What the PLCB does to Pennsylvania

Are we better off with the PLCB? Or is the PLCB causing active harm to Pennsylvania? It's not a set-up question, it deserves real consideration. When the PLCB claims credit, saying "We do all this good stuff," we should look at the claims and see if the "stuff" really is "good." Here are some of their top claims for good; see what you think.

1. PLCB prices are competitive.
In reality, this depends on what private store you compare them too but overall, according to the National Institute of Health, the average bottle of liquor cost just over $2.00 more in a control state than in a free state. And since this study was done before the PLCB started flexibly screwing us, it is probably more now. You don't wind up with real liquor superstores clustered on the border because they charge more.

2. The PLCB limits underage drinking.
When looking at the PLCB's own report (2017) Pennsylvania's underage drinking is at least 7% higher than the national average for grades 8, 10 and 12. What's worse, you can reasonably assume that the number is even higher since the two largest school districts did not participate - Pittsburgh and Philadelphia.

3. The PLCB limits DUI's & DUI fatalities
Using information provided by Responsibility.Org we find that for:
Percent of Alcohol-Impaired Driving Fatalities of Total Fatalities - NJ, MD and WV are lower than PA. NY is tied and Ohio (a control state) and DE are worse.
12-20 Year Old Binge Drinking in Past 30-days : PA only beats WV of the border states.
12-20 Year Old Past Month Alcohol Consumption: PA is only better than WV (barely) and NY
Alcohol-Impaired Driving Fatalities per 100K population: PA is in the middle with 3 better and 3 worse.
Under 21 Alcohol-Impaired Driving Fatalities per 100K population: Again, PA is in the middle.
There is no clear benefit from the PLCB's "control." It appears to have no effect.

4. The PLCB limits sales to minors.
According to Stacey Witalec, then Director of External Affairs at the PLCB: "... because our stores are not licensed establishments, BLCE does not perform compliance checks in them." Since they are never checked by an independent group, then claiming they are made of green cheese has as much validity.

5. The PLCB turns in (cue Donald Trump voice) Huuuuuge amounts of money every year. 
Despite the appearance given by the taxes which pass through the stores, and the "contributions" that are required by the General Assembly, the PLCB had $1.8 BILLION in liabilities in January 2018. They owe well over $230 million in pension debt. In 84 years only 3 times did they contribute over 0.3% of the budget.

6. The PLCB provides 5,000 family sustaining jobs.  
About 40% of the store workforce are part-time. If those jobs are "family sustaining," then something isn't right.

7. The people that select wine and spirits are highly knowledgeable.
Except none have the highest regarded certificates of excellence in their profession. You never hear or see Pennsylvania leading the way in new trends, cocktails, or liquors. They always follow.

8. The "Chairman's" programs are great deals.
Until you realize that most of these didn't sell well in the free market, where there is strong competition, which is why they are cheap for the PLCB to buy.

The PLCB is just a way to take money from you the citizens to keep their bloated, inefficient jobs program alive. They do nothing for the state and everything for themselves.

Privatize.

How the PLCB Sells the High End: Badly

All throughout the Pennsylvania State Store System there are pockets of unwanted, unsold products that costs thousands of dollars. They aren't sold because some cube rat in Harrisburg estimated the market wrong, they were sent to some place that doesn't have the demographics to support luxury or niche products (or the sales savvy to match them to the appropriate buyers), or most likely the PLCB didn't have a clue on pricing and thought that since they were the only seller that people would pay three times as much to get these collector level bottles.

Case in point: The case of Chateau Ausone 2003 sitting at Store #3625 in Lancaster County, located midway between the sprawling metropolis of Columbia and Lancaster itself. Just across the street from the Sunoco and  walking distance from the Dutch Apple Dinner Theater (I'm not making this up). Average housing price is $210,000, about 10% more than the U.S. average. Not the place you would expect to find a $36,000 case of wine.  That's right: $3,000 per bottle, plus 6% sales tax. The Amish must be living large.

HEY NOW! LET'S DELIVER THAT WINE TO JAKE NOW ONCE!

While Store #3625 is a "Premium Collection" store, one has to wonder why these bottles aren't in Center City Philadelphia, or someplace in Chester County, or even on-line (where the PLCB usually puts booze it doesn't understand), or at least someplace that they could be stored properly. But they're sitting out in the land of scrapple and shoo-fly pies, getting older.

You might be saying to yourself, "Well, it's expensive, sure, but maybe they got a good deal on that case." Nope, not even close. You can go east across the border and save $1,005 PER BOTTLE! Hell, you could pay someone $500 to go get it for you, and still save money! Or drive into New York and get it yourself: you'll pay even more in taxes, but you'll still save a hefty $1,775 PER BOTTLE. As I reported back in February, the PLCB doesn't even attempt to get the best prices; they sure blew it in this case.

People who buy $3,000 bottles of wine don't generally get to the point where they can buy $3,000 bottles of wine by wasting money at the PLCB. Think about it: for the cost of a nice dinner and a night in the city, you could spend a few hundred extra and get TWO bottles in New York. Or you could visit the Dutch Apple and cap off your day by spending far too much at the State Store for one bottle. The PLCB counts on us being stupid. Stupid enough to keep putting up with this. (Stupid enough to not leave the state and break the law, but that's another story.)

Then there are the eleven bottles of Chateau la Mission Haut Brion Rouge 2010 ($1,197 a pop), sitting at one and one store only in Sewickley. It does look like they managed to sell one, so maybe it is a long term thing...except the PLCB doesn't do long term things. If it doesn't sell, it will go on sale and then go on clearance. Even then it won't be as good a price as the under-$600 per bottle (delivered!) you can find in other states. The PLCB probably won't make a dime on those bottles, but that's okay: they don't have to. Being a state-owned monopoly means never having to make a profit.

So on what do we blame things like this? Overly ambitions (or easily swayed) wine buyers? Untrained sellers? Overpriced products? Why not just wrap it all up and say: the State Store System.

Privatization is the only real Modernization. We deserve it.

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.)

Still more fun with PLCB numbers - Update

Keeping up their streak, the PLCB is still giving discounts to those who drink the higher end items and shafting those who don't.  From the July meeting agenda.

See if you can find your own.

Item - Unit Cost - Retail Cost - Page# - What it should cost


Johnnie Walker Blue with glasses in Refgid Box
$166.41  $234.99   8        $255.27

Casanova Di Neri Brunello di Montalcino "Cerretalto" DOCG
$184.56    $258.99    35    $283.12

Casanova Di Neri Brunello di Montalcino "Tenuta Nuova" DOCG
$66.10    $72.99    35    $101.40

Cain Vineyards Five
$101.36    $149.99    39    $155.49

Jameson Rarest Vintage Reserve Irish Whisky
$221.94    $309.99    39    $340.46

Glenrothes 1978 Vintage Single Malt Scotch
$643.08    $849.99    40    $986.48

Glendronach 21YO Parliament Single Malt Scotch
$100.53    $124.99    40    $154.21

Retail price should be unit cost times the markup (30%) times the flood tax (18%), 

$X * 1.3 *1.18 = Retail Cost

Still more fun with PLCB numbers

Today we are going to look at some disparities in the PLCB mark-up.  Part of the so called "modernization" is to have variable pricing, where the PLCB would raise the price (change the mark-up) of Captain Morgan a quarter so they could lower the price of Johnnie Walker Blue, for example.

But first a little history. Remember the PLCB was tasked to come up with a variable pricing plan in 1985 (within the Liquor Code). They did, but it was never implemented according to the Legislative Finance and Budget Committee Performance Audit of  May1992. However, it seems that there is already a variable mark-up in use. Looking at the June PLCB meeting minutes on page 27 you'll see Chateau D'yquem Sauternes for a unit cost of $681.05 and a retail cost of $909.99. Now to get from unit cost to retail you have to add on the 30% PLCB mark-up and the 18% JFT. There are some minor things like roundup and bottle fees that might add a few dollars too.

So we have:  $681.05 X 1.30 = $885.36 which is the markup.
Now impose the Johnstown Flood Tax:
$885.36 X 1.18 = $1044.73

But $1044.73 is not $909.99! So who gets shorted? The State or the PLCB? If the PLCB gets shorted, then the markup is only 13%. If the state is being shorted, then they are only getting 2.5% of their Johnstown Flood Tax, and not 18%.

I'd like to hear that explanation. Is the PLCB just arbitrarily changing mark-up so their prices are somewhat within range of normal and not so high as to be laughable? If they are, then why does that have to be "modernized," since they are already doing it? I find it interesting and this is not the only one - just the most glaring.

Another from the same meeting on page 29: Chateau de Beaucastel has a unit cost of $383.71 and a retail price of $519.99; again the math doesn't match.

$383.71 X 1.30 = $498.82
$498.82 X 1.18 = $588.61
But $588.61 is not $519.99

There are more, and you can do the math yourselves.
Balvenie 17 Year Old Doublewood page 19
Meteor Vineyard "Perseid" page 30
Dos Armadillos Tequila Extra Anejo page 32

Clean-up on Aisle Math!

I can find examples in other board meeting minutes, in fact, every one I've looked at (although I haven't looked at all of them nor every item). So what is going on here? A Union representative said it was probably a reporting error, which, if true, would explain it all away, but then bring up the question of why are there so many and why is it only on high priced items? Why don't regular items have as many reporting errors? I've gone through a pretty good number of them and you are welcome to try too...but so far it is only higher end items.

Even more proof is the infamous Screaming Eagle Wine debacle when the PLCB not only didn't pay the Flood Tax, make any mark-up at all and lost over $7,000 on the original unit cost of 10 bottles. I didn't see any legislative action approving that. That seems pretty variable to me going from 30% to -25% and not collecting or paying any taxes.

Does this mean the PLCB is somehow giving a break to people who can afford $900 bottles of wine while shafting the average citizen? Sure looks that way but if any representative of the PLCB wants to offer an explanation, I'll post it. I know that the Office of the Chief Council of the PLCB reads this since she has searched me out, so c'mon Faith you or your minions pass this along to somebody who can answer it.

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")

Oh PLCB - you got some splainin' to do!

Just like Ricky did with Lucy we Pennsylvanians wonder what the PLCB is doing some if not most of the time.  We hear from the PLCB and the unions that our prices in state are so great but that over $300 million a year is lost in border bleed.  Which makes one wonder if we have such good prices why isn't there a positive cash flow into the state instead of a negative cash flow out of the state? Maybe convenience, selection and service are the deciding factors not price.

Speaking of going out of state to buy liquor we have all heard how Washingtonians are going to Oregon border stores in greater number since privatization to take advantage of cheaper prices.  That is saying something when Oregon has the 2nd highest liquor taxes in the country but would Pennsylvanians also shop in Oregon if they had the chance? According to the Tax Foundation their liquor taxes are 315% of ours.  They are also a control state which means limited hours, selection in store and convenience just like here.  

This story from KNDO NBC 23 out of Yakima, WA shows the inside of an Oregon liquor store and at about 1:15 in the clip you can see some prices of what they have. The signage says these are everyday prices not sale items. I've done a comparison of those prices to PA prices to see how much less expensive we are since our tax rate is so much lower. This is what I found.

Seagram's Gin 1.75L PA $21.99 - OR $18.39 (PA 23% higher)
Seagram's Vodka 1.75 PA $21.99 - OR $17.39 (PA 27% higher)
Kahlua 1.75 PA $42.99 - OR $32.39 (PA 30% higher)
Wolfschmidt Vodka 1.75L PA $14.99 - OR $14.39 (PA 10.7% higher)
Baileys 750ml PA $25.49 - OR $21.99 (PA 21% higher)
Pinnacle Vodka 1.75L $23.99 - OR $21.99 (PA 14% higher)
Smirnoff Vodka 1.75L PA $25.99 - OR $19.99 (PA 29% higher)

Now I know what you are thinking.  Al, your numbers don't work out. Well - they do.  Oregon doesn't charge sales tax so PA prices are an additional 6% higher then just what the listed price differences would indicate.  So how does this state government controlled wholesale operation with 3 times the taxes sell for less?  As the header says, "PLCB - you got some splainin' to do!"