Monday, February 17, 2014

Where the PLCB Money Goes: Then and Now

Let's have a look at what the PLCB has done with its money -- our money -- since the new millennium has started.

Fewer stores, more employees: In July 2000 there were 692 stores with 2,869 full time workers and 1,072 part-time workers In December 2013 there are 604 stores with 3,080 full time workers and 1,417 part-time workers. Stores decreased by 14.6% and employees increased by 13.5%.

Higher gross, lower margin: In 2000 the PLCB had record sales of $1,083,330,579 and record operating income of $89,868,893 or 8.30% of sales. In 2013 the PLCB had record sales of $2,171,946,398 and record operating income of $151,877,723 or 6.99% of sales a decrease of 18.6% in operating income for every dollar spent in sales compared to 2000. (Hardly surprising, given the increase in overhead represented by the previous point.)

Cost overruns: In 2000 the Auditor General found the PLCB incurred $408,000 in additional costs due to problems in Its implementation of a new computerized Warehouse Management System. In 2010 the Auditor General reported the PLCB incurred excess costs of $500,000 due to problems with the new inventory system (on top of being over budget). The inventory system was contracted for $25.8 million and as of June 2010 has cost $66.6 million, or 158% over budget.

More for ads, less for education: In 2000 the PLCB contributed 0.76% of gross from sales to drug and alcohol education.  In 2013, the biggest year they ever had, they donated only 0.66%, up from the 0.53% in 2012 (also a "record year").  The PLCB doesn’t release how much they spend on advertising, but what they have released indicates they spend 30-40% more on advertising than education.

More booze, less enforcement: In 2000, the PLCB gave 7.39% of gross from sales to enforcement of the liquor code.  In 2013, the PLCB only did 6.19%, a shortage that works out to over $5 million less for enforcement. So even though the number of licensed establishments increased and the population increased, there was less liquor code enforcement. State stores still aren't checked at all for compliance.

More embarrassment, less arresting? In 1992 the Auditor General reported that: "Policing bootlegging and illegal importation of liquor without payment of Pennsylvania taxes should be the primary mission of the liquor law enforcement personnel."  In 2013 there were 2 reported cases of “bootleggers” caught. It could be that the more support for privatization there is, the less border enforcement takes place...since that would highlight the huge problem of people who purchase out of state. It might have something to do with the $5 million the BLCE doesn’t get since they were no longer funded at year 2000 levels too.

Same lack of relevant experience: In 2000 no member of the Board has had any experience with running an enterprise anywhere near the size of the PLCB.  That hasn’t changed at all in any year since and they still only work 21-22 days a year.

"Multiple weaknesses" in procurement: In 2000, the Auditor General reported that: “Weaknesses exist in the administration of the Pennsylvania Liquor Control Board's warehouse management system consultant contracts.”  In the 2010 Audit the Auditor General reported that: “…multiple weaknesses in the PLCB award process, including lack of documentation. As a result we could not verify the PLCB adhered to proper procurement standards or exercised proper due diligence in awarding the contract.” (Remember that one of the PLCB “modernization” plans is to have less oversight in procurement.)

The PLCB has not changed in the fourteen years since 2000...except to be a larger bureaucracy with less customer service and more problems, that spends less on its very reason for existence: control. The problems are systemic, pervasive, and totally ingrained in the PLCB's processes and workforce. They won’t be fixed until the entire system is replaced with privately-run wholesale and retail operations -- as it is in the majority of other states and countries -- and they are able to fully concentrate on regulation, compliance, and enforcement, and not sales.

Privatization is Modernization – accept nothing less.

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