Thursday, April 14, 2022

What Might Privatization Look Like?

The future is as clear as vodka...

Two years later...
I haven't given up, but I'll admit that the pandemic re-ordered my priorities. I've got [THE RAGING FEAR] my concerns under control now, and I'm starting to think about other stuff again. Like privatization. 

There's talk of using a state constitutional amendment to get rid of The Police-Enforced Monopoly that is the State Store System. This tells me two things. One, Republican legislators are tired of Democratic bullshit about this issue, and they're going nuclear. And two, that Republican legislators have stopped thinking clearly

Demolition of the PLCB, amendment-style!

It's my strong opinion that this would be the bluntest of instruments to achieve the goal of privatization of booze sales in the state. An amendment would not have the detail necessary to do this well, and would leave open all kinds of maneuvering room for backroom deals of the type I'm pretty sure we all know would happen. 

What kinds of deals? How about minimum square footage requirements, like they included in Washington State's privatization deal? The "reason" is that they're 'saving' us from 'a liquor store on every corner,' but it's really a deal for big-money donors like chain grocery and liquor stores to get a new oligopoly on retail liquor stores, trading a shitty monopoly for a still-limited oligopoly. We don't want that, believe me

Or they'll boost taxes to "make up for the shortfall" from the loss of the PLCB "profits." Once again, like Washington State's privatization deal, this is wrongheaded, and will lose us the greatest benefit of privatization: competition. It will put PA liquor stores (and bars, and restaurants) firmly behind neighboring states' stores on price, leading to even more border bleed

Because you know that the hated Police-Enforced Monopoly will not go away. We'll still be forced to buy booze in PA. Bullshit on that. Bullshit!

Okay, calm down, Lew. The constitutional amendment idea is not a good one, despite the Democrats forcing consideration of such extreme measures by their bullheaded intransigence on this issue. We need to come up with some way to make this an attractively bipartisan issue. 

Some of the problem is that the lazy legislature acquiesced when the PLCB put the supermarket safety valve in place, and didn't do the right thing: create a separate grocery/deli/c-store/gas station license for retail off-premise sales. That led to supermarket and c-store chains buying R-licenses at insanely inflated prices (over $500,000 in some instances), and now — shocker! — those businesses are dead-set against any move toward such a license. Great. 

But that's a whole other post, and I will get to that, and soon. I'm back on this. 

Time to take over the world, Pinky!

Meanwhile...What do I want to see in privatization? All open to tweaking, but...

First, and non-negotiable: the PLCB ceases to exist except as a regulatory agency...if needed. No state stores, no state wholesale. They've proven that they cannot run this fairly or honestly. They're done. As a regulatory agency, their operations must be made more transparent, and their power to "interpret" state laws and regulations to the point of nullification must end. 

Second, very important: learn from Washington State's mistakes. And they made plenty of them. A study panel should look at what Washington did, and what Alberta did, and come up with recommendations to make sure that we do better. Ask consumers in those places, too. 

Those two are huge, big picture things. Here are more direct things. 

1. Allow ALL R and Hotel licensees -- bars, restaurants, hotels -- to sell any type of alcohol beverage to any legal customer for on-premise consumption. With the purchase of an additional Off-license permit (for a reasonable annual fee to the state), they would be allowed to sell full bottles/cans to go. No more limits, no more "step outside and you can buy another" bullshit. Licenses increased to one per 500 adults in a county. Licenses become non-transferable five years after passage, which should end the ridiculous secondary market in paper.

2. Beer Distributors become all-alcohol stores with off-premise sales. Beer distributors MAY dispense draft beer in sealed (have to work on that definition) to-go containers. Number of licenses is increased to one per 500 adults in a county. License is non-transferable, starting five years after passage.

3. Create a new license for grocery stores, convenience stores, drugstores, and gas stations. Takeout ONLY, no on-premise consumption. Number of licenses are not limited, pay a reasonable annual fee to the state (with allowance for review after five or ten years), and are not transferable. License holders MAY also buy or retain a separate R-license for on-premise consumption if they want. 

4. Open up wholesale. Beer wholesalers may add all other alcohol. New wholesalers allowed, reasonable annual permit, non-transferable. More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. This may need tinkering; for instance, are multi-state wholesalers allowed to operate in the state? We may want to say no to that, or we may not

5. Pennsylvania citizens AND licensees may buy and sell from out of state. Period. This has gone on for way too long. If the state can't tax and regulate booze in a manner consistent with neighboring states, that's too damned bad. Look at it as incentive to do better. 

6. Sales tax to be applied at wholesale (or producer) level. Convert the Johnstown Flood Tax from a tax on price to a flat gallonage tax, like the rest of the country, and peg it to current national average. If that means less revenue, screw 'em. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

7. Rip out the old Liquor Code and start over. Aim for simple, understandable laws that ruin as few businesses as possible, but changes them where they are unfair, or not in the public interest. For instance, booze wholesale should emulate food wholesale: competition allowed, exclusivity as something that suppliers would pay for. The Code is currently open to way too much interpretation and confusion, and that has to end. 

8. Perhaps the most important is this: when this is done, when it's being written and decided upon, it must be 100% transparent. There must be citizen and industry representation on whatever task force does this rewriting of the Liquor Code, and regular reports must be presented; weekly, if necessary. There's too much money at stake to do otherwise, and we've already seen that it causes corruption. Obviously, I volunteer. Seriously, there should be representatives from all sides: wholesale and retail booze business (but only one each), consumers (one or two), anti-alcohol types (gotta be fair), the UFCW (no, really, it's only fair), and politicians. Maybe more stakeholders, that's just a first cut, but there must be representation and openness. 

These points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and long as big businesses, chain retailers, aren't allowed to write this privatization bill. And of course...nothing's set in stone, and politics is the art of the possible

It's about time, it's long past time, that the consumers, the voters, had a large say in how this gets done

Privatization. Yesterday, today, forever.