A group of lawmakers who oversee program oversight is working on a draft bill designed to promote transparency and objectivity as they relate to penalties issued by the N.C. Alcoholic Beverage Commission.
The draft bill comes after a March report from the General Assembly’s Program Evaluation Division. The PED says its report is a response to changes to the administrative penalty structure and the severity of penalties handed down by N.C. ABC.
The Joint Legislative Program Evaluation Oversight Committee approved language for the draft bill during a virtual meeting Monday, May 11. Bill sponsors, which aren’t yet known, could introduce the bill after the General Assembly returns to Raleigh on May 18.
The PED found that administrative penalties aren’t “proportional, lacking policies, procedures, and guidelines that would limit variance and subjectivity.”
“The General Assembly should consider requiring the Commission to set guidelines that ensure penalties are proportional to offenses, increase transparency for permittees, and establish performance management criteria.”
The report centers on three points of concern:
- The ABC lacks an established rationale for determining the severity of administrative penalties and does not notify permittees of changes in penalty guidelines.
- Performance metrics are not systematically collected or reported.
- The assignment of monetary fines varies for similar violations, rendering administrative penalties disproportionate.
The draft bill aims to improve reporting and expands requirements for justifying cases and the subsequent penalties. It directs the ABC to create a policy establishing a rationale for administrative penalties and to improve transparency for permittees. It also directs the commission to study and report on the feasibility of setting a penalty structure for determining monetary penalties for administrative violations. The draft bill, too, asks the ABC to include criteria on its website or in its annual report evaluating the effectiveness of administrative penalties at reducing the number of repeat offenders, as recommended by the PED report.
Rep. Pat Hurley, R-Randolph, proposed an amendment asking for the total number of reported ABC violations, dismissed by the commission, in the previous fiscal year, including the justification for each dismissal. The amendment passed.
Distribution of penalties for similar violations shows a high degree of variance and subjectivity, the PED report says.
The penalty, for example, handed down by the ABC for selling alcohol to an underage buyer averages $2,000. For failing to provide a tax stamp on bottles, penalties range from $300 to more than $3,400.
“The General Assembly should direct the ABC Commission to develop and publicize guidelines for determining penalty structures, monetary fines, and suspension lengths,” in addition to studying opportunities to adopt specific fine structures, the PED report says.
The most common administrative penalty involves underage access to alcohol, amounting to 34% of all violations. Nine other violations make up 31% of penalties.
To the ABC’s credit, the proportion of consumption-related violations has decreased steadily since fiscal 2009–10, falling by an average of 5% per year, the report says.
“This finding suggests that penalties reduce the frequency of alcohol consumption-related violations, a central goal of the administrative penalty system,” the report says.
In response to the report, ABC Commission Chairman A.D. “Zander” Guy says the commission agrees with many of PED’s findings, though it disagreed with a finding that “the rate of repeat offenses shows that administrative penalties are failing to deter permittees from committing future violations.” Rather, the ABC says, the maximum financial penalty of $5,000 now allowed in most cases is too low, and that allowing the commission to increase for violations such as selling to underage people, along with the current suspension choice, “would more effectively deter repeat violations. …”
“Also, I believe your research may have missed what I believe is a key reason businesses with longer suspensions of alcohol permits have a relatively low rate of recurrence of violations: Businesses that receive long, mandatory suspensions often turn in their permits and go out of business,” Guy writes.