People who claim that the Pennsylvania Liquor Control Board should hang on to their stores because they offer the state a sizeable amount of revenue are just plain wrong.
Starting from the top — literally — the three PLCB board members are appointed by the governor and approve their own CEO.
That means, aside from the initial nod from the governor, the agency operates with very little oversight. But lest I lead you to believe it is the greedy businessmen rife with corruption who are the culprits responsible for the state system’s negative income — I should tell you the real truth. The state itself is responsible for its own struggling liquor stores.
Why? Well each year while crafting the annual budget, Pennsylvania’s legislature and the governor’s Budget Office decide how much the PLCB will transfer to the state without actually consulting them. So, if liquor sales bring in more money than is expected, the PLCB can pocket some cash after sending money to the state. On the other hand, if sales are less than expected, the PLCB dips into its bank account to make up the difference. Until a few years ago, this wasn’t a problem.
But financial statements made public by the PLCB show that between the fiscal years of 2008-09 and 2010-11, the governor’s Budget Office and legislature overestimated by $49.2 million how much in profits Pennsylvania’s 608 liquor stores could transfer to the treasury. The liquor board paid the $49.2 million, essentially using all of its equity and then some. Put in simpler terms, the PLCB ended the 2010-11 fiscal year $32.2 million in debt.
And given the financial state of Pennsylvania’s overall economy, privatizing the liquor store system seems like a pretty reasonable argument. Not to mention that from inventory, to distribution, to pricing, to the number of outlets and hours of doing business, Pennsylvania maintains one of the tightest, most restrictive liquor control systems in America. Who wants that? But to argue for privatization and expect a free market in return is foolish.
Take states like West Virginia or Michigan, where you can buy alcohol from privately owned retail outlets. It is important to recognize that these states do not have an entirely free market either. They tax alcoholic beverages, restrict retail license numbers and hours of sale and mandate a three-tier distribution system where producers, wholesalers and retailers are separately owned in most cases. Therefore, while privatization of existing control systems would change the ownership of wholesale establishments and retail stores, it would not lead to a perfectly competitive market.
So basically the government is still earning a pretty penny off your wine, but they are saving you the hassle of going to one of their stores to get the damn thing. Plus, they are saving themselves money on the typical overhead costs associated with maintaining a store, like utilities or rent on commercial space. They also save money on employee paychecks, pensions — they are technically state workers — and court fees.
Unfortunately, for those hoping that privatization was their chance to stick it to Gov. Tom Corbett (myself included), he’s still kind of winning. But when 69 percent of Pennsylvanians support privatization, according to a 2011 Qunnipiac University survey, it feels scarily close to freedom.
Let’s talk about that number anyway — 69 percent — 69 percent of recently polled Pennsylvanians agreed that the state system should go private. Really? When was the last time 69 percent of Pennsylvanians agreed with anything about our state? That in itself says something about the frustrating reality that is Wine & Spirits.
Perhaps the best example of a massively inefficient government-run private agency, the PLCB shops are as mind-numbing experience as they come.
And, of course, I’m familiar with the argument about employees losing their jobs. My own father manages one of these condemned stores. I have friends who also work at state stores and, let me tell you, they will be the first to point out that some employees contribute to the inefficiency problem. Unfortunately, the union protects these employees. I do not want my tax dollars going toward that. If we have to pay some form of tax regardless, I think it’s only fair that we get to choose where and when.
When Gifford Pinchot created the board at the repeal of Prohibition, he said his goal was to make liquor sales as “inconvenient and expensive as possible” — something 69 percent of Pennsylvanians can agree the state has seemed to pull off year after year. So let’s try something different and break with tradition for once. I know just the way to celebrate.
Bri Bosak can be reached at bribosak@temple.edu or on Twitter @BriBosak.
http://ablusa.org/2012/08/washingtons-rocky-road-to-privatization/
Good article, I agree with everything you said-count me among the 69% who want to remove the state from wine and spirits sales altogether, and who has become very frustrated with a legislature that can’t even get this done with so much public support.
Hopefully we get some more new members this year who aren’t owned by defenders of the status quo-the union and certain business interests who benefit from the current system.
Great article. In privitizing liquor the state will release it self of all the cost such as land and capital yet still receive revenue from license fees and taxes.
I thought maybe the link I provided above would start some discussion. If the State distribution system is so inefficient, why is it prices have to go up in order for privatization to be revenue neutral for all the taxpayers? No state has ever realized equal revenue after they privatized, period. The Quinnpiac poll asked if you would privatize the stores in order to balance the states budget. Sale of the stores would never have brought in the cash needed to do that. Considering the current budget situation, would it be wise to risk further cuts to education, the arts, human services, etc. just to make a recreational drug more available? Would you as a state Rep vote for a bill that risks much needed revenue just to make it easier to party? “Tuition’s going up, services are going down. At least I’m not a party pooper. I’m Sen. Capt. Morgan, and I approve this message” I repeat, despite the perceived inefficiencies not one recently privatized state has increased it’s liquor dollar revenue.
Many if not most states have had some form of private alcohol sales since prohibition, the only other analysis is from two states that are hardly an apples to apples comparison.
Just something to keep in mind re John’s misleading comment-you should also keep in mind that he’s a state store employee and union member, so totally unbiased.