without OLCC approval. They are required to carry a specific number of liquor products and to meet OLCC established inventory turnover goals. The shelf display of products is subject to OLCC scrutiny and any interior point of sale advertising is subject to their approval. For example, The Distillery Rep-resentatives of Oregon (DRO), is currently petitioning the OLCC to allow small blinking lights on case displays and to increase the allowed square footage of in-store advertising materials.

Agents are prohibited from making product recommendations or quality evaluations. Credit card purchases are not permitted. Checks for all purchases must be made payable to the OLCC, even if no OLCC products are included in the purchase. Agents are held personally liable for customers bad checks unless specific, restrictive check-cashing procedures are followed. Even when procedures are followed, agents are expected to act as a collection agency for the OLCC. Agents are required to provide an annual cost survey to the OLCC, reporting their expenditures for every category of business expense. The OLCC also inquires into related items sales and profits. They also ask for a copy of the agent's Schedule C (IRS Profit or Loss from a Business).

Agents are liable to the OLCC for the full retail price of the products carried. Monthly inventories must be performed and reported to the OLCC. Inventory values are adjusted monthly to reflect retail price changes. Audits by the OLCC occur about every 6 to 8 months. Any product shortage must be paid at 100% of retail price to the OLCC, despite the fact that the state's actual investment in that product is approximately 50% of the retail price.

Each biennium the Oregon Legislature budgets a specific amount of money to be paid as agent's compensation. The OLCC, at its discretion, develops a compensation formula. The current formula provides for a standard monthly amount based on annual sales, and a commission based upon monthly sales. Over the counter sales earn a 5.66% commission and sales to dispenser licensees(bars and restaurants) earn 4.42%. The effect of the formula is to make increased sales less and less profitable. The formula rewards cost control rather than customer service. Short hours, poor locations, under-staffing, and poor maintenance produce more profitability than do increased sales. The OLCC monopoly creates dis- incentives rather than incentives for retailers.

Agents have no interest or equity in their stores. The contracts are for a ten year period, renewable at the discretion of the OLCC. Agents have no interest or equity in whatever related items business they have been able to create. When an agent leaves the system, the new agent is only required to purchase the existing store fixtures at an independently appraised value. The outgoing agent must surrender the benefits of his/her years of effort without any compensation. The inability of agents to control their operating margins or to develop equity in their businesses inhibits their ability to plan for retirement. Agents over 70 years are still working out of financial necessity.

Separate legal opinions have suggested that the OLCC control of agency operations is so pervasive that agents are in fact state employees, not independent contractors.6 Consistent with this argument, the OLCC retains disciplinary, suspension, and termination powers over agents. Hearings are available to disciplined agents, but only before OLCC hearings officers. Final judgments are made by the OLCC.

The stated purpose of the OLCC in shifting to agency operations was to put real merchants in the stores and to increase efficiency and flexibility. The restrictive nature of the OLCC/Agent relationship has prevented those benefits from being realized. The state saved money by eliminating state stores and state employees, but it failed to allow the private sector incentives of profit and equity accumulation to evolve. Without them, the system has become stagnant.

OLCC PERFORMANCE EVALUATION

To adequately evaluate the OLCC, it is important to focus upon the responsibilities assigned to it and whether those responsibilities are being fulfilled. The OLCC's charge is to further two legitimate state interests regarding alcohol: control of access to alcohol and generation of revenue from alcohol sales. In each of these areas the OLCC has failed to meet its responsibilities. Its policies and administration have steadily eroded control and undermined the revenue base that it is charged to protect.

It is fair to point out that the OLCC faces an ethical and philosophical dilemma. It is responsible for maximizing revenue from its retail operations and for controlling the consumption of alcohol. The two responsibilities are inconsistent, and to many citizens this presents an unacceptable conflict of interest. The state should not be in the business of selling alcohol. While taxation and regulation of alcohol find general public support, state wholesale and retail activities do not. The OLCC's unwillingness to remove itself from the marketplace has rendered its revenue and regulatory efforts ineffective.

Control does not exist because the OLCC exists. It exists because of three things:

1. The restrictions and legal liabilities established by the legislature and imposed upon all members of the alcoholic beverage industry.

2. The enforcement activities of the state police and local law enforcement agencies.

3. The personal commitment of the retailers and their staff to denying alcohol to minors and intoxicated persons.

The hundreds of administrative rules passed by the OLCC have not changed these standards of control. The OLCC has, in fact, diluted control with its discriminatory pricing policies. While the OLCC, temperance groups and all interested parties agree that control of minors and intoxicated persons is best performed by OLCC retail sales agents, the OLCC has systematically forced the alcohol consumer out of OLCC stores and into convenience stores, supermarkets, gas stations, and other retailers who are not as effective in control as are liquor agents. They have changed distilled spirits drinkers into beer and wine drinkers by pricing distilled spirits extremely high, always justifying these actions with the ominous statement, "Alcohol is a dangerous drug".

That abuse of alcohol is dangerous and has accompanying social costs is not a matter in dispute by anyone in the industry. What is in dispute is the apparent demonizing of distilled spirits and the coddling of beer and wine. Beer and wine provide far more alcohol to Oregon consumers annually and are involved in more traffic accidents and incidents of misconduct than are distilled spirits. The alcohol in beer and wine is not less dangerous. Why then do distilled spirits bear a disproportionate tax burden and remain a ward of the state while beer is readily available? The OLCC can not justify its continued existence unless the alcohol in distilled spirits is somehow more dangerous than the alcohol in beer and wine.

The OLCC has effectively limited the ability of liquor agents to scrutinize minors and visibly intoxicated persons because agents no longer see the distilled spirits customers who have been driven to beer and wine by high liquor prices. Agents also do not see the customers who run into a closed sign at 6 or 7pm at OLCC outlets. Those customers shift to beer and wine. Most stores now operate the minimum number of hours (48) required by their contract. OLCC budgets have repeatedly underfunded retail outlets. Operating margins for private liquor retailers nationally average 24% - 28% 7of gross sales. The OLCC retail system is funded at 8.2% of gross sales.8 Large stores operate on 5.5% - 7% margins.9 The only private retailer operating expenses not found in OLCC outlets are inventory and advertising. Together these account for less than 3% of this huge operating margin disparity. The number and quality of employees in OLCC outlets has also diminished because of inadequate funding. How can control be served by undermining the ability of the personnel you count on to identify and control minors and intoxicated persons?

The OLCC exercises no control over the liquor being bootlegged across Oregon's borders. As the OLCC has priced distilled spirits out of the hands of the responsible alcohol consumer, it has caused Oregonians to become bootleggers. It is common knowledge that many Oregonians illegally import distilled spirits from other states. OLCC, the agency that was created to exclude bootlegging, has in fact fostered it. ORLA estimates that more than 1,100 cases of liquor enter Oregon illegally each day.10 The magnitude of illegal importation by Oregon citizens makes it clear that the OLCC's excessively high prices and underfunded retail system have effectively forced many alcohol consumers out of the controlled environment that the OLCC is charged to protect.

Why has the OLCC pursued this course of action so stubbornly? In the name of revenue, but here they have been equally inept. They have misled the legislature into thinking that distilled spirits are a stable revenue source, when in fact the point of diminishing returns is long passed. Since 1981, annual Oregon case sales of distilled spirits have plummeted. The total number of lost case sales is in the three million case range.(See Chart 5) Anyone should recognize that this indicates a serious problem. Not the OLCC. Need to maintain revenue? Raise prices! So what if case sales continue to fall, we can just attribute the losses to reduced per capita consumption of distilled spirits. Of course, this ignores the increased consumption of beer and wine, the ever-increasing, illegal flow of uncontrolled, untaxed alcohol over Oregon's borders, and the 14% population increase in Oregon. 11

What is most unacceptable is that it is the duty of the OLCC to keep the legislature accurately informed and they have failed. Instead they have spent millions of tax dollars on a computerized cash register/inventory management system12 for a retail operation that is chasing customers away and becoming less and less viable.

Oregonians are not willing to sacrifice control or revenue. They just want government agencies out of areas where they are unnecessary. Clearly there is a way to preserve and promote control and maintain revenue without this multi-million dollar bureaucracy.

Let's start by acknowledging again that alcohol is a product which carries a significant social cost. It is imperative that controlled access to alcohol be preserved and that all alcoholic beverages be taxed equitably in order to maintain revenues. Any proposal which does not satisfy these two citizen concerns is neither responsible nor politically viable. The OLCC is an unnecessary obstacle to the achievement of these goals. Patching the current system will only perpetuate its inadequacies.

SYSTEMIC PROBLEMS WITH COMMISSIONS

Intelligent people with good intentions volunteer to serve on Oregon's Boards and Commissions. This process has two basic flaws, lack of public accountability and loss of control.

Commission members are insulated from public accountability. As political appointees, they are one huge step away from the electoral process. Their decisions are subject to judicial review only and the cost of such review is prohibitive for most adversely affected parties. This lack of review and lack of electoral accountability frequently leads to arbitrary and inconsistent decisions.

The real control of any agency overseen by a commission does not lie with the commission members. Information and the control of information is power. The real power lies with the agency staff, upon whom the commission members are almost totally dependent for information, analysis, and interpretation. The ideal example is the OLCC. Its five members meet only two days a month. It is impossible for them to be adequately informed on all the issues arising from the OLCC's extensive regulatory and marketing activities. They depend upon staff presentations and recommendations.13 Staff leads the commission, though it should be the other way around. Staff members are even further from the electoral process and less accountable due to contractual or collective bargaining relationships. Even with this protection, individual decision-making is a rarity. The commission system fails because it inhibits leadership. When the staff leads the commission, and neither is directly accountable, then no one is in charge.

PRIVATIZATION NATIONALLY AND LOCALLY

Every legislature in every control state has been visited by a privatization proposal. Financial crisis is the dominant force behind legislative efforts to reduce government. The November/December 1991 issue of State Ways: The Magazine for the Control States, headlined their article "Who's Running the Store--Fiscal crises and philosophical changes force control administrators to re-assess the handling of retail operations." Mississippi, Michigan, Iowa, and West Virginia have converted to private and semi-private retail stores. The Wyoming control system has always had private retail stores. The Alabama Court of Civil Appeals recently ruled that the state's public retail outlets violated the Alabama Constitution by competing against private retail outlets.14 The Washington Liquor Control Board is aggressively pursuing privatization at the retail level. If Washington privatizes and reduces their margin from 57% to 20%,15 as originally proposed, Oregon will suffer catastrophic losses in liquor sales and revenue. The current losses to California and Nevada will pale by comparison.

Privatization is an ongoing discussion in Oregon. In 1980 an initiative petition to privatize retail distilled spirits distribution gained sufficient signatures but was not placed on the ballot after losing a challenge to its ballot title. In 1992 the Governor's Task Force on State Government recommended the full privatization of distilled spirits distribution in Oregon,16 but the Governor rejected the idea at that time. A proposal based upon Iowa's privatization plan was discussed at the 1993 legislature. Privatization continues to be discussed in Oregon and CONTROLLED PRIVATIZATION is evolving as a reasonable and responsible alternative.

CONTROLLED PRIVATIZATION

MARKETING REFORMS

Legislate an equitable alcohol tax

The current OLCC markup (tax) on distilled spirits exceeds 105% of landed cost. This equates to a tax rate of more than $28.00 per pure alcohol gallon. Beer is taxed at approximately $3.35 per pure alcohol gallon. That the same amount of pure alcohol is taxed at such different rates is unjustified.

This disparity ignores the statistically overwhelming role of beer in drunk driving convictions. A U. S. Department of Justice Survey in 1989 of convicted drunk drivers in county jails revealed that 62% reported drinking only beer, while less than 20% reported drinking distilled spirits only. Beer and wine provide three times the pure alcohol to Oregon consumers annually as do distilled spirits, but distilled spirits bear more than seven times the tax burden.

The OLCC imposes a percentage markup over cost instead of a tax based upon alcohol content. This markup exaggerates the regressive nature of the beer and wine/distilled spirits tax disparity even more so for mid-priced and expensive products. While a 12 oz. beer, a 1 oz. serving of HRD Vodka, and a 1 oz. serving of Grand Marnier all contain essentially the same amount of alcohol, beer pays less than $.01 in tax, HRD $.13, and Grand Marnier $.74. The effect of the markup system has been to render many products economically inaccessible to Oregon's consumers.

Since 1981 case sales of distilled spirits have fallen dramatically. Almost 3.5 million cases have been lost, or approximately $104,000,000 in net revenue.

Since the OLCC raised retail prices 5% in August 1993, case sales of liquor are approximately 50,000 cases behind the previous year. The Governor's 1993-1995 mandated budget, which was legislatively adopted, projected increased revenue of eighteen million dollars over the previous biennium, based on the 5% price increase. The reality is a probable twelve to fifteen million dollar shortfall in projected revenue.

Strong opposition by the industry and liquor retailers stopped the OLCC from considering a second price increase as an attempt to recover the revenue shortfall. The OLCC is currently attempting to implement a veiled price increase by reducing the number of items and the dollar amount per item eligible for monthly price reductions or "specials". This proposal is strongly opposed by ORLA and the DRO.

The solution to this dilemma is obvious, simple, and equitable. All alcohol is potentially dangerous. Every alcoholic beverage should bear its fair share of alcohol's social cost. ORLA will submit legislation to the 1995-1997 Oregon Legislature to establish a pure alcohol gallon (PAG) tax in lieu of the existing tax structure. This tax would be administered by the Oregon Department of Revenue and will tax all alcoholic beverages sold in Oregon on their pure alcohol content. The bill will contain a tax rate of $11.00 per PAG. This rate, when applied to the OLCC's sales projections for all alcoholic beverages, will generate $2.5 million more in revenue than the OLCC's current projection for the 1993-1995 biennium.

Beer taxes would increase about $.04 per 12 ounce can.20 Wine would reflect a similar per drink cost increase based on equivalent alcohol content. These increases are so minimal that they should have little impact on customer preferences. Distilled spirits prices would drop approximately 20%. Premium brands currently priced out of the hands of the average consumer will again be affordable.

Recovered bootleg sales will be significant. There will also be economic growth and employment opportunities when Oregonians again sell the estimated 1,100 cases of liquor being bootlegged daily.

Not only does the PAG tax simplify alcohol taxation, but it returns alcohol taxation authority to the people's elected representatives in the Oregon Legislature. No longer will alcohol tax decisions be made by a commission which is not accountable to the public.

The stability of alcohol as a revenue source will be enhanced. At present, when a consumer converts from a drink of distilled spirits to a drink of beer or wine, he consumes essentially the same amount of alcohol. The state's revenue source, however, shifts from a $28.00 PAG source to a $3.35 PAG source. The proposed PAG tax insulates the state from revenue fluctuations caused by consumer movement between products.

Oregonians' concern for controlled access will be satisfied. The most widely purchased, consumed, and abused products will begin to pay their fair share of alcohol's social cost. Customers who shift back to distilled spirits from beer and wine, and customers who previously bought out-of-state will return to the best controlled retail environment.

This reform has national implications. It offers revenue enhancement opportunities to all states, private or control, as all states have disparities in their taxation of alcoholic beverages. A successful implementation of the PAG tax in Oregon would provide a revenue lesson for the country and would benefit distilled spirits consumers nationally.

Privatize retail outlets

Control is not a function of the OLCC's presence in the retail market. It is a function of a statutory and regulatory structure which would continue to exist absent the OLCC. Under the OLCC revenue, control, sales, and customer service have deteriorated. To an extent, the OLCC will recognize that revenue could be collected without them. Their most consistent argument against privatization is that the alternative to the status quo is a California-type system with thousands of outlets.21 This argument is aimed squarely at the temperance groups, whose basic fear of privatization is a drastic increase in the number of outlets. Increased availability, they believe, leads to increased consumption. Many Oregonians share this fear. Rather than respond to this concern with a responsible alternative, however, the OLCC has managed this fear factor to protect their presence in the retail market. This goes beyond the limits of legitimate regulatory activity.

Responsible alternatives do exist. ORLA proposes the elimination of the OLCC retail operations division and support services, the creation of a retail liquor store license, and the issuance of said licenses to all 235 existing store operators at their request. A one-year period would be allowed for the licensing of existing operators and their purchase of existing store inventories. Reasonable license fees would be assessed. The retail license fee structure should parallel the fee structure for dispenser licensees.

A two-year period is proposed to allow the system to stabilize, with the first new licenses being considered by the 1997-1999 legislature. To ensure equal opportunity, all licenses beyond the original 235 would be issued by lottery. Any citizen who meets the licensing criteria may participate in the lottery. The number of new licenses should be determined by the legislature based on a legislatively created population formula. To ensure against a proliferation of outlets, the Oregon Legislature would retain full authority to deny issuance of any new licenses regardless of whether population requirements had been met. This responds to the temperance groups concerns and places new licensing in the proper public forum for hearing and debate. New licenses will be created to serve a specific geographic population. Licenses transferred in conjunction with the sale of a store will be restricted to serving the geographic population served by that store. These proposals ensure the enhancement of service to existing markets, the creation of new or additional service in growing markets, and the opportunity for all citizens to seek an available license.

Retailer compensation will become a function of the marketplace and not a state budget obligation. The effect of the PAG tax will be to create room for realistic operating margins. These would replace the current inadequate retail system funding of 8.2%. Proper margins and market pricing will generate reduced prices, better store locations, extend operating hours, and increase numbers of skilled employees. As service is increased, sales are increased. Control is enhanced because licensees will have an economic interest in their stores that does not now exist. Having an economic asset to protect can only enhance the licensee's commitment to denying service to minors and intoxicated persons. Better skilled employees, greater employee retention, and increased numbers of employees all contribute to better scrutiny and control.

CONTROLLED PRIVATIZATION would also expand the retailer's ability to refuse service to habitually intoxicated persons, minors, and shoplifters. As "agents" of the state, retailers cannot bar the persons cited above from the premises, but must make a case by case determination whether the person is intoxicated, intent upon shoplifting, or previously involved in alcohol-related misconduct in the community. The retailer is not allowed to take preemptive measures to avoid predictable alcohol-related misconduct. Retailers are forced into a reactive mode which places the retailer, the problem customer, and the public at risk.

Private ownership of the existing state liquor inventories will relieve Oregonians of a multi- million dollar budget obligation. Removing the state from the retail sale of distilled spirits also insulates it from its current liabilities under the Tort Claims Act.22

Privatize wholesale liquor distribution

The OLCC's presence in the wholesale liquor industry serves no purpose. There are few, if any control issues at the wholesale level. Public access to distilled spirits is virtually nonexistent at the wholesale level.

From a revenue standpoint, the OLCC's wholesale operation is fiscally irresponsible. The PAG tax, the current OLCC markup (tax), or any other form of tax on distilled spirits can be imposed without OLCC's receiving, warehousing, and shipping expenses. The OLCC's warehousing operation is costing approximately $5,000,000 for the 1993-1995 biennium.23 Over $19,000,000 in inventory is floored by the OLCC's warehouse and retail stores.24 Additional expenses are incurred through the support services necessary to maintain these operations. The expenditure of these tax dollars is not essential to the production of revenue. Revenue received by the State of Oregon is generated by the imposition of a tax upon the product, not by OLCC's handling of the product. The OLCC does not participate in the wholesale or retail activities of beer and wine, but merely collects the taxes imposed upon those products. The same procedure will work for distilled spirits. OLCC's most common argument against private warehousing is that private business would have to build in a profit margin which would raise prices to consumers. This argument is correct insofar as it assumes no change in the current tax structure. However, implementation of the PAG tax reduces the tax burden placed upon distilled spirits and ensures lower retail prices.

ORLA proposes the creation of a wholesale liquor license and the shift of distilled spirits wholesaling from the public to the private sector. The PAG tax would be imposed upon distilled spirits at the wholesale level and collected by the Oregon Department of Revenue. The OLCC would be given a one year period to notify suppliers of the change and terminate wholesale operations. This period would coincide with the one-year period allowed for licensing of retail outlets. Any inventory remaining at the end of this year would be sold to the private wholesalers or retailers.

The benefits to the taxpayers accrue immediately. The warehouse facility could be sold and would go on the tax rolls. The state would no longer have the cost of owning, protecting, or managing millions of dollars inventory. The tax burden of funding the wholesale operation is eliminated. As with retail, removal of the state from the wholesale activities further insulates it from tort liability.

Discussions with private beer and wine wholesalers revealed some industry concerns about the privatization of wholesale distribution. Oregon has approximately 140 wholesalers of beer and wine. Wine wholesalers in particular are concerned that privatization of distilled spirits wholesaling could result in the elimination of many existing wholesalers and the consolidation of wholesale activities in a few large interests. This consolidation has occurred in other states. California has only two wholesalers of distilled spirits. They also distribute wine. The dynamics of beer wholesaling vary sufficiently from those of wine and distilled spirits to limit the interest of beer wholesalers in acquiring distilled spirits products or vice versa.

Because of the concerns of numerous small wholesalers, ORLA chose to develop an alternative. If the legislature perceives a threat to existing Oregon businesses that makes open private wholesaling unlikely, contracting out the wholesale function is the solution. The state can contract with a single distribution company or bonded warehouse with statewide service to provide wholesale distribution for distilled spirits suppliers. Though open, private wholesaling is more beneficial, contracting out will produce many of the same benefits and savings.

ORLA proposes simultaneous privatization of retail and wholesale operations. Other states have been reluctant to take such large steps. Iowa and Wyoming have retained wholesale control. Washington proposes to privatize retail but retain state control of wholesale. It appears that control states are reluctant to let go completely and that full privatization may be an evolutionary process.

REGULATORY REFORMS

Simplify licensing

The licensing requirements of the OLCC rival any other regulatory structure in the state in their complexity and scope. Twenty-five different types of licenses exist.25 Ratios for food sales to liquor sales, lounge seating to restaurant seating, and the like abound. Regulation of licenses has become so specific that it no longer ensures consistent standards within the industry, but intrudes upon the day-to-day operation of the businesses. Licensing is intended to ensure that qualified, financially sound, honest people are given the opportunity to operate a business associated with alcohol consumption. Licensing is also intended to hold those same people accountable for any failure to perform responsibly. It is not intended to make the state a partner in private enterprise.

ORLA's original proposal was to transfer the licensing function to the Oregon Health Department. Subsequent discussions with legislators and attorneys revealed that transferring the existing regulatory structure to another agency would indeed create savings, but it would not address the ever-increasing intrusiveness of licensing standards and activities. The scope of the problem is far beyond prompt rectification.

ORLA proposes that the 1995-1997 legislature create an interim committee to develop legislative guidelines for restructuring the licensing process. The committee should focus on the accountability of licensees. Legislation should include a simple, statutory, multipurpose license application. It should develop specific statutory limitations on the scope of licensing's regulatory activity. Hours of operation and location are proper topics; whether the pool table is visible from the restaurant is not. Only those factors which can be specifically tied to incidents of licensee misconduct should be subject to regulation. The result of restricting regulatory scope will be the reduction in size of the regulatory agency with accompanying budget savings. The reduced licensing function can then be more easily placed within a more appropriate agency.

Elimination of the OLCC Hearings Division

The problems with the OLCC Hearings Division are not unique. The same deficiencies are evident in the hearings divisions of most state agencies. The basic flaw is the agencies' relationship to the hearings officers and the decision makers. Hearings officers are funded through the agency budgets, hired by the agencies, supervised by the agencies, and when necessary disciplined or fired by the agencies. They are normally housed in the same building with the agency offices. Hearings are normally conducted in the agency offices. Agency staff and a deputy attorney general usually present the case. The hearings officer then makes a ruling. Initial review of that ruling is by the agency. In some cases there is a commission like the OLCC which has the power to affirm, reverse, or modify the ruling. It is not possible that this system can be fair or impartial. The agencies are the prosecutors, judges, juries, first level of appeals, and ultimate decision makers. The procedural power and control the agencies have over hearings officers and final decisions, and the employment relationship between the agencies and the hearings officers prevent any possibility of due process. The concept of separation of powers is intended to preclude this type of governmental omnipotence. Justice is further subverted because final decisions of the agencies can be appealed only in the Oregon Court of Appeals. This process is prohibitively expensive.

These problems demonstrate the need for a complete renovation of the hearings process. Justice demands that all parties to a hearing be afforded an equal chance before an unbiased decision maker. ORLA's original proposal was to transfer the OLCC Hearings Division to the Department of Health. Discussions with legislators, lobbyists, and attorneys directly involved in the hearings process revealed that:

1. The Department of Health was not the best place to move OLCC Hearings, and

2. The incestuous agency/hearing relationship was so serious that any solution offered should address the problem statewide.

ORLA proposes the creation of a state level hearings department. Hearings would be removed from individual agency control consolidated under a single department. Funding for the state wide hearings department would be taken from the individual agency budgets. Consolidation of the hearings divisions would eliminate existing duplication, especially at the supervisory level.

During discussions with Associated Oregon Industries ORLA learned that proposals for consolidation of the hearings divisions had been previously legislatively unsuccessful. The inertia and territorial nature of the agencies proved to be too big an obstacle. Two factors make the success of this proposal more viable at this time. One is the financial pressure to reduce and consolidate government created by Ballot Measure 5. The other is the fact that attorneys who are involved in the current hearings structure are also working to revise the current system with an eye toward major renovation. ORLA will request that the 1995-1997 legislature establish an interim committee to prepare the necessary legislation. ORLA will continue to coordinate with knowledgeable attorneys and with the office of the Attorney General. In the event that the creation of a state level hearings department is successfully opposed by the agencies, ORLA has a viable alternative. The key to objectivity and fairness in the hearings process is the elimination of agency control of budget, work supervision, and final orders. This can be readily achieved. The physical location of the various hearings divisions need not change. All that is necessary is that the authority for budget, work supervision, and review of final orders be removed from the individual agencies and consolidated under the Secretary of State. Funding for the administrative costs can be transferred from the agency budgets to the Secretary of State's budget. Consolidation of these responsibilities will bring consistent standards to the hearings process and save tax dollars. The success of this alternative will restore the balance of power between the citizen and the state. Justice is more readily achieved when the state is held to the same standards as its citizens.

ORLA also initially proposed the option of binding arbitration. Discussions with attorneys revealed that the state is not permitted to enter into binding arbitration insofar as the hearings process is concerned.

Contract with local law enforcement agencies Liquor law enforcement would be best accomplished by the Oregon State Police and local law enforcement agencies. To validate this statement one must examine the conditions under which problems that require liquor law enforcement occur. This examination should consider the severity of the problem, the location of the problem, and the resources that respond to the problem.

1. Alcohol-related domestic violence occurs in private residences and public settings. The more severe forms may require medical, police, jail, court, transportation, and temporary housing services.

2. Alcohol abusers frequently drive while intoxicated. Detection, arrest and control of these individuals requires police, jail, towing, court, and transportation services.

3. Minors attempting to purchase and/or possess alcohol are detected at the point of purchase or at the place of consumption. Parental involvement, police services, medical services, jail, court, and transportation may be needed.

OLCC enforcement plays no effective role in the three serious alcohol-related problems identified above. In fact, should OLCC enforcement officers observe serious alcohol violations, they routinely call sworn police officers to effect an arrest. If local officers must be called to make an arrest, then citizen's tax dollars should support local officers, not OLCC middlemen.

For many years there was disagreement about what status OLCC enforcement officers should have in the law enforcement community. Many wanted them to have full police powers while others wanted them to play a more passive role and be mostly educators and compliance officers. The passive role faction was successful and OLCC enforcement officers are not sworn officers. This philosophical shift from enforcement to compliance has reduced them to counselors and ticket writers.

OLCC enforcement has no responsibility for investigation and prosecution of crime against or within the retail liquor stores. Retail stores are directed by OLCC to contact their local police.

The OLCC is in a very poor geographic position to enforce the liquor laws. It has tried to deal with this problem by establishing district offices around the state. This is ineffective and wasteful, especially when you consider that the Oregon State Police and local law enforcement agencies already have numerous offices and facilities throughout the state. They are already charged with the responsibility of enforcing all Oregon laws.

The OLCC Enforcement Division is notably absent when arrests are made for alcohol-related misconduct. The really serious problems fall to the Oregon State Police and local policing agencies for resolution. This leaves relatively unimportant issues for the OLCC enforcement officers.

ORLA proposes that the OLCC Enforcement Division be eliminated and that the state contract with local law enforcement agencies for liquor law enforcement. There are 8 supervisory and 53 non-supervisory positions assigned to regulatory field services enforcement.26 OLCC Enforcement Division also consumes office space, automobiles, support service personnel, and agency administrative costs.) A shift of this funding could produce at least 50 new sworn officers statewide.27 Savings will also be available through the elimination of duplicate offices, vehicles and administration. Liquor law enforcement will gain the extensive resources and experience of local law enforcement agencies.

REDEFINE ALCOHOL CONTROL IN OREGON

The above reforms will leave little of the OLCC. The remaining OLCC functions should be transferred to appropriate state agencies, i.e., disbursements to the Department of Revenue and server education to the community colleges. All OLCC administrative rules should be reviewed for merit and necessity. Those worthy of retention should be cast in statute.

REFER THE ENTIRE PACKAGE TO A VOTE OF THE PEOPLE

The Knox Law which created the OLCC is arguably of constitutional status. Future legal challenges may be avoided by putting each of these reforms to a vote of the people.

IMPLEMENTATION

The legislature can implement Controlled Privatization through several simple, straightforward actions.

1. The PAG Tax Define the tax unit, pure alcohol gallon. Set the tax rate at $11.00 per pure alcohol gallon. Impose the PAG tax upon all alcoholic beverages sold in Oregon. Direct the Oregon Department of Revenue to administer the tax. Collect the tax at the wholesale level. Eliminate positions in the OLCC fiscal division, as appropriate. Implement the PAG tax no later than July 1, 1995.

2. Privatize Retail Outlets Phase out OLCC Retail Operations and associated support services. Create a retail liquor store license, using general licensing criteria. Issue licenses to the 235 existing agents upon request and transfer existing store inventories on a standard 30 day account. Licenses beyond the initial 235 are to be issued by lottery. Any applicant who meets licensing criteria may participate in the lottery. The number of new licenses will be determined by the legislature, based upon a legislatively-created population formula. New licenses will be restricted to servicing a specific geographic population. Any transferred license must continue to serve its existing geographic population. Provide a twelve-month phase down period for licensing existing stores and transferring existing inventories. Set a two-year moratorium on issuance of new licenses to allow the system to stabilize.

3. Privatize Wholesale Distribution Create a wholesale liquor license. Instruct the OLCC to notify all vendors that they will need private warehousing and distribution. Allow private sector interests to fill the warehousing and distribution needs of the industry. Provide a twelve- month shutdown period which coincides with the time allowed for retail licensing. Sell the remaining inventory to wholesalers and retailers.

Alternatively, direct the warehousing and distribution function to be contracted out to a single distribution company or bonded warehouse. Provide a similar twelve-month period for transfer of operations.

4. Simplify Licensing Create a joint interim committee to develop legislative guidelines and prepare legislation for restructuring the license process. Appoint the committee in 1995. Propose legislation during the 1997-1999 session, to coincide with the first issuance of new licenses (end of 2 year moratorium).

5. Eliminate the OLCC Hearings Division Create a state level hearing department. Remove all hearings from agency control and consolidate them under one department. Use the funds currently allocated to the agency's hearings budgets to support the statewide hearings department. Eliminate duplication in supervisory personnel.

Alternatively, remove authority for budget, work supervision, and final orders of hearings from the individual agencies and place it under the Secretary of State. Reduce supervisory personnel at the agencies and use that funding for the office at the Secretary of State. Legislation for either alternative should be passed in the 1995-1997 session.

6. Contract with Local Law Enforcement Eliminate the OLCC enforcement division. Use the funds saved to contract with local law enforcement agencies for liquor law enforcement. Supplement no later than July 1, 1996.

7. Redefine Alcohol Control Examine the remaining activities at OLCC and transfer them to appropriate state agencies, i.e., disbursements to the Department of Revenue, server education to community colleges. Review all OLCC administrative rules for merit and necessity. Cast those worthy of retention in statute.

8. Refer to the People Legislatively refer all proposed changes to a vote of the people.

POLITICAL OBSTACLES AND STRATEGY

An effective political analysis should focus upon players and process. The various governmental, business, and citizen interests must be identified, and a process developed which will gain their support or diminish their opposition.

The OLCC will be a major opponent regardless of the prohibition against using state resources for political activity. They will predictably resurrect their 3,000 store argument and attempt to frighten liquor agents, legislators, temperance groups, and the public. OLCC has previously targeted liquor agents with threats that Fred Meyer and Safeway will gain access to the distilled spirits market and put them out of business. They have also suggested that all private retail licenses be auctioned to the highest bidder, knowing that most liquor agents are financially incapable of bidding competitively. The specifics of these proposals respond to each of these concerns.

Non-member liquor agents express mixed feelings about these proposals. Some clearly support controlled privatization but fear that it will be altered during the legislative process to create a California-like system. Others favor the status quo. Those who are resisting change do so out of fear, or in a few cases, because their current store location is uncharacteristically profitable. Informal meetings have been held statewide to present the specifics of CONTROLLED PRIVATIZATION and address these agents' concerns. These meetings began in September, 1993, and will continue through the 1995-1997 legislative session. Several agents have joined ORLA after learning the specifics of CONTROLLED PRIVATIZATION. Once privatization is under debate in the Oregon Legislature, most liquor agents will inform their legislators of their support or fears. In either case, the legislator can support CONTROLLED PRIVATIZATION because the proposal eliminates the bases for non-member agents' fears. It limits the number of outlets, licenses the existing agents, and provides for reasonable licensing fees.

The distilled spirits industry is supportive of the PAG tax and privatization of retail.28 It would prefer to continue to deal with a single wholesale distribution center. The industry should not be an obstacle. Contact has been made with the Board of Directors of the Distilled Spirits Council of the United States (DISCUS), and communication with their local, regional, and national lobbyists will continue.

Local liquor brokers and the Distillery Representatives of Oregon generally support Controlled Privatization despite the possibility that privatization of wholesale may eliminate some brokerages.29 The sorry state of the distilled spirits industry in Oregon and the unreasonable restrictions placed upon brokers have convinced them that change is inevitable.

The Oregon Restaurant Association (ORA) has yet to state its support for CONTROLLED PRIVATIZATION. Its reluctance lies in the fact that the majority of its constituents do not deal with distilled spirits. It is reasonable for ORA to maintain a neutral position at this time.

Beer and wine wholesalers and national beer interests will be our strongest opposition. They will not support any tax increase on their product. National beer interests fear the national implications of the PAG tax. They have fought equivalency taxes successfully at the federal level. Beer and wine have successfully avoided tax increases in each of the past two legislative sessions in Oregon. Local interests expect a tax increase this session and admit that the PAG tax may be an option, depending upon other legislative proposals. Any opposition can be offset by disseminating facts about beer and by exercising the public contacts of agents and their customers.

Temperance groups are initially resistant to any change in the status quo. When exposed to the national and regional trends toward privatization and the changing demographics of Oregon, however, they acknowledge that some change is possible. They will not support any proposal which dramatically increases the number of distilled spirits outlets.30 CONTROLLED PRIVATIZATION has been presented to Mothers Against Drunk Drivers and communication with them will continue.

Often overlooked, Oregon's cities and counties, the recipients of alcohol tax distributions, are a significant interest. CONTROLLED PRI-VATIZATION has been presented to the Association of Oregon counties and initial interest in the PAG tax and contracting for local law enforcement has been expressed.31

Controlled Privatization is a drastic departure from the status quo. Such a leap requires a patient process. Support is developed by contacting the various interests early and planting the seeds of change. Legislators and legislative candidates have attended regional informational meetings. More than 30 legislators have been contacted through these meetings and individual meetings. No stated opposition to these proposals has arisen. Legislative contacts will intensify as the 1995-1997 session progresses.

Support of the various editorial boards and media is imperative, but press coverage should not be utilized too early. Coverage will be more important and effective closer to the legislative session and upon the referral of Controlled Privatization to the voters.

The current political climate is most favorable to change. All of the political players cited will have to deal with shrinking revenue projections,and with immense public pressure to reduce government. Controlled Privatization responds to these priorities. It also provides legislators with the opportunity to eliminate or diminish one of Oregon's most visible and unpopular bureaucracies.

The citizens of Oregon are the most powerful interest group to be considered. CONTROLLED PRIVATIZATION is responsive to their concerns for reduced government, reduced taxes, improved customer service, and improved control of alcohol access. CONTROLLED PRIVATIZATION benefits all Oregonians regardless of whether they purchase alcohol. The people of Oregon, through the proposed referendum, will have the final word on CONTROLLED PRIVATIZATION.

Legislative fiscal and legislative counsel have been consulted, and the CONTROLLED PRI-VATIZATION bill is currently being drafted. CONTROLLED PRIVATIZATION will be split into several bills to enhance each proposal's chance of success. The legislature is more likely to take several small steps where the interests and impacts can be readily defined, than one huge step, the implications of which are more difficult to assess. The bills will be placed in appropriate committees. Agents and lobbyists will be present daily during the 1995-1997 legislative session.

Work will continue on the CONTROLLED PRIVATIZATION proposals which are recom-mended for deferral to interim committees.

CONCLUSION

The OLCC was formed to address the social concerns of 1934. It has outlived those concerns. Its continued presence in the retail and wholesale marketplace is harder and harder to justify. The OLCC's inability or refusal to adjust to a changing environment has rendered it ineffective in revenue generation and in the control of access to alcohol. The national trend toward privatization cannot be overlooked. Fiscal constraints have forced other states to privatize their control systems. The same constraints will make privatization an attractive option for Oregon. With Washington state planning privatization to the North and already private California to the South, Oregon's control system will be isolated. The market pricing of these states will victimize Oregon's distilled spirits industry and its revenue base unless dramatic change is implemented. Customer dissatisfaction with OLCC prices and service levels will accelerate Oregon's movement toward privatization.

Oregon's citizens have made two things clear:

1. A reduction in government bureaucracy is absolutely mandatory, and

2. OLCC's prices and services levels are unacceptable.

The market reforms presented herein drastically reduce government bureaucracy and provide immediate budget reductions. The PAG tax reduces distilled spirits prices and provides an operating margin for the retailers which will support significantly improved service levels. It also enhances Oregon's competitive position with its surrounding states. These proposals accomplish all of the above without sacrificing control.

The regulatory reforms proposed will also reduce government bureaucracy and provide budget reductions, albeit over a slightly longer period of implementation. Restructuring the licensing process and focusing license criteria on areas of legitimate state interest will make licensing more effective and less intrusive. As the scope of government intrusion is reduced, the size of the administering agency will shrink. Budget savings will accrue, and will be enhanced by the ultimate consolidation of liquor licensing with another agency. Casting the licensing criteria in statute should limit the agencies ability to expand licensing criteria beyond legislatively approved boundaries.

Renovation of the hearings process offers budget economies and objectivity whether placed under a statewide hearings department or transferred to the Secretary of State. Consolidation will cost Oregon's citizens less and treat them more fairly.

Contracting with local law enforcement agencies will replace an ineffective bureaucracy with effective, locally controlled, sworn police officers. Citizens will gain the superior resources and experience of local law enforcement agencies and will halt the waste inherent in the current duplication of services.

CONTROLLED PRIVATIZATION is politically viable. Never before has the financial pressure and citizen demand for reduction in government been greater. Liquor agents report that never has OLCC customer dissatisfaction been stronger. CONTROLLED PRIVATIZATION is a responsible, economical, innovative departure from the status quo. It will serve Oregon's citizens well.

ENDNOTES

1. Presentation by Dave Heynderickx, Office of Legislative Counsel, to Joint Interim OLCC Oversight Task Force, December 13, 1993, on history of OLCC.

2. 1993-1995 OLCC budget document.

3. Teleconference with OLCC Purchasing Division.

4. State Ways, The Magazine for The Control States, November-December 1991, Page 28, Danielle Cowan, Spokesperson for the Oregon Liquor Control Commission.

5. Retail Sales Agent Agreement, OLCC form 84540-106, rev. 5/88., OLCC Retail Operations Manual, rev. 9/87.

6. ORLA conversations with Banton and Kinsley, P.C. and Wynne Hewitt, Dodson, and Skerritt, Attorneys at Law, April, 1991 - November 1992.

7. Robert Morris & Associates, 1992 financial analysis.

8. OLCC 1993-1995 legislatively approved budget document.

9. ORLA computation, based upon OLCC reports of individual agency sales and compensation.

10. ORLA estimate based upon 3.4 million lost case sales (1981-1993), 14% population growth (1981-1993), customer comments, conversations with Washington State Liquor Control Board, conversations with California border retailers, and extent of California retailer advertising in southern Oregon cities, specifically Medford and Grants Pass.

11. Teleconference with Center for Population Research and Census, Portland State University.

12. OLCC legislatively approved budget documents for biennia 1985-1987, 1987-1989, 1989-1991, 1991-1993, and 1993-1995.

13. ORLA members have observed this process during their attendance at hundreds of monthly OLCC meetings.

14. Birmingham Post Herald, June 28, 1994, pages A1, 6. Patrick Rupinski.

15. The Oregonian, series of articles, August 1994.

16. The Oregonian, January 21, 1992, p. B8, Dan Hortsch.

17. OLCC 1992 budget document; OLCC financial statement, January 28, 1994.

18. OLCC Budget 1993-1995.

19. Figure based upon Oregon alcohol con-sumption estimates in the 1993-95 OLCC Legislatively approved budget.

20. ORLA calculation based on OLCC 1993-1995, legislatively approved budget document.

21. Letter of W. Eugene Hallman, Chairman, OLCC, dated November 18, 1991.

22. Attorney General Opinions, September 24, 1985 and October 2, 1985.

23. OLCC legislatively approved budget document 1993-1995.

24. Teleconference with OLCC Purchasing Division.

25. OLCC document depicting OLCC license codes, undated.

26. OLCC Organizational Chart, dated October 1993, pg. 9.

27. ORLA calculation based on OLCC 1993-1995 legislatively approved budget document and projected "Controlled Privatization" savings.

28. ORLA's discussions with national and regional distillery representatives.

29. ORLA's discussions with local distillery representatives and brokers.

30. Mothers Against Drunk Driving Position Statement, dated January 14, 1992.

31. ORLA August 16, 1994 meeting with Associated Oregon Counties.