Liquor Privatization Done Right

Liquor Privatization Done Right
By Nathan A. Benefield

Picture this: You’re on your way home from visiting family in Delaware and decide to stop at a wine store near the Pennsylvania border. As you walk through the parking lot, something seems off.  For every Delaware license plate you see, there are three Pennsylvania plates. An aberration?  Hardly.

As a recent investigative video shows, liquor stores in New Jersey and Delaware are filled with Pennsylvania shoppers every day.  The video, produced by the state chapter of the National Federation of Independent Businesses, should shock no one.

We already know consumers shop with their feet—even the Pennsylvania Liquor Control Board acknowledges it.  Their survey of Philadelphia region residents found nearly half shop in other states, costing the commonwealth hundreds of millions annually in sales due to “border bleed.”

Consumers want greater convenience, selection, and lower prices.  They want beer, wine, and liquor to be sold in local grocery stores.  They don’t want to drive as far, or make multiple stops.  And they want the ability to buy alcohol in whatever quantity they choose.  That’s why a Delaware shop had three times as many Pennsylvanians as Delaware shoppers.  But we can bring them back.

Lawmakers, customers, and activists celebrated the historic vote in the Pennsylvania House to end the government liquor store monopoly. Indeed, lawmakers accomplished what many pundits doubted was possible—and what several governors had tried and failed to do—by even holding a vote on a liquor store privatization bill.

But consumers and taxpayers have nothing to toast—not until the Senate and House agree to legislation that will earn Gov. Corbett’s signature. The challenge for lawmakers is balancing the free market consumers want with the demands of those already vested in the current system.

The state Senate has begun hearings on privatization and it is a near certainty they will do something, but what that something will be is far from certain.  Sen. Chuck McIlhinney, who chairs the committee taking up the House-passed bill, says he supports privatization, but what does privatization really mean?

Here are two key things that must happen in any bill to deliver for consumers and taxpayers:

First, lawmakers must increase retail competition.  This means licensing more stores to sell wine and spirits so consumers don’t need to cross state lines, allowing beer distributors and grocery stores to carry wine and liquor for greater convenience, and creating meaningful competition even if they don’t shut down the state-run stores immediately.

No Pennsylvanian wants to see a government monopoly replaced with a private one.  And providing a mechanism to close down state stores once private competition has ramped up, as the House-passed legislation did, will finally get government out of the booze business and allow the PLCB to focus on its regulatory mission.

Second, lawmakers must end the government monopoly over wholesale operations.  The wholesale monopoly allows government bureaucrats to determine what is sold in Pennsylvania and what isn’t, to set artificially high prices for every bottle sold, and to limit competition and selection.

The PLCB’s wholesale monopoly is the source of endless frustration for restaurant, winery, and bar owners and has produced a series of boondoggles on the taxpayer’s dime.  One of the biggest PLCB blunders is the branding and marketing of their own wine label, TableLeaf.  This government wine takes prominent shelf space away from Pennsylvania labels, yet the brand state taxpayers own is actually grown and bottled in California and directly competes with wineries right here in the Keystone State.

Thanks also to the PLCB wholesale monopoly, consumers were treated to the infamous wine kiosk program—elaborate vending machines in grocery stores that required a public breathalyzer test, identity verification, and a video sobriety test prior to allowing a sale.

It’s decades past time to get government out of our Prohibition-era liquor system. Pennsylvanians have suffered from the PLCB’s conflicts of interest and taxpayer-funded boondoggles for far too long.  Until lawmakers pass a plan that satisfies both consumers and stakeholders, we will continue to see shoppers stream across state lines for the convenience our government monopoly has failed to deliver.

Nathan A. Benefield is Director of Policy Analysis with the Commonwealth Foundation (CommonwealthFoundation.org).

 

Liquor Privatization Done Right

Long Nyquist Liquor Incest In Pa.

Long Nyquist Liquor Incest— Long Nyquist and Associates, the Harrisburg lobbying firm representing the state liquor store clerks, earned more than $1 million last year for campaign work on behalf of Republicans, according to TribLive.com.

The article says that its those Republicans “who are pushing privatization of liquor sales.”

Hold on there, Sunshine. Not all Republicans are pushing for this. If that were the case, the state stores would have ended two years ago as the GOP controls all of Harrisburg.

Hat tip Bob Guzzardi.

 

Long Nyquist Liquor Incest

Quakers, Bootleggers, State Stores

Quakers, Bootleggers, State Stores — Kevin Williamson’s explains how anti-free market Republican cronyists are trying to stop the ending of Pennsylvania’s government liquor monopoly.

Hey, did you know that the guy who got the contract for those laughable wine kiosks in grocery stores was Ed Rendell’s finance chairman?

Or that state store clerks are members of United Food and Commercial Workers Local 1776 which is led by Wendell W. Young IV,  who gets  a $260,000 salary?  Do you really think he works a 40 hour week?  The union’s previous president was Wendell W. Young III. You’d almost think they were North Koreans or something.

Hat tip Bob Guzzardi

Quakers, Bootleggers, State Stores

Quakers, Bootleggers, State Stores

Pennsylvania Republican Angers Constituents

Pennsylvania Republican Angers Constituents — Sen. Ted Erickson (R-26), three days ago before the Springfield Republicans, expressed a distinct coolness to privatizing Pennsylvania’s state-run liquor monopoly which is something passed overwhelmingly by the State House and is overwhelmingly supported by his constituents — at least those who are not part of a special interest group.

Erickson has now made it official that he supports expanding Medicaid to low-income workers despite the burdens it will place on the vast majority of his constituents — hey, you hear our national debt is now $16.8 trillion —  not to mention the truly poor who will now have to compete with new clients for  attention from a shrinking supply of doctors willing to accept Medicaid patients.

Erickson is not a leader in that he can’t fight to make a change to something that doesn’t work or fight to stop a change to make something that sorta works fail. He is not a follower in that he refuses to listen to those who elect him. He is the perfect example as to why Republicans lose — and he should get out of the way.

Pennsylvania Republican Angers Constituents

Sen. Erickson Throws Cold Water On Liquor Privatization

Sen. Erickson Throws Cold Water On Liquor Privatization — Sen. Ted Erickson (R-26) in a talk before the Springfield Republicans, tonight, April 17, put a damper on expectations that Pennsylvania would get out of the booze business. He said there were “questions.” He said the citizens could expect some “modernization” but left the strong impression that HB 790 would not survive as passed by the House.

Erickson also said that Gov. Tom Corbett has met with Health and Human Services Secretary Kathleen Sebelius about accepting federal money that would make an estimated
600,000 low-wage Pennsylvanians eligible for Medicaid, the government
health program for “poor” people, and has come away with positive feelings. He did say that it is not certain that Corbett will accept the money.

In better news, Delaware County Council Chairman Tom McGarrigle that Monroe Energy has made $100 million in profit since taking over ConocoPhillips refinery in Trainer.

It was also noted that about 20 homes a month were being sold in Springfield with the prices stable.

GOP Chairman Mike Puppio noted that  people move to Springfield due to the quality of the community and much of that has to do with the government of the township.

And that is true.

Sen. Erickson Throws Cold Water On Liquor Privatization

Pennsylvania Liquor Control Conundrum

Pennsylvania Liquor Control Conundrum

In 2010, Gov. Tom Corbett was elected by a wide margin, in part because of his insistence that the state-controlled liquor system be privatized — an issue on which he was absolutely correct.

Despite that being a cornerstone of his campaign, nothing was accomplished during his first two years, even though he enjoyed historic Republican majorities in both legislative chambers.

Since privatizing liquor is one of the few issues that enjoys a large consensus, it’s baffling why it took so long for the Republicans to put forth a plan. Now they have finally done so, yet it’s so ill-conceived that state-store union employees are punch-drunk with elation.

For now, though, it’s important to realize why privatization is so long overdue.

Sometimes the grass really is greener elsewhere. For Pennsylvanians, that “green” is all the money saved by consumers in other states because they aren’t gouged when buying alcohol.

For the uninitiated, here is a primer for how Pennsylvania’s alcohol monopoly works:

Pennsylvania is the largest purchaser of booze in the country. The state government, through the Liquor Control Board (LC, controls the purchase, distribution and sale of all wine and liquor. You might think that with such immense clout, we would have outstanding selection and competitive pricing. But as we all know, that’s clearly not the case.

Interestingly, the LCB is charged with two distinct, and inherently contradictory, roles. While it is responsible for raising revenue through the sale of wine and liquor, it is also charged with controlling the sale of booze throughout Pennsylvania. By definition, if the LCB is succeeding at one, it must be failing at the other.

The major reason why alcohol is so expensive is courtesy of an 18 percent “temporary” tax. So a $10 bottle jumps to $11.80 — and that’s before the 6 percent sales tax is calculated, making Pennsylvania inherently uncompetitive. But since it’s a government monopoly, the bureaucrats don’t care. Oh, and why the 18 percent levy? To rebuild Johnstown after its second flood.

Which occurred in 1936. So much for “temporary.”

Anyone traveling outside Pennsylvania knows how refreshing it is to enter a grocery store and, remembering you need a bottle of wine, browse the plethora of vino at your fingertips. Since others accomplish this feat with little difficulty, it’s incomprehensible that the nation’s sixth-largest state can’t — or, more accurately, won’t — do the same.

It is infinitely more efficient when a private company, responsive to the needs of the free market (instead of bureaucrats), stocks its shelves with items that consumers actually want, at a fair market price. It is the core principle on which America was founded.

But Pennsylvania remains stuck in the Dark Ages, choosing to remain there. It hasn’t dawned on the politicos that they are losing untold revenue because of their Draconian system, as millions cross state lines to fill their liquor cabinets.

And despite protections from the Interstate Commerce Clause, if you are caught bringing alcohol into Pennsylvania, it’s a criminal offense. In fact, such “criminals” used to have their cars confiscated for doing so.

To be fair, today’s LCB has made substantial progress. Not too long ago, customers had to place their orders at the counter, since browsing was not permitted. The clerk would disappear into the bowels of the store, only to return 10 minutes later, more often than not stating that they were “out of stock” and asking for another choice. Now imagine that scene at Christmas, with 30 people in line.

But that’s not all.

Nothing was chilled. No ancillary items such as tonic water were sold. No employees were permitted to offer advice. And credit cards were not accepted.

And all this because former Gov. Gifford Pinchot, who as a young man became violently sick while imbibing overseas, became determined to make alcohol as difficult as possible to obtain.

But the LCB’s improvements amount to being valedictorian of summer school. The whole system has to be scrapped. The ultimate irony is that the Keystone State, birthplace of American democracy and cradle of liberty, continues down the path of state control and government regulation, to the detriment of its 12 million citizens.

Pennsylvania Liquor Control Conundrum

Current Liquor Privatization Plan Unworthy

Current Liquor Privatization Plan Unworthy

“I don’t know…he’s either very smart or very dumb.”

– Quint, in ‘Jaws,’ trying to figure out the shark.

Quint’s
famous line perfectly sums up both Gov. Tom Corbett and the
Republican-controlled House as they push their liquor privatization
bill. They’re either very smart, trying to pull a fast one on
Pennsylvanians who expect better selection and lower prices (which they
know cannot happen with this bill). Or they’re very dumb, actually
believing the bill they’re peddling will actually accomplish those
things.

Here’s betting on the latter.

No offense to Chris Christie, but anytime Jersey can do something better, you know you have problems.

And
clearly, buying wine and liquor is better there. Of course, that’s not
saying much, as 48 states have markedly better ways to buy liquor and
beer than Pennsylvania. Only Mormon-heavy Utah is also state-controlled.
Gee, what great company.

So huge numbers of Pennsylvanians
continue to stock up in other states, especially tax-free Delaware, to
the detriment of state coffers.

The fact that Corbett and the
House Republicans think that situation will change with the current bill
(which passed the House on Party lines) makes you wonder if they were
drunk while crafting such bad legislation.

Let’s review:

Despite being overwhelmingly
elected in 2010, in large part by promising to privatize liquor, Tom
Corbett did nothing in his first two years. Actually, that’s not true.
His big foray into that issue was commissioning yet another blue-ribbon
panel to – ready for this? – study liquor privatization.

Just thinking about that gives you a hangover.

And
now that they are officially on board with privatization – which is the
right thing to do – they vomit a bill that will neither increase
selection, nor, most significantly, reduce prices.

Only in Pennsylvania.

This
bill is a non-starter, and should it pass the Senate in its current
form – far from certain, since Majority Leader Dominic Pileggi, R-9, of
Chester,  is lukewarm and the GOP lost 10 percent of its seats in the
last election – the people will be vastly disappointed upon realizing
that prices will be the same, or even higher.

Here’s why:

The
whopping 18 percent Johnstown Flood tax (established to rebuild that
city after its 1936 flood) remains in place, on top of which is the
state sales tax. End of story for lower prices.

Being hamstrung
by such an onerous tax gives the wholesalers and retailers absolutely no
wiggle room, forcing them to keep prices substantially higher than
stores in neighboring states.

There are only a few players in the
nation with the capital to buy in at the wholesale level, which will
cost tens of millions just to get a seat at the table. And that’s just
the beginning.

Funny thing about liquor – it’s bulky and very
heavy. Transporting it across 45,000 square miles will take one hell of
a lot of trucks and drivers, neither of which come cheaply. There
will be the need for huge warehousing space in multiple locations.
Personnel requirements will be substantial, and the costs associated
with distribution networks and other ancillary logistical issues will be
considerable. And last we checked, fuel costs were near record highs.

These companies are not in business
to break even or lose money. Translation: you won’t be buying liquor
any cheaper than you can today.

Making this bill even less than
gin-dandy are the pie-in-the-sky revenue projections related to
licensing. Beer distributors would be able to sell wine and liquor, but
for a substantially priced initial license fee (and subsequent
renewals). Great, except for three big problems:

1) Most beer
distributors are small, undercapitalized mom-and-pop operations. They
have a hard enough time making ends meet, so where exactly are they
coming up with the cash required for a license? With so many licenses
up for grabs, most banks will balk at loaning the necessary funds to
acquire a license, as it is will be seen as far too risky.

2)
Assuming a distributor could get a license, the capital outlay would
jump again, as they would have to add considerably more square footage
to their existing stores, or lease/buy a much larger space altogether.
Wine and liquor take up a lot of space, and recession notwithstanding,
that space isn’t cheap.

3) Distributors know nothing about wine,
so, in order to compete, they would have to hire additional staff with
knowledge of vino.

One of two things will occur. Many
distributors can’t or won’t apply for licenses, and for those who do,
their prices will increase to make up for their additional costs. When
you add in the mandated Flood Tax, it becomes obvious that overall costs
have to rise, perhaps dramatically. Distributors would also have to
compensate for the loss of revenue associated with the widespread
availability of six-packs and the elimination of the
buy-beer-by-the-case law.

Granted, many politicians are
slow, but this one should be a no-brainer. Eliminate the 18 percent tax,
and you eliminate the need to cross the border and give other states
Pennsylvanian’s money.

Some will ask where the revenue shortfall
would be made up should the tax be rescinded. That’s easy. First, you
don’t keep a tax that is wrong just because you happen to rely on the
revenue it provides. You fix it. Second, that’s the Legislature’s job
every budget: decide how much money goes where. If there’s a shortfall,
other slices of the pie get smaller. Tighten the belt like families do.

Most
important, there wouldn’t be a shortfall. If the incentive is taken
away to go to other states, untold millions – which would be “new
revenue” – would find their way into Pennsylvania because of the massive
volume in liquor sales that would occur. Remember, as it stands now,
the state is getting zero from the millions currently flowing to other
states.

Corbett and the Republicans need to
put down the bottle and either rectify their error of pushing a bill
they think is good, or stop the political expediency of rushing a bill
they know is bad but can deceivingly trumpet as a success purely for
re-election purposes.

Do liquor privatization right, or not at all. And you don’t have to be blitzed to know that.

 

Current Liquor Privatization Plan Unworthy

HB 790 Passes House

HB 790 Passes House — HB 790, a bill calling for the eventual privatization of Pennsylvania’s state-owned liquor store, passed the State House, tonight, March 21, of a vote of 105 – 90.

Not a Democrat voted for the bill.

The bill now goes to the Senate.

Hat tip Bob Guzzardi.

HB 790 Passes House

Liquor Store Privatization Vote Expected Thurs.

Liquor Store Privatization Vote Expected Thurs. — Activist Bob Guzzardi notes that the bill to privatize was passed out of the House Liquor Control Committee, yesterday, March 18, and a full vote in the State House is expected on Thursday.

He asks that Pennsylvania residents email the below message be emailed to your state representative.

Dear Representative

It is my understanding that you will be voting on HB 790 to privatize the state wine and spirits later this week. I urge you to support privatization. It is time to end the state monopoly and honor consumer choice in Pennsylvania. It is time to end the state’s conflict of interest and get the state out of the booze business. Thank you for supporting privatization.

Sincerely,

Guzzardi describes the points of HB 790 as:

Wholesale Privatization
One year after the legislation is signed into law, wholesale divestiture would occur.  The state would negotiate wholesale licenses to distribute wine and liquor products to stores, bars and restaurants by brand.  After paying a license fee based on valuation, a wholesaler would have the exclusive right to distribute that brand throughout Pennsylvania.

New Privately-Run Wine and Spirits Stores
–         Would allow for 1,200 initial wine and spirits licenses.
–       Beer distributors would have right of first refusal on licenses for one year.  If a distributor gets a wine and spirits license, they would be the one-stop shop to get wine, beer and liquor.
–         After one year, the unclaimed licenses become available to the public on a ‘first-come basis,’ based on number of licenses available in each county; no county will have fewer licenses available than the number of distributors.
–        All license holders must be stand-alone alcohol retail stores, unless owned by distributors.
–         A wine and spirits licensee can hold five licenses in the state, but no more than one per county.
–         Licensees can’t require memberships (that is, Costco, Sam’s Club, etc. would be excluded).

Retail License Cost
·         Licensees can purchase the right to sell wine, spirits or both.
·         The cost of a new license for beer distributors varies based on county classes.  Wine: $7,500 to $37,500; Spirits: $30,000 to $60,000. Distributors can elect to pay this cost over four years with an additional five percent fee.
·         New wine and spirits stores: Wine: $97,500 to $187,500; Spirits: $142,500 to $262,500.
·         Licenses are renewed every two years at a cost of $1,000.
·         Sunday sale permits will be available at annual cost of $1,000.

Greater Convenience through Grocery Stores and Package Reform
·         Grocery stores may purchase a license to sell any quantity of wine.  Prices for these licenses would range, based on county, from $97,500 to $187,500.  Sunday sales permits would also be available.
·         Restaurants may purchase a license to sell up to six wine bottles to go, in addition to beer which they are currently allowed to sell.
·         The gas prohibition is removed, meaning that a gas station that has a restaurant license and sells food will also be allowed to sell small limited amounts of beer and wine.

Closure of State Stores
·         Once the number of privately-operated stores (including grocery stores selling wine) doubles the number of government-run liquor stores in a county, the state stores must close within six months.
·         As the 600 state stores close, the Department of General Services could offer up to 600 additional wine and spirits licenses.
·         The PLCB will have to close all state store operations once it has 100 or less stores remaining.

Benefits for Current PLCB Employees

·         These include: training and education grants, tax credits for businesses to hire displaced workers, and a civil service hiring preference.

Safety
·         Transaction scan devices must be used and employees trained in alcohol safety.
·         State Troopers would be allowed undercover investigations in licensed establishments, something that does not occur in PLCB stores.
·         Only workers age 21 and older may sell alcohol.

How did the committee vote go?

Voting for Privatization were the following state Representatives. If your representative is on this list thank them and ask him or her to continue to support privatization.
Taylor, John – Chair
Delozier, Sheryl M.
Ellis, Brian L.
Kampf, Warren
Killion, Thomas H.
Krieger, Timothy
Lawrence, John A.
Masser, Kurt A.
Miccarelli, Nicholas A. ( not voting)
Mustio, Mark
Payne, John D.
Petri, Scott A.
Reese, Mike
Regan, Mike
Sonney, Curtis G.

Voting against the people’s wishes are the following: If one of these Representatives is your Representative please call and email your displeasure with their attitude toward consumers and ask them what special interest they are serving.

Costa, Paul – Chair
Boyle, Brendan F.
Burns, Frank
Davis, Tina M.
Harhai, R. T.
Kotik, Nick
Mahoney, Tim
Ravenstahl, Adam
Sabatina, John P.
Wheatley, Jake

 

Liquor Store Privatization Vote Expected Thurs 
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