6 Reasons to Keep The State Stores - Does it still hold up?

Marc Stier, a Philadelphia-based full-time progressive political activist, published six reasons why we should keep the State Stores five years ago. I thought I'd take a look at those reasons and how well they hold up today.

1. Poor regulation

"First, in an ideal world we could count on government regulation of private liquor stores to control the sale of alcohol. That’s important, because alcohol abuse remains a major public health hazard. But in the real world, regulation fails when it is carried out by those who hate government. And academic studies show that states that control the sale and distribution of alcohol have lower levels of problem drinking, drunk driving, and the violence and death that go along with them."

In an ideal world we could count on the government to control the sale of alcohol, Stier says, then makes the self-evident observation that the world isn't ideal. It never has been, it never will be. And what does "regulation fails when it is carried out by those who hate government" even mean? The state's liquor regulations are carried out by PLCB employees and BLCE cops: are they known for hating government? Doubtful.

So we're left with our non-ideal world, where the PLCB simply isn't very good at all at control or regulation. Pennsylvania has higher levels of DUI, underage DUI, DUI fatalities, underage DUI fatalities, binge drinking, and underage binge drinking overall than the states on our borders; the non-control states. So while academic studies (set in the ideal world, apparently) may show that states that control the sale and distribution of alcohol have lower levels of problem drinking, the reality is Pennsylvania, where the alcohol problems are in the stubborn middle, despite control.

2. Union organization

"Second, in an ideal world, the workforce in privately owned liquor stores would be able to form a union simply by securing the support of a majority of workers.
But in the real world, laws created and implemented by Republicans have made union organization in the private sector almost impossible. So I stand with currently unionized employees of the state stores."

Hung by that real world again. Stier didn't know that laws (and regulatory interpretation) would change to allow supermarkets to buy restaurant licenses and start selling beer and wine. And what happened? The majority of licenses purchased were by grocery stores which are already heavily unionized, most by the same union that the State Store workers already belong to. Guess union organization in the private sector isn't impossible after all.

3. Tax revenues

"Third, in an ideal world, businesses, including those that sell alcohol, would be taxed at reasonable rates, wouldn’t get to keep 1 percent of the sales tax to cover costs of collection they no longer have, and would pay all the taxes they owe.
In the real world, because we don’t have to worry about those problems, the wine and spirits stores generate more revenues for education, health care and other public needs than private stores would."

As we've always said, in the real world, the world we actually live in, tax collection problems are not a liquor store problem, they are a department of revenue problem. And having an average number of liquor stores for a state our size (about 2,400, compared to the 600 the PLCB manages to keep open...most days) will generate more tax revenue just due to the extra convenience. And don't forget the hundreds of millions of dollars that won't be going out of state to buy things that the bureaucrats in Harrisburg have decided we don't need or want. (BTW, if Stier thinks that in an ideal world alcohol would be taxed at reasonable rates...does he think the real world rates aren't reasonable? Because that's something we'd agree on.)

4. Wage disparity

"Fourth, in an ideal world, our governor and general assembly would be working to increase wages for working people and the middle class. But in the real world, the Republicans are attacking public sector workers and privatizing public services mainly to drive wages in the private sector down. So I stand against a proposal that is likely to make income even more unequal in our state."

In the real world, there would be LESS wage disparity. There wouldn't be the artificially large difference between a stock clerk in a grocery store and a stock clerk in a state-run monopoly liquor store (who are both represented by the same union...how's that work?). Also, I don't in any way consider the PLCB a service. It limits selection, never leads in new products, severely limits locations, and generally prevents entrepreneurs from providing the services consumers want. The PLCB stops job creation and is a drag on the economy, being well over a billion dollars in debt.

5. Discrimination protections

"Fifth, in an ideal world, the state would protect worker from discrimination by private businesses, including new private liquor stores. But in the real world, LGBTQ workers are only protected from discrimination by organized labor."

Simply not true..."in the real world." Again, Stier's pessimism (and drama) has undercut his positions, as the real world moved on and changed for the better. Workplace protections are provided by state law or regulation. Union agreements do not over-rule written law.

6. Corporate influence

"Sixth, in an ideal world, elections and public policy would be determined by the number of people on each side,  not by campaign contributions given by each side."

We strongly agree! Because by this measure, the PLCB should have been gone ages ago, since for decades the majority of people polled wanted private liquor stores. And we all know who gave more money to politicians -- those against privatization, even though it was against what the people wanted.


So what does this all mean?  In 2018 -- in the real world -- there are no reasons to keep the antiquated, anti-consumer jobs program called the PLCB.

Privatize.

PA Democrats need to go to Iowa

When you're talking about getting a bottle of booze, and the words "freedom," "consumer choice," "selection," and "benefiting the citizens" are mentioned, Pennsylvania certainly isn't the first state that comes to mind.  But then, neither is Iowa, even though they are decades ahead of what our blinder-wearing Pennsylvania legislators have come up with for liquor policy.

Just like Pennsylvania at the end of Prohibition, Iowa instituted a state-controlled system for wine and liquor. Unlike the Commonwealth, they listened to their citizens and changed with the times. Maybe you're thinking that Iowa had a different societal outlook, that they were more likely to liberalize their liquor laws. Not even close: Iowa didn't even allow drinks by the glass until 1963. If you wanted a rum & coke, you drank at home or not at all. So for at least the first 29 years after Prohibition ended, we were doing better than Iowa.

Iowa also raised their liquor tax on licensees in the 60's from 10 to 15%, but they didn't hide it by calling it "temporary" for something that happened 30 years earlier as Pennsylvania did with the infamous Johnstown Flood Emergency Liquor Boondoggle Tax. They also didn't then bump it to 18%, either.

Since Iowa didn't have as many convoluted regulations and "interpretations," they were able to totally rewrite the liquor code in 1972, simplifying it from twelve chapters down to just one, all in one place in the code. When Pennsylvania "revised" The Almighty Liquor Code in 1951 they expanded it, and spread the regulations across multiple sections of the state code. Brilliant.

Kwik Star, Charles, Iowa

On May 4th,1972 the Iowa legislature decided that gas stations could sell beer...without having separate registers and cafes! Only 44 years ahead of PA, and they had hundreds of places instead of just nine. In 2011 they allowed gas station liquor sales, too. Don't hold your breath on that.

In 1981 Iowa, again decades ahead of Pennsylvania, allowed craft brewers to not only sell their own beer by the glass but ANY beer obtained from a licensed wholesaler for on and off premise consumption.  35 years later, we're just starting to catch up.

In 1985 the Iowa legislature started to unwind state control of wholesale/retail wine sales, acknowledging that they didn't have the knowledge or expertise needed to operate consumer-friendly outlets. The dual sale of wine in state and private stores took less than two years to show the clear winner, and the state closed state store wine sales in 1987. 20 years later, the Pennsylvania Legislature hatches McIlhinney's Mistake, and we're allowed to buy four bottles of wine at a time in a relative handful of grocery stores. Yippee, yay us.

Not in PA! You can only have 4, put one back.!

Shortly after wine was fully privatized in Iowa, retail liquor followed suit. The state transitioned from 221 state stores to 256 private stores in only four months. By the end of the four month period, Iowa had approved a total of 410 private stores. Even after lowering and eliminating some taxes — contrary to what State Store clerk union president Wendell W. Young IV says — the state of Iowa makes more money by not having state stores as reported by the state of Iowa itself.

Well before the U.S. Supreme Court Granholm v. Heald decision in 2005, Iowa legalized reciprocal wine shipping in 1996. It would be 20 years later, after almost eleven years of ignoring the Supreme Court's ruling, when Pennsylvania  finally came into compliance and allowed such shipments.

So here we are in the fall of 2016. Iowa and Pennsylvania started out roughly equivalent at Repeal, but the Hawkeye State has far outstripped the Keystone State in the race to booze normalcy. Iowa has far greater convenience, one stop shops, and no bureaucrats deciding which legal products are allowed to be sold in the state (the state still has a monopoly on spirits wholesale, but it isn't run in the draconian way the PLCB does it). Iowa is decades ahead in doing what their citizens want; in August, the governor announced another comprehensive review of the liquor code. Meanwhile, The Almighty Liquor Code has only gotten more convoluted and confusing (to legislators and licensees alike) since 1951. 

With over 1,400 retail liquor outlets serving a population a quarter the size of Pennsylvania's, do you know what else Iowa has? Less underage binge drinking, lower DUI fatalities (in both legal and underage drinkers), and lower DUI arrests.

What is the lesson of looking at Iowa? Simple. We don't need the PLCB: they're not convenient, they're not helping alcohol safety, and as we've been telling you for years, when you look at the entire financial picture, they aren't even making the state any money over and above the taxes that a private system could collect.

PRIVATIZE. It just makes sense.

Citizens urge lawmakers to accept Convenience 2016 plan

Commonwealth citizens — we, the people forced to shop at State Stores — issued the following statement today.

The Citizens urge lawmakers to pass a consumer convenience bill to normalize liquor sales in the Commonwealth. The PLCB issued their "Convenience 2020" scheme three years ago and we have fewer stores and fewer "stores in a store" than we did at the start of their plan. It is time to put into effect a Convenience 2016 plan that will close all the state stores by the end of 2016 and open up the freedom to sell wine and liquor to anyone who wishes to purchase a license and meets current on-premise qualifications.

We Citizens have been treated like children for far too long. It is not up to the state to limit commerce between individuals, corporations and other states in pursuit of the false claim of safety. We are not safer, as any reading of national statistics will show. Even the PLCB reports higher than average underage drinking in the state.

We Citizens want the increase in jobs privatization has proven to bring. We want the decision of which products will be stocked to be made using our dollars as votes and not have a nameless, faceless bureaucrat (who certainly isn't an expert by any industry standards) decide for the entire state. We want the greater convenience that privatization will bring, not some idiot's dream 80 years in the making, but one proven to work: the free market.

If the state thinks that having liquor in grocery stores is a good idea, which apparently they do, then allow grocery stores to sell liquor. Problem solved.

If the state thinks access should be more convenient which again, they apparently do, make more licenses available and stop competing with private business. Another problem solved.

If the state thinks that there should be greater selection, that problem will be solved by any number of superstores waiting to enter the market, or entrepreneurs who want to offer the largest selection possible to win your business. We'll soon see stores with more items on the shelf then the entire state stocks now.

If the state wants revenue, then the free market will give proven increases in sales, which in turn results in more taxes collected. A free market will reduce border bleed with increased convenience and pricing competition, increasing collected taxes even more.

If the state wants to treat their citizens like rational adults that don't need to be told what, where, and how much they are allowed to purchase of a legal product, they will pass this plan.

We are not safer, we are not better served, and we are not satisfied. End false modernization, end false promises, end the state store system. Convenience 2016!


The Citizens represent most of the 12 million people in the Commonwealth who work in the southeast, northeast and central, western and all parts of  Pennsylvania in supermarkets, drug stores, food processing plants, government services, manufacturing facilities, nursing homes, professional offices, and all businesses, except Pennsylvania's "Fine" Wine and "Good" Spirits Stores.

More fun with math and myths

"Modernization"  math

The Math:
Is there something in the water or air in this state that causes people to not be able to read and do simple arithmetic when it comes to talking about PLCB numbers? How many times have I proven Wendell W. "Haircut 100" Young IV wrong, or the PA Whine and Spiteful Council wrong, or the notoriously un-mathematical state store supporters wrong? Even Representatives like DiGirolamo and Ferlo couldn't escape. Representative Sonney, now it's your turn.

The "Save the PLCB" universe was all atwitter when a Republican (actually two, counting DiGirolamo) announced a direct shipping bill or supported the idea of a direct shipping bill. Here was the proof that modernization was what the people wanted (provided you were one of the people who got campaign contributions) and a great way to show that the PLCB was at the forefront of almost — but not quite — being consumer oriented. 

Now Rep. DiGirolamo said that his version of direct shipping would bring in an additional $25 million in use taxes (called 'profit' by the PLCB) based on additional sales of  $361 million at a 6.92% margin. These are his numbers, I just do the math.(1).

However, Rep. Sonney has a fiscal note attached to his bill with a chart right on top that shows the state will lose $13,750.000. The interesting thing is that if you read the fiscal note on page 2, Fiscal Impact, it says: "The PLCB projects that the reduction in the mark-up from 30% to 10% could reduce revenue by approximately $16,500,000 annually..."  It goes on to use completely different numbers from the chart on page one. I'm guessing that he doesn't even know this, but the point being made is that if nothing else changed but the reduction in mark-up, the state will make less.

The Myth:
But HB 189 does change other things.  Instead of 55 wineries signed up for the current system supposedly at least 300 more will join the party, which sounds like a lot...but is only about 5% of U.S. wineries. How much more direct-shipped wine will Pennsylvania citizens and businesses buy when there are 400 choices instead of 55? Rep. DiGirolamo says 5.4 times as much (2), he isn't saying where he came up with the figure.

Will the state still lose money if sales increase by over 5 times and the mark-up is only 10% on SLO's? This is the PLCB we are talking about, so nothing they do should surprise you. They shouldn't lose money, in my opinion, but never underestimate their incompetence.

So this is good for the state and the citizens, right?  Not really. It still places the PLCB as the roadblock for which items can be ordered. If the PLCB can get it, you have to order from them. As I pointed out, those 400 wineries that signed up only represent 5% of U.S. wineries. But will there really be 400 wineries that sign up? More importantly, don't expect to direct ship anything from outside the country — that isn't allowed.

HB 189:

1. Wants the wineries to pay $100 license fee.
2. Wants a list of all wines shipped to PA residents
3. Wants permission to audit the direct wine shippers' books.
4. Wants submission to the jurisdiction of the board, any other State agency and the courts of this Commonwealth for purposes of enforcement.
5. Wants to require proof of age of the recipient, in a manner or format approved by the board.
6. Wants all boxes labeled with the words "CONTAINS ALCOHOL:SIGNATURE OF PERSON 21 YEARS OF AGE OR OLDER REQUIRED FOR DELIVERY." (no other state requires this)

And it goes on. How many wineries will make special boxes just for PA? How many will submit to jurisdiction? How many residents want the government to know what and how much they ordered?  Is this really what you think of when you say direct shipment?

Will this bill change the tax code to determine what  the state uses as the definition of a nexus for tax purposes? Some companies will have no physical presence in the state and no third parties who act as agents or representatives of the remote seller who have a physical presence within the Commonwealth. This point was brought up to me by a lawyer who is sympathetic to privatization; it carries no legal weight, but is interesting to think about..

All in all, it's looking like another failed attempt to improve the consumer satisfaction when buying wine and spirits in the Commonwealth. Band-aids like Rep Sonney's HB 189 do little to fix the problem of a broken system that most think is insufficient to their needs and wants, and does nothing significant to  move the state forward to the free market system that all normal states use.


END IT - DON'T MEND IT



1.) $25 million divided by .0692 is $361,271,676.30
2.) Current SLO wine orders are $67 million, $361 million is 5.4 times as much

We need the PLCB! Because it...does what, exactly?

When talk is raised about privatizing the state's 80 year old monopoly on sales of liquor and wine, of doing away with the PLCB-controlled State Stores, we hear a variety of reasons against it. "Reasons" like these:

"We need the PLCB because it collects taxes."

Really? The Commonwealth of Pennsylvania....

• collected about $1 billion in cigarette tax last year without state employees selling cigarettes.
• collected about $9 billion in sales taxes without having state employees in WalMart, Target, car lots, Burger King, KFC, Dollar General, dry cleaners, furniture stores or any of the thousands of other businesses in PA.
• collected about $1.25 billion in motor vehicle fuel taxes last year without having state employes work in gas stations.
• collected taxes on about 1 million firearms and ammunition sales without having state employees sell firearms or ammunition.

"We need the PLCB because it controls alcohol consumption."

Really? New York, New Jersey, and  Maryland have lower DUI fatality rates than PA. Ohio is statistically a tie and only Delaware and West Virginia are worse. (And Ohio and WV are control states...) New York and New Jersey have lower underage DUI fatality rates than PA; Delaware and Ohio are statistically tied; only Maryland and West Virginia do worse.

The UFCW -- the union that represents State Store clerks and has been a major lobbying foe of privatization of the stores -- claims that PA has the lowest death rate in the country associated with alcohol consumption: it is not true. The PA rate has gone up almost 31% since 2007 and is now higher than Maryland and New Jersey and may fall behind Delaware when the latest report is released. The most open private state in the country -- Louisiana -- has a lower rate than PA. What does all this mean? Alcohol consumption is affected by many independent factors, and "control" is not particularly effective.

There are already over 20,000 licenses for private businesses to sell alcohol; none of them have state employees on their registers. Why do the private employees have to take RAMP (Responsible Alcohol Management Program) training from certified instructors...but State Store workers don't?

"We need the PLCB because it keeps alcohol from minors."

Really? How do we know that this even works? State Stores are NEVER checked for underage sales by outside agencies, like the police, or the state's Bureau of Liquor Control Enforcement, but private businesses are. There is no independent proof that the State Store System makes any resident of the state -- young or old -- safer.

"We need the PLCB because it provides revenue for the state!"

Really? The State Store System provides under 4 tenths of one per cent of the state budget. It also owes over $600 million as its share of the pension deficit, a number that's missing from the PLCB's sunny annual report.

The State Store System limits employment, since every state or province that has fully privatized tripled employment in the industry.

The State Store System does not pay any business taxes -- 2,000+ private stores would.

The State Store System does not pay any license fees -- 2,000+ private stores would.

The State Store System limits access to product, thus limiting sales made and taxes collected (and sending thousands of Pennsylvanians across the border to buy booze -- and gas, and smokes, and lottery tickets -- every day).

These aren't reasons; they're illusions!

Why is selling liquor and wine considered an essential part of government? If we could go back to 1933, do it over again, pick a different way of selling liquor and wine...is this what we'd choose?

Really? 

Why does the legislature refuse to correct this aberration? Is it because satisfying union bosses is more important to them than increasing employment, going along with 40 years of public opinion polls, or treating citizens like adults?

Really?

Privatization IS Modernization. Really!

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.

The PLCB value to PA.

A fairly short look at another reason the PLCB is bad for consumers.

First we have to understand what "value" is. Value is not something defined by any organization but by the individual who decides to buy "X" instead of "Y." Does that $10 bottle of wine have more 'value' to you as an individual at this time then that NY Strip Steak? This time it may, next time it may not, depending on the scarcity and availability of the item or suitable substitutes. Value is not solely price-driven either, since for every purchase the consumer considers what they won't or can't buy if they do get the product under current consideration; be it that steak or a new car. You can see this individual idea of value in people who may have expensive shore homes with little furniture, driving a 10 year old car; or the opposite, with people who have an expensive car, but live in a place that needs more than just a fresh coat of paint.

Society also places value on things. Roads, Schools, Police, etc., etc. It also places value on labor. Obviously some skills are worth more to society than others, so their value is higher, and thus the compensation received is higher. One can get an idea of how society values a profession by the compensation given within that geographic region. But in Pennsylvania, alcohol retail labor prices are not bound by market forces, and are therefore not reflective of the scarcity or societal subjective valuations of such work.

The presence of extreme unionization further shows the manner in which wages and benefits have been manipulated to unsustainable levels, and how the State creates dependent constituents who will support the government entity because they alone benefit from it. What emerges is a wage rate and level of benefits that are not found in any other retail industry, supported and defended by a large workforce of unionized bureaucrats, who will fight privatization at all costs in order to protect their artificially high wages and benefits.

These artificially high wages and benefits lure workers to the PLCB. In effect, the high compensation tells potential workers, "This is where you are needed, there is a scarcity of this kind of worker and because of that we value you greatly". However, this is false because they are not brought about by market exchange and competition, but instead by government coercion, restrictions, and taxation. They mislead the worker, and draw them into the self-sustaining bureaucracy. If it were not for the PLCB with its artificially high compensation, these workers would've been drawn into other productive industries, where their wages would have indicated a true shortage/valuation of workers and would've been put to productive uses more highly valued by the consumer.

If you believe the PLCB is a worthwhile endeavor because it provides a revenue stream to the state, then these artificially high wages and benefits reduce that revenue stream, thus providing less benefit than if labor were priced at market rate . If you believe that the PLCB should not be selling retail or wholesale alcohol, then the artificially high wages and benefits cause prices to be higher than they otherwise would be along with limiting entrepreneurship, job creation, and competition . In either case the current labor structure is not optimum for the citizens except for the 0.04% of residents who work for the PLCB.

"No government enterprise can ever determine prices or costs or allocate factors or funds in a rational, welfare maximizing manner. No government enterprise can be established on a business basis even if the desire were present. Thus, any government operation injects a point of chaos into the economy, and since all markets are interconnected in the economy, every governmental activity disrupts and distorts pricing, the allocation of factors, consumption/investment ratios, etc." (Murray Rothbard - S.J. Hall Distinguished Professor of Economics, UNLV)

(I'd like to thank Joe Norton for his invaluable help with this article.)

RECORD PROFITS FOR THE PLCB!!!!

The PLCB announced the results of the 2012-13 fiscal year this week, and they were clearly happy with them. They had net income of $128.4 million (what they used to call "profit", but apparently we've trained them out of that), an increase of $24.9 million over the previous year, and "transferred" $512 million to the state's General Fund in taxes and fees, like the Johnstown Flood Emergency Tax and sales tax. The PLCB credits "robust sales and cost controls" for the increase, and a 6% increase in wine sales.

Happy control freaks immediately rejoiced, and one dropped a comment here this morning:

$128 million is hard to overlook.

Here's my response. 

What's that? The amount that was wasted on the wine kiosks? The cost overruns on the new POS system? Oh, the so-called profits for 2012! Well, hell, it's against the law to buy booze anywhere else, they ought to be making SOMETHING.

Seriously, glad you brought this up. The PLCB is doing some bizarre sack dance right now about the "record" amount of money they siphoned out of the pockets of Pennsylvanians the past year...and all it took was millions in advertising, national growth in wine and spirits sales, and a police-enforced monopoly. Wow, pretty impressive.

Except when you look at the gross sales vs. profits over the past few years. Five years ago, the PLCB's gross sales were $1.778 billion; this past year they were a record $2.171 billion, an increase of 22.9%.

Five years ago, the "profits" were $112.2 million; this past year, they were $128.4 million. That's an increase of 14.4%.

Profits not keeping up with sales? Well, their costs must have gone up, right? Actually, they closed about 30 stores in that time; I have to assume stores that were losing money (why close them otherwise?). So what the hell, PLCB? Where'd all the money go? Fatter salaries for bureaucrats? Courtesy contracts? De luxe wine tasting rooms? Or just failed programs, like the wine kiosks?

I know what some of your "cost controls" were that put profits up 24% this past year: not filling positions. Board member Robert Marcus admitted that earlier this year in legislative hearings, saying roughly 250 positions, many of which he described as essential, remain unfilled. Marcus tried to blame the Governor, saying he would not permit the jobs to be filled, but that's malarkey coming from an agency that has its own source of revenue and is all too independent. Corbett spokesman Kevin Harley noted (in this story in the Inquirer) that the LCB is an independent agency that controls its own finances and hiring, and said he was not aware of any open positions that the administration had refused to fill.

Meanwhile, up in New Hampshire, where they KNOW how to run a State Store System, they made $145.6 million in profits on less than a third of the gross sales the PLCB did. Oh, and they did it while charging a bit less than the PLCB. Kind of looks like the PLCB is -- as I've been saying -- grossly mismanaged and inefficient. Are these the people we want to trust to come up with "modernization" ideas?

I have one modernization idea: PRIVATIZE.