Meanwhile, in Saskatchewan...

How long has booze privatization been debated and promised in Pennsylvania? Decades.
How much has been done about booze privatization in Pennsylvania? Nothing. 

Meanwhile, in Saskatchewan, the Saskatchewan Party campaigned this spring on a platform that included transitioning their provincial monopoly liquor stores to privately-owned stores. They were put in power by the electorate, and now, less than two months later,, they've announced that they will convert 40 of the 75 government liquor outlets to private stores, and create twelve new private stores.

Dear Pennsylvania General Assembly:

Contact your Representative NOW

Do not let Senator McIlhinny and his Big Step Sideways liquor plan become what we will have to live with for decades to come. Make no mistake: if this goes through, there will be no further change to Pennsylvania's liquor and wine sales for years. We'd be much better off staying with the system as it is today for another year and fixing it properly than taking this Frankenstein plan that Senator McIlhinney has been pushing for the past three years. Ask yourself: where did this plan that no one really wants come from? Why is he so sure this is the way to do things? And the most important question: cui bono? Who benefits? 

Write your Representative today and remind them that REAL privatization is what we want. Below is the letter I wrote to my Representative; feel free to use it or change it as you wish.

Dear Representative xxxxxxxxxxx,

I urge you and your colleagues, with the utmost vigor, to reject the half-baked plan of Senator McIlhinny. He has been an obstructionist to the privatization movement for years and continues in that role now.  The citizens want privatization: private stores, selling to private individuals and businesses, while buying whatever they want from private wholesalers. Anything less means a continuation of the gross ineptitude, graft and malaise that is the current PLCB.

The selling of retail products is not part of government, the regulation of those products is. A simple concept that needs to be adhered to.

Sincerely,

xxxxxxxxxxx

The Citizens say Democrats holding up Liquor Privatization.

 Commonwealth citizens — we, the people forced to shop at State Stores — issued the following statement today.

The Citizens are disappointed in the House and Senate Democrats for not being able to help put together a budget that builds on the record education funding of last year and provides the relief from the state store system we have been asking for over the past 45 years.

Citizen spokesman Joe Sixpack reiterated that "There has never been a scientific poll in favor of the state stores. Given the choice of our current system or what the people see in free states they choose freedom every time." He continued with, "The state stores will never be as convenient as 1800-2400 private stores are, they will never be able to provide the selection of what a real super-store can, stores that have more on the shelf than the entire state stocks.  They will never have the expertise that can be found in private retail. State stores will never be able to satisfy the consumer the way the private market can - just look at EVERYTHING else you buy to see that."

The Citizens also want to be able to buy wine in a grocery store to go with their meals as is the norm in over half the states.  "While the goal would be able to buy wine at the same checkout as the food purchase we realize that such freedom may come as a shock to a number of people and fully expect the PLCB to make it as inconvenient as possible in order to uphold their mission statement." said a previous Citizen's press release.

END IT, DON'T MEND IT

The Citizens represent most of the 12 million people in the Commonwealth who work in the southeast, northeast and central, western and all parts of  Pennsylvania in supermarkets, drug stores, food processing plants, government services, manufacturing facilities, nursing homes, professional offices, and all businesses, except Pennsylvania's "Fine" Wine and "Good" Spirits Stores.

Revealed: How the PLCB is going to make that extra $185 million...

Well...they aren't. Nobody really believes that the "Consortium of Control States" is going to work; states just won't work together on booze sales. That puts a big hole in the total right off the bat.  Using the 6.92% profit margin for the PLCB that has been bandied about by some legislators -- which is optimistic, at best --  the state would have to sell over $1.3 Billion in additional product — an increase of over 50% — in the next two years to hit the revenue goals in "modernization." In other words, they want to take more money from you in increased sales, fees, and higher prices.(We break it down for you here.) Not exactly how most people think of "control."

The only way the PLCB "makes" more money is by taking it from YOU

Tell your legislators that is it time they did something FOR the people, and not TO the people. Free us from 80 years of incompetence, mismanagement, graft, idiocy, nepotism, and political payback by making Pennsylvania normal again. Let the state regulate, not retail. Or as some genius on the PennLive site recently commented: 

"End it, don't mend it."

Why PA won't lose money privatizing

There are two conflicting arguments proponents of the State Stores use to say we shouldn't privatize. The first is the old "liquor store on every corner" lie, trying to scare us with images of urban decay, and the second is that prices will go up (because you know, like how competition always makes prices go up) and selection will go down. The selection part is just laughable, since we all know what the private sector can provide. If somebody wants it, the private sector will provide it: that is just how free markets work, as shown by everything else you purchase. If you don't believe it, think about how many different candy bars and single-serving drinks the average Sheetz offers.

That leaves "but we'll have too many stores," although nobody can define what the right amount of stores are except for the free market - stores that fill customer needs will survive, and if they don't, they won't. What does that mean for the state?  It means that it will collect more license fees, more business taxes, more sales taxes, and more excise tax and of course, more people will have to be working because all those stores don't exist since they can't all be current existing stores. So according to the pro-State Store folks, using their weak logic, amounts collected have to be greater than the current amount because more is being sold at a higher price.

We know sales will go up because they have elsewhere. PA isn't going to be special in that regard.  Will they go up 44% like the favorite CDC report the UFCW uses - doubtful since they haven't anywhere else. Will they eventually get up to the national norm? Probably, if they open more stores than the relatively small amount called for in HB 466 or Senator Wagner's proposed bill.

In the only recent example of privatization of a control state, total sales in Washington went up about 15%; 8-9% internally and 7% went out of the state, the increase in border bleed. Adding 27% in new fees probably had a lot to do with the increase in border bleed, so the lesson for PA is don't do that. Let's pick a reasonable number for how much prices may go up -- say 5% -- and let's stick with a 15% increase in sales. I think that will be a little low since we will be privatizing both wine and spirits while Washington only did spirits but I'll stick with it since it is a real number. That means the total sales will be about $465 million more than they were last year, or an increase of about $116 million in just tax revenue not counting all the other stuff, or pretty much a zero net in terms of liquor revenue but a larger gain in overall economic activity.

Border bleed will probably stay close to what is is because greater convenience will cause people to buy locally and the slight price increase won't change the buying habits of too many. But then you have all the new employees working, delivering to bars and restaurants, more distributors with new warehouses, new superstores being built where none exist today. All of that adds to the economy too, and all of that is something the PLCB won't provide; can't provide.

There's a sub-argument that private stores can't survive on the wholesale and retail markup of 30% like the state stores do. Bullshit. The PLCB doesn't survive on only 30%, they currently have an effective 45.2% markup (Gross Revenue From Sales divided by COGS), and they get there with all sorts of hidden fees and charges generally unknown to the buying public while all the while saying the markup is only 30%. They lie. The 5% increase I mentioned above would move that to just over 50% and lots of businesses would love to have that or even the 45.2% effective rate the PLCB has now.

Now let's say - horror of horrors - that prices actually decline. Lower prices increase demand which means more workers are required to fill that demand, which means more product is being sold which means that more sales tax is being collected.  The excise tax collection will go up too. Lower prices will decrease border bleed as competition and convenience cause more people to buy locally; as it will be is easier and/or cheaper or both. That causes sales to rise even more. There might even be an increase in out of state buyers that come into PA to buy.  So where do we end up?  Ahead of where we are now that's for sure. Ahead in jobs, ahead in tax collection, ahead in license fees, ahead in business taxes, ahead in income taxes, ahead in paying less future pension debt, ahead in convenience and ahead in consumer satisfaction.

Don't listen to him Tim and Skip - he's talking that crazy talk!

So if all the other states surrounding us have higher prices, as numerous state store people say, then if PA prices rise we'll be normal, if prices go down and get close to what most people believe are the better prices in New Jersey and Maryland, we'll be normal. And if we get the state out of the liquor business, we'll be normal like most states.

I vote for normality, not monopoly. Dump the system and move Pennsylvania back to normal.

What does it take to wake up the PA Senate?

Something for all the Democratic and RINO senators to think about as they prepare once again to avoid voting for what the plurality if not majority of people want: privatization and de-monopolization of the sales of spirits, wine, and beer.

Privatization does not increase underage drinking.  According to the U.S. Department of Health and Human Services, 29 percent of those ages 12-20 consumed alcohol in Pennsylvania. Compare this to states that have far less government control such as West Virginia (which is also a control state for wholesale) and the number decreases to 24 percent. In fact, the United States average is 27 percent. If government controlled liquor is effective in curbing underage drinking, why are we 2 percentage points higher than the national average and higher than almost all our neighboring states? Why is our underage DUI fatality rate higher than all but one border state?

Privatization does not cause more drunk driving, cause more alcohol related accidents or more alcohol related fatalities. Pennsylvania is once again barely average or worse. In alcohol related traffic fatalities in 2012, Pennsylvania was at the national average of 3.3 per 100,000. If the current government monopoly is better suited for curbing drunk driving, why are we not ahead of the national curve? Furthermore, MADD ranks the states in order of DUI-related accidents per capita. Pennsylvania ranked 35^th best – lower than New York, New Jersey, New Hampshire, West Virginia, Virginia, and Ohio. Obviously the median here is 25; Pennsylvania being 10 states away. In 2010 overall alcohol related deaths, Pennsylvania is also surpasses neighboring states. Pennsylvania reported 26 per 100,000 residents. Compare this to 24 in Delaware, 22 in Maryland, 20 in New Jersey, 20 in New Work, and 25 in Ohio.

In the 2 years since Washington privatized DUI fatalities have decreased at a far faster than in Pennsylvania even though they started at a lower rate. You now have a 36% less chance of being killed due to an alcohol related accident in Washington compared to Pennsylvania.

Privatization increases employment. As President Ronald Reagan used to say, “The best social program is a job.” The labor union UFCW 1776 will tell you that privatization kills jobs, but they are wrong. More than doubling or even tripling the amount of outlets for wine and spirits can only mean more jobs. It’s common sense. If anything, the UFCW saying there won’t be jobs for their members is tantamount to saying they don’t believe their members are employable in the private sector. Every locale that has privatized has seen an increase in employment. New warehouse jobs, new delivery jobs, new store jobs. Places that fully privatized tripled employment in the industry. The ability for these employees to use their previous knowledge to specialize in this new industry could actually increase their earning power.

Privatization will increase revenue. A 2010 study commissioned by the Wine and Spirits Wholesalers of America found that 23.6 percent of the wine purchased by consumers in Pennsylvania comes from out of state, resulting in the loss of $17.3 million in excise taxes. A more recent study conducted for the PLCB showed that 45 percent of residents in Philadelphia and its surrounding counties purchase some or all of their alcohol outside of Pennsylvania. The PLCB's own numbers showed that consumers purchased approximately a quarter of their wine and spirits in other states. This border bleed equals more than $180 million in lost sales, and more than $40 million in lost state tax revenue annually from just a handful of counties. These are lost dollars that could fund programs that are essential to our Commonwealth, but that are instead funding Delaware, Maryland, New York, and other border states with lower prices and increased selection.

Decreasing border bleed through price competition, increased convenience, one-stop shopping and increased selection will increase taxes collected. Increased sales will increase taxes collected. Business will pay taxes the current system doesn’t.  More people working will pay taxes. More people working means more sales across the Commonwealth for everything which also means more total taxes collected.

Privatization will remove the inherent conflicting interests of PLCB sales and enforcement. Quite simply, our current system is a house divided. The same entity charged with licensing vendors and enforcing liquor laws is marketing, selling, and producing alcohol...in direct competition with the private companies it regulates (with a surprising lack of consistency). Under privatization, penalties and fines could become much stricter as the PLCB’s conflicted mission would be resolved. In the new, fully privatized system, the PLCB would license, enforce, and educate; which is the appropriate role of government. The troika of party hacks who make the arbitrary and often inconsistent rulings on licensees' questions about application of the Liquor Code could be replaced by experienced regulators, lawyers who do nothing but apply the Code, full-time. The agency would then be run by a director, not a jumped-up "CEO".

Privatization can renew the people’s faith in their government. Distributing and selling liquor should not be in the hands of a state-run monopoly, which is clearly not a core function of government. There has never been a poll that has been in favor of the state run system. Historically, 40 years of polling show the citizens want a change and that change is to a free market system they see working far better in neighboring states. The lack of reform in the face of overwhelming public support leads citizens to conclude that state government is distant, unresponsive to their wishes, and captive to selfish interests. By responding to the will of citizens and consumers, lawmakers can show that Pennsylvania state government listens and responds to the will of the people they are elected to serve.

(Taken, updated and modified from an April  2013 letter sent by the PA Manufactures Association to the Senate)

Abolish the PLCB Q & A

To celebrate somewhat of a small milestone - my 50th story posted here I've decided to open up the blog to hear what you want. I've been writing about and answering the questions that I get from my reading, tips or tidbits of info from unhappy PLCB employees, inspiration from UFCW officials (and some not so official), and the regular citizens like you. These are things that I wanted answered or at least thought about but now it is your turn fellow privateers (or even the other side -- the Control Freaks and the prohibitionists) to ask me something about the PLCB you want answered. I can't say I'll have the answer you want or even an answer but I'll try.

Want to know how many stores are open? I'll go into the whole spiel about how many stores the PLCB says it has vs. how many are actually open vs. how many can citizens go to and not just licensees. Want to know how many stores turn a profit?  It is far less that you would think. Got a favorite bottle you want a better price on I'll compare PA to what I find.

Your turn, your voice, your questions.

As always, all questions/comments will be published (yes, even the Anonymous ones) so long as they are:

• relevant (don't tear off into rants on politics, or the lottery, and so on)
• civil: no personal attacks, and please keep the profanity to a minimum
• one round; don't keep asking the same question

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!