The Department of Alcoholic Beverage Control (ABC) licenses and regulates the manufacturing, sale, purchase, possession, and transportation of alcoholic beverages. Currently, ABC has about 90,000 licenses across the state, including businesses such as winegrowers, liquor stores, and restaurants. The Governor’s budget proposes $75 million for support of ABC in 2018‑19. This is an increase of about $3 million, or about 4 percent, from current-year estimated expenditures. The department is supported primarily by the Alcoholic Beverage Control Fund, which is funded almost entirely by licensing fees.
LAO Bottom Line. The Governor proposes $207,000 from the Alcohol Beverage Control Fund in 2018‑19, rising to $265,000 in 2022‑23 and annually thereafter to fund additional rental costs associated with ABC occupying privately owned leased space rather than its current space in the state-owned Santa Ana State Building. We recommend rejecting this proposal because it is not needed given that the Legislature has decided it does not want to proceed with the administration’s plan to move ABC and other departments into the proposed privately owned leased space.
Plan to Move ABC From State Building to Leased Space. In a November 2017 notice to the Joint Legislative Budget Committee (JLBC), the Department of General Services (DGS) proposed to move ABC and several other departments from the state-owned Santa Ana State Building into leased space in a privately owned office building in another part of Santa Ana. DGS indicated that the proposed move was triggered by concerns about the condition of the Santa Ana State Building, as well as other factors such as the layout of the building and the prevalence of homeless in the building’s vicinity. After moving the tenants out, DGS indicated it would likely sell the Santa Ana State Building.
JLBC Did Not Concur Citing Various Concerns, Including Process and Costs. After reviewing DGS’ notification, JLBC did not concur with the proposal to move ABC and several departments out of the Santa Ana State Building and into leased space. The committee cited various factors for not concurring with the proposed move. For example, JLBC expressed concern that the 30-day notification process did not provide the Legislature with an adequate opportunity to thoroughly evaluate a proposal that involves a major state asset—the Santa Ana State Building. Additionally, the JLBC also noted uncertainty about whether the proposed lease—and the associated sale of the state-owned Santa Ana State Building—would be the most financially prudent decision for the state given the information available.
The Governor proposes $207,000 from the Alcohol Beverage Control Fund in 2018-19, rising to $265,000 in 2022-23 and annually thereafter to fund additional rental costs associated with ABC occupying leased space in the privately owned building recommended by DGS. (We note that the Department of Health Care Services has also submitted a similar proposal.)
Reject Proposal Due to Inconsistency With Legislative Intent. The Legislature—through the JLBC—has decided it does not want to proceed with the administration’s plan to move ABC and other departments into the proposed privately owned leased space. Accordingly, this proposal is not needed, and we recommend rejection. We note that the administration could submit a new proposal through another process that provides the Legislature with an opportunity to thoroughly evaluate it, such as the traditional budget process. If the administration pursues that approach, the Legislature could conduct its assessment of the revised proposal to determine if it addresses its concerns, and subsequently decide whether additional resources are necessary for the affected departments, including ABC.