The PLCB doesn't know business; just ask them

The PLCB plays at being a business, but they really don't know what they're doing. We've told you that many times. If you don't believe us, you can just listen to them. They'll make it pretty clear.

The PLCB -- the actual three member board, plus the so-called "executive director" Charles "Not a CEO, Nope, No Sir" Mooney -- testified in front of a joint meeting of the House Of Representatives Liquor Control Committee and Senate Law and Justice Committee about the effects of Act 39...especially about flexible pricing (you can read the whole transcript here). It's a big deal, these meetings and the change Act 39 brings, and the Board has to be ready for the legislators' questions.

And of course...they weren't. Apparently, they weren't really ready for flexible pricing, either, despite having asked for it for years. 

Let's start with the Chairman. Here's what he told the legislators when they started drilling him about why they hadn't simply negotiated lower prices to begin with; you know, with the huge "buying power" we always heard about. As we told you all along, the "buying power" bullshit was just that: bullshit. They never used it.

Holden: "If we would have sought lower product costs from suppliers, it would have resulted in reduced Commonwealth revenue due to the required application of a flat percentage markup and taxes." On face value, that would seem to make sense. Lower wholesale prices, run to a set mark-up formula to the shelf, means "reduced Commonwealth revenue," sure. Of course, it also means lower prices for us. You know, the citizens. But if it means the revenues are maximized, well, okay. After all, you can't make more money by lowering prices. 

But there ARE real businesses that make a profit doing exactly that. You may have heard of them: Walmart. Target. Aldi. Total Wine & Spirits. All of these real businesses, run by real business people, regularly make tons of money by cutting prices. It's established practice: lower your gross margin, so you make less money on each item; but at the same time the lower prices mean more sales, so you make more money overall. The PLCB doesn't get it; guess it's too much work. ("So many boxes to lift!")

They didn't need "flexible pricing," they could have been doing this all along. It's simple. For every item on the shelf, there is a price that will result in the maximum revenue. Higher, and sales decrease; lower, and total profit decreases. That price point is affected by things like competition, or price-matching, or sales, but the PLCB doesn't do any of those; they certainly don't have any significant legal competition. (And no, the PLCB does not have sales, at least, not in the usual sense: if the producers drop a price, the PLCB passes it through as is, and their slice of the pie remains exactly the same. They never cut prices, except on their ill-advised "clearance sales." Thanks, guys.)

Of course I'm lying. I don't know any of this math stuff.

But here's the thing that boggles the mind. Even under "flexible pricing," where they have to negotiate each price of the top 150 wine and spirits items, they STILL aren't using this business tool. So while they are screwing the suppliers and consumers, it certainly isn't as satisfying as it should be for either of us. 

No, the PLCB wants to really ream us. "...brands that are not within the statutory definition of best selling wines and spirits continue to be governed by the proportional pricing requirement of the liquor code. For a future legislative consideration, we respectfully recommend that the same pricing flexibility be extended on all products sold by the PLCB." 

And there it is. It's not enough that they raise prices on the majority of the best-selling items, they want to do that to everything. Keep in mind that there is no institutional pricing oversight by the legislature (only these hearings where the legislators gets to chide the Board about prices, and the Board gets to say 'oh, yeah, guess so, whatever') and as always, nobody with any experience in the industry is leading this parade of monkeys down the path.

More bumbling ensued as the hearing went on. The Chairman: "We made some mistakes at the initial supplier meetings. We asked suppliers for significant reductions to their product costs to increase our margin. But we failed to take a few things into consideration. We miscalculated the reaction of some of the largest suppliers of our best selling brands, who refused to come to the table at all." Imagine that. You said, 'Hey, we want to pay less for these brands everyone wants,' and companies that deal with sharpened pencils every day said 'That's nice. No.' After all, they sell the same products in neighboring states...that don't have the PLCB.

And once again, we suffer for the mistakes of ignorance, just as we have done for the past 83 years. While the Chairman was being the mouthpiece for this failure, it fully lies on Charlie Mooney. After 40 years in the PLCB, Mooney might know about graft, nepotism, bribes: it's apparently the way the PLCB runs. But it looks like he had no idea how the actual liquor industry (or any industry for that matter) worked.

So after blundering around for nine months, and hiring two specialists to help them figure out how to do this, and -- once again! -- paying an outside consulting firm to gather data, that all eventually led to this statement: "... pricing flexibility has resulted in a reduction of product acquisition costs for almost seven hundred products, retail prices decreases for more than one hundred and twenty products and retail price increases of a hundred twenty-five products."

Let me put that in English for you - they saved money on 580 products and you didn't see a dime of it. They raised prices on more items than they reduced prices, and of the top 10 selling liquor or wine items you saw a reduction on only one: a pint bottle of cheap vodka. Remember those top 10 items are the ones they should have the most leverage on, due to sales volume. They screwed us again. Of course they did.

SENATOR MCILHINNEY: "... the state citizens own this system, and they should be able to get some, any benefit by having a good deal when they go to the liquor store."
MR. HOLDEN: "Absolutely",
Except they aren't. We aren't. Weren't the legislators paying attention? We got NO benefit on 81% of the products that the PLCB paid a lower price for. They said so themselves.

Charlie Mooney also came up with: "Senator, we -- I am confident, without all the data in front of me, that, overall, consumer prices have decreased." Well Charlie, without having all the data in front of me, I call BULLSHIT. Especially after you raised prices on 422 items just because you had crap negotiating skills and didn't get what you wanted.

Maybe they should rename it the PLCB principle.

Remember that the PLCB has over $1.7 BILLION in liabilities, they are a drag on the economy of the state and stifle a free market where large and small businesses do not exist because of their continued presence in the marketplace. They do nothing for the citizens, unless you happen to be one that works there. Even Russia has free market liquor stores. Pennsylvania doesn't.

A closer look at the PLCB Cash Cow

The PLCB and the UFCW (the State Store clerks' union) have always fed the public (and the Legislature) a big lie about the PLCB Cash Cow. They make it sound like their bulging bovine is comprised of nothing but filet mignon, and shits millions into the General Fund.

What they want you to think

However, the Federal Government doesn't think so and with new accounting rules in effect, the real value of the PLCB is more starkly in focus. Remember a couple years ago, when pension debt was required to be included in the annual report, showing that the incompetents in Harrisburg were really $240 million in debt? Now other benefits besides just pensions have to be taken into account, and it turns out that the PLCB is OVER A BILLION BUCKS IN DEBT. with total liabilities of over $1.7 billion! Yup, billion.  With a 'B.'*

Let me say that again. The agency that has been stealing from the public and short-changing the clerks the benefits it promised (which it could never afford to begin with) for over 80 years, while telling us all that it makes money...is over A BILLION DOLLARS in debt.

Don't believe me?  Why not ask the PLCB themselves? Here's the minutes from their December 6th meeting; take a look at page 9.

The reality of 80 years of lies.

What does it mean? It means that even with stealing more from you with "flexible pricing," even after screwing us with rising prices just because they want to, even after cheating us out of the discounts given by the suppliers, even after purposely working against PA businesses with imported house brands...they still need more...a lot more. The lying political hack they call a Chairman could barely keep a straight face when he told this whopper: "And, as we’ve said all along, prices will increase for some items, when the supplier and PLCB agree that the market can bear the increase." 

Looking at page 10 of the minutes you can see that for October they claim a profit (Change in net position) of $8,623,941. That means that if they didn't do anything else besides pay down debt, it would take ten years just to break even for the debt due today. Of course, they would be accruing more debt, new debt during those same 10 years. This is a Ponzi scheme worthy of Bernie Madoff. No wonder they worked so hard trying to get the Governor's borrowing plan into place. It would further obligate the citizens into paying off their debts and for the next 20 years keep the people who care about limited government and fair treatment for the citizenry at bay.

What does it take to be rid of them? How incompetent do they have to be? How anti-consumer will they get trying to pay off what they owe? You know where this money has to come from, don't you? I got a hint: the wallet of someone you know really, really well.

Can we afford to keep the PLCB's cash cow? Are state stores worth it? 3,500 clerks should not hold hostage a state of 12 million people. Privatize.


(*) Now $1.8 Billion in liabilities for January)

The numbers don't lie...but somebody is

In the House Appropriations Budget Meeting for the PLCB held earlier this month, the PLCB leadership said that they would have to dip into reserves to meet the Governor's anticipated request for $185 million. Why is that, if "modernization" is going to be the windfall that the Governor (and clerks' union president Wendell W. Young IV) says it is? Are their arguments that facile?

The Governor said in his "Budget In Brief" of 02/07/17 (pg.15) that through modernization ..."an additional $137 million in LCB revenues will be generated." The PLCB didn't correct or disagree with that number. So let's see what doesn't add up. If their income for FY 2015-16 — after paying for the BLCE, but before the General Fund Transfer — was $103,856,933 (which it was, according to their financial report), then a $137 million increase would take it to just over $240 million. But if the PLCB has to dip into reserves to pay $185 million, that has to mean that their so-called "profit" is less than $185 million.

OH NO!  42 million of my friends are missing!

However, during that same budget meeting — in sworn testimony — the PLCB said that even with record sales again, they would only make about $90 million for FY 17-18. That $90 million and $137 million "modernization bonus" take it to $227 million in total. That's $42 million more than the $185 million they said they could pay IF they dipped into reserves. So where is this $42+ million going? If they make the $90 million they project, and the $137 million additional that they didn't object to, then turning in $185 million to the General Fund should be no problem. Remember that these numbers are what the PLCB calls "profit," so everything (except the $238 million in pension debt...but that's another story) is already covered.

We have to ask: why after all the "modernization" is in place does the PLCB think they are actually going to make LESS than they did in FY 15-16?

Could it be that "modernization" is a sham, and that it isn't going to bring $137 million, or $100 million, or even $80 million? Is being off by well over 60% how the Governor and the PLCB do estimates? How big a failure is this going to be? The MINIMUM $42 million off would push this well beyond wine kiosk failure, or the 66% computer cost overrun, or selling house brands or anything I can think of. This would be a failure the size of the 82 year lie that the State Stores would be convenient to the public. They got what they wanted, "flexible pricing" and all, so show us the modernization money, PLCB!

Do the math and decide: are they just stupid? Or is the PLCB deliberately misrepresenting how much money they will bring in for the Commonwealth?

Something to look forward to.

I don't know if you have ever watched a train wreck actually take place in front of you in real time, but it is something that you can't stop looking at. That's what it's like watching the anticipated PLCB profit projections coming from McIlhinney's Mistake, the "epic change" of a liquor bill. The big number is $149 million in increased revenue overall, but with zero dollars, none, nothing coming from the casinos that number is already down to $137 million. Of that, $25 million is going to come from Sunday sales and a whopping $75 million from "flexible pricing."

Now to get that $100 million that would mean, based on FY 2015's profit margin (1) of 5.988%, an increase in sales of about $1.67 BILLION (2). Not gonna happen.  Even if we use the exceptional FY 2014 profit margin (3) of  8.28% it would still be over $1.2 BILLION in increased sales. That ain't gonna happen either. Even if we count the increase in sales from all those places that will be allowed to sell wine it ain't gonna happen. So if the PLCB doesn't decrease expenses -- and when have they ever -- they have to increase sales. A lot.

What this means is that we may have been sold a bill of goods that is not based on any reality. Remember that no increases in staff or payroll are taken into account, at least, not that I've seen. Modernization proponents didn't say if they are or not in their proposals at the time.

PLCB Flexible Pricing model

Now dollar sales do not necessarily HAVE to go hand in hand with an increase in product sales. It follows the same trend, but isn't 1 to 1. With "flexible pricing" the PLCB can charge more for popular items and less for unpopular items in order to move stock. They could, all of a sudden, decide to play hardball and negotiate prices with vendors, which they have chosen not to do so far; see here, here and here. Only now they are going to keep the difference instead of passing it on as they had to do by law before (except they didn't do it, which kept prices higher, which cost you more, and increased sales totals for them).

If they do get lower prices, they can make more money because they will be spending less for product. Well, maybe. In the game of liquor chicken, who will blink first: the major suppliers or the retailer? Think of it this way, who gets the blame when something isn't on the shelf, no matter whose fault it is? The retailer. Who can least afford to aggravate the consumer: the PLCB, or Jim Beam? The PLCB is not dealing from a position of strength: the people want the product, they don't want the PLCB. Having new colors and plants in the store does not make up for having empty shelf space, especially when there is no benefit to the consumer because you want to keep that extra dollar.

Will all  this result in a large increase in sales and a large amount of money saved? Do cows fly? Bailment (not paying for products until they leave the warehouse) was supposed to save $100 million a year too, and that didn't happen. Now I realize that next year, when the financial numbers finally come out, it won't be for a whole year of this new fiasco and I'll have to adjust the totals based on historical values for July and the first two weeks of August, or just look at the second half of the year and extrapolate from there. No matter how you slice up the PLCB pig, you aren't going to find any bacon, only fat.

This is what happens when the PLCB increases sales over 50% in one year

Normal is what we want and there is no rest until we get it.

Privatize.

(1) The PLCB doesn't really make any profit, it just has left over Use Tax money it didn't waste on something. That said, FY 2015 Operating Income of  $111,520,313 divided by Sales Net of Taxes $1,862,269,904 gives you "profit margin" Note that Operating Income is before any required deductions.

(2) $100,000,000 divided by "profit margin" gives you the additional amount required to achieve the desired increase.

(3) Operating Income of $147,959,116, divided by Sales Net of Taxes: $1,786,501,686

What if the state ran the drugstores?

What if other things that the state regulates were done the same half-assed way they do alcohol?

For instance, how about a pharmacy? They're always telling us alcohol is a drug. Well, then, give the drugstore the PLCB treatment! No more soda, chips, greeting cards and lipstick: sorry, this is a DRUG STORE. Imagine if the "Pharmacist" only needed the same qualifications as the Beer Distributor or the State Store Manager. How would you like that? If they're all just drugs, why shouldn't the people who dispense them have the same requirements: mostly, a pulse, and some civil service points.

Flip it the other way, and imagine if a State Store Manager had to pass a state board to prove he is qualified, like a Pharmacist does. He'd have to stay current with all new products, and know that you don't put Elderflower liquor in a Greyhound (contrary to the advice you get on the FWAGS website). That he had to know the interaction of thousands of different products, and maybe have a minor in mixology and certifications in wine or spirits. So why don't they?

Why is it easier to buy a case of Nikolai than to get Tramadol, Anexsia, Humira, or even Viagra? (You gotta figure that Viagra is popular at the PLCB considering what they do to the consumer everyday.)  Is it because the PLCB really is only giving lip service to "control" and know that they really don't, really can't do a very good job of it? Maybe it is the money. Making it more difficult would cut into the meager amount that the PLCB turns in. I'm thinking that it is most likely job protection. They have this racket going and to do anything to jeopardize it would just be going against their grain.

Who does a better job of regulation? Private Pharmacies or the PLCB?

They certainly aren't working for us: 83 years for the "freedom" to buy four bottles of wine in less than 20% of all grocery stores, or to buy a sixpack at a cafe no one ever sits in. Hell, they won't even let you drink the sixpack you just bought at the cafe they have to provide. Makes sense only in the fog shrouded mind of "modernization" supporters.

You gotta ask yourself not when they will do better but IF they ever will do better. History is not on their side. Privatize and regulate like all the normal states do.


(This is day 46 with no financials yet.)

Quick, Clean Up Those Liquor Laws: The Neighbors Are Visiting!

5-20-2016: This piece has been updated after a full reading of the bill as released by Sen. McIlhinney's committee and subsequently swiftly approved 50-0 by the Senate. Updates are italicized; deleted words are struck out.


This headline in Tuesday's Inquirer caught my eye this morning:

Pa. May Ease Liquor Rules For Democratic Convention

Here's the piece, describing likely temporary changes in The Almighty Liquor Code for the duration of the Democratic National Convention in Philadelphia later this summer.

Short version: the Legislature feels politicians' pain, but not yours.

"C" is for "Cheat"

Less-short-but-still-short version: Bars can stay open past 2 AM while the convention's in session — four whole days — if they are granted a special license, which costs $5,000, and is only available for events directly related to the convention (What's odd: it's not clear if the event license applies to individual licensees, or the event premises, or wherever the "national event" decides to serve booze). Even more galling: for that time period only, these special licensees will be able to buy receive booze directly from out of state for those four days, unlike you...ever! This is so state delegations can get their favorite hometown booze (Washington State wines, Maine craft spirits), recognizing that (as our old pal, Senator Chuck McIlhinney, who passed the House bill out of committee, put it) "we're not going to put it in our liquor stores for four days and then sell it to them and then have to be stuck with it." Well...probably sounded good to him at the time. What Chuck probably meant to say was that it would be unreasonable to expect the clerks to have to deal with a bunch of interesting new products, so let's arbitrarily bend the law instead. Right, Chuck? That's what you do over in the Law & Justice Committee, after all.

Our version: Someone in the Legislature got a rush of blood to the brain and realized that conventions run on booze -- they do, even the Democrats, and don't even start on the whole weed thing -- and that our booze laws suck so bad that it could hurt future convention business...no, wait, if that was it, they'd make these changes permanent for Philadelphia and Pittsburgh, because that's true for every convention, not just political ones.

No, this is, as usual, about different rules for the ruling class, and charging you to pay for them. Because if you think that the bars who get those special licenses are going to pay for them in four days, or even try to pay them off in four days, you're dreaming. You'll be paying for them. Lucky you. (Okay, what's likely to happen is that some deal will be struck that the licenses are paid for as part of the venue payment, or covered by the donations of free booze.) And if the licensees are smart, they're going to stock up like mad during those four days, get Total Wine to ship in truckloads of booze to beat the PLCB like a gong. There is no limit on how much booze can be brought in, either. In the words of the bill as it stands, the licensees may "ACCEPT, IMPORT, POSSESS OR RESELL 
DONATED ALCOHOL ACQUIRED FROM LICENSED AND UNLICENSED ENTITIES SO LONG AS IT RECEIVES BOARD APPROVAL PRIOR TO DOING SO. THE DONATED ALCOHOL DOES NOT NEED TO COME TO REST AT A PENNSYLVANIA LIQUOR STORE PRIOR TO ITS USE BY THE PERMIT HOLDER, UNLESS THE  BOARD SO DIRECTS. MALT OR BREWED BEVERAGES DONATED UNDER THIS SECTION SHALL NOT NEED TO COME TO REST AT A LICENSED IMPORTING DISTRIBUTOR PRIOR TO THEIR USE BY THE PERMIT HOLDER, SO LONG AS
THE DONATED BRANDS ARE REGISTERED WITH THE BOARD AND THE BOARD APPROVES THE ARRANGEMENT." Note that this kind of arrangement would be exactly the kind of thing that could normally cause a licensee to be fined, possibly even lose their license.

Is that even how the law would work? Who knows, because McIlhinney had his fingers all over it, so it's likely to be something completely novel that no one asked for or wanted. Would you pay $5,000 for the "right" to be open from 2 AM to 4 AM for four days? For a bunch of drunken strangers? (On the other hand, would you pay $5,000 for the "right" to buy booze from regular wholesalers, rather than the PLCB? Just for the novelty of someone delivering the booze to you for a change? Hey, maybe!)

Leave out the longer hours, which is window-dressing: all they'd have to do to achieve this is to tell the BLCE to stay away from Philadelphia and give the bars the high sign. This is nothing more or less than an admission that the PLCB can't deliver what wholesalers and retailers in other states do routinely: put new products on the shelves (not in some airy-fairy "online store" that no one can search properly) in a timely manner by delivering them directly to bars. An admission that the state's booze monopoly is a failed, broken system that can't do what business needs.

If it needs to be fixed for four days...it needs to be fixed for good. And we know the way to fix it. The Inquirer knows, too. They ran this editorial on May 20: have a look. The House GOP caucus should belatedly redeem themselves by refusing to pass this deeply cynical bill. Failing that, the Governor should veto this unabashed deal-making. And if they don't, we the people should raise hell.

Privatize it. The time is now. 

Dangerous Things

We citizens of the Commonwealth are lied to every day by the PLCB, its associated unions, and seemingly every Democrat in the Legislature about how we need The State Stores to protect us from ourselves. That alcohol is the one drug that requires not only regulation by the state but state employees to sell it to us. Never mind that the alcohol in beer is exactly the same...but for some reason that can be sold by private businesses, or that the alcohol in a drink is exactly the same, and that can be sold by private businesses too (although they do want them to have their special PLCB training (which is of dubious value)).

What about all the different legal drugs? Why is it that pharmacies aren't run by the state and pharmacists state employees? Prescription drugs, by definition, need to regulated, but it seems that private business can handle that. There were almost a third more prescriptions filled in Pennsylvania in 2014 than all the bottles and boxes of wine and liquor of all sizes sold by the PLCB. Remember that these are drugs that the Federal government says are too unsafe to be sold without control, yet every state sells them through private businesses. Hard to explain why they aren't under state control, given the booze idiocy we put up with in Pennsylvania.

Drugs and alcohol are an apples to apples comparison. You can't explain why they are treated any differently on one side, because the other side is exactly the same. A logical fallacy has to exist: that fallacy is that we need State Stores and State Store employees to safely sell us wine and spirits. More proof is offered in that a strong majority of states have privately-owned retail alcohol sales, including every one of the states bordering the Commonwealth. Guess what: add them all up, and on a per capita basis, they do better in every alcohol harm statistic — DUI, underage DUI, binge drinking, underage binge drinking, and alcohol-related fatalities — than Pennsylvania. The "control" is not working.

How about guns? There is a saying that guns don't kill people; people kill people. Politics aside, it's at least partially true, since unless you beat somebody to death with your gun, you also need bullets. You can have all the guns you want, but without ammunition you probably aren't going to kill anything. However, while there are all sorts of regulations and controls on guns (though they are also sold by private businesses), there aren't many on ammunition. If you can buy cigarettes, you can buy bullets. Taking one drink won't kill anyone (despite what your D.A.R.E instructor may have said). One bullet can, yet you can go buy a whole box of bullets at Walmart. Is the state really looking out for our safety? 

The myths just keep exploding

So if we aren't safer having State Stores...why keep them? State revenue? How much is less safety and the worthless and patronizing annoyance of the State Stores worth? The entire non-tax contribution of the PLCB is 3/10ths of 1% of the budget. Chump change, a rounding error. So maybe it's the political patronage and nepotism. We have to deal with a system that is less convenient, has less selection, keeps us less safe, but still costs more, so some political hacks can have a nice state job? 

Or is it the entirety of the agency, a jobs program? If it's a jobs program, it's insignificant. The entire PLCB isn't even 1/10 of 1% of the state's full-time employment. You could fire every one of them, and the state unemployment rate wouldn't even quiver. If we're going to pay for a jobs program, how about we just add some jobs at PENNDOT?  We can pay for them by eliminating the Turnpike Commission and folding those jobs into PENNDOT. At least that will get something useful done.

I'm going to bet that it's union influence and a continuing stream of campaign money given to certain legislators (and directly to the parties) that keeps us from being normal. The State Store System clearly isn't better than privately-run stores, or other states would be moving toward it, and that certainly isn't happening. People want freedom of choice, and a monopoly can never provide that.

Private business is normal. 

Private sales are normal. 

Regulated business is normal. 

State-run retail is NOT normal.

Let's move toward normal.

How PLCB buying power incompetence has cost you and me Billions

In my last post, PLCB "Buying Power" A Myth, (which you really should read first), I told you how for the past eighty-plus years the PLCB's incompetence in not negotiating or even trying to negotiate the best prices for Pennsylvania liquor prisoners should damn them for all eternity to the lowest circle of Hell, the one Dante reserved for people who betray those whom they should serve.

As always, we are going to provide some numbers to show what they've cost you. I'm going to use the largest selling whiskey in the state as an example, the standard 750 ml Jack Daniel's Old Number 7. (I thought I would use that because when the PLCB reads this (and they do), it might reinforce how to spell Jack Daniel's correctly, since they seem to have a problem with that.)

We are going to compare Pennsylvania prices with the state that has the 2nd highest liquor taxes in the country — Oregon, also a control state with uniform prices — and see who at least attempts to take care of their customers: the PLCB or the OLCC.

From the PLCB we know that (non-negotiated) cost +30% markup (required by law) + handling fee  (arbitrary) + 18% Johnstown Flood Tax (levied on the price) + rounding up (always up!) to nearest .49 or .99 (just because) = Retail Price. In this case, our bottle of JD has an initial cost of  $14.46. so putting that into our formula we come up with $14.46 + 30% ($4.34) + Handling fee ($1.20) + Flood Tax ($3.60) + Roundup ($.39) = Retail Price of $23.99.

Oregon doesn't give us their unit price so we have to work backwards from the retail price to figure out approximately what their cost price is. Oregon works on cost + 79.8% markup + $1.40 Handling fee + $.50 per bottle surcharge + roundup (to nearest .05). Oregon's shelf price for a 750 ml bottle of Jack Daniel's Number 7 is $24.95 or about $1 more than PA. Taking that $24.95 and working the formula backwards we subtract the roundup (which we'll call zero, because the price is already at $X.95, and we don't really know, except that it's not much). Next we subtract the surcharge of $.50, which gives us $24.45. Then we take out the handling fee of $1.40 to leave us with $23.05.  Taking out the 79.8% markup ($23.05/1.798) ends up with a cost price of $12.82 at most (it's unsure because of the unknown roundup, but it's less than a dime difference). Remember: PA is paying $14.46.

Hey, but Oregonians still pay more on the shelf, so Ha-ha! Only...how much is the PLCB's "non-negotiable" system of costing and pricing costing you, when you compare it to the unit price the OLCC is getting? Easy enough to find out. Put Oregon's cost into the PA formula. $12.82 +30% = $16.67; adding $1.20 gives you $17.87; drown it in the 18% Flood Tax, and that brings it to $21.08, then add the roundup…and you end up with $21.49, a $2.50 savings ON EACH BOTTLE, if only the PLCB did their job. PLCB incompetence in business cost PA consumers over $6.1 Million extra on Jack Daniel's alone last year.

You're getting screwed out of $2.50 every time you buy a bottle of Jack — remember, that's only one example — because the PLCB can't be bothered (or doesn't know how) to use their "massive volume leverage" to get the same price little Oregon does. Multiply that by how many millions of bottles they've sold since 1934, and that is how much they have cost the consumers of the state. An amount you have been paying extra for all these years because of PLCB ineptitude, laziness, and their "we don't give a shit, we're a monopoly" attitude. Far more than any so-called "profits" they have ever turned in.

Remember: this isn't a tax that's being levied on you that's going to benefit the Commonwealth, it's not a fee you're paying to the PLCB to pay for alcohol enforcement, it's not "profit" that gets sent to the general fund whether it's real or just hidden pension funds...it's money the PLCB doesn't know how to get from distillers, vintners, and importers. It's gone to line their pockets, exactly the people who the PLCB apologists rant and rave that privatization will somehow steal all your money to pay. Too late: they've already got it, had it for decades, thanks to the PLCB.

Is this the system you want to keep or do you want them to "modernize"? Because "modernization" and "flexible pricing" will just cost you more by statute instead of by PLCB incompetence; the only difference will be that the PLCB will waste the money on Increased Operating Costs to fuel the Boondoggle Machine. I say we privatize and let business people run businesses and end the PLCB screwing of the public.

We're better off privatized

After four years, I think it is safe to say that the liquor market in Washington state has settled down. Like everything else that is sold, big stores offer more and small stores offer less. People will pay more for convenience and pay less when buying quantity. Not every store is the same, which is a big change from the old state stores; just as it will be here.

How's Washington doing? Since the unions always make this about money, let's look at that. According to The Herald Business Journal total sales volume has increased 21%, and that doesn't count the couple of percent increase in border bleed. Border bleed isn't a product of privatization, Washington has always had it. It's no surprise, they've had higher taxes, and therefore higher prices then the adjoining states of Idaho and Oregon for decades. However, it isn't like the border bleed that Pennsylvania has; the population is smaller and there are no major population centers near the borders. An entire year of Washington border bleed is about a month's worth of what Pennsylvania loses.

How do we know this?  The states bordering Washington tell us that their sales have increased 7% after Washington privatized (and the booze taxes were jacked). For Idaho, that would be about $11.7 million and for Oregon about $34.8 million, or a total of $46.5 million per year being lost out of state after privatization.

In contrast, PA has at the very least $230 million in border bleed in just eight counties, and that was five years ago according to the PLCB itself.  Extrapolating for the entire state using the Pennsylvania Food Merchants Association or the Wine and Spirits Wholesalers of America studies puts it closer to $500 million, or almost eleven times Washington's border bleed.

Sounds pretty bad, right? Let's hope that our politicians get it right and don't raise taxes when the state stores are privatized. Will convenience go up? No doubt. Will selection increase? Overall, yes, though not everywhere; the State Stores won't be charging Philly to have a full wine selection in Potter County. Will border bleed decrease? Certainly: if you make a product easier to buy locally, people will buy more locally. Look at Washington: even though there were 27% in added 'fees,' sales still increased 21%. If PA doesn't raise taxes that number will increase, and even a few percent more as border bleed decreases.

What do we need to replace financially? $110 million, give or take, which includes State Police funding, Drug and Alcohol education funding, and the average amount turned into the general fund for the past 5 years. Last year the PLCB collected $334.4 million in Johnstown flood tax and $130.2 million in sales tax. A total of  $464.6 million. If sales go up 25% then taxes collected go up 25% too and 25% of $464.6 million is $116.15 million. Done! The PLCB "profit" is replaced!  But there is more.

Every place that has fully privatized has tripled employment in the industry. New owners will be paying business taxes the PLCB doesn't pay, they will be paying license fees the PLCB doesn't pay, and they won't be looking to the taxpayer to address any future shortfall in pension and medical. You won't have as much bureaucracy to pay for, there won't be some unqualified person deciding what the entire state is allowed to buy, there won't be the graft and corruption of state employees, there won't be people who thought kiosks were a good idea, there won't be state stores trying to hide behind 4 different names and there won't be the PLCB as we know it now. Certainly a good thing.

What there will be is NORMAL. Or at least far closer to normal than what we have currently and normal is good. Just ask the majority of the population how much better free enterprise is over state monopoly.

Could Border Bleed Actually be $500 million?

Everybody thinks that border bleed — Pennsylvanians going "out of control" to buy booze in other states, spurning the State Store System...which is illegal — only happens on the southeastern border of the state*, when in reality it occurs across all of Pennsylvania's borders and for a number of reasons.

Why do Pennsylvanians break the law just to buy booze? Why, for everything from spur of the moment decisions to deliberate shopping for lower prices, more convenience, different products not carried by the state stores, or just plain better service that a non-monopoly store can only provide. A private store depends on pleasing their customers; a monopoly store knows you have nowhere else you can legally go.

Back in 2004 a study prepared for the Pennsylvania Food Merchants Association (long-time foes of the state liquor monopoly for perfectly self-interested reasons: they'd like to sell wine and spirits themselves, like stores in other states) determined that 29.4 percent of the Commonwealth's consumption of wine comes from cross-border sales, as well as 20.8 percent of distilled spirits. Has much changed since then?

Let's extrapolate, shall we? In 2004, there were about 640 state stores. Now we have 605, so convenience certainly didn't increase. 29.4% of wine sales would have been $248,460,768.80 in 2014 (Can't use current numbers, because over 11 weeks after the end of the fiscal year the PLCB still hasn't released them). 20.8% of spirits would result in $243,569,926.08, for a grand total of  $492,030,694.88.  Not quite $500 million, but then I'm using numbers from two years ago. I'll bet it would be over the threshold if the PLCB ever decides to let us know how they did last year.

In 2010, a study that was made by the Wine and Spirits Wholesalers of America, they found that 23.6% of wine sales were done out of state or just over $200 million for wine alone. Using the current ratio of wine to spirit spending that would mean $276 million spent for spirits or a total of $476 million in total border bleed (within 3.25% of the extrapolated 2004 numbers). Close enough for PLCB work, as they say.

The PLCB Neiman report of 2011 had it over $230 million and that was for just 8 of 67 counties and didn't sample any Maryland sales at all. As I pointed out in my report in February, that number is certainly well above $300 million now. Do the other 59 counties spend $150 million out of state? I can't prove it using just the Neiman report, but the other studies indicate they probably do.

Has anything changed since 2010-11? Is the economy more like 2004, or even better now?  Have gas prices come down somewhat? Do people travel more? Of course, the answer to all those questions is yes. The Neiman report showed that even during the recession people that shopped both PA and out of state stores spent more money out of state than in state in those counties and at almost all levels, but especially higher levels, than they spent at state stores. And they did it for the same reasons they always did:

Travel out of state for a broader selection and better price (Neiman report pg 28)

Go out of state to get better prices and stock up on personal supply (Neiman report pg 36)

Recapturing some of that $500 million potential through privatization means more jobs, more taxes collected, more businesses, more selection, more choice, and more benefit for the citizens by not having government interfere with retail. Painting your PA liquor jail cell and extending visiting hours (or selling the jail to some outside firm, Gov. Wolf's latest dim idea) might be better than what you have now but it isn't the same as being a customer in a free market.

Don't "modernize" it or lease it, and don't leave it as it is: NORMALIZE IT. 


*This is probably because Philadelphia-area citizens are so blatant about it; we just don't care at all.

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!

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.

END IT, DON'T MEND IT.

Why can't the PLCB put out financials in a reasonable amount of time? Real business does.

The fiscal year ended on June 30th, and with it, the PLCB year. Here we are, about a month later, and not a peep from the PLCB about how they did.

A real business would have been filing quarterly reports, but I guess we citizens, the so-called 'owners' of this public nightmare, aren't important enough to rate that consideration. It isn't like some clerk is Harrisburg is sitting there with a pull-down adding machine waiting for the mail to be delivered. This is the age of computers. The day after the fiscal year ends, they know what they made within a few tenths of a percent, they know what they spent, and they know what is owed to them. So where is it?

PLCB - Moving at the speed of early 20th century business.

I'm not asking for audited results, just for the normal BS they put out in September last year: gross sales, sales net of taxes, taxes collected, what they spent, operating income. I can understand if it doesn't match the audited amounts done months down the road: things change a bit. But unless there is a major accounting screw-up, or costs that they try to hide (remember the $33+ million in computer system overruns), the number will be close enough to give the public an idea of what is going on. Just why does that take 2 months? Could it be because privatization is in play?

Here are my predictions for this past fiscal year:

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?

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.

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).

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.

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.

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.

Until then - keep buying out of state. It's the patriotic thing to do.

Wanna Talk Washington? Fine, Let's Talk Washington

The latest claim by some union members and supporters is that Washington state is making less money this year than when they had a state run system, and the implication is that it's because they privatized. The truth is that they are about $46 million ahead of the last year of state-run stores.  Even though I explained and pointed out where to find all the numbers in "Why Johnny can't read or do math Part 3", they seem to still have difficulty with addition.

One more time, then: the Washington State Department of Revenue collects liquor taxes. The total for Fiscal Year 2014 was $267,374,563. The Washington State Liquor Control Board collects spirit fees, license fees and beer and wine taxes. That was $227,320,000 for Fiscal year 2014. That means the total state booze-related revenue collected in FY 2014 was $494,7 million. In the last year of state-run liquor stores (FY2012), the total returned was $448.7 million (including store "profit") which also included the one-time $31 million income from the sale of the old state stores and was still $46 million less than this year.

Now, here's the crucial part that brings all the crowing about the State Store System's "record sales" into perspective. Compare what the PLCB, with control of both wine and liquor and twice the population and over twice the total sales of Washington State, did over that same period. They didn't even come close to  increasing the contribution to the state by that amount. Their increase was only $33 million, and yes, that includes the so-called "profit" and taxes, too. Washington does not charge regular state sales taxes on liquor, but includes a Spirit Sales Tax in the price, the same way PA includes the Johnstown Flood Tax in the retail price. I did include PA sales tax in the above comparison; it's revenue from booze sales. But still...they couldn't match the increase Washington saw when it privatized (and remember; Washington only privatized liquor!).

Freedom of choice, free enterprise, free interstate commerce...those are things the country was founded on, and these are the things denied the citizens of Pennsylvania by the State Store System. Washington State now has greater selection, more convenience, more taxes collected, and lower DUI fatalities. Looks to me like Washington is winning. We can be winners too. Privatize.

Privatization Is Modernization.

The PLCB annual report - Let's look at some numbers

By all accounts, the PLCB had a good sales year. Well, hurray. It's nothing to brag about -- though they will, and have -- since they are the only game in town. The population grows (slowly, but it grows), the economy gets better, and people spend more money on booze. It isn't because the PLCB is doing a good job; it is because the citizens have no other choice.

PLCB touts "record sales": report shows net income down

That doesn't stop the PLCB from presenting their annual report as if they had something to do with the growth in sales. Here are some things they crow about in the report:

1. License fees returned to local municipalities $ 4,521,545 -- If the PLCB didn't get in the middle, local communities would get this revenue as a regular stream when businesses paid for their licenses TO THE LOCAL COMMUNITIES.

2. Philadelphia and Allegheny counties received $8,269,803 in returned local sales taxes. -- Again, if the PLCB wasn't in the middle, the taxes would be collected and distributed anyway. It must be nice to crow about following the law...except, of course, when it comes to trips and gifts for senior level PLCB employees.

3. Paid Total Annual Rent of $42,034,434 for 606 stores. -- This begs the question of how much rent would be paid if there were 2400 or so private stores? 2400 stores is about what the national average is for a population of almost 13 million.

4. Tweets sent: 723. -- Now this is pretty funny. A $2 billion enterprise managed to send out fewer tweets than my 16 year old niece does in a month. And then they go on to say that the PLCB was mentioned 2,516 times. This post counts as one of those mentions, just as an example, and so does this: "Hey @WolfForPA, can you do something about the PA Liquor Control Board, like get rid of it? ‪#‎priorities‬ ‪#‎wine‬ ‪#‎freedom‬" (tweeted by @mainlinehousewife on Nov. 4)

5. Updated the Fine Wine and Good Spirits eCommerce site with 'complete and accurate product names,' product descriptions and standardized acronyms. -- Really? From the people who completely cocked up the beer registration list just a few years ago? Let's look at just a couple easily-found examples.

George Dickel Tennessee Whiskey. The No. 8 brand is listed in the bourbon section and the No. 12 brand is listed in the Whiskey section

Jack Daniel's Tennessee Whiskey has one listed in the bourbon section "Jack Daniel's 1St Edition Straight Bourbon Master Distiller Collection" Which only exists in the mind of some PLCB employee since Jack Daniel doesn't label ANY of its whiskeys as "bourbon." Not one. All the others are listed in the Whiskey section as they should be, except for one that is in the Blended Whiskey section; but Jack doesn't do blended whiskey either. I will give them credit though: it only took them 80 years to finally learn how to spell "Jack Daniel's" correctly. I pointed out mistakes on that as recently as this past spring.

6. Also restructured the website search engine to allow searches using misspelled words, abbreviations, and synonyms producing much improved search results for customers. -- Let's see how that works.  Sticking with Jack Daniel's type in Jack Danial's into the search box.  You only misspelled it by one letter putting an "a" instead of an "e" in Danial's. The result.....a page and a half of Calico Jack rum first, but JD does show up on page 2.  

How about we just forget the "'s" and put in Jack Daniel into the search box.  Again a page and a half of Calico Jack rum and then the JD on page 2. An improvement! ...until you realize that if you spell Jack Daniel's correctly and search for it, you still get a page and a half of Calico Jack rum first! The trick, apparently, is to just put in Daniel's, and you'll get all the JD  listings. Just don't misspell it or forget the "s" or the apostrophe, because then you get nothing contrary to what the PLCB says. Not quite ready for prime time and certainly not a product a $2 billion company should be proud of.

I can find a lot more but let's look at some money.

Sales on the captive Pennsylvania population did go up 3.2%, which is to be expected, given that the state has a monopoly and overall spirits and wine sales were up nationally. But Gross Profit only went up 3%...and Net Income (which in a 'real' business would be called 'Profit') went down by 3.6%! Wondering why? Here's a clue: operating expenses went up 5.2% (which is a lot, considering what it bought them, as we'll see in a bit). Operating income went down, even though the much-ballyhooed 'bailment' is in effect (where the PLCB doesn't pay for a product until it leaves the warehouse). Contributions to the BLCE went up 4.1 %, but BLCE enforcement of border bleed is at the lowest it has ever been. Oddly, during this record alcohol sales year, the amount that went to Drug and Alcohol programs went down 3.6%, which seems a little contradictory, given the 'control' mission of the PLCB.
 
Don't overlook another big one: Return on Assets (usually called Return on Investment) went down 14.8%! ROA gives an idea as to how efficient management is at using its assets to generate earnings. Also, even though there was only 1 more store than last year, wages as a percent of sales increased an astounding 18.3%, which is not a good indicator of efficiency either.

Of course, a real business has to list all their debts on their reports to shareholders...and I don't see the over $600 million that is the PLCB share of the pension debt listed anywhere. Maybe it doesn't count since the taxpayers and not the PLCB have to cover it. 

Like any business with a PR department, the PLCB tries to put on its happy face when reporting on what a super duper job they are doing, but the end result is still less selection, less convenience, higher prices, no real increase in safety, and certainly more aggravation for the consumer than in states with a privately-run liquor retail and wholesale industry. One only has to travel to see that for yourself.

Still more fun with PLCB numbers - Update

Keeping up their streak, the PLCB is still giving discounts to those who drink the higher end items and shafting those who don't.  From the July meeting agenda.

See if you can find your own.

Item - Unit Cost - Retail Cost - Page# - What it should cost


Johnnie Walker Blue with glasses in Refgid Box
$166.41  $234.99   8        $255.27

Casanova Di Neri Brunello di Montalcino "Cerretalto" DOCG
$184.56    $258.99    35    $283.12

Casanova Di Neri Brunello di Montalcino "Tenuta Nuova" DOCG
$66.10    $72.99    35    $101.40

Cain Vineyards Five
$101.36    $149.99    39    $155.49

Jameson Rarest Vintage Reserve Irish Whisky
$221.94    $309.99    39    $340.46

Glenrothes 1978 Vintage Single Malt Scotch
$643.08    $849.99    40    $986.48

Glendronach 21YO Parliament Single Malt Scotch
$100.53    $124.99    40    $154.21

Retail price should be unit cost times the markup (30%) times the flood tax (18%), 

$X * 1.3 *1.18 = Retail Cost

Still more fun with PLCB numbers

Today we are going to look at some disparities in the PLCB mark-up.  Part of the so called "modernization" is to have variable pricing, where the PLCB would raise the price (change the mark-up) of Captain Morgan a quarter so they could lower the price of Johnnie Walker Blue, for example.

But first a little history. Remember the PLCB was tasked to come up with a variable pricing plan in 1985 (within the Liquor Code). They did, but it was never implemented according to the Legislative Finance and Budget Committee Performance Audit of  May1992. However, it seems that there is already a variable mark-up in use. Looking at the June PLCB meeting minutes on page 27 you'll see Chateau D'yquem Sauternes for a unit cost of $681.05 and a retail cost of $909.99. Now to get from unit cost to retail you have to add on the 30% PLCB mark-up and the 18% JFT. There are some minor things like roundup and bottle fees that might add a few dollars too.

So we have:  $681.05 X 1.30 = $885.36 which is the markup.
Now impose the Johnstown Flood Tax:
$885.36 X 1.18 = $1044.73

But $1044.73 is not $909.99! So who gets shorted? The State or the PLCB? If the PLCB gets shorted, then the markup is only 13%. If the state is being shorted, then they are only getting 2.5% of their Johnstown Flood Tax, and not 18%.

I'd like to hear that explanation. Is the PLCB just arbitrarily changing mark-up so their prices are somewhat within range of normal and not so high as to be laughable? If they are, then why does that have to be "modernized," since they are already doing it? I find it interesting and this is not the only one - just the most glaring.

Another from the same meeting on page 29: Chateau de Beaucastel has a unit cost of $383.71 and a retail price of $519.99; again the math doesn't match.

$383.71 X 1.30 = $498.82
$498.82 X 1.18 = $588.61
But $588.61 is not $519.99

There are more, and you can do the math yourselves.
Balvenie 17 Year Old Doublewood page 19
Meteor Vineyard "Perseid" page 30
Dos Armadillos Tequila Extra Anejo page 32

Clean-up on Aisle Math!

I can find examples in other board meeting minutes, in fact, every one I've looked at (although I haven't looked at all of them nor every item). So what is going on here? A Union representative said it was probably a reporting error, which, if true, would explain it all away, but then bring up the question of why are there so many and why is it only on high priced items? Why don't regular items have as many reporting errors? I've gone through a pretty good number of them and you are welcome to try too...but so far it is only higher end items.

Even more proof is the infamous Screaming Eagle Wine debacle when the PLCB not only didn't pay the Flood Tax, make any mark-up at all and lost over $7,000 on the original unit cost of 10 bottles. I didn't see any legislative action approving that. That seems pretty variable to me going from 30% to -25% and not collecting or paying any taxes.

Does this mean the PLCB is somehow giving a break to people who can afford $900 bottles of wine while shafting the average citizen? Sure looks that way but if any representative of the PLCB wants to offer an explanation, I'll post it. I know that the Office of the Chief Council of the PLCB reads this since she has searched me out, so c'mon Faith you or your minions pass this along to somebody who can answer it.

Why can't Johnny read or do math — Part 3

If you remember in Part 2 of this saga, one anonymous poster — we’ll call him Business Rep 23 — was not able to figure out how Washington State collected more money after privatization. He couldn’t add the numbers from the Washington State Department of Revenue and Washington State LCB, and he said that the money from the old state stores wasn’t included.  If you look at the WSLCB Annual Reports, none of them list “Store Profit.”  It’s just part of their income after expenses and since they turn over everything else to the State or Local governments, they seem to not feel the need to do reporting the PA way.

Let’s see what the real numbers were in Washington, and how they compared pre and post-privatization. The last annual report before privatization was for FY 2012, which went from June 1, 2011 to May 31, 2012. This would include the big run on liquor that happened before privatization took effect on June 1, 2012 and the auction sales of the old state stores.

Total liquor sales were $900.47 million or about 42% of what PA does (it bears repeating: Washington only privatized liquor sales; they already had private wine sales). Washington State LCB does collect the beer and wine taxes, and some tobacco taxes too, but those obviously weren’t affected by privatization. If you do include all of that, the total is $448.7 million returned to the state. That number is what Business Rep 23 and his cohorts like to use when comparing Washington’s old liquor income to Washington’s new liquor income.  The key number here would be $448.7 million turned into the state for everything, including any profit made in the old state stores.

Now let’s look at the 2013 Annual Report, the first one after privatization.  There is no income from

Gross Liquor Sales any longer, but the License Fees have gone up from $33.91 million to $257.6 million and that the total returned by the WSLCB  to the State is now $318.32 million.  (License Fees are the actual cost of licenses, plus the 17% Retail License fee and the 10% Wholesale License fee that were added as part of the privatization bill.)

AHA! you say, that’s $130 million less than the year before, Business Rep 23 was right!  Er, well, no, he isn’t.  When Washington State was the only source to buy liquor, they collected all the state liquor taxes: the Spirits Sales Tax and the “Spirits Liter Tax.” But now that Washington State has a private system, those tax collections are now part of the Department of Revenue, and not the WSLCB. (Imagine: the Department of Revenue collects the taxes, instead of some dinky enforcement bureau. Makes sense, right?)

To get the total tax numbers, you have to look at the spreadsheet the Department of Revenue so kindly keeps updated here.  Looking at the Summary FY2013 tab and adding the monthly tax collections, you see approximately $228.6 million was collected from consumer sales and $37.3 million was collected from licensees through distributor sales, a total of $265.9 million.

This gives Washington State approximately $318 million from the WSLCB, and $266 million from taxes, for a grand total of $584 million in liquor/booze revenue.  Even Business Rep 23 has to admit that $584 million is more than $448 million. Okay, he doesn’t have to, and I’m sure he will make a bunch of statements trying to tear that fact down without any proof, but…come on. $584 million is at least 23% more than the $448 million that was collected the year before, just like I said in part 2.

So to sum it all up:

The WSLCB Beer and Wine taxes, tobacco seizures, other income, and all liquor revenue including store “profit” collected in FY2012 before privatization resulted in a total of $448.7 million being returned to the state, while in FY 2013, the first year after privatization, it was $584 million.

The moral of the story?  

Don’t believe Business Rep 23 or anybody else unless they have the facts to back up their statements.