The Union Scheme to keep PA in debt

(Another chapter in the continuing Wendell Young IV lies and I can prove it series)

On January 29th, the two unions that represent the State Store System clerks sent out a letter that, among other things, seemed to guarantee that 'modernization' will make $185 million MORE in its first year.

Let's look at the modernization scheme point by point.

They start off well with "Remove Sunday Sales Limitation on Store Openings and Hours of Operation" This actually makes sense, so when the system is privatized private store owners will be able to decide their own hours within the legal time span. 

Things start to go downhill with the second item. "Pricing/Customer Relations Management: Allows the PLCB to use best retail pricing practices to secure the very best price for the customer."  So for 80 years they really haven't been trying to get the best prices for the consumer? Then why should we believe that will change?

Item three is even more incredible. "Right Locating Fine Wine and Good Spirits Stores"  In other words, putting the stores where the people are. It took them this long to figure that out? Perhaps the Store in a Store (or One Stop Shop, as the PLCB calls it) is what they mean. That has only been around for 34 years and has not gone anywhere.  The high point was sixteen stores; it hasn't gone above that yet. It seems that most—and I mean thousands of stores—don't want the PLCB with them. After the Wine Kiosk Fiasco, it's no surprise.

The forth item "Expedited Review of PLCB Leases by the Department of General Services" makes sense until you realize that they have had 80 years to get the proper locations of state stores. You can't blame it all on the DGS. The PLCB should know where they want to put stores YEARS in advance and work toward doing that. That is how real business runs.

Item five is a bit revised since last year; "Direct Shipment of Wine and Spirits: Permits Pennsylvania residents to receive shipments of wine and spirits in Pennsylvania and also permit the PLCB to ship out of state." Spirits were added to this proposal. Not sure how other states will take to a different state agency shipping to their residents, but if our legislature is an example, it won't happen. It has only been a decade since Granholm and this may fix it...depending on how many wineries and distilleries sign up and pay for licenses. The current direct wine shipping program has less than 25, so for that to improve, some things will have to change. It isn't that wineries don't want to ship to PA, it is that they don't want to deal with the PLCB. That makes millions of us.

The sixth item is Lottery sales, and that makes sense also, even more so in a private system.

Item seven sounds good but..."Consortium Product Buying: Allows the PLCB to take the lead in joining some of the other 18 control states, like Michigan, Virginia, Ohio and New Hampshire, in buying product unified fashion to help secure the very best price for the PA consumer on the PLCB store shelf."  Real businesses save money by buying in bulk, and then doing the distribution of products themselves. They buy direct from the manufacturers. With the 3 tier system in place in many states this wouldn't be allowed. It would also force all the states involved to use the same distributor which may violate current distribution agreements. I can see this being a hornet's nest but hey, based on the past PLCB track record of business decisions... Keep in mind, it would only affect spirits; these other states don't "control" wine sales.

Now we come to the hook inside all this shining bait, the item that will lock the PLCB into the state budget for decades. DEBT.

The Unions think that: "Monetizing the incremental revenue gains of the agency would allow the state to secure a bond. Securing a bond on increased profits as a result of modernization – not the tax revenue - is very attractive to investors, since the agency has continued to deliver increased revenue annually to the State Treasury, during good and bad economic times. The risk is low and potential for reward high."

This means that the amount the Governor could ask for would have to be locked in, since additional profits (if any) would be used to finance the debt and couldn't be used for anything else. Rather than being discretionary, based on what the Governor thinks the needs of the Commonwealth are, it would be up to the PLCB to set the upper limit based on their needs and debt payment  So let us look at the statement "...the agency has continued to deliver increased revenue annually to the State Treasury." Remember, this isn't taxes, so any increase there doesn't count.

Using 1999 as a starting point, in the next 15 years from FY 2000 through FY 2014 inclusive, Operating Income has gone down eight times and gone up seven compared to the year before, and the amount sent to the General Fund has remain unchanged four times, gone down four times, and only gone up seven times. All with record sales every year. So the Union wants to put the taxpayers on the hook for an agency that DOES NOT deliver increased revenue annually, in an arrangement that makes the continuation of the State Store System a necessity under the terms of the bond. This is not about debt, or monetization: this is about shutting down all talk of privatization.

With the increased PLCB share of the pension obligations well over $600 million, the Unions think that increasing the Debt using future earnings (if any) is the way to keep the state store system.tied to the government. This isn't for the good of Pennsylvanians but only for the good of the state store clerks.

We are not safer, we are not better served and we are not satisfied. Privatize.