Fact Check, what the UFCW says, What Rep Turzai says

Below is the list that the UFCW 1776 calls "Twenty of Turzai's Lies" You can read the list here.  Not anywhere near as many as I've documented from Wendell Young IV (which nobody has refuted as of yet) but enough to see who is spinning more. I'll take them one at a time

Who is spinning more?

 01: Turzai: The PLCB has been operating in the red for the past 10 years.
      UFCW: The PLCB’s net profit for the past 10 years is almost $1 billion total

There are three ways to look at this.. The first is if everything the PLCB collects is a tax because tax is defined as "a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc." so what ever isn't specified as the Johnstown Flood Tax or Sales tax can be thought of as a use tax and not profit.

The second is that to have a profit a business has to list all liabilities and since the PLCB doesn't (not listing the over $600+ million in pension liability or $50+ million in medical for just two examples) it is questionable if a profit is made.

The third is that the PLCB as a business that is not responsible for any liabilities because the taxpayer, not the PLCB will cover them and therefore does make a profit. I'll call this one a tie

02:Turzai: The Fiscal Note for House Bill 790 said it would bring over $1 billion in upfront revenue.
    UFCW: Turzai’s own Fiscal Note says there would be at most $137.5 million in upfront revenue.

OK, there is one fiscal note listed by for HB 790 PN 1291. and it specifically says "A total of $1,123,000,000 is estimated to be generated from one-time license fees" The Rep. Turzai fiscal note does say $137.5 million. so the question is - what time period is "upfront" ?  Upfront is usually thought of as before something happens so does the money start counting before the beginning of privatization or before the end of the state stores?  This one is a tie.

03: Turzai:There is going to be an auctioning off of 1,200 wine and spirits licenses.
      UFCW: There is not one mention of auctioning licenses in House Bill 790 or his current legislation House Bill 466

This one goes to the UFCW, there is no mention of auctions in HB 466

04: Tuzai : When West Virginia went to the private sector they saw an increase in revenue.
      UFCW: West Virginia lost millions and has never financially recovered since privatizing.

Try as I might I could not find anything on line from the state of West Virgina that listed revenues from over 30 years ago when they privatized retail sales. Without verifiable information I can't make a call on this one. However, as a side note, Iowa which also privatized retail a few years later reported making more money. (1)  I have to toss this out for lack of information.

05: Turzai: There will be no increase in unemployment compensation and all PLCB jobs will be absorbed in the private sector. 
      UFCW: The Public Financial Management study states 2,302 full-time equivalent employees will lose their jobs and cost more than $64 million in unemployment costs over four years.

Since everyplace that has fully privatized has tripled employment in the industry jobs will be created, far more than are lost. If the offset is enough to make a zero balance after some of those new jobs will be filled by people already supposedly trained is a question I don't have enough information to answer. This one is a tie also.

06:Turzai: There will be open dialogue and everyone will be at the table to discuss issues.
     UFCW: There hasn’t been a House hearing on liquor privatization since 2011.

This one is tough because it is an opinion.  If you are a citizen of the state and don't know anything about the issue already I question your ability to govern the rest of us.  If you are a legislator then there is no excuse what so ever not to educate yourself. More hearings will not bring anything new to the table. THe UFCW is still using documents and statistics from as far back as 2006 so that isn't going to change. The question is if the state should sell a retail product or not.  Once you have decided that then questions like "should we have pretty stores" or "add 1,000 more "R" licenses" come into play but not before. I know that both caucuses will be meeting on this issue so I'm in agreement that everyone can discuss the issues. Rep Turzai gets this one.

07:Turzai:The PLCB produces no profit.
     UFCW: The PLCB’s net profit was $123 million alone in the last fiscal year.

This is just a rewording of #1 and the result is the same- a tie.

08: Turzai:There will not be any lost revenue.
      UFCW: Both the Fiscal Note to HB 790 and PFM show revenue gaps that need to be made up.

The fiscal note to HB 790 does say that because of the increased discount to licensees, going from 10 to 14% will reduce income it is the same proposal mentioned in some modernization plans so what is good for the goose is good for the gander.

The PFM report also shows revenue gaps but self admittedly accounts for a zero balance of the over $200 million in inventory, the sales jump as private stores ramp up before divestiture and the $200 million in other assets which can be sold although for not anywhere near the inventory value. Add to that, the complete lack of accounting for economic churn increased employment and peripheral employees will bring and the increase in sales greater access will bring it does raise questions if there will be any lost revenue in total. Since neither side can provide concrete evidence either way this one is a tie.

09: Turzai: There will not be a complete proliferation of alcohol.
      UFCW: Under Rep. Turzai’s proposal, spirits outlets will triple, including in urban areas.

Even after tripling the amount of liquor stores the state will still be well below the average for a population of 12 million - about 33% less. Since the beer distributors will get first call on licenses and they already sell alcohol where ever they are - urban or rural that aspect is a red herring.  Community zoning should take care of the additional licenses past the initial 1200. Who knows better about what the needs of the community are - Harrisburg or the people who live there? Rep Turzai takes this one.

10:Turzai:No other state taxes liquor like Pennsylvania. 
     UFCW: Almost every state has a liquor tax, as well as retail and wholesale markups.

This one will go on a technicality. No other state does tax like Pennsylvania,  We don't have a liquor tax, we have a temporary tax that is to be used to help people from a 1936 flood.  Now what it turned into and what it is used for may be like a liquor tax that other states have - it isn't. The Johnstown Flood Tax is not part of the Liquor Code. Rep Turzai wins this one too.

11: Turzai: There will be new business taxes.
      UFCW: Turzai’s proposal heavily favors existing retailers, meaning no new business tax.

Another iffy one. Obviously if a business increases sales volume there is new business tax but if there physically aren't any or many new businesses then the number of businesses being taxed doesn't increase. Pure semantics. A tie at best or completely rejected at worst

12: Turzai:There is significant border bleed.
      UFCW: Turzai cites an unknown statistic, but in reality border bleed is minimal and there is reverse border bleed into Pennsylvania.

I'm sorry, but when the PLCB itself commissions a study on border bleed and shows that there is hundreds of millions of dollars leaving the state that indicates a significant problem Rep Turzai gets this one hands down.

Wendell Young IV star of Say Anything

13:Turzai: The public supports privatization at a 70-75% approval rating and there is widespread support for his plan.
     UFCW: No poll shows this claim. Instead, recent polls show support going the other way. Also, dozens of groups oppose House Bill 790 from last session.

This gets a bit tricky. The primary question is if the state should sell a retail product.  Given that there are 40 years of scientific polls that say the citizens do not want the state store system and some of them are in the 70% range and there has never been a poll saying they want to keep the state store system over a private system that indicates there is widespread approval for privatization.  Later polls give a third option of modernization which is a dependent option and not a primary option. You have to agree that the state should sell a retail product before you can choose how they sell it.

What dozens of groups believe or not has no bearing on what scientific polls say. To believe otherwise is to succumb to "We know better than you what is good for you"  The majority of citizens want a private system as Rep Turzai says.

14:Turzai:Beer distributors will do well under his proposal.
     UFCW: The Malt Beverage Distributors Association opposes Turzai’s plan.

It is true that the MBDA opposes this plan it is also true that they represent less than half of all beer distributors. Their disapproval does not negate if some beer distributors will do well or if most will do well or if any do well.  It has no real bearing since how well an individual distributor will do is dependent on how hard he works at his business and not his membership in the MBDA. Another that is a tie at best

15:Turzai:There are only 3,500 employees at the PLCB we need to worry about. 
     UFCW: There are more than 5,000 employees at the PLCB and mostly all will lose their job

According to the state itself there are 3,074 full time employees and 1,519 part time employees as of 1/15/15.  This doesn't count any seasonal employees which may push the total over 5,000 but would also be stretching the truth a bit. Since the UFCW continually uses the PFM report I'll use it too and it says that between 2,436 - 2,678 Full Time Equivalents or 3,210 total employees  would be unemployed depending how the PLCB retail and wholesale was disassembled.

Now you can make a case for people won't be working in the same state job but a number will still be working for the state. Rep Turzai has the facts on his side for this one but semantics are with the UFCW - they get it.

16: Turzai: Operational costs have increased by 70% at the PLCB over the past decade.
      UFCW: Operational expenses have only grown at a 1.7% compound annual growth rate in the last five years.

I've a mind to throw this one out.  Answering a question with a statement that doesn't match the question is just not being honest.  According to the FY 2005 Audit by the Auditor General operational costs were $289,810,000 and in 2014 were $424,478,913 which is a 45.6% growth so Rep Turzai is wrong.  However. the 2010 Operational costs were $381,801,000 which comes out to a 2.15% compound annual growth rate to 2014 so the UFCW is wrong too.I didn't include COGS in my operation computations because the PLCB has no real control over that but if I did then operation costs from 2005-2014 would have gone up 56%  and the compounded annualized rate would be 2.79% I'm not counting this for either side.

17: Turzai: Private wholesalers sell to the PLCB wholesale system currently. There is a duplicate system in PA.
      UFCW: Producers sell to the PLCB wholesale. There is no duplicate system.

There is a duplicate system.  While for major items the PLCB may go directly to the producer, for the vast majority of items available in the system they go through a private distributor. This is easy to see because every SLO item has a vendor code and that code is not the Wild Turkey Distillery or the Conundrum winery, it is a distributor. and since SLO items outnumber in stock items by at least 4 to 1 there is a duplicate system. Rep Turzai is correct

That is the end of the list, why they called it 20 lies and then only listed 17 is a question you'll have to ask the UFCW.  I've always said they weren't very good with math.

The totals are
Rep Turzai - 6
UFCW - 2
Tie - 6
Tossed out - 3

Who do YOU believe?


(1)Privatization was deemed successful from a revenue standpoint, with profits increasing by $125 million over the first 11 years of privatization compared to estimates under State control of the stores. At the time of the 10-year review, the conclusion was that most of the increase in profits was the result of eliminating the state stores and the costs associated with them. PFM report pg 111

Why can't PLCB supporters do math? Or research? Or think for themselves?

I've made a number of posts on problems the PLCB supporters have with math: the "Why Johnny can't read or do math" series parts 1-3 and the "Wanna talk about Washington" along with the last week "The UFCW 1776 thinks that PLCB profit is less than minimal - We knew it all along."
The comments in some of the posts or the information provided by the supporters themselves proves that they still can't do math, or research their position with any degree of accuracy.

Let's take the main point in the comments that a newspaper story reports that the Washington State Office of Financial Management says that revenue collection was nearly $369 million in revenue for the incomplete (at that time it was written) FY 2014. Thus proving that privatization didn't work because it was less than the $448.7 million the state got in the last year of state run operation in 2012.

The only problem is that whoever fed our poster his info didn't look into the numbers at all. The $448 million also included $103 million in Wine and Beer taxes that aren't included in the newspaper's OFM story.  Also, the 2012 numbers include the one time input of $31 million received for about 160 state state stores that were sold. Lastly the story doesn't mention the change in the high beer tax rate which took place on July 1st 2013 which makes sense since they weren't part of the $369 million revenue collected.  The tax rate was lowered from $23.58 per barrel to $8.08 per barrel, a 291% reduction, decreasing the beer tax collected by over $47 million.  That beer tax reduction was not part of privatization. 

If you want to compare apples to apples then lets look at the last year of state run operation, use the total contribution to the state and local governments take out the wine and beer taxes and compare it to FY 2014 totals minus beer and wine taxes.  The 2012 total comes out to $448.7 million minus $103.1 million gives us $345.6 million and the 2014 total comes to $201.7 million minus $54 million in the wine and beer taxes (1) plus $267.4 million in liquor taxes  (2) which then totals $415.1 million and is still more liquor taxes collected than the last year of state run stores.  Remember that the 2012 total had an extra $31 million from selling the state stores.

I know, it is hard to imagine the Pennsylvania Legislature lowering taxes of any sort, but Washington is not Pennsylvania. I pointed this out in my posting "Washington is not equal to Pa"  In short, the continued lack of veracity by those who continually post in favor of the PLCB needs to be questioned at every turn, as they have proven they will twist and turn and outright lie when give a chance

Can there be any doubt that Washington is making more money without their state stores?

We deserve better than new "modernization" lipstick on the state store pig. Privatize and get the government out of retail and back into regulation where it belongs.

Let the free market rule, not the PLCB.

(1) WALCB annual report 2014 page 17
(2) the OFM report on I-1183 gives a slightly different number of $268.6 million due to ending on a different day.
Original post was updated; the Legislature changes taxes, not the PLCB. 

The UFCW 1776 thinks that PLCB profit is less than minimal - We knew it all along.

One of the more outrageous claims by the UFCW in the past week has been that border bleed is "minimal". From their "fact sheet" on Speaker Turzai's recent PCN interview:

"Fact:Turzai cites an unknown statistic, but in reality border bleed is minimal and there is reverse border bleed into Pennsylvania. (See No. 6 in outline)" (The outline mentioned is not provided or listed by the UFCW.)

How they know this isn't said, but let's look at the official PLCB report of 2011 done by the Neiman Group. The PLCB doesn't list this study on their website, which is why the link points elsewhere but they bought and paid for it nonetheless.

This report only used the Philadelphia area counties of  Berks, Bucks, Chester, Delaware, Lehigh, Montgomery, Northampton, and Philadelphia, so I'll only be using sales from those counties myself.  The following is a list of how much PLCB sales were in each of the above counties for 2013, the latest available taken from the 2013-2014 Year In Review, page 13.

Bucks	$135,700,317.31
Berks	$52,109,662.18
Chester	$120,388,495.05
Delaware	$77,696,292.72
Lehigh	$70,209,394.60
Montgomery	$200,801,436.82
Northamton	$41,606,625.89
Philadelphia	$228,424,798.19
Total	$926,937,022.76

That $927 million represents 42.6% of all PLCB sales. Using the Neiman report that says 5% of people only shop out of state (page 12) that would mean $46.3 million in lost sales by itself.  However, the Neiman report also says that 40% also shop in and out of state. Since people who buy out of state spend more (page 16) it would be safe to think that the total sales amount of those that shop in both would be greater out of state. I'm going to use half, just to err on the conservative side. That would meant that people spend at least 20% of total sales (half of the 40% who shop in and out of state) out of state. That number would be $185.4 million and that's almost certainly low.

So the total minimal border bleed is $46.3 million plus $185.4 million, or $231.7 million: about 11% of the entire state store sales. Or is it? As the Neiman report says, people spend more out of state to begin with, and then you have to look at when the report was made: 2011. Things weren't so good in 2011. Gas was higher, the economy was worse, people traveled less, all things mentioned in the report as potential reasons why people might be spending more in state in 2011. That isn't as true now and the border bleed number may be in the $300 million range -- which according to the UFCW is "minimal."

So if $300 million, or even $231 million, is "minimal," then the $124 million in non-tax contribution by the PLCB is less than "minimal," and shouldn't even be mentioned, based on that logic. There are very few things that the UFCW and I agree on, but it seems that this logical conclusion is one of them.

Maybe they are wrong and it isn't minimal. How many other things are they wrong about either on purpose (usually called lying) or from just not being able to read and research. I'm just one guy and can find and figure this out, they have thousands of members, entire staffs and apparently no fact checking. Why should we trust them?

Tell your legislator that you are in favor of HB 466 and get the state out of the liquor business.

HB 466 will allow 1800 liquor store licenses -- far more convenient than 600 state stores, no matter how many baskets and islands and palm trees they put in them. HB 466 will allow 825 grocery stores to sell wine, something the UFCW is dead set against (unless it involves more UFCW workers in a One Stop Shop; something that has failed for the 34 year existence of the program).

HB 466 will get the state out of telling you what you are allowed to buy -- no "modernization" plan does that.

HB 466 will give the freedom of choice found in other states -- modernization doesn't do that either.

HB 466 will benefit small business -- The PLCB modernization does not.

Modernization is a false choice because nothing changes.  Just because they paint your jail cell and allow longer visiting hours does not mean you are free.

Privatization is REAL moderniization

Liquor revenue vs. other revenue

More in the continuing saga of why can’t Johnny read -- or do math?


The Union in the guise of a former clerk and current business manager will tell you that “No state has ever realized equal revenue after they privatized, period.” (except Washington State, but I’ll get to that shortly). They cite the decline in Iowa and the contract in Maine as prime examples.

Let’s look at those in real terms. Iowa got out of the retail wine business on July 1 1985, the wholesale wine business on July 1, 1986 and the retail liquor business on March 1, 1987. UFCW Local 1776 president Wendell W. Young IV in sworn testimony stated that, “In just three years, after wine was privatized, revenues dropped by $20 million annually. Revenue dropped by $4 million in Year One; by $12 million in Year II and, finally, by $20 million in the third year of private control.”

What he said is true but there is more behind the numbers that isn’t told. On July 1, 1986 — the same day that retail wine sales were privatized — a 15% licensee tax was repealed. On March 1, 1987 — the first day that private retail liquor sales were allowed — Iowa lowered the wholesale mark up by 12% in order to help the newly established private liquor store businesses. There were 221 state liquor stores, and at the end of the four month transition period, there were 256 private stores; within the year the number rose to 430.

In fact, as reported back in 1997 on the 10^th anniversary of Iowa’s privatization, “Keeping the wholesale liquor business and selling the retail end proved to be fiscally sound. State officials estimate their treasury is $95 million richer than it would have been had Iowa retained its state stores.” And “Between annual license fees and the wholesale markup, the state now makes almost $15 million a year more than it would have, had it stayed in the retail business.” Not exactly the disaster that Mr. Young said in his testimony.

So who do you want to believe that Iowa is better or worse off, Wendell Young, who has an obvious bias, or the State of Iowa itself?

As for Maine, they contracted out their liquor distribution. They knew ahead of time exactly what they would get and what it would cost. Ten years later that contract is ending and Maine is looking to do another 2 contracts instead of just one. This time they want one for distribution and one for marketing and advertising. Obviously, Maine thinks this is the better way to go instead of running the whole show themselves and having all of those salary, retirement and medical costs.

Now for Washington. Collected revenue is up, over any year during state control; up 23% for the last fiscal year. That will go down some when one of the newly imposed fees decreases from 10 to 5% but is still going to be above anything the state stores brought in according to the Washington State Department of Revenue.  So much for the UFCW business manager’s quote about no state ever realizing equal revenue.

Lastly there is Ohio. The union doesn’t like to talk about Ohio since they sold their wholesale operation for $1.5 BILLION. While it is a strange combination of public/private partnership, the Jobs Ohio non-profit that controls the wholesale operation is a private entity. They can go bankrupt with no cost to the state, and anything they make goes to Ohio job creation. The state has no jurisdiction over their books or the management.

Now Ohio might be a special case but when Wendell Young or any other representative says that nobody would pay X amount for PA’s system or that no place made money after privatizing – they are simply lying. Every place in the U.S. (or Canada) that has privatized some or all of their liquor system has also seen an increase in employment, and while that isn’t “liquor revenue,” it is better than what we have here.

The takeaway is simple: if you’re a Pennsylvania legislator, revenue should not be a factor when you’re considering liquor/wine privatization. As far as that goes, neither should employment. Privatization will, based on previous experience, most likely increase revenues, and almost certainly increase employment — if you do it right. In this case, “right” is not giving in to compromise. Do a Washington State — shut everything state-owned down in a matter of six months to a year — but don’t raise taxes. Watch border bleed decrease, employment increase, and voter satisfaction go right off the charts.

Privatization IS Modernization. Accept nothing less.

Let's Play "Spot the Lies!"

In the world of privatization, it seems that some opinions can't be bothered to rely on pesky things like truth, opting instead to build their "cases" on what Steven Colbert would call "truthiness" - things that sound true, until they are confronted with those annoying facts.

Such appears to be the case with Donald Cohen's opinion piece on PA Privatization appearing this week on The Patriot News, titled "Lawmakers should just say no to booze privatization: As I See It."

How Cohen apparently sees "it" is through rose-colored - but not fact-tinged - glasses. Cohen is, according to PennLive.com, "the executive director of In the Public Interest, a nonprofit comprehensive resource center on privatization and responsible contracting, based in Washington D.C." Red flags should be raising in your brain as you read that (it's not possible to determine, through scanning In the Public Interest's Website, where and from whom they get their funding).

You should head over to PennLive.com and give Cohen's ill-conceived OpEd a read, if only to get your blood boiling. I think we could start a serious game of "spot the lies!" in that piece, though it would be like shooting fish in a barrel. If it were a drinking game, you'd be hammered before you were halfway through reading it.

Many commenters on the original piece have beat me to the punch on this game, and following are two highlights from that discussion. One comes from a commentor called BertB:

"An analysis of state data by the Keystone Research Center found that states with tighter control over the sale and distribution of alcohol have lower rates of alcohol-related traffic deaths than states that take a more hands’ off approach." 
Except for PA which is in the lower half of the states in DUI, underage DUI, binge drinking and underage binge drinking.

Really, the only way that rational alcohol enjoying people can tolerate this stuff is to turn it into a game, right?

So... let's play!