Liquor revenue vs. other revenue

More in the continuing saga of why can’t Johnny read -- or do math?


The Union in the guise of a former clerk and current business manager will tell you that “No state has ever realized equal revenue after they privatized, period.” (except Washington State, but I’ll get to that shortly). They cite the decline in Iowa and the contract in Maine as prime examples.

Let’s look at those in real terms. Iowa got out of the retail wine business on July 1 1985, the wholesale wine business on July 1, 1986 and the retail liquor business on March 1, 1987. UFCW Local 1776 president Wendell W. Young IV in sworn testimony stated that, “In just three years, after wine was privatized, revenues dropped by $20 million annually. Revenue dropped by $4 million in Year One; by $12 million in Year II and, finally, by $20 million in the third year of private control.”

What he said is true but there is more behind the numbers that isn’t told. On July 1, 1986 — the same day that retail wine sales were privatized — a 15% licensee tax was repealed. On March 1, 1987 — the first day that private retail liquor sales were allowed — Iowa lowered the wholesale mark up by 12% in order to help the newly established private liquor store businesses. There were 221 state liquor stores, and at the end of the four month transition period, there were 256 private stores; within the year the number rose to 430.

In fact, as reported back in 1997 on the 10^th anniversary of Iowa’s privatization, “Keeping the wholesale liquor business and selling the retail end proved to be fiscally sound. State officials estimate their treasury is $95 million richer than it would have been had Iowa retained its state stores.” And “Between annual license fees and the wholesale markup, the state now makes almost $15 million a year more than it would have, had it stayed in the retail business.” Not exactly the disaster that Mr. Young said in his testimony.

So who do you want to believe that Iowa is better or worse off, Wendell Young, who has an obvious bias, or the State of Iowa itself?

As for Maine, they contracted out their liquor distribution. They knew ahead of time exactly what they would get and what it would cost. Ten years later that contract is ending and Maine is looking to do another 2 contracts instead of just one. This time they want one for distribution and one for marketing and advertising. Obviously, Maine thinks this is the better way to go instead of running the whole show themselves and having all of those salary, retirement and medical costs.

Now for Washington. Collected revenue is up, over any year during state control; up 23% for the last fiscal year. That will go down some when one of the newly imposed fees decreases from 10 to 5% but is still going to be above anything the state stores brought in according to the Washington State Department of Revenue.  So much for the UFCW business manager’s quote about no state ever realizing equal revenue.

Lastly there is Ohio. The union doesn’t like to talk about Ohio since they sold their wholesale operation for $1.5 BILLION. While it is a strange combination of public/private partnership, the Jobs Ohio non-profit that controls the wholesale operation is a private entity. They can go bankrupt with no cost to the state, and anything they make goes to Ohio job creation. The state has no jurisdiction over their books or the management.

Now Ohio might be a special case but when Wendell Young or any other representative says that nobody would pay X amount for PA’s system or that no place made money after privatizing – they are simply lying. Every place in the U.S. (or Canada) that has privatized some or all of their liquor system has also seen an increase in employment, and while that isn’t “liquor revenue,” it is better than what we have here.

The takeaway is simple: if you’re a Pennsylvania legislator, revenue should not be a factor when you’re considering liquor/wine privatization. As far as that goes, neither should employment. Privatization will, based on previous experience, most likely increase revenues, and almost certainly increase employment — if you do it right. In this case, “right” is not giving in to compromise. Do a Washington State — shut everything state-owned down in a matter of six months to a year — but don’t raise taxes. Watch border bleed decrease, employment increase, and voter satisfaction go right off the charts.

Privatization IS Modernization. Accept nothing less.