Just Had A Thought

 I'm in the process of being interviewed by email for a story about the PA Liquor Code and how people are finding ways around it (like BOTLD and, of course, beer and wine in supermarkets and Sheetz), and I sent the following quote in...that really seemed to sum up the whole thing so well that I thought I'd share it. 

So many things in PA liquor law are done ostensibly in the name of "control," when really the liquor code controls competition more than it does consumption. It has long since stopped serving the citizens, and only serves existing businesses and politicians. 

You Were Right; The Pappy Lottery Was Rigged

Reported on PennLive.com: Five PLCB executives were investigated by the State Ethics Commission for, let's not mince words, cheating on the PLCB's Pappy Van Winkle "lottery." 

Let's do a perp walk. 

• Board member Michael Negra
• Cliff McFarland, director of supply chain 
• Tom Bowman, director of product selection
• Bryan Kelleher, director of the bureau of business development for wholesale operations
• Carl Jolly, a retail operations manager

All five of them were found to have participated in a scheme to snap up 'unclaimed' Pappy Van Winkle 12 Year Old bourbon (the "Lot B" bottling prized by the pros) and other allocated whiskeys. See, the PLCB would hold a lottery (which often led to website crashes, and was widely believed to be rigged, though no evidence of that has surfaced...yet) for PA residents to take a chance at buying one of the state's allocated bottles of various whiskey releases. After the results were announced, the winners would then be able to buy the bottles at the PLCB list price, which was, admittedly, often hundreds of dollars less than at private stores in other states. 

'Shopping' at the PLCB Executive Store

But amazingly, not every bottle would be claimed. For instance, the lottery cited in the PennLive article, the January 2020 lottery for the Lot B bottling, had over 17,000 entrants for 999 bottles, and 24 went unclaimed. The rules of the lottery said that those bottles would then be released for a "second-chance" lottery...but the PLCB decided not to do that, and instead the vultures at the top feasted on the remnants. 

Want more? The lottery allowed winning entrants to purchase a single bottle. Ha! Jolly, for instance, despite not having even entered the lottery (why would he? That's for us suckers), "bought three bottles of Pappy Van Winkle bourbon for $410 and separately a bottle of Weller 12-year Reserve Bourbon for $40." That was in one lottery. We're not told how many bottles in total 0were bought by these PLCB parasites. 

There is an aspect to this that is particularly hard to swallow. Their participation is not contested; they all did it, some of them multiple times. They didn't steal the bottles; they bought them, at list price, with their own money. There is apparently no credible evidence that they flipped the bottles to make money; Lot B, for example, is currently going for well over $1,000 in the so-called "secondary market." 

But because there was "insufficient clear and convincing evidence of a pecuniary benefit", the State Ethics Commission found that there was "no violation" of the state ethics code. That's bullshit. The whiskey wasn't theirs to buy, and even if they didn't sell it, they had that potential. That's like saying you're not guilty of theft because you stole a Van Gogh...and then just kept it. I mean, you didn't make any money on it, right? No harm, no foul, baby!

Despite that "innocence," the Ethics Commission's report says that they were each "ordered to fulfill his agreement to not purchase any items offered by the Pennsylvania Liquor Control Board outside of the process by which a Commonwealth resident may purchase such items." Don't the words "fulfill his agreement" sound like a deal was made? 

Of course a deal was made. And once again, the PLCB gets away with this crap. And what do we do? Nothing. That's what we do. Because the miserable PA Legislature has other things to do. Like making it harder to vote, and easier to frack.

Do you remember when the PLCB was the ONLY retail operation to shut down voluntarily in March of 2020? Absolutely closed for six weeks, and not only that, they boarded up the windows because they were afraid of us, that we rampaging drunks would loot their stores. 

Actual PLCB store, Wilkes-Barre, March 2020

Why are these guys still around? Will no one rid us of this troublesome agency?! 

Apparently not, because neither Shapiro's or Mastriano's campaign responded to me when I asked them about their positions on PLCB privatization. I'd remind you that I'm a nationally known whiskey writer, I've testified about these issues before the legislature; I'm not just a blogger howling in the night...but they didn't respond. 

Which leads me to believe that we're screwed. Shapiro is just another Democrat who will veto any privatization bill -- for reasons unclear -- and Mastriano apparently is either beholden to the religiously anti-booze or will be too busy fighting for freedom, whatever he thinks that means. 

But don't worry. These guys promised not to buy booze outside the normal channels again. Pinky swear. 

Looks like it's gonna be a long eight years. 

Out Of Control

I've been at this for years, since 2008, although I did pretty much drop the ball during the pandemic (which I regret, deeply, because a LOT of things needed to be said, but that's virus over the dam now). One of the consistent themes through all of those years was the way the Liquor Control Board was actually out of control. 

I've brought up numerous examples of this. The famous wine kiosks, the Rise of Conti (and the essential abolishment of his CEO position after he fell from grace), numerous clashes with Governor Rendell (told you I'd been at this for years), the lying about 'variable pricing,' and the disastrous allocated whiskey lottery that they never could get right, and finally just gave up on.

Whoops, not THAT Frank Burns!

But one of the most egregious, amazing examples was one I missed during my COVID hiatus, when Representative Frank Burns (D-Johnstown) tried to find out how many "zombie" licenses the PCLB had for future auction (these are seized or unused licenses; after a year, under relatively new law, they revert to the PLCB, where they can be auctioned to the highest bidder). 

The PLCB said no! That's right: a government agency refused to give regulatory information to a duly-elected legislator. So Burns went to the Office of Open Records. They said the PLCB had to give him the information...and The Lords Of Liquor Control refused again, appealing to the Commonwealth Court. The court ruled in Burns's favor, so of course, the PLCB (which has an unending supply of crap lawyers) appealed the ruling to the state Supreme Court. The PA Supremes fairly quickly denied the PLCB's appeal, upholding the Commonwealth Court ruling, giving the agency 30 days to present the information.

Yeah, I'm Frank Burns. Arrest the PLCB.
(And the snozzberries taste like snozzberries!)

Aside from the truly interesting fact that Rep. Burns is a Democrat, and the state Supreme Court has a solid Democratic majority (so they clearly do get what the PLCB is, but consistently refuse to privatize it), what do we learn here? 

The PLCB directly denied a legal request for information from a state legislator. This wasn't a frivolous request, like 'Hey, how many bottles of Maker's Mark do you guys have right now?' It was information that concerned constituent requests and a valid issue, namely, how is a purchaser supposed to know what the value of a license is when the PLCB won't tell them how many are going to be available? 

The PLCB gave its stock answer, which had always worked for it in the past: 'That's proprietary information, my good man.' But this time, they ran into someone who was just as willing to go to court as they were, and they lost. (Burns paid the legal costs out of his own pocket, by the way; the PLCB...yeah, they paid out of our pockets.)

Commonwealth Court Justice Cannon

They not only lost, the judge "bought none -- not one iota -- of what the Liquor Control Board was trying to sell. [Wow, the PLCB sucking at selling something; shocker.] The Right-to-Know Law is clear -- the information here is public record,” said Burns's lawyer, Terry Mutchler, the first director of the state's Office of Open Records. “It is a very strong decision that advances the law by giving deeper guidance on the components of records that agencies consider pre-deliberative. And also, because it points out that although the LCB may be ‘business-like,’ it is not a business.” (Yes, that's why I included the entire quote.) 

This is classic PLCB style. Don't just be wrong; deny you're wrong, waste thousands of taxpayer dollars denying you're wrong, and then when you're proven wrong, be assholes about it. Assholes? Yeah, the PLCB's main comment on the Supremes' decision was along the lines of, 'Wow, we were really looking forward to proving our case, but we've been denied justice.' Typical. 

This is all by way of proving the point I've been making for years, the one I simply cannot believe the General Assembly does not get: the PLCB is a rogue agency. Burns gets it. He believes that the Board wields too much power and has become arrogant and unresponsive to the public’s wishes. “The LCB has their own little kingdom with a moat around them for protection,” said Burns. “They’re not accountable to anyone, and that has to change. If they can treat a legislator like this you can only wonder how they treat other people out there.”

Bang on, Rep. Burns. The Liquor Control Board is literally out of control, and the reason is that it is answerable only to itself. It is a government agency with its own plentiful source of revenue. It has its own enforcement arm, its own courts and judges; it regularly thumbs its nose at the legislature, the governor, and the Pennsylvania courts; and it arbitrarily changes state-written regulations by 'interpreting' them as they wish.

It does not need to be reformed, or 'brought to heel,' or be regulated. It needs to be done away with. It serves no purpose that is not either anti-consumer or superfluous. Everything the PLCB does can be done more efficiently by existing state agencies. Except the actual wholesale and retail sale of booze: thanks, we can do that better on our own, no state agency required. 

Here's how I laid it out almost exactly 14 years ago in this blog: "...privatize booze sales, put licensing and inspection in the hands of the Dept. of Agriculture, tax collection in the purview of the Dept. of Revenue (they've got some experience with that), put the anti-alcoholism and underage drinking prevention programs under the Dept. of Health, and fully hand over enforcement to the State Police. [Then] give a re-write of the [Liquor] Code over to a commission that includes interested consumers for a change, and charge them with writing a simpler, more understandable Code."

The PLCB shut down for six weeks during the pandemic, and Wolf himself said  (link goes to a PDF) we didn't need them, because now we could buy booze at the Acme store. The PLCB is corrupt, the PLCB is outdated, the PLCB has only 600 stores for the entire state. The PLCB won't let you buy booze in Jersey or Delaware, they force us to buy from them. 

Why the hell aren't we done with this? Why does the Legislature put up with it? 

Privatize. End this out of control agency. 

What Might Privatization Look Like?

The future is as clear as vodka...

Two years later...I haven't given up, but I'll admit that the pandemic re-ordered my priorities. I've got [THE RAGING FEAR] my concerns under control now, and I'm starting to think about other stuff again. Like privatization. 

There's talk of using a state constitutional amendment to get rid of The Police-Enforced Monopoly that is the State Store System. This tells me two things. One, Republican legislators are tired of Democratic bullshit about this issue, and they're going nuclear. And two, that Republican legislators have stopped thinking clearly. 

Demolition of the PLCB, amendment-style!

It's my strong opinion that this would be the bluntest of instruments to achieve the goal of privatization of booze sales in the state. An amendment would not have the detail necessary to do this well, and would leave open all kinds of maneuvering room for backroom deals of the type I'm pretty sure we all know would happen. 

What kinds of deals? How about minimum square footage requirements, like they included in Washington State's privatization deal? The "reason" is that they're 'saving' us from 'a liquor store on every corner,' but it's really a deal for big-money donors like chain grocery and liquor stores to get a new oligopoly on retail liquor stores, trading a shitty monopoly for a still-limited oligopoly. We don't want that, believe me. 

Or they'll boost taxes to "make up for the shortfall" from the loss of the PLCB "profits." Once again, like Washington State's privatization deal, this is wrongheaded, and will lose us the greatest benefit of privatization: competition. It will put PA liquor stores (and bars, and restaurants) firmly behind neighboring states' stores on price, leading to even more border bleed. 

Because you know that the hated Police-Enforced Monopoly will not go away. We'll still be forced to buy booze in PA. Bullshit on that. Bullshit!

Okay, calm down, Lew. The constitutional amendment idea is not a good one, despite the Democrats forcing consideration of such extreme measures by their bullheaded intransigence on this issue. We need to come up with some way to make this an attractively bipartisan issue. 

Some of the problem is that the lazy legislature acquiesced when the PLCB put the supermarket safety valve in place, and didn't do the right thing: create a separate grocery/deli/c-store/gas station license for retail off-premise sales. That led to supermarket and c-store chains buying R-licenses at insanely inflated prices (over $500,000 in some instances), and now — shocker! — those businesses are dead-set against any move toward such a license. Great. 

But that's a whole other post, and I will get to that, and soon. I'm back on this. 

Time to take over the world, Pinky!

Meanwhile...What do I want to see in privatization? All open to tweaking, but...

First, and non-negotiable: the PLCB ceases to exist except as a regulatory agency...if needed. No state stores, no state wholesale. They've proven that they cannot run this fairly or honestly. They're done. As a regulatory agency, their operations must be made more transparent, and their power to "interpret" state laws and regulations to the point of nullification must end. 

Second, very important: learn from Washington State's mistakes. And they made plenty of them. A study panel should look at what Washington did, and what Alberta did, and come up with recommendations to make sure that we do better. Ask consumers in those places, too. 

Those two are huge, big picture things. Here are more direct things. 

1. Allow ALL R and Hotel licensees -- bars, restaurants, hotels -- to sell any type of alcohol beverage to any legal customer for on-premise consumption. With the purchase of an additional Off-license permit (for a reasonable annual fee to the state), they would be allowed to sell full bottles/cans to go. No more limits, no more "step outside and you can buy another" bullshit. Licenses increased to one per 500 adults in a county. Licenses become non-transferable five years after passage, which should end the ridiculous secondary market in paper.

2. Beer Distributors become all-alcohol stores with off-premise sales. Beer distributors MAY dispense draft beer in sealed (have to work on that definition) to-go containers. Number of licenses is increased to one per 500 adults in a county. License is non-transferable, starting five years after passage.

3. Create a new license for grocery stores, convenience stores, drugstores, and gas stations. Takeout ONLY, no on-premise consumption. Number of licenses are not limited, pay a reasonable annual fee to the state (with allowance for review after five or ten years), and are not transferable. License holders MAY also buy or retain a separate R-license for on-premise consumption if they want. 

4. Open up wholesale. Beer wholesalers may add all other alcohol. New wholesalers allowed, reasonable annual permit, non-transferable. More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. This may need tinkering; for instance, are multi-state wholesalers allowed to operate in the state? We may want to say no to that, or we may not. 

5. Pennsylvania citizens AND licensees may buy and sell from out of state. Period. This has gone on for way too long. If the state can't tax and regulate booze in a manner consistent with neighboring states, that's too damned bad. Look at it as incentive to do better. 

6. Sales tax to be applied at wholesale (or producer) level. Convert the Johnstown Flood Tax from a tax on price to a flat gallonage tax, like the rest of the country, and peg it to current national average. If that means less revenue, screw 'em. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

7. Rip out the old Liquor Code and start over. Aim for simple, understandable laws that ruin as few businesses as possible, but changes them where they are unfair, or not in the public interest. For instance, booze wholesale should emulate food wholesale: competition allowed, exclusivity as something that suppliers would pay for. The Code is currently open to way too much interpretation and confusion, and that has to end. 

8. Perhaps the most important is this: when this is done, when it's being written and decided upon, it must be 100% transparent. There must be citizen and industry representation on whatever task force does this rewriting of the Liquor Code, and regular reports must be presented; weekly, if necessary. There's too much money at stake to do otherwise, and we've already seen that it causes corruption. Obviously, I volunteer. Seriously, there should be representatives from all sides: wholesale and retail booze business (but only one each), consumers (one or two), anti-alcohol types (gotta be fair), the UFCW (no, really, it's only fair), and politicians. Maybe more stakeholders, that's just a first cut, but there must be representation and openness. 

These points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and succeed...as long as big businesses, chain retailers, aren't allowed to write this privatization bill. And of course...nothing's set in stone, and politics is the art of the possible. 

It's about time, it's long past time, that the consumers, the voters, had a large say in how this gets done. 

Privatization. Yesterday, today, forever.

Why This Isn't Already Done

This is something I just posted on the "Abolish the PLCB - Rewrite The Code!" Facebook group page (a group you're certainly encouraged and welcome to join). A new member was full of righteous rage and wanted to know how to get privatization and said we needed to force Harrisburg to change this. Frankly, I wish we could. But 12 years of writing and editing this blog, and all the activity that went with it, has taught me patience, the patience needed to wear away a stone. Here's what I've learned, here's how it's got to be done.  

For the new readers: I've been trying to push this rock for twelve years. I've been to Harrisburg to attend hearings and lobbying meetings, I've testified before a joint committee of the legislature once, I've made friends with a number of reporters and fed them info and ideas. Some small progress has been made, but...a reality check is needed. This is an uphill fight, although the PLCB's huge failures in the past month are a great opportunity.

Here's why.

I was so spunky back then.

I had a lot of schemes and ideas when I started working on this back in 2008. The tough truth is that there isn't anything that can be done until a MUCH larger number of voters are actively engaged on the issue. And that's not easy, because of a few factors.

1. People are liable to be embarrassed to stand up for their booze rights. "It's only a drink, it's not important." Polls usually show that people are willing to be taxed more for drinks, even though they already are.

2. Many Pennsylvanians just don't know any better. They've never gone out of state to buy booze, so the State Stores' adequacy is all they know.

Dezinformatsiya...UFCW style

3. The other side, largely through the union that represents the State Store clerks, UFCW Chapter 1776, does a great job of shaming anyone who supports privatization: "You're a drunk! You just want more alcohol! This will cost thousands of family-supporting jobs! The PLCB gives MILLIONS to the state, to police, to communities! There are much more important things that need to be done!" And people back off, because that SOUNDS reasonable.

4. There's a LOT of deeply-believed misinformation and ignorance about the situation. That the PLCB is a cash cow (it's not), that it serves us well (with only 600 stores in a state where 5,000 would be average, how can they?), that it's not illegal to buy booze out of state (it absolutely is). People are constantly amazed about the existence of the Johnstown Flood Tax, they believe it's illegal because "it's a tax on a tax" (completely not illegal to do that), without ever realizing the huge layer cake of taxes and fees that boost the shelf price of booze in PA.

5. The PLCB is absolutely brilliant at assessing the threat of privatization, and doing just enough to make people think they're improving, and the threat decreases.

Despite all this, we will have to get millions of them on board, because the Legislature cannot be moved otherwise.

Democratic legislators block-vote against this; in over 10 years, not one has ever broken ranks that I can recall. Republicans from southeast PA are likely to flip-flop on it: they face more pressure from unions here, and from a highly-organized group of beer sellers who'd just as soon see their competition run incompetently. It's a powerful combo. Speaker Turzai has tirelessly campaigned for privatization (he's retiring after this term), but the Senate has balked on it, and Wolf will not sign a full privatization bill. Without Democratic votes, there's no way to override him.

Privatization? No. HELL no.

The courts won't do anything because of the 21st amendment; states have very broad power to regulate alcohol.

The Board itself is, naturally, only interested in preserving the agency. The three members are traditionally appointed 1 each by the legislative GOP, Dems, and the governor, so no real help there.

THE ONLY THING THAT WILL WORK is getting fellow citizens involved. Writing letters to newspapers, reminding people how badly the PLCB handled literally everything in this crisis, reposting on Facebook.

Like it says at the top of the blog,

"...there was [in 1997] no overarching passion within the General Assembly, or in the public at large, for privatization. Unless and until there is a general hue and cry, it is very unlikely there will be a privatization initiative that succeeds." -- John E. Jones III, former PLCB chairman

Time for a Change.org

With the State Stores closed, and the PLCB's website essentially non-functional -- 

With restaurants and bars across the state reduced to take-out business --

With the PLCB refusing to service any but the largest accounts (while the Wolf Administration tells Pennsylvania that we should look to the private market to meet the demand caused by the closed State Stores...while denying that market the right to sell spirits)

With thousands of businesses on the brink of failure, tens of thousands of people unemployed -- 

Someone has to do something. 

Why not you? Sign this Change.org petition, asking Governor Wolf and the Legislature (or the PLCB, why not?) to immediately allow the sale of wine and spirits to-go (or local delivery) by all licensees, including beer distributors, through the end of 2020. Give them a chance to make the money that will allow them to stay open, employing some people, and giving others hope for re-employment when the crisis ends.

Buddy, can you spare a signature? 

Before you say, 'Oh, those Change.org petitions don't change anything,' last week a petition just like this one succeeded in getting the government of Ontario to allow restaurants to sell wine and beer to go. We can do that here, just as quickly, just as easily.

Until then, Pennsylvanians will continue to cross the borders, spreading the disease. Those taxes will be lost to the state, where they could help pay unemployment benefits, while the PLCB flounders, trying to serve the whole state from three warehouses with a patched-up website (while the wholesalers who service the PLCB's operations have their offers to help rejected), literally filling only hundreds of orders out of hundreds of thousands of attempts to place an order. 

Is this a total solution? No.
Will this save every restaurant, every bar? No.
Will it adequately compensate every beer distributor for the damage to their business? No.

Is it better than what the State's doing now?  Hell yeah. 

Over 11,000 people have signed as of April 14. This is not a fringe position. 

Please. Sign the petition and share it. Thank you.

Allow Pennsylvania licensees to sell spirits for take-out & delivery thru 12/31/20

Why Is The PLCB Lowering Spirits Instead of Selling Them?

Philadelphia

The PLCB shut down the State Store System of Stores because of the COVID-19 pandemic. They are the ONLY control state to do so (other than Utah, temporarily, because of an earthquake that happened concurrently). Liquor stores remain open in other states (because a lot of them sell booze in grocery stores, you know, like normal people do); beer distributors were literally classified as "life essential" by Governor Wolf in yesterday's shut-down-the-state order; and of course, as we pointed out recently, we were told by the state that we didn't need the State Store System of Stores because "Individuals can still buy wine and beer at grocery stores with PLCB licenses."

Wilkes-Barre

We have encouraged the State to leave the stores closed. The Distilled Spirits Council of the US and American Distilled Spirits Association has pointed out that the current instruction leaves the citizens unable to buy spirits (a completely legal product in Pennsylvania and the United States), and suggested the state at least temporarily allow the sale of spirits at the grocery stores and beer distributors that remain open...somewhat heroically, and I'm not kidding about that.

Allentown (the sawdust is a nice touch)

I've been talking to wine and spirits wholesalers who work with the PLCB to supply their warehouses. They're ready, willing, and able to supply spirits to the grocery stores, convenience stores, and beer distributors that are already open and selling. What's more, they're also ready to supply the restaurants and bars who are eager to do take-out beer and wine and spirits sales, just to keep their people employed, to literally keep their businesses from failing. Not closing temporarily: failing. The wholesalers know that they can find drivers to do the work. The PLCB has said they could do this (click the link, and scroll down to the 7th paragraph), but have never shown a bit of initiative toward action on it.

Williamsport

Has there been any indication that the PLCB is even considering any of this? At least the legislature has decided to come back to work remotely and get something done, but you have to believe this isn't going to be high on their list -- and I'm not suggesting it should be. But as we saw when the Board decided that it could simply "interpret" the hated Case Law right out of existence by declaring a six-pack to equal a case, the courts give the PLCB very broad latitude indeed on "interpretation" of The Almighty Liquor Code (had we mentioned that the PLCB has its own courts?). They could easily rule on all of this stuff, and let the Legislature catch up.

Also Philly

No. The Board, the Governor, the Department of Community and Economic Development have done nothing about this, none of the really easy steps that would take some of the stress off businesses, and extend some fairness to the folks in the spirits production chain (who also need gainful employment), and let those of us who might want a whiskey sour or Bloody Mary (or quarantini, which is apparently a thing) buy a bottle or two.

What are they doing?

Harrisburg

They're boarding up State Stores as a precaution against looting. 

In a state where the last large scale riots were over fifty years ago, the PLCB decided to raise public morale with this amazing display of optimistic trust. Because nothing says "it may be rough, but we're going to get through this together" like boarding up your store...in Williamsport. 

This lack of leadership, lack of understanding, lack of common good sense is just another example of what an awful mistake having this all-too-independent state agency in charge of retail stores has been. The Legislature should, in the spare ten minutes it would take, use this opportunity to say, 'Okay, that's enough. You had your chance, more than enough chances, and that's it. Game over, PLCB. You're done.'

Even better? It really would only take ten minutes. The Legislature actually drew up plans back in 1987 to end the State Store System of Stores and those plans, never enacted, are still available online in the Pennsylvania Code...ready to roll.

Here's the plan; your predecessors already did the work for you. Literally all you should have to do is change the dates and vote.

Because all the PLCB is going to do in this crisis is protect themselves. Apparently they think Pennsylvania is France. We deserve a lot better than this.

Paris

Support for Emergency Spirits Sales

Posted with these brief comments: Clearly the PLCB is in the minority. We could be doing more. If take-out is allowed, the opportunity to allow citizens to do one-stop shopping HELPS the situation. The Legislature and the Governor and the PLCB should take up this suggestion (at the very least) immediately. Jobs are being lost.



March 18, 2020

The Honorable Tom Wolf
Office of the Governor
508 Main Capitol Building
Harrisburg, PA 17120

Dear Governor Wolf:

We are writing to you on behalf of the Distilled Spirits Council of the United States and the American Distilled Spirits Association, national trade associations representing producers and marketers of distilled spirits sold in the United States, regarding the difficult decision to close all Fine Wine & Good Spirits stores in response to COVID-19.

We understand state leaders like yourself are struggling with the careful balance of protecting the health of citizens while also protecting the financial health of state and local economies. We'd like to offer some alternatives to completely shutting down all state stores that take into account these dual needs and share how other control states are handling the issue.

Control states, including Alabama, North Carolina and Virginia, have adopted emergency rules to reduce the risks to patrons and workers while also trying to keep afloat hospitality businesses and continue to serve the public.

For example:

. In Alabama, the state has reduced the number of open ABC stores and shifted personnel to open locations. The state ABC has also outlined guidelines to protect customers and employees including limiting the number of customers allowed in a store at any given time; having store personnel retrieve customers products; encouraging credit card purchases; and requiring employees to wear gloves.

. In North Carolina, local counties continue to operate their off-premise spirits stores but might consider scaled back hours of operation. Distilleries may still sell bottles for off-premise consumption.

. In Virginia, stores remain open with reduced operating hours at certain stores. The VABC guidance states, "As the sole retailer of distilled spirits in Virginia, we are dedicated to filling our role in providing product to our licensees and the public."

. Utah and New Hampshire continue to keep their state stores open.

To date, Pennsylvania is the only state to completely close down all stores that provide consumers with access to distilled spirits products. Pennsylvania's hospitality industry, including craft distillers, is already under enormous strain due to the U.S. tariffs on EU spirits and wine products. We respectfully request that you reconsider your decision to close all state stores. It is the only channel of distribution that Pennsylvania consumers have to distilled spirits.

If you are unable to re-open all or select PLCB stores, an innovative alternative would be to temporarily allow "R'" licenses that currently sell beer and wine to also sell spirits until PLCB stores are re-opened. Many restaurants are now selling take away food only and the loss of patrons is financially harming their businesses. These restaurants are already licensed to sell spirits and already are trained in proper ID verification. As restaurants across the state are suffering huge financial losses due to lack of business, the ability to also sell distilled spirits would help offset their losses and could potentially prevent permanent restaurant closures.

The spirits industry stands ready to assist you in exploring innovative approaches to protect Pennsylvanians while easing the burden on consumers and the hospitality industry. We are all in this together and we are committed to doing our part to support our communities during this difficult time. For example, distillers in Pennsylvania and across the country are converting their distilling operations into production lines for hand sanitizer to help communities combat COVID-19. We look forward to working with you and the PLCB now and in the future.

Thank you for your leadership.

Very Best Regards,

Chris R. Swonger
President/CEO
Distilled Spirits Council of the United States

Matt Dogali
President/CEO
American Distilled Spirits Association

CC: Chairman Tim Holden, Pennsylvania Liquor Control Board”

Why Not Leave Them Closed?

We have a tremendous opportunity before us. We must not waver. We must not hesitate.

The State Stores could easily be closed by June.

Let me explain. 

I have a tremendous idea!!

By now, you all must know that Governor Wolf has declared that the State Store System of Stores is CLOSED, nominally because of the COVID-19 pandemic. Shut down as of 9 PM on St. Patrick's Day, of all inane coincidences. What's more, the PLCB's FWGS website is no longer delivering booze to your door (you know, because they never really wanted to anyway), AND the licensee "service centers" are also closed (all the bars are closed anyway, except for takeout food and beer, two things with which the PLCB is entirely uninterested).

Wow. And as I was writing this earlier, Wolf issued a proclamation (link will download a PDF of the letter) shutting down ALL licensee operations that involve selling food or drink (of any kind) for consumption on premises. Take-out/to-go is still allowed, but one wonders for how long (see below). The only exception is for hotel room service.

Note: licensee operations only. Restaurants, lunch counters, etc. that are NOT licensed are still asked to voluntarily limit operation to take-out only. Wolf is doing this under the authority of The Almighty Liquor Code: "The PLCB, upon authorization from the Governor, has the authority under the Liquor Code (47 P.S. §4-462) to mandate the closure of licensed establishments in times of emergency."

Here's what you see when you go to Ye Olde Fine Wine Et Goode Spyrites site of Web:

Reaction has been mixed. There was an insane rush to the stores, people standing in line for half an hour, as if they were Fine Bottled Water and Good Toilet Paper Shops. People say, oh, you don't need booze (idiots). Or they say, booze is as necessary as groceries and medicine, which, if you really think that, then why didn't you tell your state rep that years ago and get it out of the state's incompetent control? Eh, another missed opportunity.

Back to today. Why did the governor close the State Stores, and not close beer distributors, not close the sales rooms of wineries, distilleries, or breweries (yes, and meaderies and cideries and kvasserei)? Simply because he could, most likely, and possibly because of union pressure. Naturally enough, why is not a question that's been asked of Wolf directly. It's much more important that we do 'flatten the curve' and get this damned virus under control. Believe me, that's absolutely true. Retail operations, particularly small ones, are going to take a whupping here, and that's going to be disastrous for the economy.

But that's not what we're here to talk about. It's about the opportunity to finally put an end to the ridiculous State Store System of Stores. 

Rahm Emanuel's famous quote was about the 2008 recession. He followed the famous part with this:

"This is an opportunity, what used to be long-term problems, be they in the health care area, energy area, education area, fiscal area, tax area, regulatory reform area, things that we have postponed for too long, that were long-term, are now immediate and must be dealt with."

Are the State Stores an immediate problem? Are they one that "must be dealt with"? Of course not. I'm not a fool. No one's livelihood or survival is threatened by the continued existence of this Relic of Repeal, this Fossil of Prohibition.

But it is definitely falls under "thing that we have postponed for too long," making this is a unique opportunity to deal with it. The State Stores will be closed for at least two weeks, probably more. And the Governor, a Democratic governor, has openly admitted that the State Stores are not necessary to serve the needs of the citizens of the state. 

He did? When did he say that? In the letter to Pennsylvania businesses (dated March 14) from Wolf's Secretaries of Health, and Community and Economic Development, there is a list of descriptions of "non-essential businesses" that are asked to close. At the end of that list, there are these bullet points:

NOTE: Liquor stores will begin an orderly closure. Individuals can still buy wine and beer at grocery stores with PLCB licenses
NOTE: Restaurants should stay open for carry-out and delivery only

You see? The State Stores can close because people can still buy wine at grocery stores and restaurants. Of course they can, and they do, in huge, growing amounts.

If the State would allow grocery stores (and beer distributors, and restaurants, and deli licenses, and private clubs) to sell spirits by the bottle -- and really, why not? It's all the same alcohol! -- we could just leave the State Stores closed. Never open them again.

It's not that hard. Have an auction, sell off the inventory, and have time for new businesses to get licenses and open with former State Store employees at the register (or at the helm, why not?).

At the very least, the Legislature should immediately adjust The Almighty Liquor Code to allow licensees -- grocery stores, bars, and beer distributors to add off-premise, take-out spirits sales. End this ridiculous prejudice against spirits. Let mom pick up a bottle of Bailey's at the Giant Eagle.

And do away with the stupid cafe requirements (because...we're only doing take-out now, and the world hasn't ended), and the childish "buy four bottles and step outside the door" limit. What ridiculous bullshit is that, anyway?

We could do this. It's just waiting to happen.

"...it's an opportunity to do things you think you could not do before." Clearly Governor Wolf is ready.

PRIVATIZE. And if we can't do that, take the spirits monopoly away from the State Stores. The grocery stores have earned it, beer distributors have earned it by staying open during the crisis...something the State Stores weren't prepared to do. 

A great place to work?

Among the lies, & fallacies, disingenuous statements and statistics that appear out of thin air over at the old PLCB fudge factory, we hear how the PLCB is a great place to work! Jinkies! Cool!

But what do the numbers say? According to the 2019 annual report (on page 61) the average age of a store clerk is 44 years old. Not exactly attracting younger workers. And when they do get workers, 56% of them are part time. I don't think those are the "Family Sustaining Jobs" that are so often mentioned. Out of that 56%, over half of them quit every year for a turnover rate of 53.1%. Even if you somehow manage to get one of the 2,453 full time filled positions, there is a 49.3 % turn over rate there too. Now factor in this: 29% of store workers change location every year.

Can you say "turn and churn"? Is it burnout, or do they just get tired of the bullshit? If the PLCB isn't that good at retaining employees, just how good they are to work for?

Turn it on its head: is this mismanaged workforce of any benefit to the agency (and thus, to the commonwealth). The average sales per employee for 2017 across this kind of industry was $689,000 per each full time equivalent. The PLCB can force a "part time" employee to work 34 hours a week if they want to, so that makes figuring out the total hours the part time workforce puts in a bit difficult. I'll just go with 25 hours a week for part time workers and 15 hours for seasonal workers.

With 3,190 full time sales and admin employees putting in 37.5 hours per week times 52 weeks, that's a total of 6,320,125 hours. Add to that 25 hours times 1,773 workers times 52 weeks equals 2,304,900 hours plus 383 seasonal workers at 15 hours each, but only 13 weeks of work equals 74,490 for a grand total of  8,719,515 hours. Take that and divide it by 37.5*52 (1,950) and you get roughly 4,471 full time equivalent employees.

Now that we have the number of full-time equivalents, we can then multiply that by $689,000 for each employee and come up with $3,080,519,000 as what average sales should be. But the PLCB only did $2,126,927,971 in sales or UNDERPERFORMED the average by just about 45%. In simple terms, having the PLCB do things is costing the state about $950 Million in lost taxable sales based on average sales. Now that is the average, there could be significant differences for liquor stores. But looking at Total Wine, they are only about 10% below that average, so it pretty much confirms the PLCB is a bloated, poorly managed organization,

It gets worse. All the PLCB numbers were taken from the number of working employees as of June 2019. However, the amount that are authorized is greater.  If the PLCB were fully staffed, they would be 65% BELOW average in sales per employee. Filling over 1000 current vacancies might cause the PLCB to not be able to meet the amount of payout revenues requested by the administration.

That of course, would require the PLCB to variably screw the citizens that much harder just to keep them afloat. In that scenario, it is better for them to have less people on the sales floor. What a way to run a business!

PLCB workers, staff, administrators, board members, and your supporters in the Legislature: tell me why we need this bloated, under performing jobs program?

We are not safer, we are not better served and we are not satisfied. Privatize.

How much did they steal from you this year?

It's that (belated) time of year, time for the PLCB to tell us what a wonderful job they are doing and what a swell place to work they have. Their Annual Report is out (you can download the PDF document here), and the truth is in there; we just have to root it out. 

We say it's "that time of year," but it's not, actually, because the annual report took a ludicrous four months to come out...again. Last time it took four months they said, "Ohh, there were special considerations with the new tax code." No new tax code this year, and they didn't bother with a new excuse. What's the point: it's all lies anyway.

Onward! Right on page 2 there's a mission statement (emphasis added):

The mission of the Pennsylvania Liquor Control Board is to responsibly sell wine and spirits as a retailer and wholesaler, regulate Pennsylvania’s alcohol industry, promote alcohol education and social responsibility and maximize financial returns for the benefit of all Pennsylvanians.

Funny how the part about maximizing revenue isn't in the liquor code. Just as well, since based on the available statistics they aren't doing a very good job on the stuff that is, like alcohol education or social responsibility; at least, not compared to states on our border. Their own report on these outcomes shows that students who consumed alcohol in the past year went up from 81.4% to 83%  After 85 years of the PLCB, 85 years of CONTROL FAILURE...maybe it is time to try a different system. Any normal business wouldn't survive 85 years of failure.

What have they done to us lately? After record sales (and record variably-priced screwing us) PLCB liabilities went down $2.03 million on over $1.1 billion dollars of debt. A payback rate of over 500 years, and getting worse. It was "only" 400 years previously. For some reason they don't report that number. Another interesting part of their financial reporting is that they say, on five pages in a row, that "The accompanying notes are an integral part of these statements." And then don't list what any of the accompanying notes are. They aren't going to verify what they are saying; just believe them, because they have such a great track record of telling the truth.

Another thing they don't tell us is that while variable pricing was supposed to be a partnership where the public was supposed to receive some benefit, we don't know what the benefit is in dollar terms. We can look at past financial statements and see that the PLCB is making almost double what it used to. That's almost all because of lower acquisition costs, but where is the share that the public was supposed to get?  We may have seen a 2% reduction in prices, and even that might be high. For every extra $100 they make, we are probably lucky to see a $2 reduction, spread across a number of products. Even then the PLCB still screws us, because of their rounding formula. Rounding is not considered part of "mark-up," so they can hide that from us, just like they hid what the mark-ups actually are now.

It all goes back to the total lack of leadership and experience of those at the top. They are never held responsible for the lack of progress under their leadership, so the status quo, or even a slip in the status quo, is the norm. On the business side it is even worse. I can understand hiring political hacks if you don't want things to improve in a structured order. But when you've got a failed congressman, a political chief of staff, and a furniture company exec it doesn't seem to be the path to a successful liquor business. In 85 years there hasn't been a Yuengling or Jacquin's executive, or someone from a wine wholesaler or spirits importer, who was qualified and wanted to do the job...really?

When you think about this, keep in mind this quote from the Joint session of the House Liquor Control Committee and the Senate Law & Justice Committee of 2017 (adjusted a bit for truth):

SENATOR MCILHINNEY (former Chairman Senate L&J Committee, since retired): "... the state citizens own this system, and they should be able to get some...benefit by having a good  deal when they go to the liquor store."

MR. HOLDEN (Chairman: Liquor Control Board) : "Absolutely Absolutely not."

There, I fixed it for you, Tim.

The Difference is What They Steal From You

I did a short post on this for the "Abolish the PLCB -- Rewrite the Code!" Facebook group. If you missed it there (and you really should join), this is the full version.

I'm about to go out shopping for my Labor Day get-together (planning ahead, as the PLCB minions always nag about). Phone in hand, I'm checking prices, just on the rare case that the PLCB put something I want on clearance. Because that's the only way they ever beat Total Wine's pricing. No surprises: no clearance deals, and nothing I wanted was on sale, or the difference might have been greater.

I usually go to New Jersey, but the Total Wine in Towson, Maryland was closer, and even with the so-called "Free State" (what bitter irony) charging a 9% sales tax on alcohol it worked out to about the same total cost as New Jersey, but with less driving time. This is a big store at 30,000 sq.ft. A true Superstore unlike anything in Pennsylvania. They also sell beer — like any real liquor store would — and as a bonus (for me, at least), they sell cigars, too. If Total Wine has a variable pricing scheme, it at least appears to favor the consumer with lower prices, and not just the owners. Competition will do that.

Here's the Pennsylvania version of variable pricing at work. Jack Daniel's is the largest selling American whiskey nationwide, and in both Pennsylvania and Maryland. If you compare the prices on big brands like that, keep this in mind: every dollar difference is what the PLCB is stealing from you with variable pricing. You know that Total Wine isn't losing money. They're set to overtake the PLCB in total sales shortly, so they must be doing something right, even though they have to deal with competition and not the easy ride of a police enforced monopoly.

Dare to compare:

Kendall Jackson Chardonnay Vintner's Reserve California PLCB $15.99, Total $9.97 - $6.02

Maker's Mark Straight Bourbon Whisky 1.75L PLCB $59.99, Total $44.99 - $15.00

Kim Crawford Sauvignon Blanc Marlborough PLCB $11.89, Total $10.97 - $0.92

Apothic Red PLCB $12.99, Total $7.97 - $5.02!

Tito's Handmade Vodka 80 Proof 1.75L PLCB $34.99, Total $28.99 - $6.00

Jack Daniel's Old No 7 Black Label 1.75L PLCB $46.99, Total $39.99 - $7.00

These are common choices, big sellers. Nothing out of the ordinary or esoteric to skew the results. It does show how badly we are being treated, how badly the PLCB is managed, how badly variable pricing is being abused...and how much the PLCB lied to get it. We told you this would happen. And here it is, in black and white.

End the charade. Privatize.

What could Tennessee Wine and Spirits Retailers Association v. Thomas mean to Pennsylvania?

I am not a lawyer, and some or all of my thoughts could be right or wrong, so maybe this post should be filed under wishful thinking, but...there seems to be a crack in the control wall. It's from the hammer blow struck by the Supreme Court's decision in Tennessee Wine and Spirits Retailers Association v. Thomas, handed down on June 26. Take a look with me and see what you think. 

The future of the PLCB?

The facts of the case:

To sell liquor in Tennessee, you need a license from the Tennessee Alcoholic Beverage Commission (TABC). That's pretty normal...in states where private liquor stores are allowed. But there was a catch in Tennessee. Under Tennessee Code, to get a license, you must have been a resident of the state for two years. There was a ten year residency required to renew a license, so don't plan on leaving. And yes, the same requirements were there for corporations.

The case stems from two license applications that did not meet the residency requirement. The TABC was planning to approve their applications anyway...until the Tennessee Wine and Spirits Retailers Association informed TABC that if they did, they planned to sue. (You know...to protect their competitive advantage.) The TABC preemptively went to court to determine the constitutionality of the requirement. The district court ruled that it violated the dormant Commerce Clause of the U.S. Constitution (Been saying that about the PLCB for years! -- Lew). The Sixth Circuit affirmed, and it was off to the Supremes, because the Association wasn't giving up on their anti-competitive lawsuit. 

Cracking the wall around the 21st Amendment

The Supremes Say: 

In a 7-2 decision (Justices Gorsuch and Thomas dissenting), the court found that: Under the dormant Commerce Clause, notwithstanding the Twenty-First Amendment, a state may not regulate liquor sales by granting licenses only to individuals or entities that have met state residency requirements.

The 21st Amendment has long been held to allow states free rein on writing laws controlling the sale of alcohol within their borders. Section 2 of the Twenty-First Amendment states: “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

But a number of Supreme Court decisions since the 1990s -- 44 Liquormart, Granholm, etc. -- have been chipping away at the absolute nature of such control. Tennessee Wine and Spirits takes that quite a step further. The Court’s Commerce Clause jurisprudence holds that “a state law that discriminates against out-of-state goods or nonresident economic actors can be sustained only on a showing that it is narrowly tailored to ‘advance a legitimate local purpose.’” Tennessee’s residency requirement clearly favors residents over nonresidents, hard to justify as a "legitimate local purpose" in the face of the Commerce Clause.

That's just what the Supreme Court found. The Court noted that at the time the Eighteenth Amendment (nationwide prohibition) was ratified, it had already been established that the Commerce Clause prevented states from discriminating against the citizens and products of other states. Against this backdrop, when the Twenty-First Amendment was ratified, “the Commerce Clause did not permit the States to impose protectionist measures clothed as police-power regulations.” Thus, while § 2 of the Amendment gives states latitude with respect to the regulation of alcohol, it does not allow them to violate the nondiscrimination principle.

(A discrimination, maybe, against every citizen and entity who would like to sell alcohol in competition with the state's police-enforced monopoly?)

The Court concluded that protectionism is not a legitimate local purpose and that the residency requirement “has at best a highly attenuated relationship to public health or safety.”

My Opinion
Our state law does discriminate against out-of-state citizens and out-of-state economic actors. It also imposes police powers to maintain and enforce protectionist measures. Read the beginning of the Liquor Code Section 104(a):"This act shall be deemed an exercise of the police power of the Commonwealth for the protection of the public welfare, health, peace and morals of the people of the Commonwealth and to prohibit forever the open saloon, and all of the provisions of this act shall be liberally construed for the accomplishment of this purpose."

In the above decision, the Supreme Court held that "Protectionism is not a legitimate local purpose" and stresses the REGULATORY authority, not monopoly authority of the state. But does that make Pennsylvania's Almighty Liquor Code invalid? That just might be the next question the Court will have to decide. How much does the 21st Amendment give the states the right to impose protectionist, monopoly, discriminatory measures, instead of regulation that allows the intent of the Commerce Clause? How much does it matter if the state allows private retailers or only state store sales?

As I said, I'm not a lawyer. But it does make me think of what might be coming down the road at some point. I think that Costco and Total Wine teaming up will have the resources to get it done and none too soon for me.

Privatize.