Why the PLCB should follow the law, not "interpret" it

If the PLCB were a private citizen, it would most likely be in jail. It does things that the people — through their representatives in the legislature — never approved. It willingly and repeatedly violates the law, and consistently goes against one of the very foundations of English and American law: "Everything which is not forbidden is allowed." Also stated as "no crime without law," this is an essential freedom of the ordinary citizen. The PLCB, on the other hand, seems to work on the opposite idea, that "all that is not expressly permitted is forbidden." Sorta like North Korea.

Are they making broad interpretations of the laws for the benefit of the citizens? Good intentions are not an excuse for breaking the law. Never have been. The laws are for everybody, they don't say "except for when the PLCB wants to save us from ourselves" anywhere.  Let's take a look at some of the legal and common sense violations they are a party to.

Just this past week Giovanni's Pizza & Pasta, in Dormont, PA was trying to comply with all the written legal requirements so that they could deliver wine. But the PLCB isn't interested in just the legal requirements; their requirements have to be met as well. What are those requirements? They won't say. "That's a matter that is under review for consideration by our attorneys and our board. There's nothing in Act 39 that says it's illegal, but Act 39 did impose certain conditions that need to be met. We don't have a determination on that matter yet." - Elizabeth Brassell, director of communications for the Pennsylvania Liquor Control Board (emphasis added).

I'm sure we all remember the magic 12 pack case where they "interpreted" that a "case or original container" could mean a 12-pack, even though a case had been a case (and an "original container" had been ONE original container, not a pack of  12 of them) for as long as anyone could remember. How many times in the past 80 years had they refused to consider that?  More than we will ever know.

Why was the new interpretation suddenly different? No one knows. Of course there are the infamous Wine Kiosks that were never checked to see if they complied with federal law, The PLCB just didn't bother and really didn't seem to care in that case. Even after they were called out on it they still didn't check.

While moot now, state law did say that only 25% of State Stores could be open on Sunday. Since they don't care what the law says, the PLCB was about 18 stores over the limit when Act 39 took place, allowing more stores to open. They obviously didn't care about a legal limit that was written to apply specifically to them!

How about the ever-changing beer at gas stations gymnastics? "You can't sell beer at the same location where you sell gas, period, that's the law! Well, unless the property is actually next door. Oh, and they can't have an interior connection...unless we say it's OK, in which case, that's fine, for that one licensee, not for anyone else."

That's contrary to what the Liquor Code explicitly says: "No license shall be transferred to any place or property upon which is located as a business the sale of liquid fuels and oil." But according to the PLCB, if you have a business that sells gas and you build another store next to it, and then attach them together (and they are owned by the same company), it isn't a continuation of the original gas selling business. If not, then why do they have an interior connection? Common sense was never a PLCB strong point.

One of my favorites in the "Do as I say not as I do" category is that a licensee of one class can't provide anything of value to another class of licensee. So as a distributor you couldn't help a restaurant with how to display their beer selection for example. However, the PLCB has outside representatives that come in all the time to set up advertising displays in their stores, and hires outside companies to do the sets* in the stores too. But then there are no requirements for State Stores either. We shouldn't expect them to know how to stock shelves and sell things - should we?

Maybe if the PLCB just regulated and didn't run a half-assed retail booze monopoly, they would be able to do at least one thing well. I doubt it, but I'd like to find out.

Privatize.


* A 'set' is where every bottle goes and in what order they should be on the shelves. These are the people that decided to not have the 1.5L sizes next to the standard 750ML sizes of the same wine but to group all the 1.5L bottles together.  The same ones that destroyed the standard "top shelf" setup that liquor had been using for almost 100 years.  Of course, no place except PA state stores do this.

Why Its Not Safe To Go Into The Woods - A PLCB Horror Story

Not satisfied that their stupid laws, random enforcement, idiotic "interpretations," and never being checked for underage sales are killing enough citizens, the PLCB figures that having more stores open with longer hours for the start of hunting season fits their goal of  "...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...:

So while DUI, Underage DUI, DUI Fatalities, Underage DUI Fatalities, Binge Drinking, and Underage Binge Drinking is worse in PA than most of the border states, apparently drinking, driving to game lands, and hunting is perfectly acceptable and even encouraged by the PLCB.

They are getting sneaky about it too. In my first blast at this insane policy in 2013 they put out a separate announcement stating that these stores would be open early just for hunting season.  I'd link to it but the PLCB no longer  has it listed. In 2014 they combined it with the Thanksgiving holiday extended hour increases as shown here. Now they are trying to just outright hide the fact they are expanding store hours for hunting season by not listing it at all.  When you look at this year's announcement there is no mention of  Holidays or Hunting Season. All you get now is a flat "The following stores will have extended store hours in late November." However, if you look at the stores that are open or have extended hours on November 30th it is only because of hunting season.

So if you find yourself in the woods on November 30th, remember that the PLCB did their best to make sure all those people with guns were able to get liquor. I wonder how many cows would survive if they didn't ?

65 years of research isn't enough

I've been fighting this for a while now but there is only one conclusion I can come up with:

Some of our legislators are idiots.

There, I said it.

Reading the bills floating around that pertain to Liquor control one has to wonder what and why they are thinking some of these things. Who might they be pandering too? Some are pretty obvious and others not so much. I'll give you a few...strangely specific examples.

HB 619 - A bipartisan bill to change the requirements on who can hold a wine auction for a charity or non-profit. One of the limits is that you have to be: "(6) any nationally recognized community-based voluntary health organization committed to fighting cancer which has been in existence for at least ninety years"

Well, guess what...that leaves only the American Cancer Society.  Groups like the  Leukemia and Lymphoma Society, which has only been around since 1950, don't qualify to have a wine auction to help them raise funds.

Sticking with HB 619 you have: "(7) any nationally recognized emergency response organization that offers humanitarian care to victims of war or natural disaster and has been in existence for at least one hundred twenty-five years"

Find another organization besides the Red Cross that fits those limits. Now if you live out in the sticks (a county of the third class) and raise guide dogs, for example, you could have opened last week and get an auction permit if HB 619 passes. Don't live in a county of the first or second class - they don't quality at all.

It isn't just that one bill. Here is HB 770, which has limits like this: "a club which has been issued a club liquor license and which, as of December 31, 2002, has been in existence for at least 100 years" This limits it to a handful of clubs like the Philadelphia Club and the Westmoreland Club, the only two I can think of off the top of my head. I'm sure there are a few more. Nationally chartered clubs like the VFW and American Legion don't have an age requirement.

Then you have HB 55 which wants to expand the Liquor Control Board from the current three incompetents to six incompetents, with an additional three members from the industry for a total of nine -- with full pay and benefits of course. Here's a better idea: just require that one of the current three come from the industry. You're welcome.

HB 121 means well...if you happen to be in favor of skirting the minimum wage and child labor laws - to wit: "Notwithstanding any provisions of law to the contrary, a hotel, restaurant or club licensee may permit a minor of any age to perform music so long as the minor is not compensated and the minor is under the supervision of a parent or guardian."  The parent or guardian part also goes against the current liquor code which states a supervisor "shall mean a person twenty-five years of age or older who is directly responsible for the care and conduct of a minor or minors while on the licensed premises and who keeps the minor or minors within his or her sight or hearing." Are there so many 8 year olds who are being prevented from crooning at the local saloon that we need a law passed about it and why shouldn't they be paid if they do?

HB 412 Wants to add "neighborhood improvement district management associations" as eligible entities - without any age restrictions. So start one today, get you a liquor license!

HB 483 Wants to redefine what Cider is and, to me, in a seemingly odd way by limiting the amount of flavor and carbonation. But it does remove the limit it can only be made from apples and it raises the alcohol content from 5.5 to 14%. My question is why not make it the same as beer which has no proof limit? Better yet, ask the people who know.

HB 488 Will raise penalties for licensees that sell to minors. Which is fine, great, but why doesn't it apply to the State Stores? Because they are never checked by any outside agency or police force for sales to minors, and they aren't "licensed."

Not to be outdone, the Senate also has some silliness going on with liquor control. Everything from "Modernization" SB 15 which readers know I've dissected already, to more "Eligible Entities" with age restrictions (SB 323)

SB 611 Will let the state stores sell lottery tickets, "except that no bond, insurance or indemnification may be required by the board" We all know that nothing (cough cough kiosk) ever goes wrong when the board does things.

This is about 20% of all the liquor-related bills introduced so far. Now you know why the liquor system in Pennsylvania is so screwed up. Wipe it clean and start again. Being normal isn't bad, but living in PA as a liquor consumer is.

END IT, DON'T MEND IT.

Wanna Talk Washington? Fine, Let's Talk Washington

The latest claim by some union members and supporters is that Washington state is making less money this year than when they had a state run system, and the implication is that it's because they privatized. The truth is that they are about $46 million ahead of the last year of state-run stores.  Even though I explained and pointed out where to find all the numbers in "Why Johnny can't read or do math Part 3", they seem to still have difficulty with addition.

One more time, then: the Washington State Department of Revenue collects liquor taxes. The total for Fiscal Year 2014 was $267,374,563. The Washington State Liquor Control Board collects spirit fees, license fees and beer and wine taxes. That was $227,320,000 for Fiscal year 2014. That means the total state booze-related revenue collected in FY 2014 was $494,7 million. In the last year of state-run liquor stores (FY2012), the total returned was $448.7 million (including store "profit") which also included the one-time $31 million income from the sale of the old state stores and was still $46 million less than this year.

Now, here's the crucial part that brings all the crowing about the State Store System's "record sales" into perspective. Compare what the PLCB, with control of both wine and liquor and twice the population and over twice the total sales of Washington State, did over that same period. They didn't even come close to  increasing the contribution to the state by that amount. Their increase was only $33 million, and yes, that includes the so-called "profit" and taxes, too. Washington does not charge regular state sales taxes on liquor, but includes a Spirit Sales Tax in the price, the same way PA includes the Johnstown Flood Tax in the retail price. I did include PA sales tax in the above comparison; it's revenue from booze sales. But still...they couldn't match the increase Washington saw when it privatized (and remember; Washington only privatized liquor!).

Freedom of choice, free enterprise, free interstate commerce...those are things the country was founded on, and these are the things denied the citizens of Pennsylvania by the State Store System. Washington State now has greater selection, more convenience, more taxes collected, and lower DUI fatalities. Looks to me like Washington is winning. We can be winners too. Privatize.

Privatization Is Modernization.

We can't even be better than Utah

There are 2 and only 2 states that completely control the sale of wine and spirits. One is Pennsylvania and the other is Utah. Pennsylvania, the Keystone state, the state where our democracy was formed, one of the 13 original United States of 1776. Utah, 120 years younger, a theocratic territory with a religious background of no drinking,

You would think that Pennsylvania with over 4 times the population would have stores that any large U.S. city would claim. Small boutique stores in trendy urban areas, Specialty stores with unique selections picked out by knowledgeable owners, Mega stores with 30,000 square feet of retail space and 10,000 products in stock. Pennsylvania has none of that. In fact, the Commonwealth has fewer stores per capita than Utah, and even less when you look at the number of stores per drinking age population.

Here is a store in Heber Utah,, population 12,900, that if transported to anywhere in PA would be the 2nd largest store in the state. That is only because the PLCB has opened ONE in the entire state that is larger and that happened only a few months ago.

 

Is it a fluke?  Something they did to to show off?  I mean, doesn't PA have thriving metropolises of 13,000 people or MORE that could use a store like this?  Not according to the PLCB.  Their cookie cutter approach means that even places that could support specialty stores, Mega stores and boutique stores don't get them. The PLCB doesn't know how to run them, staff them or even sell in them. Our system is so backasswards that "modernization" actually results in LESS products available in a given store size. Why doesn't Philly or Pittsburgh or Scranton or Harrisburg or Erie rate a store like Utah has in Hurricane  (population 13,700).  A store that is bigger than anything in PA...how's that work? 

Does their DABC actually pay attention to consumer demand? Are they run by actual business people and not political hacks?  (Not really, their board is as hackneyed as ours) Is it because they have an advisory committee of real business owners, brewers, restauranteurs and health professionals?  My guess is that they are actually more competent across the board and are held more accountable then the people who run the PA state store system. You don't see DABC officials being cited for graft or nepotism or coming up with wine kiosks, or failed "store in a store" ideas.

In another state, New Hampshire just opened two 20,000 square foot stores both larger than anything in PA. We know what a thriving business they have since people actually go to their state stores rather than away from them like in Pennsylvania. In just over 2 years Washington now has over 40 stores larger than anything in PA. That's what happens when you pay attention to consumer demand. We get wine kiosks.

While nobody should suffer under the limitations of states monopolizing what should be privately-owned and run retail...the question is, why do Pennsylvania residents have to be at the bottom?

Privatization IS Modernization.

Modernization won't do what the consumer wants. Part IV

Let's look at another failed concept by the PLCB. Although they won't admit it is a failure, when nothing you want comes out of a program it is a failure. Here we have the epitome of customer convenience in the eyes of the PLCB.  Read and then wonder why they ever thought it would work.

Two years ago, in October 2012, the PLCB came up with an eight year plan called "Convenience 2020." This plan was to put a "One Stop Shop" inside a grocery store that already had twisted themselves around to comply with the PLCB regs and then had to overpay to get an "R" license in order to sell beer.  A match made in heaven, since the stores already hate the PLCB for making them go through the added expense and effort of what is a relatively easy process elsewhere.


Is the PLCB, since they "interpret" the liquor code to whatever they feel like on any given day, going to somehow put the liquor and the beer in the same area since the age requirements for purchasing are the same? Of course not! This is the PLCB: convenience is a foreign concept to them. They only go through the motions, because otherwise they would have been privatized decades ago.

In this Pennsylvania nightmare you get your cart, shop for groceries and then make a choice. You can either pay for your groceries and take them out to your car and then come back for your beer; or buy your beer first, and then go shop for and buy groceries...at a different set of registers. BUT WAIT! You forgot the wine. Now you can go get the wine first because your cart won't fit in the liquor store, pay for it there, then go grocery shopping pay for those, take everything to the car and then come back for beer (or buy the beer pay for it at the beer register and then pay for the groceries). And just think: if it's a hot day, you can leave the wine in the car and have it get heated up just like in the PLCB's trailers!

The epitome of convenience! You get to pay at three different registers inside the same store.


And they wonder why it isn't working out.


Idiots.

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

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

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

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

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

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

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

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

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

So to sum it all up:

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

The moral of the story?  

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

What we don’t have….

The latest failed tactic of those who want to keep the PLCB (largely the people who work there, and the unions they belong to) is to counter the “majority of states do it this way” argument with “but only X amount have this” – pick whatever consumer feature you want that PA doesn’t have and that they don’t want us to have.

The one I like best is “only 15 states have one stop shopping for food and alcohol.” Of course, Pennsylvania isn’t one of those states and heaven forbid we try to lead the way instead of lagging behind. Truth be told is that 39 states have one stop shopping for alcohol including six of the so-called control states. Pennsylvania is a control state, and the most onerous of them all, because while only PA and Utah control wine and spirits retail, you can still buy some beer in Utah in a grocery store (by the case, if you really want!), but you can’t do that here, except in the few stores that have gone to the trouble and expense to buy a tavern license and put in a "cafe" and even then you still can't buy a case at one time.

So in in 39 states you only have to make one trip to buy a case, a six-pack, a bottle of wine and some bourbon; in 10 states you have to make 2 trips; but only in the Commonwealth...do you have to make three trips.

Perhaps if we didn’t have to waste so much time we could write our legislators and list this idiocy as yet another of the myriad of reasons to get the PLCB out of all retail and wholesale.

Privatization – the ultimate modernization.

Modernization won’t do what the consumer wants – Part III

Today we are going to look at another part of  the PLCB's plan for “modernization,” called getting "the right people.” That's what point #9 of the Executive Summary of "Proposed Statutory Amendments of the PLCB" calls it; have a look:

9) Changes to Staffing and Human Resource Management:

• Restrictions imposed by the Civil Service Act and the Administrative Code impair the PLCB’s ability to effectively manage its workforce 

• Allowing the PLCB to make employment decisions outside of Civil Service, and giving the PLCB the authority to classify or reclassify its own positions and set the compensation of all employees will give the agency the autonomy and independence needed to place the right people in the right positions at the right rates of pay. 

• The PLCB currently pays the Civil Service Commission approximately $1 million dollars per year to administer examinations for store employees.

• Appropriate employment, classification, and salary policies would be put in place to provide necessary controls and structure to the Board’s decisions.

So...to get the “right people,” they want to set different rates of pay. Obviously, it has to be a higher rate to get those people, otherwise those people would be here now. Equally obvious is that the PLCB believes that they can’t train or teach the people they have now, and currently don’t have knowledgeable staff that could fill the positions that the “right people” would fill. (They've had 80 years to work on it, but they're only admitting that failure now.)

Since these “right people” currently won’t work for the PLCB because the salary -- even though it's at the highest end of retail compensation in America -- doesn’t match their needs, who is going to pay for the increase? You know who: us, the wine buyers, the taxpayers, because we are the ones who have to cover the increased pension obligations that these “right people” will incur since they are being paid more. The PLCB portion of the pension deficit is $550 million and expected to go to $600 million by the end of this year. But that isn’t enough. All that extra money the PLCB says they will be making; some of it will have to go to pay for these “right people” and their benefits. How much will be left over for the General Fund? Anything significant?

The only benefits to this scheme are really to the PLCB and the people who work for them. We consumers still won’t get the convenience and selection found in other states even if our “right people” are wearing world class aprons.

Privatization IS Modernization.  Contact your legislators and tell them so.

Modernization wouldn't do what the consumer wants -- Part II

Today we are going to look at some other parts of so called “modernization;” increasing the licensee discount from 10 to 18% and variable pricing.  Notice that there is nothing mentioned for the consumer, even though they spend 2.8 times as much as licensees. Why?  Because licensees contribute larger sums than regular people, and since they don’t complain too much, you don’t have to pay as much attention as you do to what the citizens want. Pretty much saying, “to hell with standard practice, no case discounts for you!”

Based on last year’s PLCB sales numbers to licensees, an additional 8% discount would come to around $24,250,000. Where does that money come from?  It isn’t taxes since they are added in before the discount. Everything else stays the same since the discount doesn’t affect inventory or salaries or other costs...so it has to come from what the PLCB calls "profit" (what we know to be taxes that they just hadn’t happened to spend yet). Let’s look how that $24 million ties into the big scheme of things. To do that we have to do some math.

The PLCB had “profits” of $128,356,057.00 after the transfer to the PA State Police, but before the General Fund transfer. I'll be rounding the numbers from here on so they may not match exactly.
According to the PLCB talking heads “modernization” will increase this amount by $75-125 million depending on who you listen to.  Since there is a 66% difference between those two numbers, I’m not sure how accurate their guesswork is. In any case, let's use $100 million and add to that the $24 million that has to be made up from the proposed additional discount for the licensees to bring it to almost as much as they make now. The new total for operating income after PSP transfer is $252.4 million. Add to that number $387.6 million in operating expenses and you get $640 million in gross revenue from sales needed if this happened this year. 

But it didn’t happen this year so let us estimate what next year might look like.  I’ll say that sales will increase 5% to $2.28 billion which means that Sales Tax and Local Taxes will be about $135.8 million leaving $2.14 billion.  From that the 18% liquor tax ($327.2 million) will come out giving us $1.82 billion as sales net of taxes.  Historically cost of goods sold is about 69.5% so I’ll use that. COGS would be $1.26 billion leaving us with $554 4 million

However we needed $640 million leaving us $85.6 million short and I’m being generous since I didn’t put in any increase for expenses. Now the PLCB just can’t raise prices of X number of products by $85 million and call it even.  They have to raise prices enough so that after all expenses and taxes come out they have $85 million extra left over. Remember they had to sell almost $2.2 billion last year to get $128 million, so working off of that, they need to sell $3.8 billion worth of product to get to $252 million and we know that isn’t going to happen. They could raise the markup 65% or they could reduce costs by closing 25% of the stores and I don’t see that happening either. So they have to get the money from somewhere and “Variable Pricing” is one of the places they say it will come from. Not all of it but certainly a large portion.

Just what is the PLCB version of variable pricing?  Unlike a pure model the PLCB has to keep the prices the same state wide instead of regionally, by neighborhood or even by store. Also, unlike other variable pricing models of commodities, the consumer has no negotiating power other than to drive to New Jersey (which they probably should have done to begin with). Think Airline tickets if you need another example of variable pricing.  The price changes by demand, time of day, competition and other factors so while you may pay $200 for that round trip to Orlando, the next person could pay more or less.  

Now I don’t give the PLCB credit for being able to change pricing in real time as the airlines do.  They don’t have a good history with computerized things. The intent is the same though.  Lower prices on slow moving items to get them out or move a specific volume of items, and stores may strategically raise prices on more popular or high demand items when possible to increase profits.  A good overview is here. Something the PLCB should pay attention to: “When variable pricing can be tied to differences in costs of doing business, different prices can be justified; otherwise, brands run the risk of being seen to be opportunistic and unfair, likely damaging their reputations.”

I don't have any idea how many or how much prices will have to go up to get near that magical $85 million extra (and I don't think Senator Ferlo really does either), but it isn’t a small amount, considering that the PLCB only clears an average of 92 cents per bottle and it would have to go up to $1.80 per bottle if applied evenly and we know it isn't going to be applied evenly. Maybe some other things will reduce that or maybe not.  I’ll look further into some other “modernization” statements in another installment.

Privatization IS Modernization, accept nothing less.