Wednesday, September 28, 2016

Forget the Zombie licenses: raise the quotas!

There's a lot of hand-wringing and bluster going on about one of the provisions of Act 39, the "epic" change to The Almighty Liquor Code (as trumpeted by Governor Wolf, who didn't do anything except sign it). It's the so-called "zombie" license auction, wherein the PLCB has been directed to sell off the approximately 1,200 inactive liquor licenses that are in escrow, suspended, or otherwise not being used.

Many people are freaking out about this, but a lot of us wonder what the hell zombie licenses even are. Why aren't they out there earning a living?

Our weak-kneed, nanny-state legislators are more to blame for the current idiocy than you may realize. The idea of selling the zombie licenses is a futile attempt to solve a problem they created. For reasons known only to whatever power you pray to, the legislature, throughout the past 82 years — on BOTH sides of the aisle — dislikes bars and restaurants more and more with each generation.

When the PLCB was first created, it was decided that your great-grandparents would be allowed to have one "R" license for every 1,000 citizens. Then with Act 702 of 1951 that number was increased to one for every 1,500 citizens. Which was great for the "R" license owners, which was probably reflected in the campaign donations from the tavern and restaurant owners associations.

Then in 1972, Rep. G.R Johnson (R-Delaware) decided that the citizenry were eating out and having entirely too much fun, so he put forth HB 517 which (along with letting stadiums sell beer on Sunday, the sweetener) proposed raising the quota from 1 per 1,500 to 1 per 3,000 residents. After a few rounds of amendments, it was eventually set at 2,000. Why the House and Senate majorities thought this was a good idea is not recorded. So HB 517 passed and was signed into law as Act 108 of 1973.

Between 1935 and 1972 Pennsylvania's population went up about 22%, but the number of licenses per capita was decreased by 50%, relative to the original quota. A prime example how the legislature made things even worse than old Gifford Pinchot wanted in 1934!

But they weren't done. Deciding they hadn't sufficiently put the populace under their control, the legislature again took up the quota system in 1989. Rep Eugene Saloom (D-Westmoreland), the Chair of the House Liquor Control Committee, decided that he had to protect small businesses that didn't yet exist by raising the quota to 1 per every 3,000 residents.

This is a quote of the logic (or lack of) for his decision. "Some of the urban area's population is shifting to the suburban districts, and one thing they don't need are additional beer distributors and additional bars. We know that if it isn't changed there will be a lot of people in business not making a profit." A quota of 1 per 2,000 had allowed people to make a profit, but even if that didn't change in the suburbs, it suddenly that wasn't enough. Saloom's HB 1946 marched on to become Act 160 of 1990.

Now you can think that maybe this guy is just an idiot. But that means the entire legislature were idiots too. While the House and Senate were again controlled by the Democrats, this passed with overwhelming bipartisan support: 187-4 in the House and 48-0 in the Senate. Why was this so important?

It's 1991, population has increased only 150,000 (1.2%) since the last time the quota was raised in 1973 and the licenses were reduced by a 50% ratio AGAIN! This must have made the restaurant and tavern owners ecstatic. I'm sure that contributions just rolled in over and under the table.

To exacerbate the problem, licenses could be held without being used indefinitely, and those that were turned back into the state disappeared from the market completely, reducing the total number under the quota system, and thereby raising the price of those that were still active. Pretty nice when the state itself limits your competition, reduces entry into the market, and gives you ownership of the license unlike any other licensed activity.

Pennsylvania Legislators, both Republican and Democrat, need to pull off the blinders and stop putting band-aids on the sucking chest wound that is Pennsylvania alcohol policy. They can start by doing things that benefit the citizens. Not the clerks. Not the Tavern owners. Not the Beer Distributors. US.

Start with changing the quota back to what the cowering semi-Wets of 1934 thought was sufficiently draconian: 1 license per 1,000 people in a county. If that's too many, the market will sort it out quite efficiently, like it does when there are too many Starbucks in an area.

(edited 9/30/16 to update 1951 quota info)

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