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N O R T H C A R O L I N A ASSOCIATION OF COUNTY COMMISSIONERS LEGISLATIVE BRIEF: ABC SYSTEM Background North Carolina's ABC system is unique in that it is the only system in the nation in which ABC boards are appointed locally to oversee the stores in each jurisdiction. If voters in a city or county approve in a referendum the sale of liquor, then an ABC board is established by the local governing body to oversee the operations of the ABC store. The state ABC Commission determines which products will be sold, sets the prices and houses the inventory in a state warehouse. The local ABC boards order their products through the warehouse and then pay the distillery directly upon delivery. There are 161 local ABC boards that operate 411 stores. In 2008-09, cities and counties received more than $46 million in revenues from the local ABC boards. In 2008, the N.C. General Assembly asked its Program Evaluation Division (PED) to study the current ABC system. The PED released its evaluation in December 2008. Its study concluded that the state ABC Commission lacked the ability to effectively and efficiently manage the ABC system and made numerous recommendations to improve the system, many of which would grant more control and authority to the state ABC Commission. On Jan. 12, 2009, Governor Beverly Perdue signed an executive order establishing the N.C. Budget Reform and Accountability Commission (BRAG). The mission of BRAG is to review "the services and programs provided by State government" and make sure that "the operations of State government are streamlined and improved to achieve cost savings without sacrificing core missions and services." The ABC system is one of the issues being studied by BRAG. In addition to these efforts, Sen. Marc Basnight (Dare) is organizing a special legislative committee to review the ABC system and make recommendations for reform. He has asked the NCACC and the N.C. League of Municipalities (NCLM) to recommend members for the special committee, which is scheduled to convene Feb. 1. Over the past several months, several local ABC boards have come under scrutiny for perceived ethical issues, leading to more calls to reform the system. Outlook for 2010 Several bills were introduced in 2009 that would have implemented many of the proposals contained in the PED report. H768/S839 (Modernization of the ABC System) and H1367 (Modernization of the State's ABC System) were not heard during the session. The bills give the state ABC Commission the power to establish performance standards for local ABC boards and the authority to close stores that are not profitable. The bills would also require the local boards to comply with directives issued by the state ABC Commission. The bills also force separate ABC boards within a county to merge by July 1, 2011, with the result of no more than one ABC board per county. The NCACC and the NCLM oppose the bills because of the usurpation of local control. On Jan. 20, 2010, Governor Perdue told members of her Local Government Advisory Commission, which includes officers from the NCACC and the NCLM, that she was bothered by the issues plaguing the ABC system and that she wanted to address those concerns. She said she would have "slam-dunk" legislation ready for the 2010 short session and that she is willing to consider any alternative, including privatizing the system. The NCACC and NCLM oppose privatization due to the potential loss of local revenues. It is estimated that local governments would lose $60 million in reoccurring revenues. February 5, 2010 G-4 Page 127