Where the PLCB Money Goes: Then and Now - A Second Look

Let's have a look at what the PLCB has done with its money -- our money -- since the new millennium has started. I did this story almost 3 years ago so let's see what may have changed The numbers from 3 years ago will be in parenthesis. 

Fewer stores, more employees: In July 2000 there were 692 stores with 2,869 full time workers and 1,072 part-time workers In June 2016 there are 601 (604) stores, and as of May 15th, the last reported figure for FY 2015 there were 3,067 (3,080) full time workers and 1,606 (1,417) part-time workers. Stores decreased by 15.1% (it was 14.6% the first time I wrote this) and employees increased by 18.9% (13.5%). Just looking at it from 3 years ago there are 3 less stores but 176 more employees. 

Higher gross, lower margin: In 2000 the PLCB had record sales of $1,083,330,579 and record operating income of $89,868,893 or 8.30% of sales. In 2016 the PLCB had record sales of $2,430,209,796 ($2,171,946,398) and non-record operating income of $131,770,874 ($151,877,723) or 5.42% (6.99%) of sales a decrease of 53.14% (18.6%) in operating income for every dollar spent in sales compared to 2000. (Hardly surprising, given the increase in overhead represented by the previous point.) Looking at these numbers is there any doubt "flexible pricing" is going to cost you more?

Cost overruns: In 2000 the Auditor General found the PLCB incurred $408,000 in additional costs due to problems in Its implementation of a new computerized Warehouse Management System. In 2010 the Auditor General reported the PLCB incurred excess costs of $500,000 due to problems with the new inventory system (on top of being over budget). The inventory system was contracted for $25.8 million and as of June 2010 has cost $66.6 million, or 158% over budget. Of course, we are still paying the legal expenses for the wine kiosks too.  Who knows when that will end or how much it will total.

More for ads, less for education: In 2000 the PLCB contributed 0.76% of their expenses to drug and alcohol education.  In 2013, the biggest year they ever had up to that point, they donated only 0.66%, up from the 0.53% in 2012 (also a "record year"). This year it went up but only because they had to pay the $800,000 they shorted Drug and Alcohol programs last year. It is still below 2013 levels  The PLCB hasn't released how much they spend on advertising until this year where they said the spent "about $6,700,000" or over double what they spent on education.

More booze, less enforcement: In 2000, the PLCB gave 7.39% of their expenses to enforcement of the liquor code.  In 2015, the PLCB only did 5.51% (6.19%), a shortage that works out to over $9 million less for enforcement compared to 2000. So even though the number of licensed establishments increased and the population increased, there was less liquor code enforcement. State stores still aren't checked at all for compliance.

More embarrassment, less arresting? In 1992 the Auditor General reported that: "Policing bootlegging and illegal importation of liquor without payment of Pennsylvania taxes should be the primary mission of the liquor law enforcement personnel."  In 2013 there were 2 reported cases of “bootleggers” caught. It could be that the more support for privatization there is, the less border enforcement takes place...since that would highlight the huge problem of people who purchase out of state. It might have something to do with the $9 million the BLCE doesn’t get since they were no longer funded at year 2000 levels too. While I'm sure a few token bootlegging arrests were made in 2015 I haven't been able to find out how many.

The real PLCB new funding source.

Same lack of relevant experience: In 2000 no member of the Board has had any experience with running an enterprise anywhere near the size of the PLCB.  That hasn’t changed at all in any year since and they still only work 21-22 days a year. It hasn't changed with the current board, or ANY board either.

"Multiple weaknesses" in procurement: In 2000, the Auditor General reported that: “Weaknesses exist in the administration of the Pennsylvania Liquor Control Board's warehouse management system consultant contracts.”  In the 2010 Audit the Auditor General reported that: “…multiple weaknesses in the PLCB award process, including lack of documentation. As a result we could not verify the PLCB adhered to proper procurement standards or exercised proper due diligence in awarding the contract.” (Remember that one of the PLCB “modernization” plans is to have less oversight in procurement although thankfully that part of "modernization" wasn't part of ACT 39.)

The PLCB has not changed in the sixteen years since 2000...Act 39 will only cause a larger bureaucracy with less customer service and more problems, that spends less on its very reason for existence: control. The problems are systemic, pervasive, and totally ingrained in the PLCB's processes and workforce. They won’t be fixed until the entire system is replaced with privately-run wholesale and retail operations -- as it is in the majority of other states and countries -- and they are able to fully concentrate on regulation, compliance, and enforcement, and not sales.

Privatization is Modernization – accept nothing less.

Why is it that....

The PLCB advertises even though they have no competition. There is no such thing as shopping for the best price; there's only the PLCB price. And of course...forget about shopping for selection. If they don't have it, you don't need it. Or want it. You may think you do...but they think better.

The PLCB limits how many bars and restaurants can serve alcohol, and while very few places are under their quota, there isn't a quota for State Stores. We are nowhere near what a normal state would have for liquor stores (and normal for wine retailers is so far away we can't even see it from here). In fact, the number of State Stores has been steadily decreasing for the past 45 years from over 750 to the current 605, and has only held steady the past two years.

The PLCB has no paper trail that lists who came up with in-house brands, who made the decision to feature them on endcaps, who decided to push them in advertising, and who said to feature them as alternatives when doing searches on the website? Do they know what they are doing at all? (Does any of it have to do with the continuing trail of ethics violations?)

The PLCB never lists any proof for the sales increases "modernization" supposedly will bring. Tell us exactly how opening another 140 stores on Sunday will generate $22 million more in operating income, or how just opening stores quicker will add $25 million more? Tell us what states will join in the booze-buying consortium being proposed? Have they even been approached about it? (Wanna bet there's no paper trail?) Tell us how the PLCB will make $75 million more if allowed to set pricing? Who will decide what the pricing will be, what will the change be based on, who will have oversight, who will look out for the consumer's interest (it never has been the folks in Harrisburg so don't expect them to suddenly start now),

The PLCB hasn't said whether a six-bottle container of 750ml bottles of Belgian Trappist brew will be a "case" too under their new "interpretation." It is over 144 ounces after all.  What about 6 bottles of beer that are only available in 700 ml bottles? Will there be a special "interpretation" for those if somebody decides to sue and the PLCB is too lazy to support their 80 years of apparently wrong "interpretation" like what happened in the latest "interpretation" that allowed 12 packs? And why can't the Legislature get off its butt and just do away with the case law entirely?

The PLCB ranks 15th worst out of 17 control states for binge drinking rates and is in the bottom half of all states, tied for 31st place. Why? Because "control states" like PA don't really control anything. The total alcohol use for control states averages higher (2.46 gallons per capita consumption in gallons, based on population age 14 and older) than the U.S. average of 2.33.

The PLCB's plans to increase sales are "good," but if the system were normalized, and a retailer wanted to increase alcohol sales...that would then be "bad?" Is private alcohol chemically different from PLCB alcohol? It's the same tax rate.

The PLCB and its pitiful handful of supporters somehow manage to overcome all of these issues, and continue to monopolize liquor and wine sales in the commonwealth. Kinda makes you wonder what keeps the Legislature from cleaning this up.

You can't fix stupid

Yes, it is true: you can't fix stupid. No matter what the clerks' union comes up with, it will never get away from the image of what was quite possibly the most inane advertisement ever to be put on Pennsylvania's airwaves. It is so bad in so many ways that the entire nation is laughing at the state, and the idiots who put this together for broadcast.



That bunch of idiots would be the UFCW Local 1776 media office and an outfit called Strategic Communications (the link is provided in case you want to put this gang of ham-handed 'communicators' on your company's Do Not Call list). It is so bad that one of the union's own members said on Facebook, "I work for this system and I personally find this ad embarrassing. Their true intentions are to keep our jobs (which I do not mind), but Ads like these are utterly ridiculous." Obviously he wishes to remain anonymous.

I have not seen one positive response anywhere. I would like to read one just to get an idea of what kind of person thinks this was a good idea.  Those that don't are legion,  If you haven't seen the stories, here are a baker's dozen of them. Be sure to read the comments: they just don't get any better.

1.) http://www.forbes.com/sites/kellyphillipserb/2014/05/04/union-privatizing-the-sale-of-alcohol-will-kill-children-lower-tax-revenue/

2.) http://fermentationwineblog.com/2014/05/worst-alcohol-related-ad-history-world/

3.) http://thelibertarianrepublic.com/unions-panicking-possible-liquor-privatization-pennsylvania-video/#axzz30tTcJtUY

4.) https://www.againstcronycapitalism.org/2014/05/state-liquor-store-union-pulls-out-the-stops-new-ad-explains-that-selling-beer-in-grocery-stores-kills-children/

5.) http://www.nationalreview.com/corner/377162/union-monopoly-protects-pennsylvania-children-drunken-slaughter-tim-cavanaugh

6.) http://philadelphia.cbslocal.com/audio/1562-chris-stigall-show/the-chris-stigall-show-wendell-young/

7.) http://tinyurl.com/njtuhwc (About 7 minutes in)

8.) http://www.philly.com/philly/blogs/entertainment/television/WATCH-UFCWs-hilariously-bad-anti-liquor-privatization-ad-.html

9.) http://reason.com/blog/2014/05/02/pennsylvanians-cant-buy-beer-and-wine-at

10.) http://www.commonwealthfoundation.org/policyblog/detail/will-more-choice-and-convenience-really-kill-your-kids

11.) http://www.nationalmemo.com/watch-the-craziest-political-ad-of-2014/

12.) http://philly.barstoolsports.com/around-barstool/video-anti-liquor-privatization-ad-says-pa-selling-beer-at-convenience-stores-will-kill-one-child-every-week/

13,) And my own lambasting published here last week.

Enjoy, have fun and don't laugh too hard. Remember: this year privatization killed the little girl; last year, they killed her father. If this drags on one more year...that's going to be a pretty lonely ad campaign. But it's still going to be stupid, because there's just no way this line of reasoning is ever going to make sense.

Would Privatization Kill Children?

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


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

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

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

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

The PLCB responds to the Smackdown.

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

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

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

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

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

Yup. It's a classic. Pure PLCB.

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

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

PLCB SMACKDOWN

 

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

What they made, what they say they made.

Finally, a full 6 weeks later than last year the PLCB released their un-audited numbers to the public.  Now we all have heard that they made $660 million in a record sales year. That is like saying the PA Dept of Revenue "made" $23 Billion. Collecting taxes is not making money. The PLCB collected $520,483,384 in taxes and then overcharged the people of Pennsylvania $128,365,957 for the privilege of going to a state store.  To be fair they did pay for the BLCE to enforce the state monopoly that prevents the citizens from going anywhere else to purchase wine & liquor and to keep track of the all important beer registration list, neither of which they seem to do all that well.  They also paid out $2,567,319 or about half of their advertising budget to drug and alcohol programs. You would think that an agency charged with, "...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..." (PA Liquor Code 1-104) would at least spend less on advertising and more on education but that's not how they roll.

So what else does this latest set of numbers tell us?  I noticed that for the first time in at least two decades that they didn't take an advance from the state ($110 million the last few years) to get things going.  We'll have to wait and see if they can keep it up or if this is just a one time thing to make the numbers look good under the threat of privatization.  Liabilities would have gone up 10% if they had taken it verses the normal 2-3% for the past few years.  History isn't on their side.  Bailment was also something that would control costs but inventory, the thing bailment was supposed to reduce, went up 11% from the previous year.  Cash went down 44% from 2012 and Accounts Receivable decreased a whopping 94% which may be a good thing if other entities are paying their bills almost immediately or it may not be that good if the business isn't selling as much goods or services.  The published reports don't provide enough information to figure it out. Store operations only went up $2 million but they closed 8-10 stores (PLCB audit 2012 lists 608 stores, testimony in May says 596) and the Chairman says that they are short at least 250 employees so I guess that is one way to keep it even but how long can they keep this balancing act going is the question.

While record sales are nothing new to the PLCB I wonder why the record profits don't follow the same pattern.  It took 5 years for Operating Income to beat the FY 2008 total, There were record sales in FY 2009 and profits went down 24%, there were record sales in FY 2010 and profits went down another 36%. Three of the last four years ended with negative assets which had never happened before. Total Net Assets still hasn't passed 2006 levels. In terms of percent of Income Before Operating Transfers the BLCE and Drug and Alcohol programs get less now than they did in 2000.

At some point next year we'll see the official audited report and know exactly what happened but until then we have to deal with what little is released.

I, like the majority of Pennsylvanians fail to see the need to keep a exceedingly small minority in place to the detriment of 12.75 million residents. The numbers just don't justify the continuation of the state in the retail and wholesale spirits business.

Privatization is the Ultimate in Modernization.

Get Mom Vodka For Mother's Day? Why not?

If you've never heard of the Independent State Store Union, you're missing some fun. They're the union that represents the managers of the State Store System, and they have a real love-hate relationship with the PLCB and the state's monopoly on liquor and wine sales: they love to complain about the PLCB, and they apparently hate alcohol and working late. They put out press releases all the time, critical of the PLCB's  policies and the Board members themselves; they're usually inadvertently hilarious in their earnestness.

Recently, they sent an editorial to the Centre Daily Times suggesting that the serious abusive drinking situation at Penn State could be alleviated...by shorter hours in the State Stores. You can only assume that they'd expect to get the same pay for those shorter hours, but that probably has nothing to do with their idea, it's all about the children. They do display a disturbing disgust with alcohol, considering their job is selling it: "the PLCB continues to promote a carnival-like alcohol atmosphere for drinkers..." I haven't seen any tilt-a-whirls at my local State Store, but I'll keep an eye out for them.

Their latest press release is here...oh, to hell with it. I'll just reprint it. It's a press release, right, and this is the press, right? Fair use! They're upset that the PLCB has an ad campaign suggesting that folks buy their mothers a nice bottle of vodka for Mother's Day. Actually, they're freaking out about it.

"Your Mother's Day promotional radio ad program costing $142,000 is more damaging to the common good of all Pennsylvanians than the mere dollars expended.  You refuse as Board and chief staff members to make any decision that is contrary to the most outrageous marketing strategies of the alcohol beverage industry no matter what effect they have on the public good.  You are collectively the number one drug pushers in Pennsylvania.  As puppets of the alcohol beverage industry, you have abdicated any role of being a regulator against the bottom line interests of the industry," says Ed Cloonan, Information Director for ISSU.
Cloonan continues, "Your Mother's Day radio/print hawking promotions makes a joke of alcohol education for women.  In advance of Mother's Day 2011, you will be able to send coupons and frequent drinker credit rewards to pregnant women."

ISSU is asking all five gubernatorial campaigns to replace the three PLCB Board members, the CEO, the Director of Marketing and Merchandising, and the Director of Retail Operations as quickly as possible after the winning candidate assumes office in a new administration."

Where to begin?The guys who manage the stores that sell booze are accusing their bosses of being "drug pushers," they stoop to the lowest sort of neo-prohibitionist hype-drivel ("frequent drinker credit rewards to pregnant women," forsooth!), and...they're calling for their boss to be fired. Now, I'm all for calling for my boss to be fired if they deserve it; I did it while in federal service in 1989...but I did it in my exit interview. Because publicly saying your boss should be fired -- for selling drugs!-- is usually tantamount to submitting your resignation. This is a big Reason to abolish the State Store System: to do away with counter-intuitive foolishness like this.



This report on WHTM (ABC affiliate in Harrisburg) shows what a mountain is being made out of this molehill. This is all -- pardon the expression -- bullshit. No one mentions the key point: selling and buying a bottle of vodka is perfectly legal in Pennsylvania (as long as the person selling the bottle is a State Store System employee or an employee of one of the very few licensees that offer bottle service, and the person purchasing it is of legal age). Giving it to a legal age woman is legal, whether or not she has children of any age. To suggest otherwise is sexist, foolish, and offensive.

In summation, I'm actually neutral on this, as far as the PLCB goes. I still say that a state agency acting like a retail business is simply absurd. But I don't see this as a particularly bad example of that absurdity, like, say, the Courtesy Contract was. On the other hand, the ISSU is a great example of the kind of bizarre situation that a state retail monopoly on booze sales can generate. Kill the State Store System as a favor to the ISSU: they hate selling alcohol...let them find a new, cleaner job selling something else.

Full disclosure, as always. I have a horse in this race: I got Cathy gin for Mother's Day, and I thought of it before I heard the ads (and I'm pretty sure she won't see this before tomorrow morning). She likes gin, and there's no reason she should suffer just because I usually prefer beer and whisky. So she's getting a hand-assembled gin bouquet; I think it turned out rather well.