Thursday, December 26, 2013

Liquor revenue vs. other revenue

More in the continuing saga of why can’t Johnny read -- or do math?

The Union in the guise of a former clerk and current business manager will tell you that “No state has ever realized equal revenue after they privatized, period.” (except Washington State, but I’ll get to that shortly). They cite the decline in Iowa and the contract in Maine as prime examples.

Let’s look at those in real terms. Iowa got out of the retail wine business on July 1 1985, the wholesale wine business on July 1, 1986 and the retail liquor business on March 1, 1987. UFCW Local 1776 president Wendell W. Young IV in sworn testimony stated that, “In just three years, after wine was privatized, revenues dropped by $20 million annually. Revenue dropped by $4 million in Year One; by $12 million in Year II and, finally, by $20 million in the third year of private control.”

What he said is true but there is more behind the numbers that isn’t told. On July 1, 1986 — the same day that retail wine sales were privatized — a 15% licensee tax was repealed. On March 1, 1987 — the first day that private retail liquor sales were allowed — Iowa lowered the wholesale mark up by 12% in order to help the newly established private liquor store businesses. There were 221 state liquor stores, and at the end of the four month transition period, there were 256 private stores; within the year the number rose to 430.

In fact, as reported back in 1997 on the 10th anniversary of Iowa’s privatization, “Keeping the wholesale liquor business and selling the retail end proved to be fiscally sound. State officials estimate their treasury is $95 million richer than it would have been had Iowa retained its state stores.” And “Between annual license fees and the wholesale markup, the state now makes almost $15 million a year more than it would have, had it stayed in the retail business.” Not exactly the disaster that Mr. Young said in his testimony.

So who do you want to believe that Iowa is better or worse off, Wendell Young, who has an obvious bias, or the State of Iowa itself?

As for Maine, they contracted out their liquor distribution. They knew ahead of time exactly what they would get and what it would cost. Ten years later that contract is ending and Maine is looking to do another 2 contracts instead of just one. This time they want one for distribution and one for marketing and advertising. Obviously, Maine thinks this is the better way to go instead of running the whole show themselves and having all of those salary, retirement and medical costs.

Now for Washington. Collected revenue is up, over any year during state control; up 23% for the last fiscal year. That will go down some when one of the newly imposed fees decreases from 10 to 5% but is still going to be above anything the state stores brought in according to the Washington State Department of Revenue.  So much for the UFCW business manager’s quote about no state ever realizing equal revenue.

Lastly there is Ohio. The union doesn’t like to talk about Ohio since they sold their wholesale operation for $1.5 BILLION. While it is a strange combination of public/private partnership, the Jobs Ohio non-profit that controls the wholesale operation is a private entity. They can go bankrupt with no cost to the state, and anything they make goes to Ohio job creation. The state has no jurisdiction over their books or the management.

Now Ohio might be a special case but when Wendell Young or any other representative says that nobody would pay X amount for PA’s system or that no place made money after privatizing – they are simply lying. Every place in the U.S. (or Canada) that has privatized some or all of their liquor system has also seen an increase in employment, and while that isn’t “liquor revenue,” it is better than what we have here.

The takeaway is simple: if you’re a Pennsylvania legislator, revenue should not be a factor when you’re considering liquor/wine privatization. As far as that goes, neither should employment. Privatization will, based on previous experience, most likely increase revenues, and almost certainly increase employment — if you do it right. In this case, “right” is not giving in to compromise. Do a Washington State — shut everything state-owned down in a matter of six months to a year — but don’t raise taxes. Watch border bleed decrease, employment increase, and voter satisfaction go right off the charts.

Privatization IS Modernization. Accept nothing less.


Anonymous said...

You made good excuses for why the other states lost revenue, but at the end of FY 2012 Washington generated 448 million according to their fiscal statement. Can you show us where they made 540 million in sustainable revenue for FY 2103? Some folks that don't trust you like I do would love to see proof you're not lying. Even with the 10% average price increase that number seems unrealistic. Post a link.

Lew Bryson said...

"You made good excuses"? What kind of crap is that? Iowa lowered their excise tax AND lowered the markup on their monopoly wholesale business: that's not an excuse, that's an obvious reason.

You need to learn some manners...and some common sense. Explain your question: as it stands, those two numbers are simply floating in financial mid-air. Did you make them up? Can you post a link?

Albert Brooks said...

How does one prove sustainable revenue? PA had record sales in 2009 and 2010 but "profits" went down in both years. Does that mean it isn't sustainable? If you care to rephrase your question I'll see if I have an answer when I return.

Anonymous said...

Sure.The Washington FY 2012 report.
The $448 million cited here plus the 23% increase claimed by the blog equals approximately $540 million. Let's see it in print. Last June they were projecting only $425 million. Were they really that far off?

Albert Brooks said...

You are looking at the wrong set of numbers.

I'd love to continue but I have to leave now.

Anonymous said...

I can't find a pertinent figure on your link. Maybe you mis-posted because you were in a hurry. So did the total revenue generated during the last year of public ownership($448 million) increase by 23% or not? Show us.
Any way we have a cool new slogan;
"Don't worry about the revenue, your looking at the wrong set of numbers!"
Legislators probably never heard that one before!

Lew Bryson said...

Your numbers are off as well, John (can I just call you John? Since we both know that's who it is?) $448 million isn't the revenue collected by the Washington spirits monopoly; it's the TOTAL revenue collected, which includes $168.7 million in non-store/non-monopoly revenues (beer and wine taxes (not sold by the state in Washington), license fees, fines and penalties, "tobacco seizures," and "other income."

So let's do the apples to apples thing, and actually compare spirits tax revenue. On the second sheet of that Dept. of Rev spreadsheet Albert linked to, the FY2013 sheet, take a look at the first set of figures. Add up the monthly figures in the C column (FY 2013 tax collections) and you get $265,174,073; add up the FY 2012 figures in the E column, and you get $241,714,895. That's an increase of 9.71%.

Now, that's not 23%; I'll save you the excitement of announcing that. But on the other hand, that doesn't include the added "fees" that I-1183 tacked on, either, which are pure gravy, 100% in addition to FY2012, because they didn't exist in 2012. I don't have figures on them, unfortunately: don't know where they are. But it's clear as day that if straight excise taxes are up, and a large chunk of additional "fees" were added to those increased tax revenues, that Washington State's tax revenues from booze are UP in the first year after privatization. Pennsylvania could very likely break even in the first year of privatization, even missing the paltry "profit" of the State Stores.

So, can I show you exactly 23% increase? No, I don't have the figures; I didn't write the post. But it's clear that Washington State has replaced the revenue. And it's just as clear that the other states are satisfied with what they've done. I'd say it's also pretty clear that the legislatures in some of the other states recognize that "revenue neutrality" is a red herring; there's a large factor of citizen satisfaction involved. There's also the issue of border bleed, which the Washington initiative failed on. Leave taxes alone (or better, lower them to match neighboring states), and border bleed will recede as PA's citizens see more and better options closer to home. Which is the real issue here, not niggling over percentage points of increased revenue.

Anonymous said...

You can call me Phil. Did the Washington LCB contribute $540 million to the state treasury or not? Of course they collected more in taxes and fees. They raised them. Prices went up. Not exactly magic. But the bottom line is the total contribution by the agency. Where is the hole in the revenue stream? Hint: The public stores turned a profit that no longer goes back to the taxpayers.
"Don't worry about the revenue, you're looking at the wrong set of numbers."
Why did prices go up in Washington anyway?

Anonymous said...

It all boils down to this the state will make more money and more job creation,some of the wine companies are willing to pay 14 to 15 a hour to start and benefits, I did my research and the states revenue is some what suspicious, because I think they spend more than they can show profit, because of the rising costs, of fuel,employees health care costs and other expenditures, so you see they are justifying to the people of pa. why it is important to keep these stores, but in reality it is not.

Lew Bryson said...

Whatever, John. Like I said, the whole point is NOT the exact amount contributed. You and your comrades at the UFCW have been saying for over a year than revenues took years to reach the same levels after privatization; this shows it's simply not true. I'm not going to argue over how MUCH they went up! The "public stores" tiny little profit is a ripple in the revenue stream.

As for this:
Why did prices go up in Washington anyway?

Well...The article gives NO source for that graphic, so who decided that the retail/wholesale markup was TWICE that of the state? Someone in the art department? Even the source of their quote that the wholesalers raised their prices (owner of a small distillery, hardly a disinterested party) admits that the reason for those increases are likely due to the new taxes/fees. I know you've been pushing this ONE story from this ONE "online magazine of news & culture"...but it's poorly reported and poorly written, and that graphic has NO attributed source. Not particularly trustworthy.

And...I think we're done here. You're starting to repeat yourself. If you don't come up with anything new, I won't be allowing your posts through. Fair warning, and a standard one. Got anything else?

Lew Bryson said...

As usual, the "Anonymous" response from John was a barrage of personal insults and obviousness (the PLCB continues to bring in revenue: well, duh, it collects the excise taxes!). Sorry, chummy, you'll have to do better. Got nothing against real questions; they sharpen the argument. But quibbling and insult and repetition? Try that at the union hall, it don't work here. See ya!

Anonymous said...

Interweb quote of the day..."Don't worry about the revenue, your looking at the wrong set of numbers"
To bad nobody quotes you people. John bet me you would snake out of that last comment exactly the way you did. He and his friend have you figured out pretty well! Denial is not just a river in Africa. Cheers, Phil.

Lew Bryson said...

Right, "Phil." Only problem's not a quote. John made it up. You show me anywhere on this blog, or in the comments, where anyone without an "Anonymous" handle said "Don't worry about the revenue, your [sic] looking at the wrong set of numbers." You can't: you made it up. Please use it in public, can't wait to call you a liar.

Classic bullshit. On the other hand, Wendell W. "President for Life" Young IV really did say privatization would mean the "possibility of liquor stores on every corner." ( What a freaking laugh riot THAT one was, and continues to be. I do miss Conti, but Wendell's still around, making us all laugh, with his $300 haircuts and $4,000 suits as a working man's representative. It's even better when he gets in trouble in interviews and starts slinging the personal attacks. He's a precious gift to privatization supporters: I hope he never quits!

Albert Brooks said...

Perhaps John could use "I can't do math but don't worry about the numbers I come up with" The subtitle of this post is "Why can't Johnny read and do math" after all.

I'm sorry that your union talking points didn't include the Washington spreadsheets but most of the info is there if you know how to add and the rest is easily available if you know where to read.

AS Lew pointed out no matter what you believe it went up and you were wrong when you said that no place ever had that happen.

Anonymous said...

Excuse me Albert but Lew deleted a few a my posts. Your spreadsheets are only for tax collection and don't include the profits the Washington stores made. I don't know why I'm wasting my time here when this has been gone over in more caucuses, meetings and hearings under the dome than I can count. Everyone else is wrong, the beer blogger and his little buddy are are right. Sure. Maybe you are. Show me where the state made that 23% increase over the $448 million in FY 2013 and we'll be fine with admitting it. Until then I call BS.
"Don't worry about the revenue, you're looking at the wrong set of numbers" (grin).

Lew Bryson said...

Still using your made-up "quote," I see.

Your posts weren't "deleted," they just weren't put up, for the reasons you were warned about (the ones that have been in place since this blog started). But that's the same kind of childish disregard for civility that got you banned from the privatization page on Facebook, so it's not a surprise.

Albert Brooks said...

If you already know the the numbers you are using aren't correct why do you continue to use them?Why is it that you can claim PA makes 2.1B in "revenue" but every other state has to make whatever number you use in after all expenses? The spreadsheet has the information but you just can't see it without somebody else either telling you what to say or giving you the numbers. I'm sorry I'm making you do some math.

Anonymous said...

Ridiculous. The total contribution from the Washington state FY 2012 was $448 million. You say that increased by 23%. Show us. LMAO. But your spread sheet is well known. Been using it to show how tax collection haven't reached projection and/or equaled last years total in many recent months. I'd send it to your rep as a reminder. I don't really have time for this, if a friend hadn't come over the other morning to show it to me I would never have seen it. Thanks. Remember to tell your rep "Don't worry about the revenue, your looking at the wrong set of numbers" They might invite you to testify at the appropriation hearings this budget season! Maybe you'll have better luck than Cawley and Turzai.
Hey Lew, you ought to publish those comments so (if anyone actually reads this) people can compare them to one of your alcohol warriors threatenimg to come up to my house and visit me wife and kids. I'm not a prohibitionist but if anyone was following that they would agree constant drinking has a terrible effect on perception and sensibilities. Then there is denial, projection, and retarded emotional development. Put up those comments I made. Nothing there I'm ashamed of. We union thugs don't threaten families.

Lew Bryson said...

Remember to keep making things up, John, like "quotes," and stories about threats, as if anyone would care about you or your family.

As to posting your offensive comments, well, like I always say: Blogger's free. If you don't like how this blog's run, start your own.

Albert Brooks said...

Paranoia strikes deep. I don't see anywhere in this thread any mention of families besides your drivel.

Going back to the not being able to read portion of the subtitle I did not say that total contribution went up 23% The WALCB takes in other taxes beside those that pertain to hard liquor sales. Only an idiot would think that because one area increased the entire whole increased by the same amount.

I'm glad you have some friends who know what to look at and realize that Washington did increase contrary to what was said in the quote I listed. Is being wrong dependent on how wrong you are? Being a little wrong isn't the same as being a lot wrong or is that only true in unionland?

Anonymous said...

Lew you speak like your looking in a mirror.
I'm sorry for all your anger.

Lew Bryson said...

Thanks for your lively comments.

sam k said...

Is it my imagination, or is this anonymous guy a one-trick pony who insists on hanging on like a pit bull for no other reason than to hear himself talk?


Lew Bryson said...

Exactly, Sam, which is why I've stopped posting his comments. Like I always say: Blogger's free, start your own blog.

Anonymous said...

either a union shill or representative moron mark cohen...not thats theres any difference

Cheryl said...

Great job Albert. Through the privatization talks the union has repeatedly shown that they will distort facts to sustain themselves. Thanks for the post.

Albert Brooks said...

Thank you Cheryl, there will be more to come I'm sure.