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 On July 1, 1986 — the same day that retail wine sales were privatized — a 15% licensee tax was repealed.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.

40 years of…….……nothing.

As you read this I want to remind you that A. Democrats have been in power 21 of the past 40 years and B. Shapp was a Democrat.

This story from 1973 illustrates that after 40 years the Union and PLCB have done almost nothing for the consumer. Let’s take the points one by one.

1.       The union proposed more stores, particularly self-service ones. Self-service stores like we have now were introduced in January of 1969 and 34 years later, or 30 years after this article was written, the last counter store finally closed. There were 750 stores in 1973 - we have 600 now. I would call that a double failure. (For those of you not old enough to remember, Pennsylvania had “Counter Stores” exclusively for the first 35 years after Repeal. You walked up to a front counter, marked a printed list of what you wanted or wrote down the code number, and gave it to the clerk, who then went into the back to get it for you. The last one closed in FY 2003-04.)

2.       Permit credit cards. While the union may have proposed this it was customers, particularly licensees that brought about this change in 1987 - 14 years later and at least 15 if not 20 years after other business of this size did. Certainly a failure at the time.

3.       Provide home delivery for large orders.  I would think that businesses would like delivery too since they place larger orders than most residents but notice how they weren’t mentioned.  A continuation of the PLCB “don’t rock the boat or we’ll screw you” policy still in effect today. In any case there is still no delivery. Another failure.

4.       Adjust markup on items.  You thought this was thought up recently didn’t you? 40 years later still nothing.  I’d call that a failure too.

5.       The union report claims that prices are no higher than in New Jersey.  Sound familiar? After 40 years the citizens still think New Jersey prices are better – mainly because it is true and the over $300 million in border bleed and the building of the outlet stores prove it.*

The fear-mongering hasn’t changed at all. Prices will go up if we raise taxes they say in the last paragraph.  Well DUH.  Don’t raise taxes, increase convenience and sales will go up and revenue will go up, border bleed will go down and everybody, especially the citizens, will be much happier that they don’t have to deal with the state store system. At least the union didn’t come up with “Privatization killed my daddy” in 1973 like they did this year although it was Wendell Young’s father in charge of the union back then.  Some things never change.

(*) For more information on outlet stores read this article

This quote is from the PLCB about the history of the PLCB. "June 3, 2003 - The PLCB opens its first PA Wine & Spirits outlet stores in Gettysburg (now closed), Hermitage and Franklin Mills. The stores, aimed at preventing customers from going out of state to buy alcohol, offer a large selection of products at discounted prices."  

Of course, this begs the question that if PA prices, selection, and service are better than surrounding states as the PLCB and Union claim…….why do we have to prevent people from going out of state?  The parenthetical information is mine.

Do you really want them in charge of "modernization" with a record like this?

Privatization IS modernization. Accept nothing less.

Why can't Johnny read or do math?

For those of us following such things there has been a trend by some union representatives and clerks to spin or play down the amount of drinkers and thus making our voice seem more like a minority and not as important as those who think they are keeping utter chaos and ruination at bay. 

Specifically, they like to use the 13% number as those who drink once a week. However, as with most things math the clerks and the union have their own way of doing things.  What they seem to fail to realize is that the total is cumulative – i.e. you have to add the everyday, the few times a week and the about once a week numbers to see the TOTAL amount of people who drink at least once a week. This number ranges from 30 to 35% depending what time period you look at.   

In fact, Gallup has shown time and time again that 66% of the entire adult population drink some amount of alcohol.  As they reported in August this year “Thirty-five percent report having had a drink in the last 24 hours and another 29% in the past week.” This works out to 64% of drinkers which are about 66% of the population which comes out to over 42% of the total population (.64*.66 = .4224).  This is higher than what is normally reported because of the holiday included in the survey period which means some special occasion drinkers are added in that normally wouldn’t be.

We 2/3rds of Americans who choose to drink are the majority that the state store system wants to control.  They tell us what, they tell us when and they tell us where – the very antitheses of the freedom an open market brings to the citizens.  Taxation, regulation and enforcement are the role of government, not retail sales. The citizens and the state will be far better off once the aberration of the current state store system is corrected. Every state or province that has privatized some or all of their alcohol system has seen an increase in employment in the industry.  It tripled in Washington and Alberta. Increased in Ohio, Iowa, Maine and West Virginia too.

We are not inventing the wheel again.  Take the best of that the majority of the states do, regulate and enforce what they have problems with and come up with the best system.  That is real modernization not putting lipstick on the state store pig with new names or wicker baskets.

Privatization IS Modernization – Accept nothing less.

Provided for historical data (Gallup)

Every day A few times a week About once a week Less than once a week Only on special occasions Never No opinion % % % % % % % 2007 Nov 11-14 7 13 10 9 29 33 * 2006 Nov 9-12 10 13 11 9 27 30 * 2005 Nov 7-10 5 14 11 10 29 31 * 2004 Nov 7-10 7 13 13 10 25 32 * 2003 Nov 3-5 7 16 13 12 25 27 * 2001 Nov 8-11 7 12 13 14 24 30 * * Less than 0.5%