How much did they steal from you this year?

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

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

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

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

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

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

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

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

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

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

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

There, I fixed it for you, Tim.

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.

The PLCB has over $1.6 Billion in liabilities.....and wants to stay that way.

When your business has low debt, good cash flow, a decent profit margin, and service better than the competitors, you can expect somebody might want to buy it, so they can get the benefit of all those good things. And if you're in debt up to our eyes, have crappy management, legendarily bad customer service, your business doesn't look too good to the outside world, no matter how much demand there is for your product.

Yeah, we're talking about the PLCB. After 20+ years of "record profits," somehow they are more in debt now, than at any time in their history. Over $1.6 Billion in liabilities and a total position of $1.1 Billion in liabilities exceeding assets.

Why would any business want to be in that position? They wouldn't, unless they wanted to look like a bad investment to the outside world. If the PLCB was a real money making venture run by at least semi-competent people, then the private sector would have more interest because they know that:

1. They can run a consumer industry far better than any bureaucrat.  
2. They are inherently more efficient. 
3. They wouldn't be saddled with over a billion dollars in debt right off the bat.

YEAH! My business model sucks!

But the PLCB doesn't really care how much or what kind of debt they have. There is no mandate that says they need to be current, no benefit for being efficient, no propaganda value in saying "Look, we decreased our debt!" instead of "We gave 30 million more to the General Fund!" Although this year the amount they "gave" to the General Fund actually decreased $30 million, but you aren't hearing them say anything about that.

Why aren't they worried about their debt? The PLCB has a backup plan and it is called the taxpayers. They can't default - we cover it. Have to pay out more than you take in? No problem, we got it. Can't raise those variable prices fast enough to keep up with rising admin costs? Just give less to the General Fund, the taxpayers will make up the difference!

Remember when the PLCB tried to leech itself onto the state debt with a bond against future earnings? (Don't worry: we do.) Make yourself as unattractive as possible by hanging a 20 year debt obligation to your nose, and the people in favor of privatization (i.e., the majority of the adult population) have one less tool to work with.

Giant leech.  Like the PLCB but more useful.

I'd ask you to stay alert for any hint of debt reduction from the PLCB. With all this money coming in from ACT 39 and variable pricing, it shouldn't be long before you'll hear it every day. That's right, and I have a bridge for sale too...

Privatize.

6 Reasons to Keep The State Stores - Does it still hold up?

Marc Stier, a Philadelphia-based full-time progressive political activist, published six reasons why we should keep the State Stores five years ago. I thought I'd take a look at those reasons and how well they hold up today.

1. Poor regulation

"First, in an ideal world we could count on government regulation of private liquor stores to control the sale of alcohol. That’s important, because alcohol abuse remains a major public health hazard. But in the real world, regulation fails when it is carried out by those who hate government. And academic studies show that states that control the sale and distribution of alcohol have lower levels of problem drinking, drunk driving, and the violence and death that go along with them."

In an ideal world we could count on the government to control the sale of alcohol, Stier says, then makes the self-evident observation that the world isn't ideal. It never has been, it never will be. And what does "regulation fails when it is carried out by those who hate government" even mean? The state's liquor regulations are carried out by PLCB employees and BLCE cops: are they known for hating government? Doubtful.

So we're left with our non-ideal world, where the PLCB simply isn't very good at all at control or regulation. Pennsylvania has higher levels of DUI, underage DUI, DUI fatalities, underage DUI fatalities, binge drinking, and underage binge drinking overall than the states on our borders; the non-control states. So while academic studies (set in the ideal world, apparently) may show that states that control the sale and distribution of alcohol have lower levels of problem drinking, the reality is Pennsylvania, where the alcohol problems are in the stubborn middle, despite control.

2. Union organization

"Second, in an ideal world, the workforce in privately owned liquor stores would be able to form a union simply by securing the support of a majority of workers.
But in the real world, laws created and implemented by Republicans have made union organization in the private sector almost impossible. So I stand with currently unionized employees of the state stores."

Hung by that real world again. Stier didn't know that laws (and regulatory interpretation) would change to allow supermarkets to buy restaurant licenses and start selling beer and wine. And what happened? The majority of licenses purchased were by grocery stores which are already heavily unionized, most by the same union that the State Store workers already belong to. Guess union organization in the private sector isn't impossible after all.

3. Tax revenues

"Third, in an ideal world, businesses, including those that sell alcohol, would be taxed at reasonable rates, wouldn’t get to keep 1 percent of the sales tax to cover costs of collection they no longer have, and would pay all the taxes they owe.
In the real world, because we don’t have to worry about those problems, the wine and spirits stores generate more revenues for education, health care and other public needs than private stores would."

As we've always said, in the real world, the world we actually live in, tax collection problems are not a liquor store problem, they are a department of revenue problem. And having an average number of liquor stores for a state our size (about 2,400, compared to the 600 the PLCB manages to keep open...most days) will generate more tax revenue just due to the extra convenience. And don't forget the hundreds of millions of dollars that won't be going out of state to buy things that the bureaucrats in Harrisburg have decided we don't need or want. (BTW, if Stier thinks that in an ideal world alcohol would be taxed at reasonable rates...does he think the real world rates aren't reasonable? Because that's something we'd agree on.)

4. Wage disparity

"Fourth, in an ideal world, our governor and general assembly would be working to increase wages for working people and the middle class. But in the real world, the Republicans are attacking public sector workers and privatizing public services mainly to drive wages in the private sector down. So I stand against a proposal that is likely to make income even more unequal in our state."

In the real world, there would be LESS wage disparity. There wouldn't be the artificially large difference between a stock clerk in a grocery store and a stock clerk in a state-run monopoly liquor store (who are both represented by the same union...how's that work?). Also, I don't in any way consider the PLCB a service. It limits selection, never leads in new products, severely limits locations, and generally prevents entrepreneurs from providing the services consumers want. The PLCB stops job creation and is a drag on the economy, being well over a billion dollars in debt.

5. Discrimination protections

"Fifth, in an ideal world, the state would protect worker from discrimination by private businesses, including new private liquor stores. But in the real world, LGBTQ workers are only protected from discrimination by organized labor."

Simply not true..."in the real world." Again, Stier's pessimism (and drama) has undercut his positions, as the real world moved on and changed for the better. Workplace protections are provided by state law or regulation. Union agreements do not over-rule written law.

6. Corporate influence

"Sixth, in an ideal world, elections and public policy would be determined by the number of people on each side,  not by campaign contributions given by each side."

We strongly agree! Because by this measure, the PLCB should have been gone ages ago, since for decades the majority of people polled wanted private liquor stores. And we all know who gave more money to politicians -- those against privatization, even though it was against what the people wanted.


So what does this all mean?  In 2018 -- in the real world -- there are no reasons to keep the antiquated, anti-consumer jobs program called the PLCB.

Privatize.

At the PLCB, ALL money is TAX money

Well, the good 'ol PLCB got their annual report out, and proudly lists the following as "Contributions to state and local governments" totaling $749.6 million for last fiscal year:

• $371.5 million in liquor tax
• $146 million in state sales tax
• $185.1 million in cash transfers

Of course, the first number is the Johnstown Flood Tax, which was raised twice since the flood in question, the second time about 30 years after the flood. Still, at least they call it a tax. Same with sales tax. That's what passes for honesty in Harrisburg.

It is the last one that the whole PLCB rides on, the reason they still exist: $185 million in "cash transfers," or what they like to call "profit." They don't want to call it tax revenue, but that is exactly what it is, a tax. Webster's defines a tax as: A charge usually of money imposed by authority on persons or property for public purposes. Don't like that one?  This is even more specific: A compulsory contribution to state revenue, levied by the government.

When a government entity -- the PLCB -- is levying a compulsory charge -- which is anything above break-even on their monopoly retail operations -- to increase revenue - it is a tax.

They do that so the codified taxes -- the Johnstown and the sales taxes -- pretty much remain the same. And as we've pointed out many times, they have a police-enforced monopoly and their own pet judiciary system that allows them to do pretty much whatever they want anyway.

No matter what they say, this is not a service to the citizens, nor is it a business. Successful businesses do not have record sales and still go further in debt. The PLCB is well over $1 BILLION in the red...and it isn't going down, it is going up. Businesses do not lie to their shareholders (and they keep saying...that's us!) about plans that have no hope in reaching the levels they promise.

Remember all the money bailment was supposed to save: $100 million. And opening more Sunday stores: $22 million! Opening.remodeled/new stores faster: $25 million. Variable pricing: $75 million. That all totals up to an "extra" $222 million, ON TOP of what they were turning in previously. Wow, dolla dolla bills, y'all!

Have any of these things happened?  Maybe bailment? Probably not since after the first time the PLCB didn't have to take out a $110 million loan that money was never seen again.  No increase in capital spending, no increase in pension contributions, no increase in "profit," and no explanation where it might have gone. Uhhhh...gee, guys, what happened to all that extra money?

The only thing that has consistently gone up is how much red ink the PLCB uses. For real businesses, record sales does not equal record debt for too many years in a row, but the PLCB keeps on with lies to the public about how much of a benefit they are. That's right, lies because if you read the underage drinking report, look at alcohol related DUI and fatalities both underage and legal age. Look at consumption which according to the National Institute of Health spirts consumption - the thing the PLCB is directly responsible for - went up 56% in the past 20 years. We're barely in the middle nationwide. Look at binge drinking and we are 43rd best out of 51; dropping eight places in the past four years. Worse than all the surrounding states, worse than all the free states on our borders, worse than most of the entire United States. "Control" isn't really effective. All it is.... is annoying and expensive.

The PLCB does not control anything, they still exist only to provide a jobs program for the people that work at the PLCB. They aren't even good at what they do. At the last reporting -- well over a year ago, since the PLCB not only doesn't have to report these numbers, they make it a point not to -- 81% of the items they "negotiated" lower costs on had ZERO benefit for the consumer. As a betting man, I'll take every dime you have saying that percentage has gone up and they are screwing the citizens even more.

What they supposedly contribute is meaningless when compared to what they owe, the limited selection and poor service compared to other billion dollar stores, the universally bad reputation they have had over 80 years and the outright proven malfeasance of the leadership are just some of the ways you can see what we have to put up with in Pennsylvania compared to free states.

Maybe this has really been the plan since privatization efforts started in earnest. Run things so poorly, manage so ineptly, lead so incompetently and be so financially inadequate that it will cost far more for the state to bail them out to be able to rid ourselves of this outdated jobs program than to keep them. 

Naw...they ain't that smart...are they?