Where the PLCB Money Goes: Then and Now - A Second Look

Let's have a look at what the PLCB has done with its money -- our money -- since the new millennium has started. I did this story almost 3 years ago so let's see what may have changed The numbers from 3 years ago will be in parenthesis. 

Fewer stores, more employees: In July 2000 there were 692 stores with 2,869 full time workers and 1,072 part-time workers In June 2016 there are 601 (604) stores, and as of May 15th, the last reported figure for FY 2015 there were 3,067 (3,080) full time workers and 1,606 (1,417) part-time workers. Stores decreased by 15.1% (it was 14.6% the first time I wrote this) and employees increased by 18.9% (13.5%). Just looking at it from 3 years ago there are 3 less stores but 176 more employees. 

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 2016 the PLCB had record sales of $2,430,209,796 ($2,171,946,398) and non-record operating income of $131,770,874 ($151,877,723) or 5.42% (6.99%) of sales a decrease of 53.14% (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.) Looking at these numbers is there any doubt "flexible pricing" is going to cost you more?

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. Of course, we are still paying the legal expenses for the wine kiosks too.  Who knows when that will end or how much it will total.

More for ads, less for education: In 2000 the PLCB contributed 0.76% of their expenses to drug and alcohol education.  In 2013, the biggest year they ever had up to that point, they donated only 0.66%, up from the 0.53% in 2012 (also a "record year"). This year it went up but only because they had to pay the $800,000 they shorted Drug and Alcohol programs last year. It is still below 2013 levels  The PLCB hasn't released how much they spend on advertising until this year where they said the spent "about $6,700,000" or over double what they spent on education.

More booze, less enforcement: In 2000, the PLCB gave 7.39% of their expenses to enforcement of the liquor code.  In 2015, the PLCB only did 5.51% (6.19%), a shortage that works out to over $9 million less for enforcement compared to 2000. 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 $9 million the BLCE doesn’t get since they were no longer funded at year 2000 levels too. While I'm sure a few token bootlegging arrests were made in 2015 I haven't been able to find out how many.

The real PLCB new funding source.

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. It hasn't changed with the current board, or ANY board either.

"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 although thankfully that part of "modernization" wasn't part of ACT 39.)

The PLCB has not changed in the sixteen years since 2000...Act 39 will only cause 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.

The Most Important Letters at the PLCB Are Not "U" or "I"

The most important letters at the PLCB are C...Y...A. That's right; the agency runs on Cover Your Ass. Have a look.

In the Winter/Spring issue of the PLCB propaganda magazine "Taste," they had, on the cover, featured a drink called the Aviation, which requires creme de violette. It is a crucial ingredient in the cocktail, a necessity. But the PLCB didn't sell creme de violette at the time, except as a "special liquor order" (the aptly-named SLO) with a minimum order of six bottles. It sure seemed like they were telling anybody who wanted to make the drink featured on the cover of their own magazine -- who didn't want to spend $100 on a six-bottle SLO -- to go out of state to buy the proper ingredients. Of course, after having that pointed out, the PLCB approved creme de violette 2 months later. I'm not sure if it is really on the shelf yet, and how long will it be before they decide it isn't meeting their Five Year Plan of Sales and de-list it...again?

This isn't the first time the PLCB has put drinks in their rag that you can't make if you're stuck shopping at the State Stores, and I'm sure it won't be the last, either. ..again.

Get it while you can...or go out of state...again

Of course the most famous incident of CYA in the PLCB was when they tried to hide the whole wine kiosk fiasco as documented here. Nothing like trying to destroy evidence to inspire confidence in a public organization. Then there was the whole TableLeaf (and others) house brand disaster, and again, somehow all the paperwork on who instituted the idea, who initially approved it and why - all of that has disappeared.

We can go back to the big Oracle upgrade that went more than 200% over budget ($25.8M to $66.6M) because the PLCB couldn't read and understand the contract they signed. The Auditor General had a great time with that one, stating, "This raises questions about the PLCB's ability to adequately contract for information technology solutions." And that wasn't even the first time that was brought up by the AG. That earlier report is no longer on line at the AG website but I have a copy if you want to read it.

In fact, just reading all of the AG audit reports show a history of CYA. Remember the smile training that the husband of a senior PLCB official "won"? While the AG did say it was legal -- barely -- that didn't stop the PLCB from authorizing a second year as if to rub it in. Strangely enough, customer complaints increased.

We're happy to get you anything you want (if that has been authorized by people who know nothing about the liquor industry)!

"Each board member evaluates each license application on its own merits, thoughtfully deliberating over each decision and voting as he deems appropriate," says Elizabeth Brassel, Mistress Of Propaganda PLCB. Except when the Democratic Governor asks the Democratic Chairman to change his vote, like just happened when the Board "Freed The Six-Pack"....in a whole nine stores. That's about 1,416,667 people per "freed" store. I hope they hired extra cashiers.

Lining up for them freed six-packs; thanks, Wolfman!

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News Flash! More ethics problems at the PLCB

In the "Hardly Shocking" Department...

On February 21st, an ethics complaint was filed against PLCB Director of Regulatory Affairs Jerry Waters. It is not the position of this blog to say if he is guilty or not but to report that the violation has been filed. The complaint is listed below (without the numerous pages of supporting documents).

This is yet another ethics complaint filed over the past few years on senior PLCB members, like former CEO Joe Conti, Director of Marketing Jim Short, former Board Chairman PJ Stapleton, and others.  We, the public, have been waiting for the Attorney General to release her decision for some time. Requests are met with the standard "We cannot discuss ongoing investigations" statement. There is some backroom chatter that the the violations have been referred to federal authorities; now wouldn't that be sweet?

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.

I'm gonna miss Joe "Water Heater" Conti

Acting CEO Joe Conti has finally left the PLCB after collecting about $67,000 for 6 months of "emergency" part-time work.  I say acting because he never really was a CEO. He never took responsibility for anything. Never made a sound business decision and never did anything that improved things for the public or even the store workers. Wine kiosks were "innovative"  so much so that he doesn't care if it takes 20 years to settle the lawsuits. "We may have had an error in judgment, and this may be played out over years or decades in litigation, but this was not a faulty fiscal decision.” . Vodka for Mother's Day went over so well that the ISSU, the union of state store managers, called the CEO and the LCB "You are collectively the number one drug pushers in Pennsylvania.".  Obviously that was $142,000 not well spent.

Then there is the $33 million extra that the new computer system cost.  Why?  The AG says it is because the PLCB basically didn't read and understand the contract.. You can read even more background about the events leading up to this in the 2009 Audit. This lead to the double ordering and storing wine in trailers.

That alone would cause the board or the shareholders (US) to remove the CEO but not old Joe he kept chuggin' along with sweetheart deals for Jose Garces giving him a state store within his restaurant - the only one in the state and never repeated.  That lawsuit by other Philly restaurateurs was settled after Jose Garces actually got a license.  Since that was looking like it would work out for awhile Joe tried to get his daughter a job with Stephen Starr by offering him the same special treatment - or at least that is what the AG says.  That investigation for nepotism and graft is still ongoing but it didn't stop the PLCB from bringing Joe back after he resigned. Supposedly for the emergency reason to find his own replacement even though the Governor said he wasn't going to fill the position. Then there was the questionable contract with the husband of a regional manager to teach the clerks how to say please and thank you. Commonly known as "Smile" training it compared the stress of working a register with the stress President Kennedy felt during the Cuban Missile Crisis.  This went over so well that he approved a second year of it even though customer complaints INCREASED after the training. The Auditor General said: "Although this contract was awarded according to the letter of the law, there are several incidents that occurred that raise serious concerns and put the PLCB's procurement procedures in question." And that isn't the first or second or third time the AG has commented on the PLCB procurement or implementation process. (Audits 1992, 2000, 2007, 2009. 2010, 2012)

There is more, so much more but it all is just repeats of his hubris and lack of business sense and of how out of touch the PLCB system is with the wants and needs of the citizens. "The state alcohol system is a Fortune 1000 company", Conti once said and he was a guy who once helped run a restaurant for a while in charge of it.  He said: "At the end of the day, you want convenience,” and to that end he closed 45 stores, gave us wine kiosks and admitted the state still had 30 unprofitable stores in rural areas, but that they lose less than $1 million annually combined (I guess that makes it OK).  If you can't make money in a liquor store with a complete monopoly then something has to be wrong with the system.

I'm gonna miss you Joe, you were the best friend privatization had but I have faith that whomever they find to replace you or any of the board members will be just as incompetent, inexperienced in business and out of touch with the desires of the public and that gives me hope that privatization will take hold here in Pennsylvania.

How can you hate a guy who's lasting legacy will be making the clerks wear "world -class" aprons like Williams Sonoma?

Privatization IS Modernization - Accept Nothing Less