Thursday, July 5, 2012

How to 'save' the State Stores and make privatization go away

All this time we've been talking about privatizing, and the union and the social conservatives and the beer retailers have been railing about it, and yet the talk continues...wanna know a secret?

It would be really easy to get Pennsylvanians to accept the State Store System forever.

Really. Here's all you have to do.
  1. Change the name of the Johnstown Flood Emergency Tax. Just change the name. Call it the Pennsylvania Alcohol Excise Tax, and most people will never say another word about it. It's the idea that the tax was for the Johnstown Flood and we're still paying it that drives them crazy.
  2. Get rid of Joe Conti and the CEO position. The man's a disaster: the wine kiosks alone would prove that, but the constant ethics investigations are a drag as well. The CEO position is such an obvious patronage job that it's painful.
  3. End the police-enforced monopoly. Just give up. It's rarely enforced, and it's galling to Pennsylvanians. Accept you're going to have to compete with businesses over the border...just like every other retailer does (and consider lowering the PA Alcohol Excise Tax to be more competitive...and watch sales go up, and overall revenues go up as people have fewer reasons to buy booze -- and food, and gas, and everything else -- outside of PA).
  4. Kill the case law. It's not part of the State Store embroglio, but it's a thorn in our sides, and taking it away will calm us down. 
  5. Link advancement of product knowledge to retention and promotion in the work force. If the union wants to keep their jobs, have them make this major concession: their retail jobs will actually depend on them selling products. 
  6. Double the number of stores, kill the stock requirements, and allow local control of stocking. Do we really need 2500 SKUs in Clarks Summit, when you can -- supposedly -- easily order something through the stores? Cut the operational costs of running State Stores. Allow local control of ordering, not one plan put in place in all stores by a committee in Harrisburg.
  7. Put the BLCE back under the PLCB. The PLCB and their enforcement arm don't work together. The BLCE used to be part of the PLCB; put them back together.
  8. Make the PLCB answerable to the State Government. A lot of the arrogance and crap we've seen out of the PLCB over the past five years stems directly from the agency's independence. There's no reason it should be so independent. The easiest way would be to make it part of the Department of Revenue.
Do those things, and Pennsylvanians will be satisfied enough that privatization will never pass. Not in my lifetime.

Why do I lay this out, when I dearly want privatization to pass? Simple. I know the Legislature and the PLCB will never get their shit together enough to do any of this, even though none of it would hurt state revenues.


Unknown said...

Freaking brilliant.

Al Brooks said...

You just might want to hire people with billion dollar retail experience for the board and kill that patronage egg too.

M. R. Birkos said...

You are obviously prudent and reasonable, while making some fine points. I must point out however, that there are legitimate reasons to keep the LCB.

First - we own it - the largest liquor retail organization on Earth. In the last few years, the LCB has adopted the best business practices of the private sector. They are making more money with less people. Rebranded stores show 90-200% sales gains. They are on track to return over $600 million per year to the state treasury in operating profits and taxes. And they pay us automatically - on a daily basis.

Only 2 sales to minors, out of 620 stores, over the last 3 years. Surrounding states show 40-50 violations per week.

And yet the best reason to keep the LCB is to avoid the privatization debacle in the state of Washington. The voters were seduced by a $20 million TV ad campaign promising lower prices. This past April, the legislature was only able to sell 121 out of their 167 stores, only raised $30.75 million. They wrecked a system that returned $465 million to their treasury in 2011.

Costco has lower prices on their 70 jug brands (all they brought in), But if you want quality, you must buy from the private sector guys who just bought those stores. Prices are up 35-95%.

By comparison, the LCB stock 3-6 thousand in each store, and can special order over 30,000 more, with regionally competitive prices.

Thanks again for your idea. Harrisburg should pay heed.

M. R. Birkos

Lew Bryson said...

I'll respond to that.
"We own it." It's not the largest liquor retailer on earth; it's 3rd, behind the LCBO and Costco. Sorry, but it's truth. And the idea of a large government-owned retailer is not normal; the only reason it's allowed in the U.S. is because of the overdone interpretation of the 21st Amendment. Pennsylvania's system would be illegal for any other product than alcohol: guns, drugs, gasoline, explosives, groceries...

The taxes will, of course, be paid to the state under a private system. Please don't bother with the scare stories of how much private stores would cheat the state; that's not a private liquor store problem, that's a Department of Revenue problem -- fix it. And we'll probably make MORE tax revenue with a private system; people won't feel the need to cross the border to get away from the State Stores (IF we do privatization right -- see below.)

"best business practices of the private sector." Really? The wine kiosks? The disastrous Oracle POS rollout? More money with less people? That's simply not true: administrative costs are UP.

Only 2 sales to minors out of 605 stores (sorry, they keep closing them)? Prove it. What is the enforcement in State Stores? There IS none. In surrounding states, the police catch underage purchasers with sting operations; the BLCE does not do those sting operations in the State Stores, they're not allowed. Sorry, this proves nothing.

And yet your best reason -- Washington's experience -- is the worst reason. Why? Apples and oranges. HOW privatization is done is key. Washington's was done stupidly. We don't need to do it that way, and I certainly won't argue in support of Washington's methods, anymore than I'd argue in favor of HB11. We can, and should, do better.

Why compare the State Stores to Costco? Why not compare them to Total Wine, which stocks 12,000 SKUs (plus beer!)? Is every store a Total Wine? Of course not...that's kind of the point. In PA, EVERY store is a State Store...with the same limited selection. If you don't like the selection, if you don't like the service you get, if you don't like the can't go anywhere else.

Sorry. No point to keeping the State Stores. Privatize now.

Anonymous said...

Looks like ceo Joe Conti is retiring if i here anything i will let you know

Anonymous said...

ummm the kiosks weren't joe conti's idea. what constant ethics investigations are you talking about? do you really think vouching for his daughter was such a grievous breach? not only was there no suggestion of any quid pro quo, i cant even imagine how there could you think conti could have lowered prices for sro or something?

Lew Bryson said...

Ummmmm Joe is Da CEO. He green-lighted the wine kiosk project; doesn't matter if it was his idea, it happened on his watch, and he and his pal PJ whole-heartedly endorsed it. Whose idea it was is secondary.

Ethics investigations? The awarding of the courtesy contract AND the wine kiosks both triggered investigations by the Auditor General. Both essentially said that the letter of the law was followed, both said the PLCB showed poor judgment in how the contracts were awarded. Near misses; looks like the current one may be a hit.

"Grievous breach"? The law's the law, and it says he can't do that. He could influence approval of a new liquor license, he could steer limited release wines/spirits to them (you don't think YOU can buy everything the PLCB gets in, do you? Certainly not, some of it's reserved for restaurants!), he could set them up with a sweet deal like that Garces Trading Company private State Store set-up...any number of things, and that's the whole point: the appearance of possible impropriety is what the law and the investigation is about. They don't have to prove quid pro quo, the law's pretty clear about that.

Anonymous said...

Hey Lew time to rev up this blog.

Best comment is the one that says Stapleton's JOB is an inappropriate gift..


Anonymous said...

hey lew not sure if my posts arent making it through yer sites security or if you are choosing not to post. should i try again?

kevin, today's story fails to mention that mr stapleton is at the end of his term


Lew Bryson said...

No censorship; just busy.

Anonymous said...

An investigation by the Auditor General that concludes the PLCB used ‘poor judgment’ is not an ethics investigation into Joe Conti. Your willingness to conflate the two is distasteful and can only weaken your message.
If the Kiosk program was underway before Conti arrived and then ended during his tenure, it seems a little disingenuous to suggest he ‘green lighted’ it. As CEO, Conti’s job is to execute the decisions of the board, he doesn’t ‘green-light’ anything; the Board does.
The CEO also doesn’t approve of contracts or licenses and there is no mechanism for influence. The PLCB itself does not restrict allocated products, that is done by the distributors/producers.
The ‘sweet deal ‘given to Garces was sweet for the community, not the agency or the restaurant. SRO already had the opportunity to negotiate a similar deal, I believe. And remember again, that this was a policy of the Board, not the CEO.
I find it ironic that you say ‘the law is the law’ so quickly on a blog dedicated to changing the law. The current ethics investigation is minor in scope and clearly politically motivated.

Lew Bryson said...

I'd answer all those points, but your last statement, in which you clearly can't see the difference between following well-written ethics laws and a desire to change a system imposed on the Commonwealth during a freak of politics 78 years ago pretty much shows where you're coming from. And saying the ethics investigation into the CEO and a Board member is "politically motivated" only goes to show just how wrong it is for this to be a function of the State.

The ethics investigations were into behavior at the agency, not specifically Joe Conti, but he's the CEO; the buck stops there. Now he himself is being investigated, and that's hardly a surprise. The kiosk program was NOT underway before Conti arrived; the RFP came out in 2008, Conti started at the end of 2006.

It's also clear that Conti is very much a partner in running things at the PLCB, or at least he was while PJ Stapleton was Chairman. That's why he was called on to testify during the hearings on the registration raids fiasco, for instance.

And I said nothing about allocations; I know how that works, I've written articles about it. What the PLCB does is decide what every store in the state is allowed to sell, and if they don't decide to sell it, we're not allowed to go somewhere else to buy it.

You don't get this. This agency is insulated and arrogant, and completely out of step with the desires of the population of the Commonwealth, with the 21st century. You want to keep it; what's YOUR stake?

Anonymous said...

I can see the difference between the two and I share your desire to abolish, to some extent.

However, the Auditor General does not make 'ethical investigations' nor did it investigate Conti specifically. Again, as CEO his job is to enact the policies of the board. 'The buck' does not stop with him despite your repeated claims and your continued personal attacks on him can only weaken your cause, in my opinion.

The kiosk program was in the works before the RFP came out of course. And again it was not Conti's decision to implement.

I don't know how to take your mention of 'steer(ing) limited release products' to SRO as anything but a reference to allocated products. Perhaps you can explain?


Lew Bryson said...

You're splitting hairs. More to the point, Conti's "job" is whatever Conti has been able to make it. As has been pointed out many times, by people other than me, the State Stores ran for 70+ years without a CEO; who needs him?

There are ethical issues aplenty around the wine kiosks and the courtesy contract, and despite what you claim, Conti was hip-deep in both of them.

As to what you think about my "personal attacks" on Conti, I could really care less. My purpose here is to stir things up, to get people looking at what's going on and why. The results have been gratifying, so I'm going to keep doing what I'm doing.

Oh, and the allocated products? Yes, I wasn't following you because of the word choice. But it still applies. It's what happens AFTER the producer has made it's allocation to the PLCB. When the PLCB decides that all of an allocation is going to go to licensees rather than to the stores...that's a decision that can be influenced. From there, it's a matter of who gets information and when.

Lew Bryson said...

Just a note for you, "QPQ". If you're just going to keep saying the same thing over and over...I'm not going to bother giving you a forum. You want to make a statement five times? Blogger's free; start your own blog.