What Might Privatization Look Like?

The future is as clear as vodka...

Two years later...I haven't given up, but I'll admit that the pandemic re-ordered my priorities. I've got [THE RAGING FEAR] my concerns under control now, and I'm starting to think about other stuff again. Like privatization. 

There's talk of using a state constitutional amendment to get rid of The Police-Enforced Monopoly that is the State Store System. This tells me two things. One, Republican legislators are tired of Democratic bullshit about this issue, and they're going nuclear. And two, that Republican legislators have stopped thinking clearly. 

Demolition of the PLCB, amendment-style!

It's my strong opinion that this would be the bluntest of instruments to achieve the goal of privatization of booze sales in the state. An amendment would not have the detail necessary to do this well, and would leave open all kinds of maneuvering room for backroom deals of the type I'm pretty sure we all know would happen. 

What kinds of deals? How about minimum square footage requirements, like they included in Washington State's privatization deal? The "reason" is that they're 'saving' us from 'a liquor store on every corner,' but it's really a deal for big-money donors like chain grocery and liquor stores to get a new oligopoly on retail liquor stores, trading a shitty monopoly for a still-limited oligopoly. We don't want that, believe me. 

Or they'll boost taxes to "make up for the shortfall" from the loss of the PLCB "profits." Once again, like Washington State's privatization deal, this is wrongheaded, and will lose us the greatest benefit of privatization: competition. It will put PA liquor stores (and bars, and restaurants) firmly behind neighboring states' stores on price, leading to even more border bleed. 

Because you know that the hated Police-Enforced Monopoly will not go away. We'll still be forced to buy booze in PA. Bullshit on that. Bullshit!

Okay, calm down, Lew. The constitutional amendment idea is not a good one, despite the Democrats forcing consideration of such extreme measures by their bullheaded intransigence on this issue. We need to come up with some way to make this an attractively bipartisan issue. 

Some of the problem is that the lazy legislature acquiesced when the PLCB put the supermarket safety valve in place, and didn't do the right thing: create a separate grocery/deli/c-store/gas station license for retail off-premise sales. That led to supermarket and c-store chains buying R-licenses at insanely inflated prices (over $500,000 in some instances), and now — shocker! — those businesses are dead-set against any move toward such a license. Great. 

But that's a whole other post, and I will get to that, and soon. I'm back on this. 

Time to take over the world, Pinky!

Meanwhile...What do I want to see in privatization? All open to tweaking, but...

First, and non-negotiable: the PLCB ceases to exist except as a regulatory agency...if needed. No state stores, no state wholesale. They've proven that they cannot run this fairly or honestly. They're done. As a regulatory agency, their operations must be made more transparent, and their power to "interpret" state laws and regulations to the point of nullification must end. 

Second, very important: learn from Washington State's mistakes. And they made plenty of them. A study panel should look at what Washington did, and what Alberta did, and come up with recommendations to make sure that we do better. Ask consumers in those places, too. 

Those two are huge, big picture things. Here are more direct things. 

1. Allow ALL R and Hotel licensees -- bars, restaurants, hotels -- to sell any type of alcohol beverage to any legal customer for on-premise consumption. With the purchase of an additional Off-license permit (for a reasonable annual fee to the state), they would be allowed to sell full bottles/cans to go. No more limits, no more "step outside and you can buy another" bullshit. Licenses increased to one per 500 adults in a county. Licenses become non-transferable five years after passage, which should end the ridiculous secondary market in paper.

2. Beer Distributors become all-alcohol stores with off-premise sales. Beer distributors MAY dispense draft beer in sealed (have to work on that definition) to-go containers. Number of licenses is increased to one per 500 adults in a county. License is non-transferable, starting five years after passage.

3. Create a new license for grocery stores, convenience stores, drugstores, and gas stations. Takeout ONLY, no on-premise consumption. Number of licenses are not limited, pay a reasonable annual fee to the state (with allowance for review after five or ten years), and are not transferable. License holders MAY also buy or retain a separate R-license for on-premise consumption if they want. 

4. Open up wholesale. Beer wholesalers may add all other alcohol. New wholesalers allowed, reasonable annual permit, non-transferable. More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. This may need tinkering; for instance, are multi-state wholesalers allowed to operate in the state? We may want to say no to that, or we may not. 

5. Pennsylvania citizens AND licensees may buy and sell from out of state. Period. This has gone on for way too long. If the state can't tax and regulate booze in a manner consistent with neighboring states, that's too damned bad. Look at it as incentive to do better. 

6. Sales tax to be applied at wholesale (or producer) level. Convert the Johnstown Flood Tax from a tax on price to a flat gallonage tax, like the rest of the country, and peg it to current national average. If that means less revenue, screw 'em. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

7. Rip out the old Liquor Code and start over. Aim for simple, understandable laws that ruin as few businesses as possible, but changes them where they are unfair, or not in the public interest. For instance, booze wholesale should emulate food wholesale: competition allowed, exclusivity as something that suppliers would pay for. The Code is currently open to way too much interpretation and confusion, and that has to end. 

8. Perhaps the most important is this: when this is done, when it's being written and decided upon, it must be 100% transparent. There must be citizen and industry representation on whatever task force does this rewriting of the Liquor Code, and regular reports must be presented; weekly, if necessary. There's too much money at stake to do otherwise, and we've already seen that it causes corruption. Obviously, I volunteer. Seriously, there should be representatives from all sides: wholesale and retail booze business (but only one each), consumers (one or two), anti-alcohol types (gotta be fair), the UFCW (no, really, it's only fair), and politicians. Maybe more stakeholders, that's just a first cut, but there must be representation and openness. 

These points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and succeed...as long as big businesses, chain retailers, aren't allowed to write this privatization bill. And of course...nothing's set in stone, and politics is the art of the possible. 

It's about time, it's long past time, that the consumers, the voters, had a large say in how this gets done. 

Privatization. Yesterday, today, forever.

Not a Mistake, Not perfect...Good Enough

Last post I asked if we would be calling Senator McIlhinney's privatization proposal "McIlhinney's Mistake." Here's what I thought we'd see in it:

Best guess at that, from things he's been saying: bars and restaurants should be allowed to sell full bottles of wine and spirits to go, the State Stores stay open, the case law stays and the beer in grocery stores situation remains in its ridiculous "cafe needed" state, and the PLCB remains as the state's sole wholesaler...and that's going to be "privatization," McIlhinney's Mistake-style.

Here's how that went when we got a revamped version of his SB100, yesterday:

• Beer distributors and bar/restaurant/deli/hotel license holders can sell wine and spirits to go (for an $8,000 annual fee ($4K for just wine/just spirits, and $2K for "specialty spirits," single category), and a limit of four bottles per sale unless you're a distributor); there are about 14,000 such licensees, and another 1,000 in escrow (some kept there deliberately by anti-drinking types).
• The State Stores stay open
• Distributors can sell sixpacks (as packaged by the manufacturer...killjoys); taverns can sell up to a case
• Grocery stores still need a deli license -- no new licenses created -- and a cafe area, some minor restrictions on what can be sold at each register area are loosened
• The PLCB remains as sole wholesaler; study of situation required after 2 years, if divestiture will not have "significant impact on the fiscal stability of the Commonwealth," the Legislature may consider selling the wholesale operations
• PLCB as wholesaler is required "to buy any specific liquor or alcohol requested by a permit holder"
• PLCB will ship to "permit holders" by the case for a fee; manufacturer/distributor can drop-ship directly to permit holders 
• State Stores get "flexible pricing"
• Licensees get an 18% discount on PLCB prices
• Elimination of the Johnstown Flood Tax!
• Direct wine shipment to citizens
• "Windfall" money goes to senior citizen property tax relief
• All retail liquor stores (State and private) to have consistent hours: 8 AM to 11 PM.
• PLCB and permit holders are prohibited from selling private labels (buh-bye, TableLeaf!)
• Creation of a Wine Industry Promotion Board (nothing about brewers or distillers)
• Did I mention that the State Stores stay open?

 Well...My major issues, in another bullet point list.

• The State Stores stay open, and with NO formula in place to close them. That's left to the discretion of the PLCB. Bad idea, verging on very bad idea. Rip off the band-aid.
• Why stop at sixpacks? Take away all restraints on volumes: distributors and taverns can both sell everything from single bottles to kegs. And why "as packaged by the manufacturer"? Why no mixed six? They'll be pulling the wings off flies, next. If they do keep the stupid "compromise with no one" sixpack minimum, I nominate "as packaged by the manufacturer" as the first thing to go in the amendment process. It's just petty. If the store doesn't want to sell mixed sixes, they can make that a policy. Doesn't have to be a law.
• Limits on wine and spirits sales for taverns/hotels/delis. If you're going to charge everyone $8,000, everyone should get the same deal.
• Kick the licenses out of escrow with a "use it or lose it" clause. Any license unsold in escrow for more than two years reverts to the state.Why should they be wasted just because some Mennonite doesn't want me to have a drink?
• Kill the cafe: this is an advantage for large supermarkets and hurts small grocers. 
• End the police-enforced monopoly.
• Privatize wholesale. Period.

Now...what I think we might get? Not much. I think this bill is either going to pass with relatively minor tweaking, or it's going to die. I'm hoping for more complete "package reform," and I'd really like to see an end to the insulting police-enforced monopoly, but I'm not holding my breath.

Actually, my hat's off to the Senator. I'd love to see all my major issues dealt with, and I do think that leaving the PLCB as wholesaler is going to be a disaster, but...he always said the hard part was coming up with something that could pass. I think he may have finessed that. He won't get any Democrat votes -- and bad cess to them, and especially the mule-mouthed Senator Ferlo -- but I think this could get 26 Republicans. I've got my fingers crossed.

And on that note...write your senators! Urge the Republicans to vote for this, and beg the Democrats to abstain. CC the Governor and make sure the Republican Senators you write to know that he needs this bill; CC your local representative to they know how you're pushing your senator. You know the union's doing it. Get off your ass and make it happen; this is the best chance privatization's had in 75 years. Don't let perfect be the enemy of good.

Here's what I wrote to my Senator:

Dear Senator Tomlinson,

Senator McIlhinney's proposal for eventual liquor privatization is out, and I'm sure you have the details. The proposal doesn't close the State Stores, doesn't slash jobs, keeps the wholesale monopoly, covers the revenue, provides for senior citizen tax relief, gives Pennsylvanians at least some of the beer package reform they've been begging for, and gives beer distributors an affordable way to add wine and spirits to their businesses. Most importantly, it ADDS competition, choice, and convenience to wine and spirits retail for Pennsylvanians, without harming family-owned beer distributors.

It seems like a very good compromise, one that the House can approve, and that the Governor can sign for a much-needed legislative victory for the Republicans. I hope I can count on your vote for this proposal in its final form; it is, as I've told you, very much a ballot box issue for me.

Sincerely,
Lew Bryson

Feel free to use some or all of it. DO IT!

McIlhinney's Mistake?

McIlhinney's Mistake.

Is that what we're going to be calling the liquor "privatization" bill that comes out of the Senate's Law and Justice Committee next week? Senator Chuck McIlhinney is the majority chair of the committee, and he's telling anyone who will listen that he'll have a bill ready before the end of the legislative session on June 30, a privatization bill.

He's held three hearings -- generally described as "stacked" by reporters across the state, and they mean stacked against privatization -- in which he allowed the Democratic members of the committee free rein to pontificate, bloviate, and in Senator Ferlo's case, desecrate the reputations of several public figures, including the commander of the PA State Police. Only a few people who favored privatization who were allowed to speak, and at the end of their presentations and following grilling, McIlhinney would dismiss their testimony with a breezy "that's what you're saying, but that's not what's going to happen" statement from his chairman's position.

McIlhinney says he held these hearings to bring out the facts so he and his colleagues could make a decision on privatization. Really? First, be honest and admit that NO Democrats will vote for privatization, no matter what they hear: on this issue they're owned by the unions, and they do NOT want to see the Governor gain any legislative victories when they sense his re-election chances as weak. Those are their main issues. Second, everything McIlhinney's been saying indicates that his bill is going to be the same bizarre plan he's been talking about for almost two years.

Best guess at that, from things he's been saying: bars and restaurants should be allowed to sell full bottles of wine and spirits to go, the State Stores stay open, the case law stays and the beer in grocery stores situation remains in its ridiculous "cafe needed" state, and the PLCB remains as the state's sole wholesaler...and that's going to be "privatization," McIlhinney's Mistake-style.

Tell your Senator you want REAL privatization, not McIlhinney's Mistake. You want the State Stores gone in six months, Washington State style. You want privatization of wholesale. You want beer, wine, and spirits sold in the same store, and at least 2,000 of those stores -- whatever they are -- in the state. You want an immediate and simple end to the Case Law and its stupid brother, the 12-pack Law. You want an immediate end to the Police-Enforced Monopoly; Pennsylvanians can buy booze anywhere they want and bring it back into the state. And you want it all, now. 

If the Senator comes out with a real privatization bill? GREAT! But we need to get this done. We can't afford a mistake. Not McIlhinney's Mistake.