A closer look at the PLCB Cash Cow

The PLCB and the UFCW (the State Store clerks' union) have always fed the public (and the Legislature) a big lie about the PLCB Cash Cow. They make it sound like their bulging bovine is comprised of nothing but filet mignon, and shits millions into the General Fund.

What they want you to think

However, the Federal Government doesn't think so and with new accounting rules in effect, the real value of the PLCB is more starkly in focus. Remember a couple years ago, when pension debt was required to be included in the annual report, showing that the incompetents in Harrisburg were really $240 million in debt? Now other benefits besides just pensions have to be taken into account, and it turns out that the PLCB is OVER A BILLION BUCKS IN DEBT. with total liabilities of over $1.7 billion! Yup, billion.  With a 'B.'*

Let me say that again. The agency that has been stealing from the public and short-changing the clerks the benefits it promised (which it could never afford to begin with) for over 80 years, while telling us all that it makes money...is over A BILLION DOLLARS in debt.

Don't believe me?  Why not ask the PLCB themselves? Here's the minutes from their December 6th meeting; take a look at page 9.

The reality of 80 years of lies.

What does it mean? It means that even with stealing more from you with "flexible pricing," even after screwing us with rising prices just because they want to, even after cheating us out of the discounts given by the suppliers, even after purposely working against PA businesses with imported house brands...they still need more...a lot more. The lying political hack they call a Chairman could barely keep a straight face when he told this whopper: "And, as we’ve said all along, prices will increase for some items, when the supplier and PLCB agree that the market can bear the increase." 

Looking at page 10 of the minutes you can see that for October they claim a profit (Change in net position) of $8,623,941. That means that if they didn't do anything else besides pay down debt, it would take ten years just to break even for the debt due today. Of course, they would be accruing more debt, new debt during those same 10 years. This is a Ponzi scheme worthy of Bernie Madoff. No wonder they worked so hard trying to get the Governor's borrowing plan into place. It would further obligate the citizens into paying off their debts and for the next 20 years keep the people who care about limited government and fair treatment for the citizenry at bay.

What does it take to be rid of them? How incompetent do they have to be? How anti-consumer will they get trying to pay off what they owe? You know where this money has to come from, don't you? I got a hint: the wallet of someone you know really, really well.

Can we afford to keep the PLCB's cash cow? Are state stores worth it? 3,500 clerks should not hold hostage a state of 12 million people. Privatize.


(*) Now $1.8 Billion in liabilities for January)

"Given our need inside this building..."

Pennsylvania Liquor Control Board member Mike Negra may have inadvertently told the truth (he'll probably be fined for that). Quoted in a story about the PLCB's recently announced price hikes that ran in several state newspapers, Negra let it slip that the PLCB's main mission is the survival of the PLCB, its jobs, stores, and cushy bureaucratic positions. How else are you supposed to interpret this quote?

"Given our need inside this building and throughout our agency due to rising costs of employee benefits and so forth, a lot of that is out of our hands, we felt it was something we needed to do," said board member Mike Negra. "That's what is behind it."

Any PLCB bureaucrat

You see that, right? "Given our need inside this building..." None of the usual window dressing and self-sacrificing bullshit about how the PLCB does so much for the state. Nothing about the General Fund, nothing about the state's financial crisis, nothing about the State Police, nothing about actual alcoholism prevention (what about the children???), and certainly nothing about you, you poor shlub. No, the prices are going up because the bureaucracy needs to fund their ever-increasing operating costs. 

We told you, over and over, that "flexible pricing" would mean "higher pricing." We take no joy in being right, we just wish someone would have listened.

Now can you finally call your rep and tell them it's time to privatize this mess? All of it?

The letters

I'm not going to post much commentary on these letters between myself and the PLCB;  I'll let the letters speak for themselves.

February 26th, 2016 Letter to PLCB Chief Counsel Rod Diaz

Dear Mr. Diaz,
On Feburary 25th the House held an Appropriations Committee meeting with the PLCB.  In that meeting the Chairman of the PLCB Tim Holden said that they do not negotiate with suppliers because, and this is an exact quote: "People somehow believe that we have the ability to negotiate with the vendors. We have to do it proportionately so we have to have a markup that's consistent."  Later Board Member Michael Negra reiterated with "The manufacturer sets the MSRP, the manufacturer's suggested retail price, and through the system it's backed down to determine what we pay for that product."

Now looking at Title 47 Ch. 1. Art 2 Section 2-207 (b) General Powers of the Board, I can find nowhere that says prices can't be negotiated nor that they have to use the MSRP. In fact, the wording of the stated section, "Prices shall be proportional with prices paid by the board to its suppliers and shall reflect any advantage obtained through volume purchases by the board.". would seem to indicate that they should be negotiating to gain an advantage through volume purchases.

Given the language of the law, I'd like to know what the Board's reasoning (legal reasons, decisions, laws, opinions or whatever else pertains) is used to justify not negotiating and simply using the MSRP to determine pricing.

Sincerely,
Albert Brooks

April 6th, 2016 -- The reply came not from Chief Counsel Diaz but from Elizabeth Brassell the Director of Communications for the PLCB. It turns out there is no legal reason after all. (The emphasis in bold is added.)

Mr. Brooks:
I apologize for the delay in getting back to you, but on behalf of the PLCB and Chief Counsel Rod Diaz, I’m happy to address your February 26 email regarding the PLCB’s ability to negotiate prices with suppliers of wines and spirits under the proportional pricing mandate of the Liquor Code.

You are correct that the Liquor Code does not indicate that prices can’t be negotiated or that the PLCB has any obligation to use manufacturers’ suggested retail prices.  In fact, as you suggest, the PLCB’s buying power, as well as its discretion to list and delist products, allows for some price negotiation with vendors. However, any advantages obtained through volume purchases are directly reflected in the shelf price.

Because of the proportionality requirement, the mark-up applied to wine and spirits must generally be uniform across the state and across various product classes and brands.  Suppliers know that, and when they present products and prices for PLCB regular listing consideration, they often start at or above the retail price at which they want their product offered on our shelves, then reverse engineer the tax and mark-up formula to get to the price at which they’ll sell to the PLCB.

It is this general listing process that Board Chairman Tim Holden and Member Mike Negra were referring to in discussing price negotiation in recent appropriations hearings before the legislature. 

While the proportional pricing requirement was intended to promote flexibility when it was enacted in 2007, in reality it simply limits the PLCB’s ability to consider any factors in setting a shelf price other than what we pay vendors. Suppliers are aware of these constraints and use it to their business advantage. 

We do, however, actively negotiate lower prices on one-time buys, which is how we procure products for our Chairman’s Selection and Chairman’s Advantage programs, as well as many luxury products. We believe price negotiations are a key reason one-time buys are the fastest growing part of our business.

The PLCB is charged both with offering consumers quality products at reasonable prices and maintaining and growing tax revenues and profitability for the General Fund.

In seeking a legislative amendment to Section 207 of the Liquor Code, we’d like to have a clear mandate to consider other factors in determining shelf prices, such as product class, the sales history of the product, surrounding sates’ competitive prices, national market pricing and the marketing support suppliers put behind their products. This would allow us to lower some prices and increase other prices as the market allows, thereby applying the benefit of flexible pricing as increased PLCB contributions to the General Fund.

Thank you for your questions and the opportunity to respond.  Having read your blog posts and social media commentary over the years, we’d also like to invite you to visit PLCB headquarters and meet with leadership staff here. We’re always striving to improve our operations, and we welcome a productive dialogue that could help us advance. Let me know if you’re interested.

Elizabeth Brassell | Director of CommunicationsPennsylvania Liquor Control Board 604 Northwest Office Building | Harrisburg, PA 17124

 

Who do you believe?

April 7th, 2016 -- My reply, pretty much saying that if you wanted to do better...you could.

Dear Ms. Brassell,
Thank you for the reply. I really do understand that negotiation is a give and take between two parties, each with their own idea of the value of what is being bought or sold.  That said, I have serious doubts that the PLCB has ever done any analysis to see if the sales increase from lower pricing would more than offset the amount collected at the current higher price thus collecting more for the state. Since increasing sales IS one of the primary goals of the PLCB, this option should be taken far more seriously than it is.

As in my example with Oregon for a 750ml of Jack Daniel's, there certainly is room in the pricing structure, since Oregon also works on a set markup, and yet the math says they have to be paying a lower price even though Pennsylvania buys more than 5 times as much. 2,422,647 units for PA Vs. 433,506 * units for Oregon.

While I realize negotiation is not possible across all the items that the PLCB stocks, certainly the top 100 sellers should be scrutinized using Sales Price Variance Analysis to decide what cost is most beneficial to the state and consumer, it isn't that difficult to do.

I appreciate your offer of a meeting but my goal is not to make the PLCB better, they have had 82 years to work on that themselves, my goal is to eliminate the state store system and have it replaced with what most of the country considers normal.  A free market system that is regulated by the state.  Since our goals are non-congruent with each other a meeting will not further my wants and won't shed any more light on your problems than the reading of the blog which you say you already do. 

Sincerely,
Albert Brooks

So there you have it. Why they say they can't or won't try to get better prices for the consumer and why I say they aren't trying. The question now is...who do you believe?

Our Goal Is To Be Better Than Utah

The PLCB put out their Fiscal and  Retail Year In Review booklets the other day. Nice to see that they have a goal, and I quote:

"Be recognized as the best-in-class wine and spirits retailer, distributor and regulator in the United States."

Which means that they want to be better than Utah...the only other state (or company) that retails, distributes, and regulates wine and spirits.

They might have to try harder to beat Utah...

The Annual report starts off with listing the Board Members and Directors including my fav, Faith Deihl, who hasn't worked their for a few months now. Don't want to confuse the public by being accurate, after all. It then goes into the whiny phase saying that if the government didn't make them account for all their liabilities, they would have made lots more money. Sorta like you saying your budget is fine until you have to pay your mortgage.

They continue saying how sales went up 4.2%, but what would have been the net (if they didn't have to account for all the stuff they have been ignoring for decades) only went up 2.5%  In other words, even without the accounting changes, expenses went up faster than sales...again.

Continuing to obfuscate reality they almost brag about having 134 different PA wines. However, there are more than 200 PA wineries with well over different 1100 wines and the vast majority of PA wineries aren't carried by the PLCB. The truth has gotta hurt. They also didn't mention why the Department of Drug and Alcohol Programs received 48% less this year, with funding dropping to $1.7 million to educate and prevent problem alcohol use.

The total number of stores went down by one to 603, but since those little One-Stop Shops went up by three, that means four real stores closed. But after 35 years the One Stop Shops hit their highest level ever - eighteen! The PLCB calls that a success.

Another point they don't seem to want to bring up is that Service & Demeanor inquiries went up by 8.4% in just one year. No breakdown this year if they were good or bad. Privatization must be having some effect since salaried employee turnover is up 7% along with intermittent clerk turnover also up 7% to almost 40% now. Finally, the PLCB itself shows that over 45% (an increase over last year) of  their entire workforce are classified as part time or seasonal (page 43), which are hardly "family sustaining" jobs.

Something else they don't say is that while the PLCB offers employees four wine courses, none are recognized by any established certifying agency. Sorta like getting a degree from an unaccredited online school. There still isn't a Sommelier in the entire wine selection process, which one would think should be a requirement when selecting wines for the entire state.  As I pointed out in another post, the PLCB now has 80 "wine specialists" for 603 stores, while Total Wine averages 5 PER STORE. Oh, PLCB, you got a ways to go to be best at anything.

While they try to explain it away, the single most important thing in the entire annual report is:

• Lower operating income of $111.5 million represents a compound annual growth rate (CAGR) of 1.8 percent since fiscal year 2010-11. Operating income has been adversely affected by dramatic increases in benefits costs in excess of sales growth, specifically in the following categories: pension (up 105.6 percent), workers compensation (up 520.6 percent!) and retiree healthcare (up 29.6 percent).
This isn't going to go away either.

Of course, the Retail Year in Review is mostly useless since it only describes what sales are in a police-enforced monopoly where the unqualified select what is allowed to be sold, so that certainly biases what sales would be compared the free market.

One picture says it all

All you need to know about how the people feel about liquor privatization. (click the pic)

The PLCB has nothing to hide...unless it makes them look bad

Chairman Tim Holden:
What's the PLCB hiding?

As reported Sunday in the Pittsburgh Tribune-Review the PLCB, an agency with no business reason to hide anything (since they have no competitors), has not been very open or honest when dealing with their bosses — that us, the citizens of Pennsylvania. After all, that's what their supporters keep telling us, that we're the owners of a "valuable public asset." Shouldn't the "owners" be able to ask questions and get answers?

That's not what happened, according to the Trib's reporter, Kari Andren; instead, the LCB instructed their press secretary to delay the release of such information by forcing the Trib to go through Right To Know channels:

The agency's board members directed a press secretary not to provide basic information about a former employee, such as dates of service, job title and salary, unless the reporter filed a formal request — a move that could have delayed the release by more than a month, the emails obtained under the state's Right to Know law show.

“We have to watch what we ‘give' her regarding employees without going through the Right to Know channels, even if it is public information,” board member Michael Negra wrote in a Sept. 23 email. “Agree,” Chairman Tim Holden responded the same day.

LCB spokesperson Elizabeth Brassell said the agency, “fully respects and supports the release of public information to interested parties.” But Erik Arneson, head of the agency charged with overseeing the state's open records act, said the board members' actions were not in keeping with the intent of the law. “The Right to Know (RTK) Law was not designed to be a tool used by agencies to delay access to clearly public information,” Arneson said.

More proof of this use of delaying tactics is the now 111 days over which the PLCB has refused to release their yearly financial statements. Some were verbally stated during the Ross hearings over two months ago, but so far nothing has shown up on paper or online. If the PLCB were a "real" business, they would have had to release their yearly statement before the first quarter earnings statement. However, the PLCB doesn't update the citizens with quarterly statements. Why not? It's a painfully simple answer: they aren't a real business, and never have been, and never will be.

Melissa Melewsky, a media lawyer with the Pennsylvania NewsMedia Association, agreed that the LCB's approach doesn't follow the spirit of the open records law, or Gov. Tom Wolf's call for government transparency. Wolf said he was “confident in Chairman Holden's ability to continue to make the LCB more transparent,” and the previous Chairman (and still current board member) Skip Brion has said, “This is a state agency; we should be as transparent as possible.” Apparently he has changed his mind.

This is not the first time the board has used RTK to delay, or has done things in the dark that should have been in the sunshine of public scrutiny. Years of notational votes (where the Board members meet informally and off the record to make decisions, and then only vote on 'that thing we talked about' in official meetings) and vague to non-existent board meeting information have keep the "owners" (you and I) in the dark about the working of the PLCB.

Who knows, if the public were privy to the machinations of the State Store System, we may never have had wine kiosks, or $66 million in computer system cost overruns, or paid over $4 million for an out-of-state firm to come up with that snappy "Fine Wine And Good Spirits" branding. All money well spent, I'm sure...once the real facts finally come out in a few years, the brilliance of it all will shine clear. Or not.

This is not the first time the PLCB has been publicly charged with ignoring the intent of state law; this is not the first time they've lied by omission. This is not the first time they've delayed the release of reports on their performance. So we have to ask: why the delay this time? We see the smoke, what is the fire that the PLCB is trying to hide while privatization is still a very real possibility in the Legislature? We urge the Trib to keep digging — faster, if possible — and encourage the reporters at the Inquirer, PennLive, the Daily Record, and the Post-Gazette to do the same. Because we the citizens — the owners — need this story to come out before privatization slips away. It's clear that the PLCB feels threatened by it; that's enough reason to dig out the truth.

The time to privatize is now.

PA House Democrats drank the PLCB Kool-Aid

Thinking the Democrats in the PA Legislature might suddenly, somehow come to their senses on normalization of the PLCB? Forget it. All the quotes below are taken from the PA House Democratic website. It seems that they have their own way of looking at things that may or may not match reality. Let's take a peek.

Facts?  Nobody posts facts on the internet!

"By modernizing and increasing convenience for customers, the stores would generate at least $125 million more per year once the changes are fully phased in."

That extra $125 million, even if possible, has to come from someplace and that place is you the PA consumer. Since they only make about that now with the prices they charge, how do you think they will double it? As for convenience, the number of stores has decreased by 25% since 1970, from over 750 to 605, and 7% of that loss is since 2010. Ask the people with only one or two stores in their entire county how convenient the state store system is.

"Recently, privatization in other states has brought higher prices and reduced selection in grocery stores."

There is only one state that "recently" privatized: Washington in 2012. Anyplace else was over 25 years ago and can hardly be called "recent" in my opinion.  So privatization brought reduced selection in grocery stores. Well, we can guarantee that won't happen in Pennsylvania, since they won't let us buy wine or spirits in grocery stores now! As for the higher prices, that's due to the higher taxes and fees that were imposed at the same time as privatization: can't blame that on the stores, that's just the greedy government. Don't want higher prices? Simple: don't raise the taxes!

Even if we look at states that did privatize 25 years ago we find that according to the PFM report and the State of Iowa itself -- they made more money. To quote the report, "Privatization was deemed successful from a revenue standpoint, with profits increasing by $125 million over the first 11 years of privatization compared to estimates under State control of the stores." For West Virginia it is said that not every county has a liquor store since they privatized and while that is true, NOBODY in West Virginia has to drive as far as some residents of Pennsylvania do. Let me say that again - NOBODY.

"In some communities, privatization would lead to the opening of more liquor stores, while in more rural areas, consumers might not have access to a liquor store without driving out of their way."

Again using Washington, only one of 39 counties has less liquor stores now than they did before privatization and even that county still has a liquor store. As far as driving out of their way, I guess that is subjective since the House Democrats don't think a round trip of 75 miles is "out of their way" as this citizen does. Perhaps the two years the people of Mountaintop had to wait for a store to reopen in the same shopping center wasn't an inconvenience either. More liquor stores means more convenience. Of course there will be more liquor stores! Pennsylvania has one of the lowest store densities in the entire world, outside of countries like Saudi Arabia where alcohol is literally illegal. We have been under-served for decades.

"PA Wine and Spirits stores carry 30,000 products, with an average of 3,000 in stock at any time. The stores provide or support 4,000 family sustaining jobs in every county in Pennsylvania."

Not to get too much into semantics, but if you have a product on a list -- that you don't control -- that just means it MAY be available in your system. There are private stores with 11,000 wine and spirits in stock, on the shelves, more products than in the entire state of Pennsylvania, and they can (and happily will) special order things too. There are none in Pennsylvania, of course, but they are easy enough to find. Just look across our borders. As for the jobs, over a third of all PLCB employees are part time and that isn't a "family sustaining" job. That leaves about 3,000 full time employees and not all of them work in the stores or support the stores so that 4,000 number is certainly high. The PFM report doesn't agree with it either. In any case, the states and provinces that have fully privatized tripled employment in the industry.

State Store Motto

And finally in an outright lie they finish up with:

"A June 2014 poll by Franklin & Marshall showed that more than half of the people questioned (57%) said they preferred to modernize the State Wine and Spirit Stores, rather than sell them off."

Too bad that the real number is 32% as shown on page 16 of the poll.  BTW, it went down in the March 2015 poll too. There has never been a scientific poll that shows the people want to keep the state stores, not once, not ever in 80 years. Maybe because we don't want the state store system and never have.

END IT, DON'T MEND IT.

The UFCW 1776 thinks that PLCB profit is less than minimal - We knew it all along.

One of the more outrageous claims by the UFCW in the past week has been that border bleed is "minimal". From their "fact sheet" on Speaker Turzai's recent PCN interview:

"Fact:Turzai cites an unknown statistic, but in reality border bleed is minimal and there is reverse border bleed into Pennsylvania. (See No. 6 in outline)" (The outline mentioned is not provided or listed by the UFCW.)

How they know this isn't said, but let's look at the official PLCB report of 2011 done by the Neiman Group. The PLCB doesn't list this study on their website, which is why the link points elsewhere but they bought and paid for it nonetheless.

This report only used the Philadelphia area counties of  Berks, Bucks, Chester, Delaware, Lehigh, Montgomery, Northampton, and Philadelphia, so I'll only be using sales from those counties myself.  The following is a list of how much PLCB sales were in each of the above counties for 2013, the latest available taken from the 2013-2014 Year In Review, page 13.

Bucks	$135,700,317.31
Berks	$52,109,662.18
Chester	$120,388,495.05
Delaware	$77,696,292.72
Lehigh	$70,209,394.60
Montgomery	$200,801,436.82
Northamton	$41,606,625.89
Philadelphia	$228,424,798.19
Total	$926,937,022.76

That $927 million represents 42.6% of all PLCB sales. Using the Neiman report that says 5% of people only shop out of state (page 12) that would mean $46.3 million in lost sales by itself.  However, the Neiman report also says that 40% also shop in and out of state. Since people who buy out of state spend more (page 16) it would be safe to think that the total sales amount of those that shop in both would be greater out of state. I'm going to use half, just to err on the conservative side. That would meant that people spend at least 20% of total sales (half of the 40% who shop in and out of state) out of state. That number would be $185.4 million and that's almost certainly low.

So the total minimal border bleed is $46.3 million plus $185.4 million, or $231.7 million: about 11% of the entire state store sales. Or is it? As the Neiman report says, people spend more out of state to begin with, and then you have to look at when the report was made: 2011. Things weren't so good in 2011. Gas was higher, the economy was worse, people traveled less, all things mentioned in the report as potential reasons why people might be spending more in state in 2011. That isn't as true now and the border bleed number may be in the $300 million range -- which according to the UFCW is "minimal."

So if $300 million, or even $231 million, is "minimal," then the $124 million in non-tax contribution by the PLCB is less than "minimal," and shouldn't even be mentioned, based on that logic. There are very few things that the UFCW and I agree on, but it seems that this logical conclusion is one of them.

Maybe they are wrong and it isn't minimal. How many other things are they wrong about either on purpose (usually called lying) or from just not being able to read and research. I'm just one guy and can find and figure this out, they have thousands of members, entire staffs and apparently no fact checking. Why should we trust them?

Tell your legislator that you are in favor of HB 466 and get the state out of the liquor business.

HB 466 will allow 1800 liquor store licenses -- far more convenient than 600 state stores, no matter how many baskets and islands and palm trees they put in them. HB 466 will allow 825 grocery stores to sell wine, something the UFCW is dead set against (unless it involves more UFCW workers in a One Stop Shop; something that has failed for the 34 year existence of the program).

HB 466 will get the state out of telling you what you are allowed to buy -- no "modernization" plan does that.

HB 466 will give the freedom of choice found in other states -- modernization doesn't do that either.

HB 466 will benefit small business -- The PLCB modernization does not.

Modernization is a false choice because nothing changes.  Just because they paint your jail cell and allow longer visiting hours does not mean you are free.

Privatization is REAL moderniization

PLCB competitive? Only when the wrong numbers are used.

I've been waiting to post this just in case the author or editors of the PG decided to post a retraction, correction, or even apology for publishing such a mistake-filled and incorrect article. Alas, no response to my emails to them and nothing in the paper itself. It looks like good journalism has fallen by the wayside at the PG, or at least when it comes to this piece.

The other day the Pittsburgh Post-Gazette ran a story about how PA prices were competitive with those of Ohio and West Virginia, both alcohol control states as is PA. The story itself was filled with all sorts of errors that you can read about in the comments, but our trusty Union Representative said that it "Doesn't change a thing about the premise of the article which is absolutely true."

Oddly the PG says "The policy of post-gazette.com is to correct content mistakes in articles, blog posts and on social platforms as quickly as possible. Corrections to articles will be posted at the bottom of the articles. The text of those corrections will be displayed here."  Not like they have to stop the presses to print the correction on-line.  Isn't 4 days enough time to check a website?  Myself and others were able to check the prices in minutes not days. Based on their website list of corrections the PG has made any in a day shy of 2 months so maybe they aren't "as quick as possible" 

The story got me to thinking about why it might be true.  Ohio ranks as #11 in liquor taxes and PA is #15 with 36.2% lower taxes than Ohio according to the Tax Foundation so it really should be a surprise that prices are close. Add to the disparity that Ohio generally has a higher sales tax  (local and state) than PA and the difference should be even larger. What does Ohio do better than PA? More efficient, smaller bureaucracy, less graft, less bloated management, and maybe less child killing greed than the PLCB? They also have more convenience with wine and beer both sold by private businesses.

The real question shouldn't be if PA liquor prices are competitive with Ohio but why doesn't PA beat Ohio across the board?

Privatization facts & figures

All the arguments against privatization — job losses, revenue losses, public safety endangered, less selection and higher prices, less convenience, and worse service — are addressed and refuted below, with facts and common sense. Arm yourselves with knowledge, and pass it on to your legislators.

Jobs - Everyplace in North America that has privatized some or all of their liquor distribution system has seen an increase in employment. Jobs in the industry tripled in Washington State and Alberta, Canada, the last two places that fully privatized. They doubled in Iowa, which kept wholesale sales but privatized all retail. Are the jobs exactly the same as what they replace? Probably not; are all jobs the same at every store where you shop now? Why would alcohol sales be any different?

Revenue and Border Bleed - Sales have gone up in privatized systems, every single one; how much is dependent on taxation more than anything else. Case in point is Washington State, which already had the highest liquor taxes in the country before they privatized and added new fees. Sales have still gone up in state, and the fee-driven increase in border bleed has increased sales out of state. If they hadn’t raised taxes, in-state sales would have increased even more. Washington State’s border bleed is nowhere near the border bleed rate in PA. The border bleed increase for an entire year in Washington is about a weeks worth of the border bleed PA sees.  While privatization will not eliminate border bleed in PA, it will, just from a convenience standpoint, decrease it. A privatized PA will still not be able to equal pricing of states with lower taxes, but it will make it easier to buy locally. People pay more for convenience all the time, even when less expensive alternatives exist reasonably close. Case in point is buying almost any food or dairy item in a convenience store — “a damn Sheetz,” as Senator Ferlo would snarl — instead of a grocery store. The key is to not raise taxes.

Revenue 2 – Iowa actually decreased their taxation and still reported making more than they would have if they kept their state stores.

Revenue 3 - It isn’t only direct liquor taxation that has to be taken into account. For PA, there will be business taxes that the current system doesn’t pay. There will be more income taxes from owners and workers, since there will be more of each. There will be new jobs created that do not exist under our current system, delivery to bars and restaurants being one example, and increases in current jobs to accommodate new business. Again, just one new warehouse in Washington State employed 1,100 workers, which was more than the entire state store workforce of 937. In the long term, money will be saved by not having taxpayers responsible for future retirement and medical shortfalls. The current amount the taxpayers owe for PLCB pensions is $550 million and is expected to go up to $600 million by the end of this year.

Safety – Under the current system PA has more DUIs, DUI fatalities, underage DUI, binge drinking and underage binge drinking than 4 of the 5 privately run states on our border, and is just average compared to the rest of the country. Washington State has seen an 8% reduction in DUI crashes and DUI fatalities since privatization. While some may claim that is because there was less policing, policing has no effect on the decrease in DUI fatalities. Alberta, Canada has decreased their DUI fatality rate to one of the lowest on the continent (37% lower than PA) since they privatized, even though they have over 1,300 retail liquor outlets now for a population of under 4 million. Is there a connection? No way to say without further study, but it’s plain to see that privatization didn’t make the situation worse.

Safety 2 – Limiting underage access has always been a point for those opposed to privatization. While the true rate of underage purchases in PA State Stores is not known, since they are never independently checked (or policed in undercover sting operations, as privately-owned liquor stores in other states are) it would follow that it should be about the same as other localities which have similar requirements. Washington State was at approximately 93-94% compliance before privatization and is at about 92% now. Another thing we can learn from Washington State’s experience is how to limit direct unobstructed egress to cut down on shoplifting.

Selection - Under the PLCB, urban areas essentially subsidize rural areas for alcohol selection, something that would seem to go against their stated mission of limiting access. This is the retail equivalent of PENNDOT making sure there is a Jaguar dealer in every county, because without government intervention they wouldn’t be there. Where the population can support them there will be larger stores, and in areas that can’t support those, there will be smaller stores. This is the retail model found almost everywhere. It is not the government’s job to make sure you can buy a wide selection of booze, especially when they say it’s detrimental (but they still want to sell you more of it). It is their job to make sure that a business climate exists which will allow retailers to try to sell whatever they want within the regulations and restrictions. To date I have not heard a reasonable explanation as to why the state should subsidize alcohol like they do milk.

Selection 2 - That in-store selection will increase is not in question. One only need to look across the country to stores like Bev-Mo, Total Wine, Roger Wilco, Binny’s, HighTime, B-21 and hundreds of others to see what the private sector can provide. They provide it based on consumer demand, not by what a bureaucrat or committee with unknown or non-existent credentials selects for them in a small capital city, far from major markets. What is in question is what variety will be available in rural areas. The answer is the same as it is for any other product. If the demand is there, the market will provide it, just as it does in rural grocery stores and hardware stores. If what you want is not available locally, chances are you will be able to order it, the same as now, only you probably won’t have to buy a case at a time as it is with a good portion of the current system. The entire state of big, small, specialty, urban, and rural stores will be open to you. Not that every store will ship but it will certainly be more than now, because real businesses strive for customer service since their existence depends on it and not state police enforced monopoly power.

Prices – There are no absolutes in pricing. So much would depend on the system that is selected. Do we continue with the three tier system or do we eliminate one tier and allow more direct buying? Are taxes collected at the wholesale or retail level? Will the taxes increase or remain the same? Depending on what combination is used, you can say that prices should go down or prices should go up. The one thing you can say with certainty is that in a competitive market prices are lower than they would be given the same circumstances in a non-competitive market. As the third largest retail buyer on the continent one would expect the State Stores to have some of the best pricing available in the country. However, this is not always the case and the differences are more than taxes alone can account for.

Convenience – Since closing 20% of their stores in the past 40 years and having the lowest amount of stores per capita in the country (even lower than Utah!) there is no doubt the current system is inconvenient. Quite simply, anything that doesn’t open hundreds, if not a couple thousand more locations will not provide convenience seen in other states, and is a Band-Aid at best. It is obvious the PLCB cannot begin to compete in this area because they can’t afford it based on their business model of having everything the same store everywhere. Don’t let them buffalo you: the PLCB chooses the number of stores to open, not the legislature; the number of stores is not enforced by the Almighty Liquor Code (with the exception of the number of stores allowed to be open on Sunday). So while the population has increased over the last four decades, the number of State Stores has decreased from over 750 to about 605 today. Just to reach the national average, Pennsylvania should have about four times that number. “Modernization” does not begin to answer that issue, with one proposal saying they want to put 400 sq. ft. “stores” inside other stores, which they are already allowed to do now, and have been for at least 30 years. What exactly does that do for the consumer that the same size private store (which they claim wouldn’t provide the selection) would, besides remove that business opportunity from the citizenry?

Service – Unlike other retail stores, if you don’t like the service you can’t go anywhere else. You are stuck with the same training, the same attitudes, the same level of passion. In the world of private stores, if you don’t like the service you can go somewhere else and reward them with your business. The stores with bad service will eventually fail, and if somebody else sees the opportunity another will open. In the private sector you will find stores with a sales staff of well-trained professionals along with stores whose sales staff can barely tie their shoes. You have the choice of what level you require. Same size fits all is not a tenet of retail, although it seems to be gospel for the PLCB. There are private stores who have sommeliers on staff. The whole of the PLCB, 600 retail stores and an entire state’s wholesale wine trade, doesn’t. To be fair, the PLCB does have a sommelier as a part-time consultant. One. Part time. For the entire state. The third largest retail wine buyer on the continent does not have a full-time top tier wine person. I can’t be the only one to think there is something wrong with the system that not only allows this, but doesn’t care.

Privatization does create winners and losers. The winners are the citizens who now have access to a free market; the losers are those who can’t adapt to the free market system. While no system is perfect, looking at the rest of the country it is easy to see which one is preferred by consumers and businesses whenever there is a choice.

TELL YOUR LEGISLATORS YOU WANT THAT CHOICE!