Located within the state Business, Consumer Services and Housing Agency, California’s Department of Alcoholic Beverage Control (ABC) enforces the state’s voluminous and exquisitely detailed liquor laws, contained in the Alcoholic Beverage Control Act. Any establishment in California involved with alcohol must have a license or permit from the ABC.  This includes manufacturing, distribution, wholesale and retail sales, brewing beer at home or even offering sangria at a fundraiser. The department uses census data to determine the maximum number of liquor licenses allowed in a certain area and may impose bans on new licenses or restrictions on the transfer of licenses. Nearly 430 attorneys, clerks, investigators and sworn law enforcement professionals work at the ABC and oversee the issuance and maintenance of the state’s 80,000 ABC permits. The department is transitioning to the new Business, Consumer Services and Housing Agency by mid-2013.

Alcoholic Beverage Control Act (ABC website)

Prior to 1955, state liquor laws were overseen by the Alcoholic Beverage Commission, an arm of   California’s Board of Equalization (the state’s tax collector).

The ABC became an independent department in the executive branch  in 1955 and steadily grew in size and scope. It currently is headquartered in Sacramento, with two district offices covering northern and southern California, respectively, and 24 local offices scattered throughout the state.

Part of the impetus for the agency’s creation was a 1951 California Supreme Court decision that a liquor license could not be suspended simply because an establishment catered to homosexuals. The case, Stoumen vs. Reilly, was brought after the Black Cat Bar in San Francisco lost its license following a serious of law enforcement raids. The court ruled that the authorities needed "proof of the commission of illegal or immoral acts on the premises." In response, California passed a constitutional amendment creating the department and authorized it to shut down any “resort [for] sexual perverts." The court struck down this provision as unconstitutional and emphasized that behavior, not sexual orientation, was the sole determinant of illegality.

The ABC has the exclusive power to license, regulate and control the manufacture, importation and sale of all alcoholic beverages throughout California. It also has the power to deny, suspend or revoke any specific alcoholic beverage license, for good cause, after a public hearing. As of June 30, 2010, there were 81,754 active ABC permits.

The ABC performs three basic functions: “inspection, compliance and administration.”

Applicants for a state license to sell alcohol have their “moral character and fitness” scrutinized by ABC field inspectors prior to issuance of a license, which requires approval at three levels: at one of the ABC’s field offices, at a district office and finally at its Sacramento headquarters. ABC staff members also respond to alleged violations of the Alcoholic Beverage Control Act from local law enforcement and the general public. The department’s investigators are sworn California peace officers and may make arrests and carry firearms. The complicated application and inspection process  has spawned a cottage industry of law firms specializing in liquor licensing issues. License holders are subject to routine and random inspections by the ABC. Department staff may also respond to complaints by citizens or local law enforcement. License holders must, at any time, open their premises to inspection by ABC peace officers or local law enforcement, with or without a search warrant.

The Alcoholic Beverage Control Act lists few qualifications for holders of a license. An applicant must only show that a new liquor license will “serve public convenience or necessity.” The department conducts background checks of all applicants and may decline to issue a permit if an applicant has a criminal background.

When a citizen applies for a new liquor license or transfer of a liquor license, the ABC notifies the local government. Public notices are posted at the establishment wishing to sell liquor and in local media. Any citizens wishing to contest the granting of a license may do so within a 30-day period. Government entities, such as a city council or county board of supervisors, have 90 days to notify the ABC of a reason for contesting the permit, such as evidence that the issuance of a permit would cause a public nuisance.

The ABC also imposes strict limitations on the number of liquor licenses permitted in locales throughout the state based on population: one license for every 2,500 people. Since the ABC will not issue new liquor licenses in many places, the ABC also oversees and in some cases restricts the sale and transfer of existing liquor licenses.

Currently, the ABC issues over 70 different types of licenses, from wine rectifiers to California brandy distributors to dockside permits.

All ABC licenses are subject to special restrictions, imposed as the department sees fit. For example, a liquor store in a high crime area could be subjected to limited operating hours, or could be granted a probationary permit, to be extended to a full permit after investigations and hearings.

The ABC collects annual fees from permit holders, ranging from $54 for a small vintner to $1,200 for a large-scale brewery.

Alcoholic Beverage Licenses (Department of Alcoholic Beverage Control) (pdf)

Licenses and Fees (Justia.com)

The ABC is a non-general fund department, meaning its budget is not funded by state or local taxes. Its operating budget is funded entirely by liquor license fees: fees paid by new applicants for permits, renewal fees paid by permit-holders, and suspension or other penalty fees imposed by permit-holders found by the ABC to be in violation of liquor laws.

All except $3 million of the state’s liquor license fees is used for staff salaries, benefits, operating expenses and equipment.

Official 3-Year Budget (pdf)

Crackdown on House-Infused Cocktails

In early 2010, the ABC informed bars that infused their own cocktails–i.e., house-made bitters or other solutions made in-house, such as fruit-flavored vodka that the infusions were against the law. Bar owners and bar trade organization members accused the ABC of selectively using arcane language originally aimed at moonshiners in its interpretation that infusions broke the law.

Legislation was introduced in March 2011 that more clearly delineates the difference between infusions and the type of dangerous concoctions peddled around the time of Prohibition a century ago.

State Warns Bay Area Bars Not to Infuse Drinks (by Demian Bulwa, San Francisco Chronicle)

Wherein the ABC Decides that Infusions and Bitters Are Illegal (by Jamie Zawinski, DNA Lounge)

Infusing Business Regulations with Common Sense (State Senator Mark Leno website)

License delays

State budgetary woes have reportedly helped slow the issuance of liquor licenses.  What used to be a 90-day wait may now take up to six months. The delays were attributed to a new computer system and 3-day-a-month staff furloughs ordered by then-Gov. Arnold Schwarzenegger beginning in February 2009. At issue are an estimated 7,000 annual license transfers and 13,000 new licenses. Restaurant and store owners point to the delays as an impediment to recovery from the recession.  Drinkers make this point: “Particularly with the recession, … people still do like to drink, if anything now more than ever.” 

Liquor License Backlog in California a Bad Mix (by Marisa Lagos, San Francisco Chronicle)

Crackdown on All-Ages Events

A handful of license holders in San Francisco who hosted all-ages events at their venues faced fines or revocation because, ABC alleged, they did not serve enough food. After lengthy and expensive court proceedings, the ABC dropped the allegations.

Ageless Music: The Battle Between Venues and ABC (by Jessica Goss, San Francisco News Hub)

State Goes After Legendary All-Ages Music Clubs (by Marisa Lagos, San Francisco Chronicle)

Budget cuts

The ABC is no stranger to debates over its budget. Faced with a budget imbalance in 1991, Gov. Pete Wilson cut $5 million from the department’s $23 million annual funding. A 75% reduction in agents was expected, but layoffs were avoided when a number of them left voluntarily. However, by 1993, when much of the funding was restored, the crippling effect on enforcement was evident statewide. "That was our brain trust," said one investigation supervisor in Santa Ana.

State Liquor Sales Investigators Raring to Get Back to Business (by Eric Young, Los Angeles Times)

Liquor Agency Stages Raid (by George Ramos, Los Angeles Times)

Although there are no major reforms pending in California, the National Highway Traffic Safety Administration  issued a series of recommendations in 2005 for the states to consider to reduce death and injury on the roads from alcohol-related activities. The study found that, in general, state agencies don’t have enough agents to monitor licensees, have poor record keeping, apply penalties inconsistently and lack effective administrative processes. In addition to correcting those deficiencies, the report recommended more public participation (perhaps through “court watch” monitoring similar to activities of Mothers Against Drunk Driving).

The Role of Alcohol Beverage Control Agencies in the Enforcement and Adjudication of Alcohol Laws (National Highway Traffic Safety Administration) (pdf)

Too Much Detail?

The minutest details are covered in the state Alcoholic Beverage Control Act, including what a bar owner may place on the sidewalk in front of the establishment, how much of a bar window may be taken up by signage (33%) and whether a community college may allow wine at a fundraiser. (They can, thanks to legislation passed in 2010.) In 2008, an online publication included a number of alcohol-related regulations in its list of “The Crazy Laws of California.” Among them: “California only fairly recently legalized the sale of alcoholic beverages in nudist colonies;” “It is a violation of the California Alcoholic Beverage Control Act for producers of alcohol beverages to list the names of retailers or restaurants that sell their products in advertising or even in newsletters;” and “No alcohol beverages can be displayed within five feet of a cash register of any store in California that sells both alcohol and motor fuel” unless it is in a permanently affixed cooler.

Regulating Marijuana

Medical marijuana users and the public establishments they frequent have run afoul of the ABC because the Alcoholic Beverage Control Act prohibits the sale or use of “illegal drugs” in places holding an ABC permit. While medical marijuana has been legal since 1996, this section has had a dual effect. Bar owners who allow patients to “medicate” on-site face fines or loss of license, ensuring that medical marijuana and alcohol are not sold side-by-side. This has also been used by law enforcement to deter establishments from hosting events that cater to medical marijuana patients. 

Yet, it is possible the department could be tasked in the future with regulating marijuana in the state. The marijuana legalization bill introduced in 2009 by Democratic Assemblyman Tom Ammiano used the ABC as a framework for how legal recreational marijuana use could be regulated and taxed, and suggested using the ABC as the regulatory body for marijuana users.  That bill failed, as did Proposition 19, the marijuana legalization ballot initiative which would have left regulation up to the legislature.

San Francisco “Cannabis Competition” Ruined By The Man (by Chris Roberts, SF Weekly)

Stephen “Steve” Hardy, 2007-2011. Hardy, a Democratic former city councilman in Vacaville and former San Francisco police officer, was appointed head of the ABC  by Gov. Schwarzenegger. During Hardy’s tenure, the ABC increased fee costs by more than 12%. ABC enforcement actions were seen as “anti-entertainment” by urban club and bar owners, who accused Hardy of enforcing arcane rules.  Tensions peaked in early 2009 when state Sen. Mark Leno (D-San Francisco) accused Hardy’s ABC of “running roughshod” over late-night businesses and threatened to audit the department, a threat not carried out.

Jerry R. Jolly, 2004-2006. Jolly worked on and off for the ABC since 1975.  Jolly held a variety of positions in the department, including four years with the director’s executive staff, deputy division chief, chief of internal affairs, and training and district administrator. Jolly also served as program manager for the Grant Assistance Program, Every 15 Minutes program, and the federal Licensee Education on Alcohol and Drugs (LEAD) program through the Office of Traffic Safety. He attended Session 192 at the FBI National Academy in 1998 and has been a member of several law enforcement-related organizations. Jolly served as interim director for the California Office of Real Estate Appraisers from 1998 to 2001. He had been acting director at ABC for two years before Gov. Schwarzenegger appointed him director in 2004. Jolly left the department to become a consultant for the Wine, Beer and Spirits Law practice at Pillsbury Winthrop Shaw Pittman. He is not a lawyer.