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Why can't Johnny read or do math — Part 3

If you remember in Part 2 of this saga, one anonymous poster — we’ll call him Business Rep 23 — was not able to figure out how Washington State collected more money after privatization. He couldn’t add the numbers from the Washington State Department of Revenue and Washington State LCB, and he said that the money from the old state stores wasn’t included.  If you look at the WSLCB Annual Reports, none of them list “Store Profit.”  It’s just part of their income after expenses and since they turn over everything else to the State or Local governments, they seem to not feel the need to do reporting the PA way.

Let’s see what the real numbers were in Washington, and how they compared pre and post-privatization. The last annual report before privatization was for FY 2012, which went from June 1, 2011 to May 31, 2012. This would include the big run on liquor that happened before privatization took effect on June 1, 2012 and the auction sales of the old state stores.

Total liquor sales were $900.47 million or about 42% of what PA does (it bears repeating: Washington only privatized liquor sales; they already had private wine sales). Washington State LCB does collect the beer and wine taxes, and some tobacco taxes too, but those obviously weren’t affected by privatization. If you do include all of that, the total is $448.7 million returned to the state. That number is what Business Rep 23 and his cohorts like to use when comparing Washington’s old liquor income to Washington’s new liquor income.  The key number here would be $448.7 million turned into the state for everything, including any profit made in the old state stores.

Now let’s look at the 2013 Annual Report, the first one after privatization.  There is no income from

Gross Liquor Sales any longer, but the License Fees have gone up from $33.91 million to $257.6 million and that the total returned by the WSLCB  to the State is now $318.32 million.  (License Fees are the actual cost of licenses, plus the 17% Retail License fee and the 10% Wholesale License fee that were added as part of the privatization bill.)

AHA! you say, that’s $130 million less than the year before, Business Rep 23 was right!  Er, well, no, he isn’t.  When Washington State was the only source to buy liquor, they collected all the state liquor taxes: the Spirits Sales Tax and the “Spirits Liter Tax.” But now that Washington State has a private system, those tax collections are now part of the Department of Revenue, and not the WSLCB. (Imagine: the Department of Revenue collects the taxes, instead of some dinky enforcement bureau. Makes sense, right?)

To get the total tax numbers, you have to look at the spreadsheet the Department of Revenue so kindly keeps updated here.  Looking at the Summary FY2013 tab and adding the monthly tax collections, you see approximately $228.6 million was collected from consumer sales and $37.3 million was collected from licensees through distributor sales, a total of $265.9 million.

This gives Washington State approximately $318 million from the WSLCB, and $266 million from taxes, for a grand total of $584 million in liquor/booze revenue.  Even Business Rep 23 has to admit that $584 million is more than $448 million. Okay, he doesn’t have to, and I’m sure he will make a bunch of statements trying to tear that fact down without any proof, but…come on. $584 million is at least 23% more than the $448 million that was collected the year before, just like I said in part 2.

So to sum it all up:

The WSLCB Beer and Wine taxes, tobacco seizures, other income, and all liquor revenue including store “profit” collected in FY2012 before privatization resulted in a total of $448.7 million being returned to the state, while in FY 2013, the first year after privatization, it was $584 million.

The moral of the story?  

Don’t believe Business Rep 23 or anybody else unless they have the facts to back up their statements.

Would Privatization Kill Children?

To go with last year's “Non-union employee-sold booze killed my Daddy” commercial, you may have seen the newest propaganda from the State Store clerks union about how increased availability of beer and wine will lead to the downfall of civilization as we know it. Among other lying lies from the big fat liars at the UFCW media lying office, the ad says that North Carolina put in "a similar law" and it's killing one "child" every week from underage drinking.


The idea that they can trace the death of one underage drinker (who are, BTW, usually 18 and older, hardly the toddlers pictured in the ad) per week directly to this law and ONLY this law...is ludicrous. But here are some even bigger things they don’t tell you about crazy loose boozy North Carolina vs. wonderfully 'controlled' Pennsylvania.

• North Carolina has a lower rate of high BAC fatalities than Pennsylvania 
• North Carolina has a 39% lower rate of women 18-44 who binge drink than Pennsylvania
• North Carolina has a 26% lower alcohol use rate for women 18-44 than Pennsylvania 
• North Carolina has a lower Fetal Alcohol Spectrum Disorder rate than Pennsylvania 
• North Carolina has a better rating from MADD than Pennsylvania 
• North Carolina's DUI fatality rate is the same as Pennsylvania 
• North Carolina's overall binge drinking rate is 17% lower than Pennsylvania’s 
• North Carolina is also one of the 17 alcohol control states, like Pennsylvania 
• North Carolina liquor stores are checked for underage sales. Pennsylvania's are not. 
• North Carolina allows beer and wine sales in grocery stores.  

It would be an improvement if Pennsylvania were more like North Carolina, but it will be even better if we privatized.

Sources:
http://www.cdc.gov/ncbddd/fasd/data.html
http://responsibility.org/sites/default/files/files/TCC-AIDF_2012.pdf
http://www.madd.org/drunk-driving/state-stats/
http://www.americashealthrankings.org/WI/Binge/2012

I guess I'm on the official Enemies list

Look who I found poking around one of my accounts.

Glad to know they care enough to send the top dog.

An update: 
Ms Diehl has figured out how to poke around anonymously and now that same "Who's viewed your profile" looks like this:

The PLCB responds to the Smackdown.

The PLCB response to the Smackdown?  I don't know but I can see it...

A meeting in the $40,000 PLCB drinking lounge they have set up in Harrisburg. The big screens are showing the Travel Channel, and soft music is playing. The question: what to do about the cheeky ad Total Wine ran directly comparing prices with the State Fine Store Wine and State Good Store Spirits Shoppes; and not too good a comparison for the drones in old Harrisburg. Ideas are not developing, but then someone gets a rush of blood to the brain.

"Hey, let's allow this rum to be put on special. We'll make up some cool tags and let everybody know we can put bottom shelf liquor on special too." No one has any better ideas, so the mighty marketing muscle of the PLCB lurches into action.

The next week, the sale is on, but the one brainy manager in the system (who runs the store in Snow Shoe, open three days a week for customer convenience) spots something amiss. "There is something that doesn't look right with these tags. It did pass the Art Department, The Printers, the Marketing Department, The Store Operations Director, and then was approved by the Board though, so I guess it is OK.

"But I thought that a liter was a third more than a 750ml. I guess I was taught wrong in school if all those smart people agree it's actually 25% more. Wait, isn't 'then' used to indicate time of some kind, and it's 'than' that's used for comparative purposes? Naw, they couldn't have two mistakes on one tag; nobody is that incompetent, not even in Harrisburg! Well, nobody will notice anyway. If our guys didn't catch it, then (or is it than?) the public won't either. What do they know about math and grammar compared to the folks in charge of the PLCB!"

Yup. It's a classic. Pure PLCB.

No wonder the PLCB doesn't like selling liters anywhere other than at their so-called "outlet" stores. The math makes their brains hurt!

(P.S. Total Wine sells the 1.75L at a lower cost per oz  even with the PLCB "sale")

PLCB SMACKDOWN

 

It must be their incredible buying power because the difference in taxes doesn't account for the difference in price. Maybe the PLCB can rename a store in response.

More fun with PLCB numbers

Remember that the PLCB say that they only have a 30% markup and that no private business could survive paying a wholesaler and selling a product at a profit for that amount. Prices will go up, they say, because there's no way they can sell you booze as cheap as the PLCB! They actually say that.

Well...like a number of things they say, it's true only on the surface. If you look at the agency's Income Statement for June 2012 to June 2013 you will see that Sales net of taxes is $1,731,463,014, while cost of goods sold is $1,192,047,304...which indicates a profit margin of 45.2%. All sorts of businesses can operate on a 45% margin. So how does the PLCB get from 30% to over 45%?  They have bottle fees, bailment fees, "rounding," and probably some miscellaneous stuff we don't know about. Do the bottle fees and rounding account for an additional 15 percent of PLCB  markup?

According to the PLCB itself, it does. This quote is from PLCB Consumer Relations in an email they sent me. "According to our Bureau of Financial Operations, apart from some other minor influences, the bottle fee and rounding do account for the approximate percentage you note of gross revenue on a yearly basis."

Let's look at the last board meeting from April 2 to get an idea about how quickly the price can jump once the PLCB gets hold of a bottle. We'll start with these:

Item..............................................Unit cost...Sale Price..Markup
Shoofly Chardonnay                      $6.05       $10.99      81.6%
Woop Woop Chardonnay               $6.10       $10.99      80.1%
Sassello Morellino di Scanzano      $6.12       $11.99      95.9%
Camara Alta Tempranillo Navarra    $6.33       $11.49      81.5%
Domaine du Chapitre Touraine Blanc $6.47       $11.99      85.3%
Wine By Joe Pinot Gris                    $6.55       $11.99      83%
Chateau Ste. Michelle Dry Riesling   $6.75       $11.99      77.6%
Chasseur Des Brousses                   $6.87       $12.99      89.1%
(Markup for this list is total markup with 18% JFT)

As you can see, a few cents difference -- with the 30% markup + the bottle fee + "rounding" -- can equal a large amount of change in what the PLCB charges the consumer and what their real total markup is.

And think about it. What this means is that even with a 45% total markup the PLCB can't afford to have as many stores as they did 20 years ago, let alone the 750+ they had in the 1970's.  They can't afford to hire and maintain workers at the highest end of retail and still provide the service they are required to provide. Even with a police-enforced monopoly, their business model doesn't work anywhere near as well as the private sector.

Life in Pennsylvania: where the police will tell you what legal products you can buy and where you can buy them...and if you try to buy them somewhere else...they'll arrest you. 

WE DESERVE BETTER - PRIVATIZE!


Yes, the picture is fake but the verbiage isn't. Duh. It's what we call a parody, or exaggeration, a photographic catroon. The difference is, unlike everything Wendell W. Young IV says about the PLCB, we admit that it is bullshit.

Washington State is not equal to PA

For some time we've been told (mostly by UFCW last-ditchers) that Washington State's liquor income is close to Pennsylvania’s liquor income, and that when the Evergreen State privatized their liquor monopoly, they only got a small amount -- $181 million -- for their retail and wholesale systems together.

Well...kind of.

Take a look at this, from the Washington State Department of Revenue. This shows how much liquor tax was collected in 2013. It is more than PA collects, but since their tax rate is 5 times ours, that stands to reason. But the rate of taxation really doesn’t have anything to do with the worth of the system to a purchaser, except to drive it down. Worth is determined by demand and availability; so with about half our population, high taxes which decrease total sales, an already private wine market, and the 8th highest beer taxation (even after it was reduced - see below), Washington’s system was inherently worth less than Pennsylvania’s in total and per unit.

 Pennsylvania is a much bigger market with more outlets even after closing 20% of them over the last 40 years (while Washington increased their number of stores over the same time period) and controls both wine and liquor. As such, it is worth more since the volumes are higher and greater economies of scale are present, along with a high demand and somewhat reasonable taxation on liquor, albeit higher taxation on wine. As a wholesaler, Pennsylvania's monopoly rights are worth more than just the 4 times the indicated value (double the liquor and all the wine). Of course, nobody knows exactly what anything will sell for until it does in an auction situation, and that could change up or down daily. That said, a bigger fish like the Commonwealth is worth more than two smaller fish...and certainly more than one small fish, like Washington.

Some points to consider.
Washington – Population 6.9 million
Pennsylvania – Population 12.8 million

Washington $35.22 per gallon alcohol tax.
Pennsylvania $7.22 per gallon alcohol tax.

Washington Liquor taxes collected (2013) – ~$266 million in liquor taxes (after the 27% increase in fees)
Pennsylvania Liquor taxes collected (2013) – ~$183 million as the liquor share of the Johnstown Flood Tax.

Washington – 40 million units sold (liquor only).
Pennsylvania – 140 million units sold (liquor and wine).

Washington – Reduced beer tax from $23.58 a barrel to $8.08 a barrel (2013) to help in-state brewers.
Pennsylvania – Did nothing to help brewers (probably because our beer tax rate is already one of the lowest, at $2.48 a barrel).

Washington Border Bleed – The total increase for the year was about 10 days worth of PA border bleed.
Pennsylvania Border Bleed – The largest liquor border bleed in the country.

Washington – Legislature respected will of the people to privatize liquor sales.
Pennsylvania – Legislature consistently rejects will of the people to fully privatize (so far).

While we are not Washington, we can do what they did; and with the hindsight they have enabled, do a much better job of it. More jobs, more revenue, more convenience, more selection, less government and freedom of choice can and should be ours.

Privatization IS Modernization. Accept nothing less.

Privatization facts & figures

All the arguments against privatization — job losses, revenue losses, public safety endangered, less selection and higher prices, less convenience, and worse service — are addressed and refuted below, with facts and common sense. Arm yourselves with knowledge, and pass it on to your legislators.

Jobs - Everyplace in North America that has privatized some or all of their liquor distribution system has seen an increase in employment. Jobs in the industry tripled in Washington State and Alberta, Canada, the last two places that fully privatized. They doubled in Iowa, which kept wholesale sales but privatized all retail. Are the jobs exactly the same as what they replace? Probably not; are all jobs the same at every store where you shop now? Why would alcohol sales be any different?

Revenue and Border Bleed - Sales have gone up in privatized systems, every single one; how much is dependent on taxation more than anything else. Case in point is Washington State, which already had the highest liquor taxes in the country before they privatized and added new fees. Sales have still gone up in state, and the fee-driven increase in border bleed has increased sales out of state. If they hadn’t raised taxes, in-state sales would have increased even more. Washington State’s border bleed is nowhere near the border bleed rate in PA. The border bleed increase for an entire year in Washington is about a weeks worth of the border bleed PA sees.  While privatization will not eliminate border bleed in PA, it will, just from a convenience standpoint, decrease it. A privatized PA will still not be able to equal pricing of states with lower taxes, but it will make it easier to buy locally. People pay more for convenience all the time, even when less expensive alternatives exist reasonably close. Case in point is buying almost any food or dairy item in a convenience store — “a damn Sheetz,” as Senator Ferlo would snarl — instead of a grocery store. The key is to not raise taxes.

Revenue 2 – Iowa actually decreased their taxation and still reported making more than they would have if they kept their state stores.

Revenue 3 - It isn’t only direct liquor taxation that has to be taken into account. For PA, there will be business taxes that the current system doesn’t pay. There will be more income taxes from owners and workers, since there will be more of each. There will be new jobs created that do not exist under our current system, delivery to bars and restaurants being one example, and increases in current jobs to accommodate new business. Again, just one new warehouse in Washington State employed 1,100 workers, which was more than the entire state store workforce of 937. In the long term, money will be saved by not having taxpayers responsible for future retirement and medical shortfalls. The current amount the taxpayers owe for PLCB pensions is $550 million and is expected to go up to $600 million by the end of this year.

Safety – Under the current system PA has more DUIs, DUI fatalities, underage DUI, binge drinking and underage binge drinking than 4 of the 5 privately run states on our border, and is just average compared to the rest of the country. Washington State has seen an 8% reduction in DUI crashes and DUI fatalities since privatization. While some may claim that is because there was less policing, policing has no effect on the decrease in DUI fatalities. Alberta, Canada has decreased their DUI fatality rate to one of the lowest on the continent (37% lower than PA) since they privatized, even though they have over 1,300 retail liquor outlets now for a population of under 4 million. Is there a connection? No way to say without further study, but it’s plain to see that privatization didn’t make the situation worse.

Safety 2 – Limiting underage access has always been a point for those opposed to privatization. While the true rate of underage purchases in PA State Stores is not known, since they are never independently checked (or policed in undercover sting operations, as privately-owned liquor stores in other states are) it would follow that it should be about the same as other localities which have similar requirements. Washington State was at approximately 93-94% compliance before privatization and is at about 92% now. Another thing we can learn from Washington State’s experience is how to limit direct unobstructed egress to cut down on shoplifting.

Selection - Under the PLCB, urban areas essentially subsidize rural areas for alcohol selection, something that would seem to go against their stated mission of limiting access. This is the retail equivalent of PENNDOT making sure there is a Jaguar dealer in every county, because without government intervention they wouldn’t be there. Where the population can support them there will be larger stores, and in areas that can’t support those, there will be smaller stores. This is the retail model found almost everywhere. It is not the government’s job to make sure you can buy a wide selection of booze, especially when they say it’s detrimental (but they still want to sell you more of it). It is their job to make sure that a business climate exists which will allow retailers to try to sell whatever they want within the regulations and restrictions. To date I have not heard a reasonable explanation as to why the state should subsidize alcohol like they do milk.

Selection 2 - That in-store selection will increase is not in question. One only need to look across the country to stores like Bev-Mo, Total Wine, Roger Wilco, Binny’s, HighTime, B-21 and hundreds of others to see what the private sector can provide. They provide it based on consumer demand, not by what a bureaucrat or committee with unknown or non-existent credentials selects for them in a small capital city, far from major markets. What is in question is what variety will be available in rural areas. The answer is the same as it is for any other product. If the demand is there, the market will provide it, just as it does in rural grocery stores and hardware stores. If what you want is not available locally, chances are you will be able to order it, the same as now, only you probably won’t have to buy a case at a time as it is with a good portion of the current system. The entire state of big, small, specialty, urban, and rural stores will be open to you. Not that every store will ship but it will certainly be more than now, because real businesses strive for customer service since their existence depends on it and not state police enforced monopoly power.

Prices – There are no absolutes in pricing. So much would depend on the system that is selected. Do we continue with the three tier system or do we eliminate one tier and allow more direct buying? Are taxes collected at the wholesale or retail level? Will the taxes increase or remain the same? Depending on what combination is used, you can say that prices should go down or prices should go up. The one thing you can say with certainty is that in a competitive market prices are lower than they would be given the same circumstances in a non-competitive market. As the third largest retail buyer on the continent one would expect the State Stores to have some of the best pricing available in the country. However, this is not always the case and the differences are more than taxes alone can account for.

Convenience – Since closing 20% of their stores in the past 40 years and having the lowest amount of stores per capita in the country (even lower than Utah!) there is no doubt the current system is inconvenient. Quite simply, anything that doesn’t open hundreds, if not a couple thousand more locations will not provide convenience seen in other states, and is a Band-Aid at best. It is obvious the PLCB cannot begin to compete in this area because they can’t afford it based on their business model of having everything the same store everywhere. Don’t let them buffalo you: the PLCB chooses the number of stores to open, not the legislature; the number of stores is not enforced by the Almighty Liquor Code (with the exception of the number of stores allowed to be open on Sunday). So while the population has increased over the last four decades, the number of State Stores has decreased from over 750 to about 605 today. Just to reach the national average, Pennsylvania should have about four times that number. “Modernization” does not begin to answer that issue, with one proposal saying they want to put 400 sq. ft. “stores” inside other stores, which they are already allowed to do now, and have been for at least 30 years. What exactly does that do for the consumer that the same size private store (which they claim wouldn’t provide the selection) would, besides remove that business opportunity from the citizenry?

Service – Unlike other retail stores, if you don’t like the service you can’t go anywhere else. You are stuck with the same training, the same attitudes, the same level of passion. In the world of private stores, if you don’t like the service you can go somewhere else and reward them with your business. The stores with bad service will eventually fail, and if somebody else sees the opportunity another will open. In the private sector you will find stores with a sales staff of well-trained professionals along with stores whose sales staff can barely tie their shoes. You have the choice of what level you require. Same size fits all is not a tenet of retail, although it seems to be gospel for the PLCB. There are private stores who have sommeliers on staff. The whole of the PLCB, 600 retail stores and an entire state’s wholesale wine trade, doesn’t. To be fair, the PLCB does have a sommelier as a part-time consultant. One. Part time. For the entire state. The third largest retail wine buyer on the continent does not have a full-time top tier wine person. I can’t be the only one to think there is something wrong with the system that not only allows this, but doesn’t care.

Privatization does create winners and losers. The winners are the citizens who now have access to a free market; the losers are those who can’t adapt to the free market system. While no system is perfect, looking at the rest of the country it is easy to see which one is preferred by consumers and businesses whenever there is a choice.

TELL YOUR LEGISLATORS YOU WANT THAT CHOICE!