Wednesday, May 10, 2017

PA House Democrats keep up the scare on privatization



As the State Store System trembles from the freshening breeze of competition from the likes of Wegmans and Giant and Giant Eagle (and remember, they're still chained by the cafe rule, and wine only, and the Four-Bottle Folly, and state-regulated pricing), and new salvos of booze freedom launch from an increasingly bold House GOP caucus, the House Democrats are in full spin mode in defense of the archaic PLCB monopoly. They're trying to convince the people of Pennsylvania that it is better to have a government retail monopoly than a free market for booze, a pure case of the mindwarp that is Wolfonomics.

For example, let's comment on a press release they put out on April 24th.

"Liquor sales in PA should be about consumer convenience and small businesses, not big profits for a few huge corporations."

Pennsylvania House Democratic Caucus    April 24, 2017 | 6:01 PM

Republicans in the Pennsylvania House of Representatives are scheduled to move several liquor privatization bills this week. They all have one thing in common: Pennsylvania consumers aren't demanding any of them and the Pennsylvania Senate is unlikely to consider them.

Of course the Senate will consider them, they may not act on them all but the four bills will be consolidated into some package...unless McIlhinney kills them. What party is he affiliated with again? Is he one of your guys?  

Consumers Are Happy With Modernization! Forward!
Consumers are happy with the modernization and convenience changes made last year to Pennsylvania's liquor laws -- there is no widespread public support for comprehensive privatization for privatization's sake. 

After 82 years of nanny state idiocy why wouldn't consumers be happy about changes? But are we satisfied? Since every scientific poll of the past 40+ years shows the public doesn't want the State Store System, probably not! 


Those guys? Only in it for the money!
There are only a few groups pushing to rush forward with more liquor changes so soon after last year's consumer-friendly improvements — the chain grocery stores; big-box retailers and mega-wholesalers that want to corner the market at the expense of consumers and small, family-owned businesses; and the newspaper publishers who want to reap millions of dollars in advertising sales. 
Of course stores (except the State Stores) want to gain customers by providing what they want, where they want it, be it Walmart or a local wine store (which you may have seen in other states). Just what small family-owned liquor stores are there in Pennsylvania that the Democrats are talking about? They don't exist, and unless things change, they won't. Not because of big box stores, but because the Almighty Liquor Code doesn't allow it, and the House Democrats are just fine with that. And they're still banging away at the news media. For years the Democrats and Windy Wendy Young have been saying newspapers only back privatization (and practically every Pennsylvania newspaper does, by the way) because they will reap a small fortune due to alcohol advertising. Just where is that happening? Looking at the papers in New York City: not a one has an eighth of a sheet worth of liquor ads. Even if there were more here in Pennsylvania, it would show that stores are competing with each other for your business, which can only be good for the consumer. 
By pushing expanded alcohol sales, the state risks jeopardizing public safety in many counties and municipalities, reducing revenues for the Pennsylvania budget, and killing thousands of family-sustaining jobs in every community in the state.
Really? Yet the PLCB has been pushing to expand sales for years - why is that good but real growth bad? Of the last two places that fully privatized in the past 25 years, both have lower rates of DUI, underage DUI, DUI fatality, and underage DUI fatality than the Commonwealth currently does. In fact, four of the six border states have better records. One that doesn't is Ohio (also a control state!), the other is Delaware. Maybe it's the PLCB that is jeopardizing public safety by focusing on increasing sales instead of regulating alcohol sales and abuse. The conflict of interest is real!
Jobs? The current system is limiting jobs in favor of the monopoly. Full privatization has tripled jobs in the industry where it has happened. It has increased convenience and consumer satisfaction, because there aren't some unqualified bureaucrats deciding what the entire state is allowed to buy. 
Creating thousands more wine and liquor retailers will saturate the market in many counties and municipalities.
Just to get to the national average Pennsylvania would have to add 2,000 stores. Like any other product there can only be as many stores as the market will bear (and local zoning and ordinances will allow). Imagine local communities deciding what is best for them, not Harrisburg. 
Access to a wide variety of wine and liquor selections in well-lit, clean and safe state stores will be replaced by a limited choice of major-brand items relegated to one or two aisles in chain grocery stores and big-box retailers like Costco and Wal-Mart. 
Why would a grocery store stock the same amount of products as a stand-alone liquor store?  Compare a State Store to a liquor store. Go look at a Total Wine, a BevMo, a Super Buy Rite, a Binny's or any of the real liquor superstores and compare it to a "Premium Collection" State Store. The private stores will have more variety ACTUALLY ON THE SHELF then the PLCB stocks in their entire system. Privatization can bring a wide variety of stores, specialty stores, warehouse size stores, local stores, convenient stores instead of the same one size fits all State Store. 
Wine and liquor in Pennsylvania's state stores are priced competitively. Prices for consumers in states where wine and liquor were recently privatized have gone up, not down.
With the largest border bleed in the country, there are probably a large number of citizens who disagree that the selection, service, and prices are competitive. As far as the ONE state that has fully privatized, one can expect that an additional 27% in fees and taxes that were imposed at the time of privatization may have had an effect on prices. However, prices didn't go up 27% which shows that the free market is much more efficient than a monopoly. Besides, with the knowledge of hindsight we don't have to do things exactly the same — wrong — way. 
Combined markups and taxes in Pennsylvania for wine and liquor are comparable to and, in many cases lower than, those in privatized states.
The first true statement in this entire release, but with variable pricing causing the markup to go up, it may not be true for long. As the 2nd largest retailer of wine and spirits, the real question isn't whether your prices are competitive; it's 'Why aren't they better across the board than MD, DE or NJ?'

The bills being considered this week will substantially increase the number of businesses selling wine and liquor but provide no additional money for alcohol control or law enforcement. There are already too few officers monitoring Pennsylvania's 30,000 licensed establishment. Do we really want to add even more locations to already-saturated markets? 

Most of the additional businesses that would be selling wine and liquor are already licensed by the board and are already checked by the BLCE. While there are 30,000 licenses of various types, only 19,000 are active and the state itself is adding 1,200 to that total. Again PA is below the national average, so the idea that we are "over saturated" is disingenuous at best. 
Many Pennsylvania municipalities are already struggling with the crime and expense caused by nuisance bars. We need to find solutions to those problems before we add even more licensed locations.
As already pointed out, the state is adding more licensed locations. Three of the four current bills are not adding any locations but expanding what can be sold. Maybe if the communities didn't have to wait for the PLCB to act, they could better control what happens in their towns. 
The U.S. Centers for Disease Control and Prevention has determined that liquor privatization leads to increased excessive consumption. Pennsylvania has not examined how vastly expanding access to wine and spirits -- and oversaturating the market in several counties and municipalities -- will impact public health and safety. 
The study mentioned also had consumption increasing by over 40%, which has not happened in any state, and overall the research data has been debunked by Stats.org the premier body for statistical analysis. The CDC report was so bad that Forbes did an article about it. 
Moving toward full privatization of wine and liquor sales in Pennsylvania would replace skilled jobs that provide financial security for thousands of families with a much smaller number of minimum-wage cashier jobs that don't protect public safety, improve customer service, or support families. 

Currently State Stores are never checked for age compliance by the BLCE, but every licensed establishment is. A number of private stores selling beer and wine have 100% carding policy; the State Stores do not. Everybody that serves alcohol in a licensed establishment has to be RAMP certified; State Store clerks do not. 
Being a clerk in a liquor store is not a skilled job, but as already mentioned, employment in the industry tripled the the last places that fully privatized. Not a guarantee it will happen here but a good indicator. Keep screwing around with these "ass-backwards" measures (as Senator McIlhinney pungently put it) that only complicate the mess further, and things probably won't go as well.
This blind leap toward full privatization of wine and liquor sales comes without an examination of the public health and safety impacts, no evaluation of whether Pennsylvania consumers believe full privatization is necessary or desirable in the wake of recent consumer-friendly improvements, and with no accounting of what privatization will cost Pennsylvania workers and taxpayers. 
The citizens have never wanted the State Stores. In poll after poll, privatization or private retail has always won out. After over 40 years of the same result, do you really think the citizens will change their minds? The recent improvements simply show that full privatization is desirable. People want convenience that the PLCB can't provide. They want better pricing that the stores can't give them because they have to buy from the PLCB. They want the selection they see at stores on our borders - stores that stock more than the entire state has on the shelf.
Pennsylvania should be working to benefit and protect consumers and small businesses, not rigging the system to put one of the state's most important and lucrative assets in the pocket of a few huge corporations.
Since there are no small liquor store businesses now it seems that you are already rigging the system against them. Privatization can fix that. Who will get licenses and what type are up to you in the legislature. If you say only stores of 10,000 sq.ft., then guess what...only chains and big box stores will get licenses. If you allow specialty wine or liquor only licenses then you will see entrepreneurs opening that kind of shop or restaurant - something that PA doesn't have now.
The one size fits all thinking of the PLCB can't and shouldn't be applied. 
This isn't 1934 anymore. It's time to move forward, toward a license and regulation model that the majority of states use. Get out of retail and wholesale so the free market can do what it does best. Provide products based on the wants and needs of the consumer, not on what is allowed by the government.

Monday, May 1, 2017

Are Your Prices Variable Enough?

Just how much is the PLCB screwing us with "variable pricing"?

A good question, and one that the PLCB doesn't really want to answer. There is no sunshine at PLCB HQ; their mission is to hide as much as possible, keeping as much information away from the citizens as they can. And why? It's not like they have any competition to worry about, no business secrets to keep: no one else is in their business, they've made sure of that. They do it for one reason: to keep the owners — that's you, and I, and the Legislature — ignorant of what they're really doing; of how they're desperately shuffling prices and margins around to try to look "profitable."

Would the wine kiosks have passed if the citizens, if the press, knew about them, knew that the PLCB had been advised against implementing them...by their own people? Would Joe "Da CEO" Conti been brought back after having been found to have committed ethics violations if the citizens knew, and could do something about it?*(Correction: please see below.)  Maybe anti-competitive branding and placement wouldn't have taken place with citizen involvement. But that all did happen, mainly because the PLCB kept it all hidden away and secret, to the point of having records destroyed, to the point of appearing to have had secretive off-book meetings to make decisions that are supposed to be discussed in public.

Now they don't want you to know how much of a shaft you are getting on variable pricing, the one thing they wanted more than anything else from "modernization." Remember, the PLCB said that they couldn't negotiate prices for 82 years, even though there was nothing in the Almighty Liquor Code that prevented it, and then they said that they did negotiate on some things, but not most. ACT 39 changed that, and supposedly allowed the PLCB to do something they could have been doing all along...only now the game is rigged to benefit the PLCB and not the consumer. That sounds fair.

In the PLCB meeting minutes, you used to be able to see what new products were going to show up, and the cost for those products. Not anymore. The PLCB doesn't want you to know what they are paying and what they are going to charge,  because it will raise questions about why the consumer isn't seeing benefit from "variable pricing." They don't want you to know that they are making an extra $1.16 for every bottle of Jack Daniel's sold while you see no change** on the shelf.

Now, a real retailer wouldn't tell you this either. But the PLCB isn't a real business; they have a police-enforced monopoly to ensure their market share! A real business doesn't tell you this stuff, but their competition keeps them honest, and you can be sure that they're passing along savings to you; if they don't the competition will.

But the State Store System has no reason to benefit the consumer by lowering prices in order to increase market share or maintain their customer base. They don't have to worry about that, and there's nothing in the Almighty Liquor Code that says they do. Remember the founding principle of the PLCB, as stated by Governor Gifford Pinchot himself: “to discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.

So what does the PLCB tell us about the effects of variable pricing? The Chairman said that they will not raise prices across the board, but with having to dip into reserves to pay more into the general fund, and trying to prevent privatization by making it look like they contribute more than a piddling amount to the state (not including the taxes, which would still be collected in a private system!), and having to pay off $260 million in pension debt...what do you think they are going to do? Keep their sinking ship afloat in any way they can, or benefit the consumer?

Last year the PLCB charged an average of 45.36% above cost for every product sold.  For the first eight months of this year it has risen to 45.46%, and I guarantee that will continue to climb as time goes on. If you remember, the Democrat's modernization plans said that the PLCB will make an extra $75-100 million because of this alone. That would mean they'll have to raise the charge above cost to over 60% — such a deal!

The choice comes down to this. Do we want to continue to have limited selection, limited convenience, Harrisburg bureaucrats selecting the booze for the entire state, and anti-consumer pricing? Or do we want the freedom of choice that the private market brings?

Privatize - all of it. Retail and wholesale. Why wait one variably-priced month longer?



*Correction: Conti was ruled to have violated the state's ethics code about a year after he was brought back as an 'emergency consultant' and paid about $67,000 more of your booze dollars. Our error, which we own up to...unlike Joe The Ethics Violator, who is currently on the faculty of the Fels Institute of Government, and a lobbyist with Triad Strategies. Great places for a known ethics violator.

** Since the PLCB hides all of their purchase information now, the $1.16 is just my best guess, but it is an educated guess...and it is most likely more.


Monday, April 24, 2017

Reality check: how is "modernization" working out?

The end of February marked eight months gone of the fiscal year, and just under seven months of Act 39's "modernization" of the state's police-enforced monopoly on wine and liquor sales, changes that Governor Wolf trumpeted as "historic."

So things are booming for the State Stores now, right? Well...not exactly.

Remember how bailment was going to cut inventory costs and save the citizens all sorts of money? It may have but it didn't last. Inventory cost went up over 10% so far this year and has now gone up over 46% since bailment was implemented in 2012. It will certainly pass pre-bailment amounts next year with a modest 3% increase. For the same period of time, the inflation rate went up 6.2%. (2012 Inventory $175,902,668; 2017 Inventory (so far) $257,285,382; Pre-bailment inventory $265,816,891)

Still, with all that inventory they must be making more money right? Sorry! Total Operating Income is down almost 5% year to date, while total assets squeaked out a gain of 4.2%. Meanwhile, Total Liabilities jumped almost 16%, from $803.7 million to 930.5 million. (And you know who has to cover that; you and me, the taxpayers.) Total debt is up almost $50 million more than at this time last year; $264,454,330 or about $26 million in additional debt than at the end of last fiscal year. To be fair, the PLCB statement has numerous notations about 'See Note X, Table Y', but they don't provide what those notes are. Are they valid reasons, or just lame excuses? The public doesn't know, and the PLCB clearly doesn't think we need to; it's kind of like their selection, if they don't have it, we don't need it.

The Never-Ending PLCB Story!
The PLCB is selling more product while making less money. In desperation, they're dipping into reserves to make a big payment to try and fend off  privatization, blowing smoke as thick as possible so you don't notice that they're going even further in the hole with liabilities approaching a Billion dollars...all the while remaining as incompetent as ever.

The benefits of modernization? I'm not seeing any evidence of that extra $137 million the Governor said they would make, and I'm willing to bet I won't, with only four months left in the fiscal year.

How many reasons do you need to get rid of this broken system and replace it with one that works for the consumer?

Monday, April 17, 2017

April Inventory Idiocy

I'm a Scotch guy, and I know a fair amount about it. Although they have a statewide monopoly on selling it, the PLCB doesn't...and I'm going to pick on them for that.  How incompetent/stupid/'we don't care' are they this month? Let's take a look.

I'll start off with Glenmorangie single malt Scotch whisky. The PLCB lists 25 bottlings of Glenmo on their website between on-line, in-store, SLO, and of course, "out of stock." So how many do you think you could actually get?

Well, there are nine out of stock, some of which we will never ever see again; inventory padding, really, just like the Jack Daniel's examples I pointed out here. So that leaves sixteen...right? Not exactly. The PLCB likes to double count the exact same item that they have on the shelf...and what they can supposedly only get by SLO.

Here are two examples. First, the Quinta Ruban:
It would seem that cutting and pasting the picture is beyond the ability of the people who do the inventory, and why is the price different? And before you even ask; no, there's only one expression of Quinta Ruban.
 
Next! The Nectar D'Or [a favorite of Lew's ...but not bought from the PLCB!]:
They still can't figure out how to post the exact same picture in two different places, but at least the price is the same this time!

So now we are down to fourteen. Whoops! One is supposedly "Coming Soon," so we're down to thirteen. Now how many do you think you can actually get?

Well, two are listed as "On-Line Exclusive," which may or may not mean you can find one or two in a store. (The PLCB has made that mistake more than a few times.) Are they really there? Looking at the inventory listed in the current Product Catalog, they aren't listed at all, but other out of stock online exclusives are — like the Glenmorangie Signet which the Product Catalog says is available,  but SLO and the FWAGS website says it isn't. So which is it?

Then there is the 18 year old New World which FWAGS says is out of stock but the Catalog says is available. Do these people have any idea what they're doing?

We really don't know HOW many of these are actually available. Who can say, since the inventory, like the rest of the PLCB, is entirely screwed up.

Why do we continue to put up with this incompetently-run "business" which can only make a "profit" with a police-enforced monopoly and by gouging the people they are supposed to serve with artificially high costs and variable pricing?

End the insanity, Tell your Representative to support HB 1075 and get the state out of this mess and back to what is considered normal by the vast majority of the states.


Monday, March 27, 2017

The numbers don't lie...but somebody is

In the House Appropriations Budget Meeting for the PLCB held earlier this month, the PLCB leadership said that they would have to dip into reserves to meet the Governor's anticipated request for $185 million. Why is that, if "modernization" is going to be the windfall that the Governor (and clerks' union president Wendell W. Young IV) says it is? Are their arguments that facile?

The Governor said in his "Budget In Brief" of 02/07/17 (pg.15) that through modernization ..."an additional $137 million in LCB revenues will be generated." The PLCB didn't correct or disagree with that number. So let's see what doesn't add up. If their income for FY 2015-16 — after paying for the BLCE, but before the General Fund Transfer — was $103,856,933 (which it was, according to their financial report), then a $137 million increase would take it to just over $240 million. But if the PLCB has to dip into reserves to pay $185 million, that has to mean that their so-called "profit" is less than $185 million.
OH NO!  42 million of my friends are missing!
However, during that same budget meeting — in sworn testimony — the PLCB said that even with record sales again, they would only make about $90 million for FY 17-18. That $90 million and $137 million "modernization bonus" take it to $227 million in total. That's $42 million more than the $185 million they said they could pay IF they dipped into reserves. So where is this $42+ million going? If they make the $90 million they project, and the $137 million additional that they didn't object to, then turning in $185 million to the General Fund should be no problem. Remember that these numbers are what the PLCB calls "profit," so everything (except the $238 million in pension debt...but that's another story) is already covered.

We have to ask: why after all the "modernization" is in place does the PLCB think they are actually going to make LESS than they did in FY 15-16?

Could it be that "modernization" is a sham, and that it isn't going to bring $137 million, or $100 million, or even $80 million? Is being off by well over 60% how the Governor and the PLCB do estimates? How big a failure is this going to be? The MINIMUM $42 million off would push this well beyond wine kiosk failure, or the 66% computer cost overrun, or selling house brands or anything I can think of. This would be a failure the size of the 82 year lie that the State Stores would be convenient to the public. They got what they wanted, "flexible pricing" and all, so show us the modernization money, PLCB!

Do the math and decide: are they just stupid? Or is the PLCB deliberately misrepresenting how much money they will bring in for the Commonwealth?

Tuesday, March 7, 2017

Why does PA think the PLCB has more value than the Military?

Back in August of 2014 I wrote about the supposed value of the PLCB workforce compared to the rest of the labor market. I said, "One can get an idea of how society values a profession by the compensation given." It's a fundamental truth of how the free market works...except in Pennsylvania, where the Legislature has denied reality for decades and inflated the value of PLCB workers to an extreme.

What do I mean? Try this. According to testimony at the State Senate Appropriations Committee meeting of 2 March 2017, the average value of benefits for a full time PLCB employee is 93.6% of salary; so for example, the value of benefits for a clerk making $30,000 a year would be 93.6% of their salary ($28,800), so their total compensation would be $58,800.

Now, for the actual average of a Liquor Store Clerk 2, that's a total of $64,060 in salary and benefits. Here's the rub. Compare that to a US Army Sergeant (E5) with six years in service, who these days may even have a couple combat tours under their belt: $55,233. (If you want to check my math...see below.*)

Really? Why are liquor store clerks worth about $9,000 a year more than combat infantrymen to the state of Pennsylvania? Is their job more stressful?  Do they work longer hours? Do they perform a greater service to the citizens?
I don't know who made this shirt but I want one**.
Of course, you can make this comparison with other jobs, and if you saw compensation like that the prices would probably be higher at that store or firm...but the State isn't forcing you to buy products from that person in that place under penalty of law. You have choices in the free market: you don't have to buy that product, and you don't HAVE to shop in that store. You don't HAVE to support a monopoly. But you do...if you're buying wine in Pennsylvania. (Yes, yes, with the exception of Pennsylvania-made wines bought direct, right.)

So the next time you have to go to the State Store, or have to settle for something because the bureaucrats in Harrisburg decided not to sell the item you wanted in their monopoly system, and they don't allow you to go anywhere else, stop for a moment. Ask yourself if maybe the state should be funding Veteran's care with the same zeal they fund state store clerks.

Privatization fixes that.


*pennwatch.pa.gov lists everybody and their salary who works for the state including those in the PLCB. Search under Liquor Control Board for Agency Name, then select Liquor Store Clerk 2 under the Positions drop-down menu in the results. There are 22 pages of data: add up the individual salaries, divide by the number of them to get an average, and then multiply that result by 1.963 to get the total of the average salary and benefits. For those working for Uncle Sam it is a bit easier.  They do it for you on this site (I used the PLCB HQ in Harrisburg zip code). I've just gone ahead and done the math on the PLCB compensation for you, but you can check my work.

** Buy the T-Shirt here!

Thursday, March 2, 2017

After 80+ Years...There are Some Things You Should Know

Looking at the PLCB's inventory sometimes gives the impression that they never learned to read the simple information on a liquor label. If you call them on it, they are usually pretty quick to blame the vendors, saying they are supposed to provide this information. But passing that buck just proves they don't really care if the information the public gets is correct or not.

Let's see how stupid they were this week.

I can't even begin to come up with any excuse why this isn't filled out correctly; maybe they can't read and type in the same day.
This one is a little trickier because, uh, you know, it's a long way from the 1st to 4th line.
This one is simple if you've been in the liquor business long enough to get your first paycheck: Scotch can only be made in Scotland. Period. The Scotch Whisky Association, the EU, and the US government all agree. In fact, there are a number of these types of spirit; I'll list the others as a service to the PLCB, in case they get confused again.*
  • Bourbon can only be made in the U.S. - so that means it is all domestic.
  • Cognac can only be made in the Cognac region of France - that means they are all imported.
  • Armagnac and Calvados can only be made in France -  also all imported.
  • Irish Whiskey can only be made in, yup, Ireland - again, imported.
  • Brandy de Jerez can only be made in Spain -  so they'd be imported.
  • Tennessee Whiskey can only be made in Tennessee - that means it is all domestic.
Now I know it will take some time to fix this (although a real business could probably do it in a week, or less). So I'll keep posting examples just so they don't forget or ignore it, like they have been for the last 20 or 30 years. You know..."in the public interest."

Went to see the chairman, strangest I could find,
Laid my proposition down, laid it on the line.
I won't slave for beggar's pay, likewise gold and jewels,
But I would slave to learn the way to sink your ship of fools.

We deserve better - PRIVATIZE NOW.


*If you have any questions about this you should have asked them decades ago but just in case - here is the U.S. Department of Commerce's Office of Trade Agreements Negotiations and Compliance letter on the subject.