Comrade Elrich’s Kirwan Plan: Government Run Pot Stores

Montgomery County Executive Marc Elrich (D) this past week told a community forum that to pay for the Kirwan Commission’s $ 4 billion educational spending recommendations, the state should legalize and control the sale of marijuana.[i]  According to Bethesda Beat, Elrich’s vision includes the state government controlling marijuana dispensaries, much like how the county government operates its liquor stores.

Among the many, many problems with Elrich’s proposal for paying for Kirwan, the county-run liquor stores actually lose money.

According to a more detailed financial analysis recently completed for the County Council, the liquor monopoly’s net profit is entirely due to its wholesale warehouse operation. The County’s retail operation, its twenty-five stores with a monopoly on selling hard liquor, in fact, loses money. The loss is about $5 million a year.[ii]

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Overall, six of the 25 Alcohol Beverage Service retail stores showed a profit and 19 showed a loss in the fiscal year ending this past June. The performance of individual stores was varied. The best produced a $299,000 profit.  The worst generated a $470,000 loss. The county agency acknowledged that the retail stores were in the red in fiscal 2018 and will be again in 2020.

Previously, this operating loss was obscured by an accounting sleight of hand that booked profits to the retail operation that really belong to the wholesale division. Unlike private beer and wine retailers in the county, the county’s own retail stores were not charged a wholesale markup when purchasing product from the warehouse. This allowed them to book their inventory cost at the price the warehouse paid to manufacturers. Consequently, the stores were made to seen artificially profitable.

To their credit, five of the County Council’s nine members have now demanded that County Executive Marc Elrich provide a detailed analysis of why the stores are unprofitable and how he plans to address the issue. [iii]

Some thirty years after the Berlin Wall came down, the Erich Honecker of Maryland politics, explained his government pot stores plan to Maryland Matters by saying: “What’s the justification for giving [the profits] to a bunch of private guys who are rich, so they will get richer, and then you’ll be sitting there with crumbs in your hand, when you could have all of it? The State should process and sell. And take every dime of revenues.” [iv]

To give the chief executive of Maryland’s most populous jurisdiction a little credit, though, at least he acknowledges a Kirwan price tag.  Math challenged Kirwan supporters have been denying that $4 billion divided among 6 million people equals $6,600 per person.

However, if Montgomery County’s monopoly liquor stores cannot turn a profit, what realistic prospect exists that the same monopoly organization can contribute to funding the Kirwan Commission $4 billion spending plan?

Fortunately, Elrich’s “State Weed” proposal is getting little political traction.  Former state attorney general Douglas Gansler (D) called the proposal “extremely outside the box, both in moral and economic terms.”

“The government ought to be keeping people safe, providing the highest standards of education and concepts like that — not selling people marijuana. One would have to tread carefully [because] once you go down that path, it’s difficult to come back.”

Del. Kathy Szeliga (R-Baltimore and Harford Counties), is no fan of Elrich’s proposal either. “There are limits to what the state should do to fund education. And becoming a statewide dealer of marijuana will neither solve the education funding problem nor be helpful to our youth.”

None other than Karl Marx famously said: “History repeats itself, first as tragedy, second as farce.”  From Montgomery’s money-losing county liquor stores, to Maryland “State Weed,” Comrade Marc Elrich seems determined to pursue an agenda of farce.

[i] https://bethesdamagazine.com/bethesda-beat/schools/county-executive-marijuana-legalization-government-efficiency-could-mean-education-money/

[ii] http://councilmemberriemer.com/assets/ABS-FY19-Retail-Store-Data-Memo-10-15-19.pdf

[iii] http://councilmemberriemer.com/assets/ABS_Retail_Store_Profitability_Council_Letter_FINAL.pdf

[iv] https://www.marylandmatters.org/2019/07/02/montgomery-exec-wants-md-to-get-into-the-pot-selling-business/

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