Death By a Thousand Cuts: it's working!

Thousand cuts, baby. That's how I like my hoagies.

Seven years ago, when UFCW 1776 President (For Life) Wendell W. "Windy Wendy" Young IV was faced with the reality of wine sales being allowed at grocery stores (and the possibility of wine sales at beer distributors, but the beer distributors bobbled that), he predicted that it would mean the end of the State Store System. "Young says allowing wine to be sold by private sector would take away business from state stores and be the 'death by a thousand cuts' to the state store system."

Such drama! And then it went through, and Wendy didn't say nothing more about it. In fact, The Haircut That Walks Like A Man hasn't had much to say since Act 39 went through in 2016, probably because he figured flexible pricing was going to be such a bonanza for covering the constant rise of operating costs that his job was done. 

But that "thousand cuts" call is coming back to haunt him...because it looks like he was right. 

Last week, I asked the PLCB for wine sales figures from the past three years for the State Stores, private sales, and overall sales. It's an interesting picture. I had to break it up to fit it into the format of the blog; here's a comparison by unit sales, the number of bottles sold. "Non-licensee" is the State Store sales; "Licensee" is sales through licensed private retailers: bars, restaurants, resorts, and grocery/convenience stores (that includes by-the-drink sales, which you would assume are relatively steady year-on-year).

2015 is prior to the shift to bottle sales at the licensees; 2016 was a partial year, and 2017 is the first full year of such sales. Notice the huge jump that year: 39.9% rise in licensee sales, followed by a 17.4% rise in 2018. Look at the 2015 numbers vs. the 2018 numbers: they almost doubled in three years. Meanwhile, the State Stores were sucking wind: a 4% drop in 2017, a 3.7% drop in 2018.

Calendar Year	Customer Type	Unit Sales	% Change From Prior Year
2015	Non-Licensee	67,034,168	N/A
2015	Licensee	13,331,217	N/A
2015	Total	80,365,385	N/A
2016	Non-Licensee	68,507,884	2.20%
2016	Licensee	15,282,492	14.60%
2016	Total	83,790,376	4.30%
2017	Non-Licensee	65,797,156	-4.00%
2017	Licensee	21,377,505	39.90%
2017	Total	87,174,661	4.00%
2018	Non-Licensee	63,333,698	-3.70%
2018	Licensee	25,099,208	17.40%
2018	Total	88,432,906	1.40%

How about dollar sales? Looks about the same, though the licensee dollar sales actually grew a bit more than volume sales did, each year...which means the State Stores are moving more bulk tanker stuff, and the private stores are skimming some of the higher-ticket sales. A thousand cuts, indeed. 

Calendar Year	Customer Type	Dollar Sales	% Change From Prior Year
2015	Non-Licensee	$835,985,290	N/A
2015	Licensee	$138,374,473	N/A
2015	Total	$974,359,763	N/A
2016	Non-Licensee	$862,634,339	3.20%
2016	Licensee	$160,312,440	15.90%
2016	Total	$1,022,946,780	5.00%
2017	Non-Licensee	$827,676,034	-4.10%
2017	Licensee	$225,796,242	40.80%
2017	Total	$1,053,472,276	3.00%
2018	Non-Licensee	$812,080,965	-1.90%
2018	Licensee	$266,808,655	18.20%
2018	Total	$1,078,889,620	2.40%

Private stores = more state revenue, more jobs

Overall sales are still growing, which is going in the PLCB's pockets because they're still effectively the monopoly wholesaler, but look at how much they grew when people could buy in private stores! Imagine if we went crazy and allowed private liquor sales as well! We'd be rolling in the (Johnstown Flood Emergency) tax revenue; increased sales would clearly eliminate any need for a Washington-style tax increase. Oh, and the PLCB press secretary, Shawn Kelley, happened to mention that they "understand from anecdotal reports from the Pennsylvania Winery Association [that Pennsylvania wine sales] have grown significantly since grocery and convenience stores started selling wine." I'll just bet they have. 

No need to go on; the numbers speak for themselves. I never thought we'd say this, but...Wendell was right. It's not all that shocking, or that brilliant a prediction, though. Give the people a choice, and they'll walk away from the State Stores. Give us the choice on spirits, too, and see how long it is before State Stores start withering and dying on the vine...so to speak.

Privatize. 

PLCB - 85 Years to Get It Moving in the Right Direction and They Still Fail

Those of us who have put up with the restricted system of alcohol access in Pennsylvania would expect to see some results from the 85 years of the state's social experiment. The results are in, but no one's talking about them (except us), because the PLCB fails miserably. Using data from the National Institute on Alcohol Abuse and Alcoholism, Newsweek ranked the states by their alcohol use.

So far it ain't working.  Look at the states on our border:

1. New York - Lower consumption than Pennsylvania
2. New Jersey  - Lower consumption than Pennsylvania
3. Ohio - Lower consumption than Pennsylvania
4. West Virginia - Lower consumption than Pennsylvania
5. Maryland - Lower consumption than Pennsylvania

If you don't succeed, quit after failing 80+ times.

Only Delaware has a higher consumption rate than Pennsylvania! But that's not really fair, because these rates are based on sales, not actually tallying people's drinks, and we know that a significant portion of sales in Delaware are from Pennsylvania residents in search of better prices, selection, and service. Those superstores on the border with Pennsylvania aren't there at random.

Is this the PLCB's fault? It has to be: there is no alcohol that isn't under their control. They are responsible for how beer is sold, they just don't do it directly, exactly the same as the alcohol regulators in other states work. Even their report on underage binge drinking shows they aren't doing what they are supposed to be doing. Pennsylvania's rate is worse than the national average, and not getting any better.

The State Stores are never checked for underage sales - yea!

Maybe the DUI and DUI fatalities make up for it.  No, you don't want to go there. You'll just be disappointed again; more proof that the Pennsylvania system isn't working.

If they're not "controlling" drinking, what is the PLCB doing? Surprise! They are a jobs program ingrained deep into state government, protected by politicians dependent on union money and votes. It has nothing to do anymore with protecting the public, nothing to do with enforcement of the border (what, 3 arrests last year? Wow...), nothing to do with service, and certainly nothing to do with treating the public fairly.

No, the only thing the PLCB is interested in is squeezing the citizens for more money. Prices increase when better deals are brokered, in the name of "variable pricing," which was sold to us as a way to lower prices of popular brands. No! It's a way to make more money, but not for the State, it's to cover their ever-increasing operations costs!  What other business decreases their number of stores by 25%...yet has more employees?

They don't even know their own name! Are they Wine & Spirits Shoppes? Pennsylvania Wine & Spirits ? Fine Wine & Good Spirits? We paid $3 million for the Fine & Good, you'd think they would want to use that everywhere. Might as well have saved that money -- our money -- and stuck with what most people call them even without a sign - State Stores.

PLCB Sales

PLCB Liabilities

The people in charge have no experience in the business. Prices are raised arbitrarily -- everything is done arbitrarily! -- and customer service is unimportant, because they have no legal competition. They've had record sales almost every year, but they're deeper in debt than anytime in their history...and it doesn't matter, because in the end, the taxpayers are really the ones responsible for that debt.

We, the citizens, deserve better. We are not safer, we are not better served, and we are not satisfied.

PRIVATIZE NOW.

Why the Pittsburgh Water & Sewer Authority is better than the PLCB

A few reasons why the Pittsburgh Water and Sewer Authority, a purely public agency, is better than the so-called "publicly owned" PLCB.

The PLCB Motto

1. They deliver 24/7/365.
2. You can get what they have on any holiday.
3. Nobody wants to replace them.
4. Run by people with real world experience, not political hacks.
5. Doesn't mind competition from privately-sold bottled drinks.
6. Not millions of dollars in debt.
7. Tens of thousands of places to get their product; in fact, they deliver to EVERY home.
8. They have never ran out of stock.
9. Never closes when a hurricane is 300 miles away.

AND LAST BUT NOT LEAST

10. Oh yeah, they have a Sommelier on staff and the PLCB doesn't.

Success and Failure

Quiz time boys and girls!  We are going to look at how to do things, and how to do things right. A tale of two (or more) control states. Record your answers and see how you did (some questions have more than one correct answer, but here's a tip: Pennsylvania is never the winning choice).

1.) This control state never had the FBI investigate their senior management in the last 20 years.
Pennsylvania did, and the investigation is ongoing.

2.) This state didn't have have senior management plead guilty to graft
Pennsylvania did.

3.) Pennsylvania spent $4 million (with an out-of-state marketing firm) to rename the State Stores. (Again!)
This state didn't.

4.) This state has people specifically travel to it for great booze prices.
Pennsylvania has people specifically leave it for great booze prices.

5.) This state " aggressively pursues a strategy that provides you with the best possible value."
Pennsylvania? Too lazy to try (and proud of it!).

6.) This state sells a 1.75L bottle of Jack Daniel's regularly for the same price Pennsylvania advertises as a "sale price." (And their sale price is $12 less than Pennsylvania's regular price!)

7.) Pennsylvania has the most liquor border bleed per capita in the U.S.
This state has the most reverse booze border bleed per capita in the U.S.

8.) This state won an award for being innovative in liquor and wine ordering (in control states).
Pennsylvania came in third...over a year later.

9.) Pennsylvania has one liquor store for every 21,000 residents.
This state has 20% more stores per capita.

10.) This state has 2 stores over 20,000 square feet in retail space, and a third that is over 33,000 square feet is being built.
Pennsylvania has one store in the entire state over 15,000 square feet. (And is a much, much larger state, with just under ten times the population of the other state.)

11.) The full time employees of this state generate 3 times the sales of the full time employees of Pennsylvania's State Store System.
The PLCB ended the last fiscal year almost $240 million in the hole.

Did you write down your answers? Let's see how you did!

1.) You could pick any other control state except North Carolina.
2.) Yup, any other control state except North Carolina.
3.) Any other control state.
4.) New Hampshire is famously New England's liquor store of choice.
5.) New Hampshire again.
6.) New Hampshire (as of 6/20/2016 PA regular price is $46.95, sale price $42.95. New Hampshire regular price is $42.99 and their sale price is $34.99. If you buy six, it's almost worth the trip!)
7.) Pennsylvania loses a huge amount of revenue to border bleed, while New Hampshire, with a population of about 12% of the Commonwealth, sells over 250% as much wine and spirits per capita (it ain't consumption, either: they have a slightly lower DUI rate). Over half of New Hampshire Liquor and Wine Outlet customers are from out of state.
8.) New Hampshire: innovative, Pennsylvania: wine kiosks and cost overruns.
9.) New Hampshire (1,350,000 residents / 79 stores) v. Pennsylvania (12.750,000 residents / 605 stores): not even close, New Hampshire wins again!
10.) New Hampshire: getting the picture?
11.) New Hampshire wins again: $647,000,000 in sales with only 305 full time employees = $2,131,000 per employee (right, over 2 million per employee). Pennsylvania? With $2,340,000,000 in sales and a bloated 3,100 full time employees, that's only $755,000 per employee. Sad.

Which state is a success and which is a failure? See, it's not even about Pennsylvania being a control state, it's about Pennsylvania being a lousy control state! If the Pennsylvania State Stores ran as well as the New Hampshire Liquor and Wine Outlets (er...and the taxes were similarly reasonable), this blog would never have started.

When you can't even do wrong right...time to give up. Privatize, because you will never "modernize" to the same level as New Hampshire. (Mostly because by the time the PLCB got there, New Hampshire would be 30 years ahead again.)

Why can't PLCB supporters do math? Or research? Or think for themselves?

I've made a number of posts on problems the PLCB supporters have with math: the "Why Johnny can't read or do math" series parts 1-3 and the "Wanna talk about Washington" along with the last week "The UFCW 1776 thinks that PLCB profit is less than minimal - We knew it all along."
The comments in some of the posts or the information provided by the supporters themselves proves that they still can't do math, or research their position with any degree of accuracy.

Let's take the main point in the comments that a newspaper story reports that the Washington State Office of Financial Management says that revenue collection was nearly $369 million in revenue for the incomplete (at that time it was written) FY 2014. Thus proving that privatization didn't work because it was less than the $448.7 million the state got in the last year of state run operation in 2012.

The only problem is that whoever fed our poster his info didn't look into the numbers at all. The $448 million also included $103 million in Wine and Beer taxes that aren't included in the newspaper's OFM story.  Also, the 2012 numbers include the one time input of $31 million received for about 160 state state stores that were sold. Lastly the story doesn't mention the change in the high beer tax rate which took place on July 1st 2013 which makes sense since they weren't part of the $369 million revenue collected.  The tax rate was lowered from $23.58 per barrel to $8.08 per barrel, a 291% reduction, decreasing the beer tax collected by over $47 million.  That beer tax reduction was not part of privatization. 

If you want to compare apples to apples then lets look at the last year of state run operation, use the total contribution to the state and local governments take out the wine and beer taxes and compare it to FY 2014 totals minus beer and wine taxes.  The 2012 total comes out to $448.7 million minus $103.1 million gives us $345.6 million and the 2014 total comes to $201.7 million minus $54 million in the wine and beer taxes (1) plus $267.4 million in liquor taxes  (2) which then totals $415.1 million and is still more liquor taxes collected than the last year of state run stores.  Remember that the 2012 total had an extra $31 million from selling the state stores.

I know, it is hard to imagine the Pennsylvania Legislature lowering taxes of any sort, but Washington is not Pennsylvania. I pointed this out in my posting "Washington is not equal to Pa"  In short, the continued lack of veracity by those who continually post in favor of the PLCB needs to be questioned at every turn, as they have proven they will twist and turn and outright lie when give a chance

Can there be any doubt that Washington is making more money without their state stores?

We deserve better than new "modernization" lipstick on the state store pig. Privatize and get the government out of retail and back into regulation where it belongs.

Let the free market rule, not the PLCB.

(1) WALCB annual report 2014 page 17
(2) the OFM report on I-1183 gives a slightly different number of $268.6 million due to ending on a different day.
Original post was updated; the Legislature changes taxes, not the PLCB. 

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.

The PLCB value to PA.

A fairly short look at another reason the PLCB is bad for consumers.

First we have to understand what "value" is. Value is not something defined by any organization but by the individual who decides to buy "X" instead of "Y." Does that $10 bottle of wine have more 'value' to you as an individual at this time then that NY Strip Steak? This time it may, next time it may not, depending on the scarcity and availability of the item or suitable substitutes. Value is not solely price-driven either, since for every purchase the consumer considers what they won't or can't buy if they do get the product under current consideration; be it that steak or a new car. You can see this individual idea of value in people who may have expensive shore homes with little furniture, driving a 10 year old car; or the opposite, with people who have an expensive car, but live in a place that needs more than just a fresh coat of paint.

Society also places value on things. Roads, Schools, Police, etc., etc. It also places value on labor. Obviously some skills are worth more to society than others, so their value is higher, and thus the compensation received is higher. One can get an idea of how society values a profession by the compensation given within that geographic region. But in Pennsylvania, alcohol retail labor prices are not bound by market forces, and are therefore not reflective of the scarcity or societal subjective valuations of such work.

The presence of extreme unionization further shows the manner in which wages and benefits have been manipulated to unsustainable levels, and how the State creates dependent constituents who will support the government entity because they alone benefit from it. What emerges is a wage rate and level of benefits that are not found in any other retail industry, supported and defended by a large workforce of unionized bureaucrats, who will fight privatization at all costs in order to protect their artificially high wages and benefits.

These artificially high wages and benefits lure workers to the PLCB. In effect, the high compensation tells potential workers, "This is where you are needed, there is a scarcity of this kind of worker and because of that we value you greatly". However, this is false because they are not brought about by market exchange and competition, but instead by government coercion, restrictions, and taxation. They mislead the worker, and draw them into the self-sustaining bureaucracy. If it were not for the PLCB with its artificially high compensation, these workers would've been drawn into other productive industries, where their wages would have indicated a true shortage/valuation of workers and would've been put to productive uses more highly valued by the consumer.

If you believe the PLCB is a worthwhile endeavor because it provides a revenue stream to the state, then these artificially high wages and benefits reduce that revenue stream, thus providing less benefit than if labor were priced at market rate . If you believe that the PLCB should not be selling retail or wholesale alcohol, then the artificially high wages and benefits cause prices to be higher than they otherwise would be along with limiting entrepreneurship, job creation, and competition . In either case the current labor structure is not optimum for the citizens except for the 0.04% of residents who work for the PLCB.

"No government enterprise can ever determine prices or costs or allocate factors or funds in a rational, welfare maximizing manner. No government enterprise can be established on a business basis even if the desire were present. Thus, any government operation injects a point of chaos into the economy, and since all markets are interconnected in the economy, every governmental activity disrupts and distorts pricing, the allocation of factors, consumption/investment ratios, etc." (Murray Rothbard - S.J. Hall Distinguished Professor of Economics, UNLV)

(I'd like to thank Joe Norton for his invaluable help with this article.)

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

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.