Liquor Store Privatization Battle Begins, Again

A bill to privatize Pennsylvania’s state-owned and operated liquor stores aims at providing Pennsylvanians with better selection and lower prices, but critics argue that there are no guarantees. 

“We have an opportunity to move Pennsylvania out of the post-Prohibition era by allowing the private sector to sell wine and spirits,” wrote Steve Miskin, spokesman for House Majority Leader Mike Turzai, R-Allegheny, in an email July 8. “This is a proposal whose time has come.” 

The majority House Republicans and Gov. Tom Corbett have supported this bill, which they have touted as an economic windfall for Pennsylvania. The proposal, to be introduced by Turzai before the end of the month, would sell off about 1,200 liquor store licenses to private owners and eliminate the state’s system of about 620 liquor stores. 

The plan also would eliminate two state alcohol taxes--the 18 percent “Johnstown Flood Tax” and the 30 percent markup used by the Pennsylvania Liquor Control Board, or PLCB, which owns and operates the state’s liquor system and enforces the state’s liquor laws--and replace them with a volume-based tax that would yield the same amount in revenue. 

The specific number of licenses to be sold and the rate of the new tax have not yet been determined. The proposal would not affect beer sales while leaving the enforcement role of the PLCB intact. More specifics will be available once the legislation is introduced. 

Opposing privatization is the labor union, United Food and Commercial Workers Local 1776, which represents the 3,500 state liquor store employees. 

Wendell Young, president of Local 1776, which represents about 24,000 workers including most of the state store employees, said there was no hard evidence of improved selection or better prices in states, such as West Virginia, which recently privatized its liquor system. In fact, large grocery stores or other retailers that made liquor a small part of their overall selection bought most licenses, rather than specialty stores, he said. 

In addition, these stores “aren’t going to hire more employees; they are just going to reallocate their additional employees,” said Young.

But Turzai’s legislation would give tax credits to businesses that hire displaced state liquor store employees and give those workers a “leg up” if they chose to remain in civil service with another state agency. 

Corbett made privatization of liquor stories a key component of his first-year agenda, building on the efforts of former Republican Govs. Dick Thornburgh and Tom Ridge, who failed to do so.

“Government should no more run the liquor stores than it should run pharmacies and gas stations,” Corbett said in March. “This isn’t about the money. It’s about the principle.” 

Corbett’s press office did not return calls for comment Friday. 

Corbett has commissioned a study to determine how much revenue could be raised by selling the stores. The final report is due before the end of July. Early estimates on the revenue from selling the licenses range from as little as $200 million to as high as $2 billion. Those payments would occur as part of a one-time auction, though licenses would have to be renewed at intervals yet to be determined. 

The study is being conducted by Pennsylvania Financial Management, a fiscal analysis firm contracted by the governor’s office. 

State Rep. Dante Santoni, D-Berks, minority chairman of the House Liquor Control Committee, said the specific details of the privatization plan will be discussed in a series of hearings, scheduled to begin in late July. 

State Rep. Brendan Boyle, D-Philadelphia, said the proposal would have negative social impacts as well. 

“The evidence is rather clear that privatization leads to increased alcohol consumption and excessive drinking,” wrote Boyle in an email Friday. 

PLCB announced this week that it made a record $1.9 billion in liquor and wine sales in 2010 and transferred more than $490 million to the state treasury. A specific breakdown of the most recent year’s transfer to state coffers is not available, but in previous years about 75 percent of the revenue has come from taxes. 

PLCB also transferred $20 million to the Pennsylvania State Police this past year for alcohol enforcement duties. 

But PLCB also spent more than $5 million on advertising liquor and wine this past year, which some critics point to as a conflict of interest, because the same government agency sells liquor and enforces restrictions on its consumption. 

“The PLCB is at war with itself, and the rest of us are stuck with the tab to pay for its conflict of interest,” said Matthew Brouillette, president and chief executive officer of the Commonwealth Foundation, a Harrisburg-based free market think tank that is pushing for the privatization of the state stores. 

Consistently, polls have shown public support for the privatization of the liquor stores. Most recently, a June 14 Quinnipiac poll showed 69 percent of registered state voters supported the move, while only 25 percent opposed it. The poll surveyed 1,277 registered voters in the state from June 7 to June 12. It had a margin of error of 2.7 percent. 

Pennsylvania is one of only two states--the other is Utah--that exercise full government control over wine and liquor sales.