Thursday, August 27, 2015

The PLCB benefits the PLCB

The PLCB makes decisions that work for the PLCB, no matter how many crocodile tears they shed over the prospect of privatization 'limiting the choices in rural counties.' Just ask the people in Lewisburg. They know all too much about how PLCB decisions get made.

News leaked on March 10th that the State Store located in downtown Lewisburg might be moving. The PLCB had not made any announcement nor had they talked to the residents or businesses before making the decision.
We don't care what you want, you'll take what we give you!
Seeing the precarious health of downtown threatened by the loss of the retail store, the community organized. Due to the outcry and involvement of local legislators and a letter writing campaign the PLCB backed off, and said that there was still a chance the store would remain downtown. Guess what? They lied. Even after meeting with State Senator Gene Yaw and local Representative Fred Keller (Hmmmm...both supporters of the privatization bill) in May and again stating that no decision had been made, they were actively looking for a new location. Apparently the $12.75 million in mostly state money used for downtown revitalization since 2012 meant nothing to the PLCB.

Even the option of keeping a smaller store downtown was rejected, though the PLCB keeps lots of small stores open, even stores in close proximity to each other. Newtown Square is a prime example, with two stores within 400 feet of each other. Talk about a liquor store on every corner!

This is not the first time the heavy hand of the PLCB has come down against the wishes of the citizens, citizens who are supposedly the owners of this "valuable asset," as Wendell W. Young IV always puts it. This is a case of the workers telling the owners what to do, then.

This is the same thing as happened in Lock Haven. As I wrote in the Lock Haven post: for 80 years the PLCB has only been concerned with itself, deciding what we should be allowed to buy, where to put stores, how many stores to have (there were over 750 at one point, there are 605 now), and when they should be open. They are like some overbearing, deaf deity, ineptly bestowing its grace upon the masses.

The masses are getting sick and tired of it. Sick of a system that should have been done away with decades ago, sick of being told what they will be allowed to purchase by largely unknowing and incompetent overseers, sick of not having the convenience they see in other states, sick of the case law, sick of arbitrary "interpretations," sick of graft and corruption, and sick of being treated like children.

So the next time you hear that the PLCB benefits all Pennsylvanians, just don't ask the people of Lewisburg or Lock Haven. And the next time you hear Wendell W. Young IV tell us that we OWN this valuable asset...ask him if he knows where we can SELL IT.

Monday, August 24, 2015

The only number you need to know

Do  you want to know how crappy our State Store System is? All you need to know is this single fact. The number of States, Counties, or localities looking to move toward a system like the Pennsylvania liquor system:

Since the bad decisions made at the end of Prohibition, no state has ever shifted from a private free market system to a state-run liquor monopoly. Not once, not ever.

Our system is so good that nobody wants it. No one else believes in it except Utah, the only other state that is like us. Even they are somewhat better off since you can buy beer in grocery stores there! Alabama is looking to change, Montgomery County in Maryland, a "control county," has passed a partial privatization this year, Literally hundreds of towns in Texas alone have "gone wet" and even some here in PA, like Antrim Township.

The truth is that most people do not want to live under the quasi-prohibition model of the PLCB, be they in Pennsylvania or even under the more liberal versions found elsewhere. People want to be able to choose what they want and not what some bureaucrat in the capitol decides they should be allowed to have.

We don't want the corruption monopoly brings, either. Graft and corruption is not limited to the PLCB. North Carloina has its share too. Even 40 years ago there were charges and nothing really has changed since then. PA is no different. 5 senior members charged with graft, longstanding nepotism, junkets and "tastings" for members that have no qualifications to select mouthwash let alone wine for the entire state. 

Painting the PA liquor jail cell a nice bright color, putting up new drapes, and calling it "modernization" will not change the way the system works. The state charging more is no better than anybody else charging more, except that in a free market you can shop somewhere else. You don't have that choice in PA; it's the State Stores...or the State Police.

The State Store System does nothing for the citizens. It limits job creation, tax collection, selection, service, choice, and  entrepreneurial  drive of small businesses.  I think we can do far better: don't you?


Thursday, August 20, 2015

Citizens urge lawmakers to accept Convenience 2016 plan

Commonwealth citizens
 — we, the people forced to shop at State Stores —
 issued the following statement today.

The Citizens urge lawmakers to pass a consumer convenience bill to normalize liquor sales in the Commonwealth. The PLCB issued their "Convenience 2020" scheme three years ago and we have fewer stores and fewer "stores in a store" than we did at the start of their plan. It is time to put into effect a Convenience 2016 plan that will close all the state stores by the end of 2016 and open up the freedom to sell wine and liquor to anyone who wishes to purchase a license and meets current on-premise qualifications.

We Citizens have been treated like children for far too long. It is not up to the state to limit commerce between individuals, corporations and other states in pursuit of the false claim of safety. We are not safer, as any reading of national statistics will show. Even the PLCB reports higher than average underage drinking in the state.

We Citizens want the increase in jobs privatization has proven to bring. We want the decision of which products will be stocked to be made using our dollars as votes and not have a nameless, faceless bureaucrat (who certainly isn't an expert by any industry standards) decide for the entire state. We want the greater convenience that privatization will bring, not some idiot's dream 80 years in the making, but one proven to work: the free market.

If the state thinks that having liquor in grocery stores is a good idea, which apparently they do, then allow grocery stores to sell liquor. Problem solved.

If the state thinks access should be more convenient which again, they apparently do, make more licenses available and stop competing with private business. Another problem solved.

If the state thinks that there should be greater selection, that problem will be solved by any number of superstores waiting to enter the market, or entrepreneurs who want to offer the largest selection possible to win your business. We'll soon see stores with more items on the shelf then the entire state stocks now.

If the state wants revenue, then the free market will give proven increases in sales, which in turn results in more taxes collected. A free market will reduce border bleed with increased convenience and pricing competition, increasing collected taxes even more.

If the state wants to treat their citizens like rational adults that don't need to be told what, where, and how much they are allowed to purchase of a legal product, they will pass this plan.

We are not safer, we are not better served, and we are not satisfied. End false modernization, end false promises, end the state store system. Convenience 2016!

The Citizens represent most of the 12 million people in the Commonwealth who work in the southeast, northeast and central, western and all parts of  Pennsylvania in supermarkets, drug stores, food processing plants, government services, manufacturing facilities, nursing homes, professional offices, and all businesses, except Pennsylvania's "Fine" Wine and "Good" Spirits Stores.

Monday, August 17, 2015

Show me the money!

Bailment was supposed to be this great golden road to increasing the profitability of the PLCB. I'm not seeing it.

If you don't know, bailment is the term used by the PLCB where a product is shipped to and accepted by the PLCB's warehouse, but the ownership of the product doesn't transfer from the supplier to the wholesaler (the PLCB) until that product is actually ordered by a retailer (the PLCB again). It is used to save the wholesaler money because they are not responsible for maintaining inventory, the supplier is. The claim is that bailment reduced costs enough that the PLCB didn't have to borrow $110 million (interest free) from the General Fund to kick start their fiscal year, as they have in the past. Is that what's actually happened? 

It's pretty simple to check: if you don't have to borrow and pay back $110 million, you should have $110 million more to spend or save or invest at the end of the year. So where is it? 

We know it isn't being spent on inventory, since 85% of volume is in bailment, according to testimony given just last week by the Board. And we know that the amount turned into the General Fund hasn't increased by $110 million. It was $80 million in 2008 and it was $80 million in 2014. And we know that "Operating Income" hasn't increased by $110 million.

So where did that $110 million go? Operating income was $130 million in FY 2008 and only $17 million more (13%) in FY 2014 (even though gross sales were up 26% in the same time period, meaning 'profits' dropped significantly...but that's for another post). Operating expenses didn't eat it up either, the $64 million increase wouldn't account for it even if Gross Revenue didn't increase at all, which it did by $82 million. Net assets were $77 million in FY 2014 and $105 million in FY 2008 so it isn't squirreled away in assets either.

So I'm asking. Assume I'm a member of the public, your boss, supposedly — explain to me just where that $110 million went exactly? I won't think any worse of you if you say you just blew it on tasting rooms and such — it would be hard to think worse of you, honestly — but where'd the $110 million disappear to? Show me the money!

Thursday, August 13, 2015

Famous PLCB sayings in History

While the Legislature is taking their vacation, just walking away and leaving the most important business they have undone, we thought we'd have a little fun too. We took a few famous quotes from history, and adjusted them to suit the PLCB situation. After all, the Governor spent 35 minutes on the last meeting I thought I could spend 35 minutes working on this too.  Just having some fun...mostly.

Give me the PLCB or give me death. It doesn't matter that they are both the same. - Anonymous UFCW state store clerk

I cannot tell a lie, I really hate the PLCB. - George Washington Smith (the first customer from Pennsylvania at Total Wine in Delaware)

Ask not what the PLCB can do for you, Ask what you can do for the PLCB. Chairman's statement at first Board Meeting. 4/1/33

Let every citizen know, whether they wish us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success -- okay, just the survival -- of  the PLCB - Governor Wolf on the current budget talks 

Real patriotism is a willingness to challenge the PLCB when it's wrong. - Ron Paul when looking for a good bottle of Scotch in Philadelphia 2015 

Never in the field of human conflict were so many held hostage by so few. - Winston "Churchill" Rabinowitz when asked about state stores in 1946 

You can always count on the PLCB to do the right thing - after they've tried everything else.-
Testimony of Auditor General about Wine Kiosks  3/14/11 

Nobody will ever deprive the Pennsylvania citizens of the right to price, selection and service except the Pennsylvania citizens themselves, and the only way they could do this is by continuing to vote for those who support the PLCB. - "Franky D" Roosevelt 1968 

Since when have we Pennsylvanians been expected to bow submissively to the PLCB and speak with awe and reverence to those who serve us? - William "Judge" Douglas buying drinks for a family reunion 8/9/54 

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified PLCB interpretations which paralyze needed efforts to convert retreat into advance"Franky D" Roosevelt  forty years later in 2008 

The PLCB way of "control"
The objection to Puritans, like the PLCB, is not that they try to make us think as they do, but that they try to make us do as they think. - H.L. Mencken,  The Bard of Baltimore

I have sworn upon the altar of God eternal hostility against the PLCB and every form of tyranny over the mind of man. - Thomas "TJ" Jefferson after waiting 4 weeks for his SLO order only to find out it still isn't in. 2009 

The Constitution only guarantees the American people the right to pursue happiness. If you are from Pennsylvania, you have to go out of state and catch it yourself -.Benny Franklin, buying liquor for his daughter's wedding at Moore Brothers in NJ, 1982. 

The cost of liquor is always high, but Pennsylvanians have always paid it. But one path we shall never choose, and that is the path of surrender, or PLCB modernization. - John F. Kennedy, Centre county resident speaking to his Democrat Representative Scott Conklin about privatization 2013

What do you need to run a business? Three simple things: know your product better than anyone; know your customer, and have a burning desire to succeed. The PLCB fails all three. David "Burger" Thomas owner of Dave's Liquors Pennsauken, NJ. 1983

No booze is good booze - Governor Pinchot speaking at the founding of the PLCB 1933

I'll leave you with this unadulterated quote:

Time is the friend of the wonderful business, the enemy of the mediocre. Warren Buffett

And the PLCB's time is DONE!

Monday, August 10, 2015

Well, the PLCB released some numbers - so how did I do?

A few days after I asked why the PLCB couldn't publish any financial numbers in a reasonable time, the House Liquor Control Committee got some numbers from the PLCB that tried to make themselves look good. If you watch the video, you'll see it didn't work. Here are a few facts and figures. This isn't the same amount of information that it took them over 2 months to release last year, but it is a start and enough to check the predictions I made. Let's see how I did, comparing the actual quotes from my post of July 31 to what came out at the meeting.
The PLCB spin is making me dizzy
1. Prediction: "The PLCB had record sales again. No surprise there with a police enforced monopoly, a growing population and things costing more over time: what else would you expect?"

1. Reality: Hit this one right on the head

2. Prediction: "There should be some crowing about record amounts of taxes turned in, but how is that a surprise when sales go up? Tax payments are done by tens of thousands of businesses, but the PLCB is the only one that puts out a press release saying that they did their job. Congratulations, guys."

2. Reality. Yep, they are crowing about it, but things are a bit confused. The PLCB cited various "modernization" efforts, including increased Sunday store hours. Except there weren't any increased Sunday store hours. That particular change is controlled by the legislature, and they didn't vote to increase any Sunday hours. Is the PLCB doing it illegally?

3. Prediction: "The PLCB will not have record Net Operating Income or what they call "profits." It went down last year and I'm betting it will go down again this year. You gotta wonder how they can have record sales all the time, but rarely record profits (or 'unwasted use tax', as I like to call it)."

3. Reality: While no PLCB financial sheet lists "net income," we can figure it out; it came to $121.2 million in FY 2014, which went down to $117 million this year. Damn, right again. Record sales and making less money: it's the PLCB way!

4. Prediction: "Store, Warehouse, and Transportation Costs went up 8% last year and I say they will be up by at least the same amount this year."

4. Reality: Well, they did go up, from $327 to $338 million, but that is not the 8% I predicted, it's only 3% . Can't win 'em all.

5. Prediction: "Administrative, Alcohol Education, and Support Costs went up 9% last year and they will go up again by 8-10%. Don't even think that was because of the education part, since the total was even more in 2011. Went down after Rep. Turzai started pointing it out and then went back up to what it was. It's going to go up again."

5. Reality: In a rebound with a slam dunk! Administrative, Alcohol Education, and Support Costs went up an astounding 29.4% from $62.6 to 81 Million.

So there you have it.  We'll have to wait and see how well my prognostication did whenever the PLCB can figure out how to work those computers. For now, I'm going to say that I did pretty damn well with 4 out of 5.

The  bottom line is that the PLCB took more of the citizen's money and gave less in return for the second year in a row, and for the fourth year in a row did not increase the amount turned in to the general fund, even though all those years had record sales. I know that this number is a request by the Governor, but it is AFTER MEETING WITH THE PLCB, when he knows how much they have.

Time to kill this dinosaur.


Thursday, August 6, 2015

Agency stores - How the Democrats will prove privatization doesn't work

In an August 5th interview with the Pittsburgh Tribune-Review, Democrat State Senator Jay Costa said he backed "agency shops" as a compromise to efforts by GOP legislators to privatize the State Store System. What he is really saying is, 'Let's show how these fail and keep the State Stores.' How do I know this?  Let's look at the scenario.
It's for all his friends in the rural areas.
First: The stores will only be put in underserved rural areas (you know, those 20 counties that have only one or two State Stores in hundreds of square miles), and he admits that it's to avoid cutting into PLCB profits from well-performing outlets in populous areas of the state. Nothing like a fair and level playing field for the suckers lucky entrepreneurs in those agency shops!

Second: Given the lack of enthusiasm for the "store in a store" concept (only fifteen in the whole state after 35 years!), it will probably be a standalone structure, forcing a higher cost per square foot than if integrated into an existing store. Even if not, the existing store would still legally have to provide separate entrance and register, increasing their cost. Of course, the hours won't be any better than the current State Stores either.

Third: "State Mandatory" items that all State Stores have to carry may not be the product mix these rural stores need to have, costing shelf space and sales. But Harrisburg knows best, so they're stuck.

Fourth: These stores will still have to buy from the PLCB. It isn't clear if they will get wholesale prices, which is highly unlikely (given the PLCB's jealously stingy attitude toward any private entities), or some discount from the PLCB retail price, like bars and restaurants do. If they do get a discount, you can be sure it won't be the same the State Stores get, thereby ensuring higher prices at the agency stores...exactly what the PLCB bureaucrats want to prove: private stores "cost more."

Fifth: Cost of transportation, while not stated, will certainly play a part. If you think the PLCB will provide free shipment to their new competition, you are just wrong — it ain't gonna happen.  That leaves the agency store going to a larger state store to pick up product, or all the way to one of three warehouses in the state.  (P.S. The PLCB is trying to knock that down to only two warehouses — more convenience!) In either case it is time and expense that the State Stores don't have to bear.

Sixth: While Ohio does have agency stores, that is ALL they have. There is no competing with State Stores, no limitations on being only in rural areas, and still no competition because the state sets the prices. They are a control state, just not as onerous as PA. Not a real improvement, by any stretch of the imagination.

Seventh: With a very limited number of these stores (no details on the amount, or what the criteria is for selection), there wouldn't be the incentive or need for any price competition that the free market brings. It would be the same as the beer distributor oligopoly, only with even more protections for maintaining a higher price.

So Senator Costa is selling us a bill of goods, and not an attractive one at all. What agency stores would really be about is three things.
  1. Like "modernization," putting in agency stores would lead directly to a cry to 'give them a chance,' which is really about kicking the privatization can down the road, putting it off so Wendell W. Young IV doesn't have to worry about it for another five years at least.
  2. Set up to fail, agency stores would be a great straw man for anti-privatization fanatics to point to and say, 'See, we gave you privately-owned stores, and what happened? The same selection (or less), higher prices, and no more convenience than the State Stores!!!" Because that's the way Costa wants it to be.
  3. The PLCB no longer has unprofitable stores. Because they'd dump all the stores that aren't making a profit — due to their ballooning operating costs — on the agency stores, allowing them to decrease the number of State Stores again, keeping their bloated payrolls and administrative costs humming along in markets where selling booze is like shooting fish in a barrel. 
We urge the GOP not to bite on this. Senator Costa is actually proposing to save the State Stores — a bad idea from the 1930s — with 'agency stores,' another bad idea from the 1930s. Don't double down on stupid.

Like we keep saying: End It, Don't Mend It. There's a great solution to the problems of the State Stores: privatization. Don't let this moment go. Don't let Governor Wolf off the hook.

Tuesday, August 4, 2015

"PLCB Modernization" means "PLCB higher prices"

Another installment in our ongoing series of revelations about why "modernization" is a scam.

We always hear about how the "PLCB Modernization" plans will make so much more for the state! But what they won't tell you is that they all work by taking more money out of your pocket. Here is one of sneaky little things they want to do that will cost you more. You don't see much about this item, as the PLCB has buried it pretty well. Well-hidden or not, it is one of their many ideas that will cost you, the consumer.
Because it's the PLCB way!
In the liquor industry there are specials that are offered called SPAs  or Special Purchase Allowances. By current law these SPAs have to be passed on to the consumer (that's you!), which is why you see  those sale tags on the shelves. The PLCB isn't making any less, as none of that reduction comes out of their pocket; they are just passing on the SPA.

However, the PLCB doesn't want to do that anymore. In sworn testimony, the PLCB said "With flexible pricing, the Board would be in a position to retain, and ultimately remit to the Commonwealth, some of the savings afforded by the Board's suppliers" In plain English? 'We aren't satisfied with making the exact same amount on sale items, we want to make more and have the citizens save less.' (I did a post last year about "flexible or variable pricing" if you want to review that.) In a worst case scenario, which is without a doubt what the PLCB will do, they could get an SBA, adjust the pricing upward and pocket 80-90% of the savings that were supposed to be yours.

Now, in the free market, a store will leverage those SPAs by not only using the reduction in their cost but by also cutting their margin to lower the price even further in order to attract customers away from other businesses. That is why sale prices elsewhere are more of a bargain than the sale prices in PA. The PLCB doesn't want to do that, though, because they need more money to cover their ever-expanding operating costs.

In 82 years, we have never seen anything done to change the liquor code to save you money. Benefiting the consumer is not what the Almighty Liquor Code is for, after all, unless it's about free drinks while playing slots. They have no problem with that.

It is time to END IT, not mend it. Get the state out of the alcohol business and into regulation where it belongs.

For parts 1-4 of this series see :
Part I,
Part II
Part III
Part IV