Monday, April 27, 2015

Can we talk, about these talking points?

Everything below is taken from the March UFCW Wine And Spirits Council talking points. This is what the State Store clerks' union is encouraging their members to use in communications with legislators and public groups to convince them that normalization of the State Stores would be a disaster. We found a few issues with their issues.

  • This legislation risks the over $566 million in annual contribution from the PLCB.
Sounds terrible! Except that the PLCB has never contributed $566 million. They did collect taxes, but so did the Department of Revenue -- sales taxes, income taxes -- and they don't claim to have "contributed" $23 billion to the State.
  • States that have privatized in the past, such as Iowa and West Virginia, saw dramatic decreases in revenue after they privatized their liquor systems.
But the report on privatization commissioned by Governor Corbett to study the effects of privatization based on the HB 790 plan that PFM* produced, the report that's so frequently quoted by opponents, says this: "Privatization was deemed successful (in Iowa) from a revenue standpoint, with profits increasing by $125 million over the first 11 years of privatization compared to estimates under State control of the stores." Of course, Iowa and West Virginia only privatized retail, not wholesale, and Iowa lowered taxes too. Iowa has over 1,200 places to buy liquor now, with 25% of Pennsylvania's population. And a lower DUI fatality rate.
  • PFM predicts there will be 10-­30 wholesalers who will carry a wide array of products in a private wholesale system. This is simply not true in other privatized states, due to only 1 or 2 wholesalers usually operating in private states.
Let's see how true that is. I can name over a dozen wholesale distributors in Washington State in only two years since they privatized. 1. Click 2. Columbia 3. Crown 4. King 5. Marine. 6. Pioneer 7. Stein 8. Vehrs 9. Clatsop 10. Dickerson 11. Maletis 12. Midway 13. Olympic Eagle 14. Sound 15. Tripp 16. Young's 17. Southern.
New York has at least 40 just for wine. Pennsylvania has one - the PLCB. Of course, you don't even need to guess how things will be in a privatized system in Pennsylvania, you can just look at beer. There are over thirty beer wholesalers in the Commonwealth. This one isn't even close.

  • ... $1.4  billion over five years that will cost the state to transition from a public system to a private system according to the PFM report commissioned by former Governor Corbett. 

This is a lie that has been told over and over and over, to the press, to the Legislature, to the public, and it simply isn't so. The actual first heading on page 186 of the report is "Total Agency Operating and Transition Costs." So the $1.4 billion is the system's normal operating costs plus any transition costs. The operational costs are almost $1.2 billion! With a little math, you can figure out how much the cost is to keep the PLCB using the very same report. Over $2.2 Billion. How do you like me now?
  • This proposal has the potential to put alcohol on every corner possible.
This is just fear mongering. HB 466, the current bill the passed the House, doesn't even get the state up to the national average for liquor stores, let alone for retail wine outlets. To hit average for 12.8 million people, we would need to have over 2400 liquor stores, and over 6,000 grocery stores selling wine.
  • A peer-­reviewed study from a U.S. Centers for Disease Control Task Force recommended against any further privatization.    
While the statement itself is true, the entire study methodology and results were debunked by (Debunked by Forbes, too.) This study also said that privatization would lead to a 44% increase in consumption which hasn't happened in any state that privatized any or all of their liquor system. Not even close.
  • Studies show that state employees have a much higher rate of carding minors than the private sector does.
Maybe, but Pennsylvania state stores are NEVER checked for compliance, except by "internal" audit. So you can't make a factual statement that it is happening here.
  • The Turzai privatization proposal will lead to increased prices and decreased selection.
Somebody on the Council needs to stand in the middle of a Super Buy Rite or a Total Wines or Joe Canal's or BevMo or Binny's and say that. How selection is decreased when a store has more items on the shelf that the entire state of Pennsylvania stocks must be some kind of magic.
A real New Jersey Liquor Store; not near Philly or New York, either.
  • No where in the private sector can you find that type of selection in each and every store in the state.
One size doesn't fit all and nowhere in the state can you even begin to find something like the store shown above. Not every PA State Store even has the same stock, and neither will every private store, but you'll certainly be able to find more in the private market.
  • The proposal eliminates the 30% markup, yet keeps the 18% Johnstown Flood tax. This will result in dramatic price increases. 
Since the PLCB operates at an effective 45.2% markup and private business is far more efficient there seems to be some room to work with. Will everything be cheaper everywhere? No, just like one store doesn't have the cheapest price on everything. But then, the PLCB doesn't either.
  • Prices have gotten so high, that Washington consumers have been driving across the border to both Oregon and Idaho.
Having lived in Washington State, I can tell you first hand: Washington had the highest liquor prices in the country before they privatized. Adding 27% in new "fees" at the time of privatization certainly didn't help. Although they did drop the fee schedule to just an extra 22% recently. Idaho has said their sales are up 7% along the border. Oregon is about the same. The total Washington yearly border bleed is less than 2 weeks of current PA border bleed, so what does that tell you?
  • Those who purchased the former state liquor stores from Washington State are already out of business, as they were not able to compete with Costco, Safeway and others.
The one thing that hurt small liquor store owners in Washington was the WSLCB. It was just as bad in making decisions and rulings as the PLCB. They ruled that the small stores had to pay tax on resale product while larger distributors didn't, making the small stores products 17% more expensive for the bars and restaurants that they were selling to. That ruling has since been overturned, but it took over a year to do it. Box stores are still not the majority of sales in Washington. Small stores can compete just fine if given a level playing field. Look at New Jersey and California if you need examples.
  • The Turzai proposal will lay off 5,000 Pennsylvanians who work in the Wine and Spirits stores.
Well...there aren't 5,000 people who work for the PLCB (total staff of 4,597 as of 3/15) and certainly not all of them work in the state stores (not with the bloated management structure that is in place). Nor will they all get laid off, either. There will still be a need for administration, licensing, audit and what have you. And a third of the employees in the stores are part-time.

The Wine and Spirits Council seems to believe that consumers, and more importantly, legislators, can't learn from what other states did. That we can't put in place an even better system based on real world data, and not bad reports formed from junk science, or scary commercials where family members get killed off one by one.

Private systems work: just look at how you buy everything else. We don't need State Stores or the people in them to sell a legal product. There are 27,000 licensed establishments in the state and none of them have state workers standing behind the bar, serving or managing. We aren't safer, we aren't better served, and we aren't satisfied and never will be by a state run system.

*Much of the UFCW's "scientific" support for the State Stores as a bulwark against booze-fueled lawlessness leans on a CDC "taskforce" report, largely exposed as junk science by this piece. They lean on cherry-picking out-of-context nuggets on the economics from a report on the impact of liquor privatization prepared by PFM, a Harrisburg think tank. Have a look for yourself; why trust the UFCW, why trust us?  


Anonymous said...

Unfortunately, the Ds and the southeast RINOs buy this without thinking. As long as Wendell keeps making contributions to the pols they will keep providing cover regardless of the truth.

Anonymous said...

Could an obstacle to privatization (even though as was discussed before, private union jobs could replace the civil service union jobs of state store workers, at least in a wholesale setting) be that the state stores have better security than a private store might be able to afford?

Most state stores I've been to have a very thorough security camera system, a chime that can be heard all over the store with every time someone goes through the front door, alarms on the back doors (which already are in private, employees-only rooms), and many urban stores have a security guard lurking either inside or outside (who if outside probably would stop robbers, theives, the underage, etc from ever getting inside). I know private stores would have at least some security too, but think of it this way... wouldn't a supermarket be way easier to shoplift booze from than a state store? And wouldn't it be more likely that an underage person might steal it (or sneak it into a large grocery purchase and not get asked for ID) in a supermarket setting, at least in one where the booze is in the same room as anything else?

Lew Bryson said...

No, that's not really an obstacle. I go to a farm store -- just eggs, produce, milk, and some baked goods -- out in rural PA that has a loud buzzer on the door, two security cameras, and securely locked back doors. And that's just a farm store in the sticks. Security cameras are so cheap these days, almost every business has them.
The idea that someone could "sneak" booze into a grocery purchase and not get asked for ID is laughable. Wegmans' POS system, for example, simply will not ring up any scanned alcohol purchase if ID is not presented.
Meanwhile, almost every Pennsylvanian I've talked to has a story about having bought at a State Store when they were underage. Anecdotal? Definitely. But what you're putting forth isn't even anecdotal; it's hypothetical. There were some issues with shoplifting in Washington after privatization, but again: all anecdotal. There were no hard numbers, just stories. It's as laughable as the MBDA's threats of "beer runs", underage kids stealing beer from garages and grocery stores. If it doesn't happen in other states -- and there's nothing that proves it does -- it won't happen here.

Lew Bryson said...

By the way...we like to keep comments related to the posts. If they're not related to the post they're commenting on, they don't get published. (And we don't publish comments about commercial real estate anymore, either: we call that "The Geno Washington Rule.")

Albert Brooks said...

There are a lot os state stores without cameras. One of the outlet stores doesn't have any cameras and they are some of the largest in the state. Not that is saying much compared to a real superstore but large for PA.

Anonymous said...

It is my understanding that the guards in the store are unarmed. In the past when they did carry guns they were often caught off guard and the thieves took their guns which then landed back in the streets. An unarmed guard is not a deterrent.

Anonymous said...

I have an idea for privatization (that I THINK belongs on this page because you discuss the UFCW): assuming unions (UFCW, ISSU, Teamsters, or anyone else) do get the right to operate under privatization, how about requiring (or at least encouraging) all liquor stores under the new system to sell lottery tickets? Almost all beer stores in PA currently do, which is almost an excuse the PLCB could use to justify private industry selling beer even though the PLCB sells wine/spirits for the good of "safety" and "the children" (rolling my eyes) despite all alcohol being chemically the same.

Lew Bryson said...

Unions would certainly be "allowed" to organize liquor store workers, under the same rules as any other private business; the UFCW is mainly a grocery store union now. But I don't think you could require private businesses to sell lottery tickets. They almost certainly would, but they can't be made to do it.