Publication 216, The First 100 Years
1954 Amendment Relieves Board of Liquor Control
A 1954 constitutional amendment signaled the first major piece of legislation affecting the Board of Equalization since the 1930s. This amendment, which was passed on November 2, 1954, transferred the Board’s alcoholic beverage licensing and control functions, but not its taxing functions, to the newly created Alcoholic Beverage Control Department effective January 1, 1955.
The 1954 amendment was, in a sense, a welcome relief to the Board Members, who, for the last two decades, had been plagued with accusations and allegations arising from their involvement in liquor control. Many observers felt that the attention the Board had given to liquor control had impeded its effectiveness in other areas. The state’s cities called for a constitutional amendment “. . . which would transfer to a state agency having a jurisdiction only over tax matters, responsibility for making assessments for all property within the state subject to the ad valorem tax.” 91
The Board of Equalization had become strongly identified with liquor control. However, almost twenty years earlier, the Board had acknowledged the problems this responsibility might cause, and had suggested from the beginning:
“Whenever a feasible plan is devised to transfer liquor regulation to some other administrative authority, we shall be glad to be relieved of this responsibility. Given to us in 1933 upon the repeal of Prohibition through an amendment of the Federal Constitution, the task of alcoholic beverage control is one of such magnitude as to merit the attention of those who have no other administrative duties to perform.” 92
The Board’s liquor control functions began after the repeal of Prohibition in 1933 by the U.S. Congress, when the California Legislature assigned liquor control to the Board of Equalization. In addition to collecting the excise taxes on the sale of alcoholic beverages, the Board was also delegated the licensing function. Alcoholic beverage control was assigned to the Board because it was primarily revenue producing. The Board was given its unlimited powers by an amendment to the Constitution in 1934, and in 1935 the Legislature passed the Alcoholic Beverages Control Act (ABC). California was the only state in which alcoholic beverage control was vested in an agency administered by an autonomous elective board completely independent of control by the Governor and primarily responsible for tax administration. The incongruity of combining liquor control functions with tax administration soon became apparent.
Liquor control developed into a predominantly regulatory and law enforcement function organized as a separate division of the Board. The division chief was the State Liquor Administrator who supervised fourteen district liquor administrators. Board personnel were trained in law enforcement and empowered to gather evidence and make arrests. These police duties plus investigating license applications and conditions of sale of licenses required closer association and cooperation with other law enforcement bodies than with tax collecting agencies. Separate lines of authority were maintained for district tax and district liquor administrators, so that the Board seemed to develop a split personality. Unaccustomed to its strange new policemen’s role, the staff of state liquor administrators and agents was incapable of enforcing the ABC Act. Responsibility for policing licensed premises was never properly discharged by either the state’s agents or local police authorities, and some premises, reputed to be hangouts for criminal elements, were never investigated and regulated. Some licenses were issued despite objections by local police authorities.
The Board’s licensing and policing responsibilities under the ABC Act required more hearings than all of the tax programs it administered; more than 1,800 hearings were held during the 1948-49 fiscal year. Approximately half of these resulted from the denial of license applications, the rest from suspensions or revocations of licenses.
As early as 1936, the Board advised the Legislature in its Biennial Report to Governor Merriam that it would be pleased to relinquish the ABC functions to another duly constituted agency. That request was repeated frequently. The preliminary Griffenhagen Report in 1938 and the final report in 1941 recommended that the ABC function be separated from the Board.
The Board’s policy was to issue for each 1,000 population in each county up to one packaged liquor store license (general off-sale) and one general on-sale license for drinking on the premises. The state was soon saturated with premises where alcoholic beverages were sold. Competition among retailers became intense even though prices were governed by fair trade practices imposed on the sale of distilled spirits and wines.
The over-licensing of establishments for the sale of alcoholic beverages had peaked in the early 1950s when Governor Earl Warren appointed Paul Leake to the Board after the death of Jerrold Seawell. Leake opposed the indiscriminate awarding of too many licenses. The maximum number of on-sale and off-sale general licenses had been reached in the late 1940s and no more could be issued until the new population totals could be determined from the 1950 U.S. Census. When 1950 census figures reported that California’s population had grown by 3,679,000, the law authorized the issuance of 3,600 new general on-sale licenses, almost 2,000 of them in southern California—1,300 in Los Angeles County alone. Under pressure to restrict the number of such licenses, however, the Board acted slowly so that the number issued grew very gradually.
After numerous investigations by various committees over the years the Joint Interim Committee on Governmental Reorganization (Assembly Concurrent Resolution 119) appointed a Subcommittee on Alcoholic Beverage Control, chaired by Assemblyman Caspar W. Weinberger, to investigate alcoholic beverage control in California and report to the 1954 Special Session of the State Legislature. The subcommittee’s transmittal letter with its comprehensive report to the Senate and Assembly stated:
“We can best summarize our work by saying that we hope that never again will the administration and enforcement standards of any branch of the California State Government be found to be as low as we found to be the case with alcoholic beverage control under the present system. We believe that the recommendations we have made can and will result in substantial improvement if they are enacted this year.”
The subcommittee held meetings in each of the Equalization Districts and in Sacramento from November 1953 through January 1954, and heard testimony from members of the Board of Equalization, legislators, state and district liquor administrators, district attorneys, public health officers, law enforcement officials, and representatives from civic, labor, industry, and professional groups. The committee’s primary concerns were: (1) Should liquor control activities be separated from the Board of Equalization? (2) If separated, how should a new agency of alcoholic beverage control be organized? (3) What substantive matters need revision to improve the administration of alcoholic beverage control in the state?
In addition to complaints about misconduct in places that sold liquor, there were charges that on-sale licenses were issued to persons who had no intention of going into the retail liquor business, but who resold those licenses immediately for huge profits. Licenses were issued for addresses where no facilities existed, and on the basis of blueprints for structures that could not possibly have been built on the premises of the listed address (such as between existing structures). The committee found it particularly difficult to determine on what basis licenses were being issued in Los Angeles and San Diego counties.
Although the personal involvement of all the Board Members in liquor control was closely scrutinized, only one was charged with misconduct. William G. Bonelli, elected to the Assembly from southern California in 1930 and Director of the State Department of Professional and Vocational Standards starting in 1934, was appointed to the Board of Equalization in March 1938 by Governor Merriam to succeed Ray Edgar who died in office. Bonelli was to represent the Fourth Equalization District where most of the alleged irregularities in liquor control were reported.
During his first year on the Board, Bonelli was indicted on bribery charges but was acquitted. He was subsequently reelected to the Board four times. During his fourth term, liquor scandals surfaced in San Diego, Orange, and Riverside counties, which were then part of the Fourth Equalization District. Prior to the 1954 election, Bonelli switched from the Republican to the Democratic party. The liquor scandals grew and focused on Bonelli. He lost the election to Republican Robert E. McDavid, and left immediately for the cattle ranch he owned in his native Arizona. But the controversy did not end with his defeat. On August 20, 1956, the Arizona Supreme Court ordered Bonelli’s arrest. He fled to Mexico and refused to return to face charges. He never ceased asserting his innocence. He died in Mexico in 1970.
In 1954 the legislature’s Subcommittee on Alcoholic Beverage Control concluded its study of the Board’s alcoholic beverage control activities. Sharply critical, the committee urgently recommended the creation of a separate agency to assume liquor control. The legislature submitted a constitutional amendment to the voters at the general election November 2, 1954 to establish a new liquor control agency, to which the Board’s duties would be transferred effective January 1, 1955. That measure was overwhelmingly approved by the voters at the same election that brought defeat to William Bonelli. Thus ended the most difficult period in the history of the Board of Equalization.
Once relieved of its duties in liquor control, the Board stated that it “welcomes this opportunity to concentrate its attentions on its tax functions. We have always considered these our primary duties, although, by the very nature of the work, alcoholic beverage control has demanded a large share of our attention.” 93
91 League of California Cities: “California League Conference Calls for Action Program on Property Tax” Western City. XXI, No. 10 (October, 1946), p. 31
92 Report of the State Board of Equalization 1935-1936. p. 2
93 Report of the State Board of Equalization 1953-1954, p. 4.