Why Is The PLCB Lowering Spirits Instead of Selling Them?

Philadelphia

The PLCB shut down the State Store System of Stores because of the COVID-19 pandemic. They are the ONLY control state to do so (other than Utah, temporarily, because of an earthquake that happened concurrently). Liquor stores remain open in other states (because a lot of them sell booze in grocery stores, you know, like normal people do); beer distributors were literally classified as "life essential" by Governor Wolf in yesterday's shut-down-the-state order; and of course, as we pointed out recently, we were told by the state that we didn't need the State Store System of Stores because "Individuals can still buy wine and beer at grocery stores with PLCB licenses."

Wilkes-Barre

We have encouraged the State to leave the stores closed. The Distilled Spirits Council of the US and American Distilled Spirits Association has pointed out that the current instruction leaves the citizens unable to buy spirits (a completely legal product in Pennsylvania and the United States), and suggested the state at least temporarily allow the sale of spirits at the grocery stores and beer distributors that remain open...somewhat heroically, and I'm not kidding about that.

Allentown (the sawdust is a nice touch)

I've been talking to wine and spirits wholesalers who work with the PLCB to supply their warehouses. They're ready, willing, and able to supply spirits to the grocery stores, convenience stores, and beer distributors that are already open and selling. What's more, they're also ready to supply the restaurants and bars who are eager to do take-out beer and wine and spirits sales, just to keep their people employed, to literally keep their businesses from failing. Not closing temporarily: failing. The wholesalers know that they can find drivers to do the work. The PLCB has said they could do this (click the link, and scroll down to the 7th paragraph), but have never shown a bit of initiative toward action on it.

Williamsport

Has there been any indication that the PLCB is even considering any of this? At least the legislature has decided to come back to work remotely and get something done, but you have to believe this isn't going to be high on their list -- and I'm not suggesting it should be. But as we saw when the Board decided that it could simply "interpret" the hated Case Law right out of existence by declaring a six-pack to equal a case, the courts give the PLCB very broad latitude indeed on "interpretation" of The Almighty Liquor Code (had we mentioned that the PLCB has its own courts?). They could easily rule on all of this stuff, and let the Legislature catch up.

Also Philly

No. The Board, the Governor, the Department of Community and Economic Development have done nothing about this, none of the really easy steps that would take some of the stress off businesses, and extend some fairness to the folks in the spirits production chain (who also need gainful employment), and let those of us who might want a whiskey sour or Bloody Mary (or quarantini, which is apparently a thing) buy a bottle or two.

What are they doing?

Harrisburg

They're boarding up State Stores as a precaution against looting. 

In a state where the last large scale riots were over fifty years ago, the PLCB decided to raise public morale with this amazing display of optimistic trust. Because nothing says "it may be rough, but we're going to get through this together" like boarding up your store...in Williamsport. 

This lack of leadership, lack of understanding, lack of common good sense is just another example of what an awful mistake having this all-too-independent state agency in charge of retail stores has been. The Legislature should, in the spare ten minutes it would take, use this opportunity to say, 'Okay, that's enough. You had your chance, more than enough chances, and that's it. Game over, PLCB. You're done.'

Even better? It really would only take ten minutes. The Legislature actually drew up plans back in 1987 to end the State Store System of Stores and those plans, never enacted, are still available online in the Pennsylvania Code...ready to roll.

Here's the plan; your predecessors already did the work for you. Literally all you should have to do is change the dates and vote.

Because all the PLCB is going to do in this crisis is protect themselves. Apparently they think Pennsylvania is France. We deserve a lot better than this.

Paris

Why Not Leave Them Closed?

We have a tremendous opportunity before us. We must not waver. We must not hesitate.

The State Stores could easily be closed by June.

Let me explain. 

I have a tremendous idea!!

By now, you all must know that Governor Wolf has declared that the State Store System of Stores is CLOSED, nominally because of the COVID-19 pandemic. Shut down as of 9 PM on St. Patrick's Day, of all inane coincidences. What's more, the PLCB's FWGS website is no longer delivering booze to your door (you know, because they never really wanted to anyway), AND the licensee "service centers" are also closed (all the bars are closed anyway, except for takeout food and beer, two things with which the PLCB is entirely uninterested).

Wow. And as I was writing this earlier, Wolf issued a proclamation (link will download a PDF of the letter) shutting down ALL licensee operations that involve selling food or drink (of any kind) for consumption on premises. Take-out/to-go is still allowed, but one wonders for how long (see below). The only exception is for hotel room service.

Note: licensee operations only. Restaurants, lunch counters, etc. that are NOT licensed are still asked to voluntarily limit operation to take-out only. Wolf is doing this under the authority of The Almighty Liquor Code: "The PLCB, upon authorization from the Governor, has the authority under the Liquor Code (47 P.S. §4-462) to mandate the closure of licensed establishments in times of emergency."

Here's what you see when you go to Ye Olde Fine Wine Et Goode Spyrites site of Web:

Reaction has been mixed. There was an insane rush to the stores, people standing in line for half an hour, as if they were Fine Bottled Water and Good Toilet Paper Shops. People say, oh, you don't need booze (idiots). Or they say, booze is as necessary as groceries and medicine, which, if you really think that, then why didn't you tell your state rep that years ago and get it out of the state's incompetent control? Eh, another missed opportunity.

Back to today. Why did the governor close the State Stores, and not close beer distributors, not close the sales rooms of wineries, distilleries, or breweries (yes, and meaderies and cideries and kvasserei)? Simply because he could, most likely, and possibly because of union pressure. Naturally enough, why is not a question that's been asked of Wolf directly. It's much more important that we do 'flatten the curve' and get this damned virus under control. Believe me, that's absolutely true. Retail operations, particularly small ones, are going to take a whupping here, and that's going to be disastrous for the economy.

But that's not what we're here to talk about. It's about the opportunity to finally put an end to the ridiculous State Store System of Stores. 

Rahm Emanuel's famous quote was about the 2008 recession. He followed the famous part with this:

"This is an opportunity, what used to be long-term problems, be they in the health care area, energy area, education area, fiscal area, tax area, regulatory reform area, things that we have postponed for too long, that were long-term, are now immediate and must be dealt with."

Are the State Stores an immediate problem? Are they one that "must be dealt with"? Of course not. I'm not a fool. No one's livelihood or survival is threatened by the continued existence of this Relic of Repeal, this Fossil of Prohibition.

But it is definitely falls under "thing that we have postponed for too long," making this is a unique opportunity to deal with it. The State Stores will be closed for at least two weeks, probably more. And the Governor, a Democratic governor, has openly admitted that the State Stores are not necessary to serve the needs of the citizens of the state. 

He did? When did he say that? In the letter to Pennsylvania businesses (dated March 14) from Wolf's Secretaries of Health, and Community and Economic Development, there is a list of descriptions of "non-essential businesses" that are asked to close. At the end of that list, there are these bullet points:

NOTE: Liquor stores will begin an orderly closure. Individuals can still buy wine and beer at grocery stores with PLCB licenses
NOTE: Restaurants should stay open for carry-out and delivery only

You see? The State Stores can close because people can still buy wine at grocery stores and restaurants. Of course they can, and they do, in huge, growing amounts.

If the State would allow grocery stores (and beer distributors, and restaurants, and deli licenses, and private clubs) to sell spirits by the bottle -- and really, why not? It's all the same alcohol! -- we could just leave the State Stores closed. Never open them again.

It's not that hard. Have an auction, sell off the inventory, and have time for new businesses to get licenses and open with former State Store employees at the register (or at the helm, why not?).

At the very least, the Legislature should immediately adjust The Almighty Liquor Code to allow licensees -- grocery stores, bars, and beer distributors to add off-premise, take-out spirits sales. End this ridiculous prejudice against spirits. Let mom pick up a bottle of Bailey's at the Giant Eagle.

And do away with the stupid cafe requirements (because...we're only doing take-out now, and the world hasn't ended), and the childish "buy four bottles and step outside the door" limit. What ridiculous bullshit is that, anyway?

We could do this. It's just waiting to happen.

"...it's an opportunity to do things you think you could not do before." Clearly Governor Wolf is ready.

PRIVATIZE. And if we can't do that, take the spirits monopoly away from the State Stores. The grocery stores have earned it, beer distributors have earned it by staying open during the crisis...something the State Stores weren't prepared to do. 

How much did they steal from you this year?

It's that (belated) time of year, time for the PLCB to tell us what a wonderful job they are doing and what a swell place to work they have. Their Annual Report is out (you can download the PDF document here), and the truth is in there; we just have to root it out. 

We say it's "that time of year," but it's not, actually, because the annual report took a ludicrous four months to come out...again. Last time it took four months they said, "Ohh, there were special considerations with the new tax code." No new tax code this year, and they didn't bother with a new excuse. What's the point: it's all lies anyway.

Onward! Right on page 2 there's a mission statement (emphasis added):

The mission of the Pennsylvania Liquor Control Board is to responsibly sell wine and spirits as a retailer and wholesaler, regulate Pennsylvania’s alcohol industry, promote alcohol education and social responsibility and maximize financial returns for the benefit of all Pennsylvanians.

Funny how the part about maximizing revenue isn't in the liquor code. Just as well, since based on the available statistics they aren't doing a very good job on the stuff that is, like alcohol education or social responsibility; at least, not compared to states on our border. Their own report on these outcomes shows that students who consumed alcohol in the past year went up from 81.4% to 83%  After 85 years of the PLCB, 85 years of CONTROL FAILURE...maybe it is time to try a different system. Any normal business wouldn't survive 85 years of failure.

What have they done to us lately? After record sales (and record variably-priced screwing us) PLCB liabilities went down $2.03 million on over $1.1 billion dollars of debt. A payback rate of over 500 years, and getting worse. It was "only" 400 years previously. For some reason they don't report that number. Another interesting part of their financial reporting is that they say, on five pages in a row, that "The accompanying notes are an integral part of these statements." And then don't list what any of the accompanying notes are. They aren't going to verify what they are saying; just believe them, because they have such a great track record of telling the truth.

Another thing they don't tell us is that while variable pricing was supposed to be a partnership where the public was supposed to receive some benefit, we don't know what the benefit is in dollar terms. We can look at past financial statements and see that the PLCB is making almost double what it used to. That's almost all because of lower acquisition costs, but where is the share that the public was supposed to get?  We may have seen a 2% reduction in prices, and even that might be high. For every extra $100 they make, we are probably lucky to see a $2 reduction, spread across a number of products. Even then the PLCB still screws us, because of their rounding formula. Rounding is not considered part of "mark-up," so they can hide that from us, just like they hid what the mark-ups actually are now.

It all goes back to the total lack of leadership and experience of those at the top. They are never held responsible for the lack of progress under their leadership, so the status quo, or even a slip in the status quo, is the norm. On the business side it is even worse. I can understand hiring political hacks if you don't want things to improve in a structured order. But when you've got a failed congressman, a political chief of staff, and a furniture company exec it doesn't seem to be the path to a successful liquor business. In 85 years there hasn't been a Yuengling or Jacquin's executive, or someone from a wine wholesaler or spirits importer, who was qualified and wanted to do the job...really?

When you think about this, keep in mind this quote from the Joint session of the House Liquor Control Committee and the Senate Law & Justice Committee of 2017 (adjusted a bit for truth):

SENATOR MCILHINNEY (former Chairman Senate L&J Committee, since retired): "... the state citizens own this system, and they should be able to get some...benefit by having a good  deal when they go to the liquor store."

MR. HOLDEN (Chairman: Liquor Control Board) : "Absolutely Absolutely not."

There, I fixed it for you, Tim.

What could Tennessee Wine and Spirits Retailers Association v. Thomas mean to Pennsylvania?

I am not a lawyer, and some or all of my thoughts could be right or wrong, so maybe this post should be filed under wishful thinking, but...there seems to be a crack in the control wall. It's from the hammer blow struck by the Supreme Court's decision in Tennessee Wine and Spirits Retailers Association v. Thomas, handed down on June 26. Take a look with me and see what you think. 

The future of the PLCB?

The facts of the case:

To sell liquor in Tennessee, you need a license from the Tennessee Alcoholic Beverage Commission (TABC). That's pretty normal...in states where private liquor stores are allowed. But there was a catch in Tennessee. Under Tennessee Code, to get a license, you must have been a resident of the state for two years. There was a ten year residency required to renew a license, so don't plan on leaving. And yes, the same requirements were there for corporations.

The case stems from two license applications that did not meet the residency requirement. The TABC was planning to approve their applications anyway...until the Tennessee Wine and Spirits Retailers Association informed TABC that if they did, they planned to sue. (You know...to protect their competitive advantage.) The TABC preemptively went to court to determine the constitutionality of the requirement. The district court ruled that it violated the dormant Commerce Clause of the U.S. Constitution (Been saying that about the PLCB for years! -- Lew). The Sixth Circuit affirmed, and it was off to the Supremes, because the Association wasn't giving up on their anti-competitive lawsuit. 

Cracking the wall around the 21st Amendment

The Supremes Say: 

In a 7-2 decision (Justices Gorsuch and Thomas dissenting), the court found that: Under the dormant Commerce Clause, notwithstanding the Twenty-First Amendment, a state may not regulate liquor sales by granting licenses only to individuals or entities that have met state residency requirements.

The 21st Amendment has long been held to allow states free rein on writing laws controlling the sale of alcohol within their borders. Section 2 of the Twenty-First Amendment states: “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

But a number of Supreme Court decisions since the 1990s -- 44 Liquormart, Granholm, etc. -- have been chipping away at the absolute nature of such control. Tennessee Wine and Spirits takes that quite a step further. The Court’s Commerce Clause jurisprudence holds that “a state law that discriminates against out-of-state goods or nonresident economic actors can be sustained only on a showing that it is narrowly tailored to ‘advance a legitimate local purpose.’” Tennessee’s residency requirement clearly favors residents over nonresidents, hard to justify as a "legitimate local purpose" in the face of the Commerce Clause.

That's just what the Supreme Court found. The Court noted that at the time the Eighteenth Amendment (nationwide prohibition) was ratified, it had already been established that the Commerce Clause prevented states from discriminating against the citizens and products of other states. Against this backdrop, when the Twenty-First Amendment was ratified, “the Commerce Clause did not permit the States to impose protectionist measures clothed as police-power regulations.” Thus, while § 2 of the Amendment gives states latitude with respect to the regulation of alcohol, it does not allow them to violate the nondiscrimination principle.

(A discrimination, maybe, against every citizen and entity who would like to sell alcohol in competition with the state's police-enforced monopoly?)

The Court concluded that protectionism is not a legitimate local purpose and that the residency requirement “has at best a highly attenuated relationship to public health or safety.”

My Opinion
Our state law does discriminate against out-of-state citizens and out-of-state economic actors. It also imposes police powers to maintain and enforce protectionist measures. Read the beginning of the Liquor Code Section 104(a):"This act shall be deemed an exercise of the police power of the Commonwealth for the protection of the public welfare, health, peace and morals of the people of the Commonwealth and to prohibit forever the open saloon, and all of the provisions of this act shall be liberally construed for the accomplishment of this purpose."

In the above decision, the Supreme Court held that "Protectionism is not a legitimate local purpose" and stresses the REGULATORY authority, not monopoly authority of the state. But does that make Pennsylvania's Almighty Liquor Code invalid? That just might be the next question the Court will have to decide. How much does the 21st Amendment give the states the right to impose protectionist, monopoly, discriminatory measures, instead of regulation that allows the intent of the Commerce Clause? How much does it matter if the state allows private retailers or only state store sales?

As I said, I'm not a lawyer. But it does make me think of what might be coming down the road at some point. I think that Costco and Total Wine teaming up will have the resources to get it done and none too soon for me.

Privatize.

Not Quite 10 Years Ago...

It's not quite ten years since I started this blog with this post. It was on April 22, 2008, and I should probably do the 10th anniversary post next month, but...it's snowing like mad out there right now, and I'm not going to be able to go do brewery visits like I planned, so I'm doing it now. What's a month?

Ten years ago things were pretty bad; they were worse than they are today. The State Stores were not under any kind of real scrutiny, they didn't have a useful website, and there hadn't been a serious push for privatization in 20 years. Beer was sold at distributors -- by the case and keg only -- or at taverns -- only 2 sixers at a time, and at a stiff markup -- and that was it...except for the occasional weird exception. The Legislature was in a long period of inactivity on the Almighty Liquor Code. And I was losing my mind after seeing how booze was sold all over the country.

So I started this blog...and things changed. I don't take any credit for this. Much like the success of my other crusade, the Session Beer Project, I don't feel that I caused any change. I just had a very sensitive ear to the ground, and caught the rumors and mumblings before almost anyone else did. At the most, I may have suggested lines of inquiry to reporters (who picked up on the blog fairly early; as did a suspicious number of IP addresses in downtown Harrisburg), and if that worked, well, that's always been the main aim and hoped-for audience of the blog. (A big hat-tip and thanks to my co-writer, the pseudonymous Albert Brooks, who picked up the pen while I was sidelined for over two years and has done a GREAT job feeding facts to that audience.)

What happened in the past ten years? Here's the dumb stuff.

• The PLCB spent $3.6 million on public image, advertising, and store layout, paid to a California-based marketing firm. They come up with a new name for the State Stores: "Table Leaf." In a rare rush of smarts, the PLCB realized that's idiotic (though they did keep an option on it; see below), and decided to go with the basic stupid rename: Fine Wine and Good Spirits Store. Governor Rendell was furious...and the PLCB blatantly didn't care. Your money wasted: it's a monopoly (a police-enforced monopoly, as we would point out many times), there's no need for marketing.
• The aptly-named Special Liquor Order (and they call it SLO, you can't make this up) system broke down again, and again, and again...
• The PLCB so badly screwed up their new inventory system in 2011 that store managers over-ordered so much wine that they had to store almost 100,000 cases of it in tractor-trailers...un-air conditioned trailers, in the summer. Renting the trailers and hiring security guards cost about $500,000. (Numbers are from an Auditor General report.) Good job, morons!
• Around 20 State Stores closed. A bunch more were moved for arbitrary reasons without input from local communities. And of course, we revealed that ten counties in Pennsylvania have only ONE State Store. There are ten others with only two.
• The Courtesy Contract. The PLCB spent $173,820 on training State Store System clerks "how to greet someone, where to stand, and how to read a customer's cues." And the company doing the training belonged to a PLCB regional manager's spouse. Real nice. 
• We saw several ethics investigations of the PLCB (one of which struck paydirt) and several harshly worded audits. The marketing director was found guilty of fraud...back in 2015, and he still has not been sentenced. Speculation is that he is cooperating in further federal investigations. Conti must be spooked. 
• We saw again and again that the PLCB often actively made it harder for licensees and wholesalers and brewers to sell beer. You know...their only competition in the booze biz. Not bad, when you make the rules. This included the harassment of three Philly bars and a major Philly beer wholesaler for selling "unregistered" beer, carried out by the BLCE and supported by the PLCB (and their soon-to-be-exposed flawed database). After armed raids, seizures of beer, disruption of private (beer) business, and a full-blown legislative hearing...the result was a warning letter. Harassment, and they should have been sued. 
• The Saga of Joe "Da CEO" Conti, from his disappearance, to his greatest failure, to his ignominious end, to his unlikely (and lucrative) return. We miss his shenanigans; his constantly wrong-footed instincts were the best thing that ever happened to privatization. 
• The Wine Kiosks. Nothing more need be said. Possibly their biggest failure in the last 40 years, and that's saying something. 
• Table Leaf: the brand. As mentioned above, they'd already (over)paid for this branding, so they used it for a house brand of wine. And then they decided to wield it as a weapon against their biggest suppliers...and Pennsylvania wineries. Who brought it to the Legislature's attention, and that was the end of another PLCB fiasco.
• Privatization was repeatedly brought up by the House, and squashed in the Senate, mainly thanks to the efforts of Senator Chuck McIlhinney.
• But in all the past ten years, the very worst thing that happened was that the Legislature let the PLCB have the one thing that they never should have: so-called "flexible pricing." This is the idea that the PLCB should not be forced to use the same set mark-up on every item; when they got a deal, they could pass it on (which is bullshit: they could always have done that). What it really means is that they charge more; we told you that for years, and golly, it was true. We're stuck with it, too.

  

  Ah, the wine kiosk. The Best Worst Thing.

Wow. I know I'm missing stuff, but those are the big ones. Yet somehow, these ding-dongs are still in business, still the sole wholesaler of wine and spirits in the state despite continual screw-ups.

Meanwhile, we did get some things, although almost all of them were mixed blessings. 

All right, break it up!

• The case law is finally gone! That was one of the big ones. We no longer have to buy an entire case of beer at the distributor. That'd be great, except we still can only buy a 12-pack at bars and grocery stores (more on that shortly), then walk out the door and walk back in and buy another...What kind of bullshit is that?
• We can buy beer and wine in grocery stores and convenience stores!! HOT DAMN! Whoa there, hoss. We can buy beer and wine in places that hold a restaurant license; that's always been true, but now these stores can buy those licenses (for as much as $500,000!), and put in a 'cafe' that seats at least 30, and sell sixpacks. About 450-odd stores have done so, out of the thousands in the state. So don't wet yourself with glee. And remember: a 12-pack of beer, or four bottles of wine, and it's out the door you go. 
• Direct wine shipment (and beer...but not liquor) is now a thing. That's a big deal for a small number of people. 
• The PLCB had to start telling the truth about their financials; specifically, their deep pension debt. And just like that, they were no longer making money, net of taxes. They still are paying money into the General Fund, because they have to, but they're doing it out of reserve assets. The day of reckoning is coming. 
• We got some really cool stuff: Pennsylvania booze producers can cross-sell their products. A winery can sell PA-produced beer, cider, spirits, mead...and, what, kvass, I guess? Any of that. And they can have satellite stores off their main production premises, which can also sell those other products, which has led to Pennsylvania Libations, the first privately-owned liquor store in Pennsylvania in almost 100 years. And that's cool. 
• About a thousand (I think) liquor licenses were blown out of escrow and auctioned off. Mostly picked up by grocery stores. So that's kind of good, but...all those grocery stores buying bar licenses is making the price of a license go up, a lot in some places, and that's putting the squeeze on indie mom-and-pop bars and groceries. This is going to give us a lot more chain groceries and chain restaurants, and that, my friends, ain't optimal. 

That's all I can think of right now. There have been some other side effects. One, the PLCB is running scared, and the selection is about as good as it's been in a while. (You're a fool if you think that will continue if the privatization talk dies down, so let's keep 'em scared.) Two, the BLCE has been scared to do any enforcement of the monopoly, so we can buy out of state with impunity. Three, people have a lower opinion of the PLCB these days after the corruption charges, and that's good. Four, McIlhinney's retiring, and maybe we can get someone who really gets it in there.

OTOH...The GOP has, overall, been a huge friend to privatization of the PLCB in the past 40 years, despite numerous missteps. The unpopularity of the Trump administration may lead to a loss of the solid GOP majority in the General Assembly. Overall, that's how things go, but for this issue? If the Democrats gain a majority, or cut the GOP majority, you can kiss further progress good-bye. Because the Dems have made it crystal-clear that they are opposed to any further privatization of the State Store System. We'll just have to wait and see.

Overall, though? Good progress at the 10-year mark. We got rid of the case law, and the PLCB's sales are suffering from the wine sales at groceries. This is what union boss Wendell W. "Windy Wendy" Young IV referred to as "the death of a thousand cuts." Here's hoping he's right about that, and that "flexible pricing" doesn't bleed us to death in the meantime.

I feel for you folks who are far from a border. If Philly were where State College is, away from the liquor stores of Jersey and Delaware, the PLCB would have been long gone. Let's keep the pressure on.

The Gift That Keeps On Taking

Giving and getting booze as a gift in Pennsylvania is no easy feat.

Given the police-enforced monopoly that is Pennsylvania's wine and spirits marketplace, you might expect that there are laws to fence off all possible ways around those restrictions; for instance, no "gifts" of booze (that are then surreptitiously reciprocated with cash). But if you thought there was a one bottle or a case exception for honest gifts, you would be wrong. You still have to give the state its cut, even on a gift.

And you know who is responsible to pay the fees, taxes, and unknown markup on that bottle? Not the person giving, but the person receiving. A good friend of the blog recently quizzed the PLCB about all the steps necessary to give some hard to find, not available in PA no way no how, honest to goodness collectible booze to a PA resident. Here's what they learned.

As a rule it is generally unlawful for anyone, other than the PLCB or the holder of an importer’s license or a direct wine shipper license (or a sacramental wine license), to "import" any liquor (including wine) into Pennsylvania. 47 P.S. §§ 4-491(8), (11).

No problem, you think, I'm not bringing it in, someone else did and gave it to me. Ah, but it is also generally unlawful for anyone, other than a manufacturer, the PLCB, the holder of a sacramental wine license, or the holder of an importer license, to possess or transport any liquor or alcohol within the Commonwealth that was not lawfully acquired from the PLCB, a PLCB-licensed limited winery, a PLCB-licensed distillery, a PLCB-licensed limited distillery, a PLCB-licensed direct wine shipper, or a PLCB-licensed retailer holding a wine expanded permit. 47 P.S. §§ 4-415, 4-488, 4-491(2), 5-505.2, 5-505.4.

OK, so how do you LEGALLY get that bottle into the state so you can give it to somebody? Short answer: you can't. In a moment of supreme bureaucratic idiocy it was decided that the recipient has to do all the work. Why?  All I can come up with is that the PLCB can't screw an out of state person like they can screw a PA resident.


So if you go ahead and just illegally give that bottle to somebody in PA? Here's what they have to do, if they want to legally keep it and not just flush it down the toilet and deny all knowledge when the BLCE comes busting in.

BLCE!! HAND OVER THE GRAPPA! NOW!!

First, they have to know exactly what you are giving them...ahead of time (which kinda ruins any surprise if that was your intent). Then they have to fill out an application for importation and an application for the payment of tax on the liquor to be filed with the PLCB’s Bureau of Product Selection by the intended gift recipient (i.e., the person importing the liquor). (40 Pa. Code§ 9.51.) No word on how long it takes to get that information (because nobody in their right mind has ever done it).

Once it has been decided by the Bureau of Product Selection what fees and markup and service charge (remember that this is a SERVICE to allow you to bypass the incompetents in Harrisburg) to apply, you then have to contact the Department Of  Revenue, because the state taxes on the liquor would be levied by the Department of Revenue, and they have to determine the amount of taxes that would be owed on the gift, if any. If they're confused by this, tell them the PLCB sent you.

(By this time, you may be wondering: if Revenue is collecting the taxes, and the BLCE is doing the enforcement...if we got rid of the State Stores, what would we need the PLCB for? Good question.)

If you want to try and figure out approximately what the fees are yourself, before committing to this mindstorm of bureaucracy - be prepared to wait. It took two weeks to drag the info out of the Bureau of Product selection. They finally sent a reference to 40 Pa. Code § 9.52. Why did that take fourteen days? Probably because nobody in organizational memory had ever been asked the question before. You know...because an ordinary citizen would just give their friend the bottle of booze and be done with it. 

Once that is done, hopefully before you are too old to enjoy your gift, you have to go back to the PLCB’s Bureau of Product Selection and turn in your application for importation and an application for the payment of tax on the liquor (which Revenue gave you). Now even though you have paid the tax, the fees, the markup, and the service charge, the Board can still say no because they have monopoly power and there is no legal recourse for you to appeal to if they are feeling a little bitchy that day.

Think you are done? Of course not! Your friend can't just drive across the border with with his gift. Horrors! The world will come to an end. No, the State has to maintain CONTROL by having you hire a Transporter for Hire Class A or Class C licensee to bring it to your residence. Yeah, really. And by the time this is all over, you'll want to remember to tell your friend to please never bring you another gift.

By the way, if you decide you don't like the gift and want to sell it -- because it is, after all, your legal property -- then just turn it in to any State Store and they will take care of it for you. "But what about the money?" you ask? Don't worry, it won't cost you a penny! Really. You don't get any proceeds from the sale...but your conscience will be clear knowing you didn't break the law. I'm not sure what happens if you sell a bottle when you are out of state but I'd bet the PLCB has some way to screw you if you do that too.

More Pennsylvanians than this buy or drink bootleg booze every day

Suppose this just was too much and the giver decides to say screw it, it is too much trouble for my buddy to go through, I'll just bring him some beer. Guess what? There are NO EXCEPTIONS for beer at all. No jump through the hoops while you kiss our ass paperwork hurdles, no forms to fill out, no taxes to pay. It is illegal, period, to bring beer into the state.

Don't believe me? Here is what the PLCB has to say about it: "The importation of malt or brewed beverages is governed by different sections of the Liquor Code, 47 P.S. §§ 4-431, 4-492(8), and no exception currently exists that would allow for the importation of gift malt or brewed beverages outside the otherwise authorized channels of distribution."

So I urge you to put on that mask, and join the tens of thousands of Pennsylvanians who say, 'Up Yours, PLCB!' every day, and bring that cheaper beer, nicer wine, and better liquor in over the border in as much quantity as youu need as often as you want. Be an outlaw, be a Hero for Freedom of Choice. Perhaps I'll see you on the border.

Privatize.

Smuggler's Blues from Michael Dewey on Vimeo.

I Do Not Like These Changes

Take the Liquor Code out behind
the Capitol and beat it to death.

Watchdog.org asked me what I really thought about the PLCB and the Almighty Liquor Code in light of recent changes (the ones Governor Wolf said were "historic").

So I told them.

Favorite bit?  “If privatization means less booze-based revenue for the state, well, fine, let them find it in someone else’s pockets for a change. Moderate drinkers have paid more than our fair share for long enough."

Privatization IS Modernization. Rewrite the Code; the WHOLE Code!

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.

Forget the Zombie licenses: raise the quotas!

There's a lot of hand-wringing and bluster going on about one of the provisions of Act 39, the "epic" change to The Almighty Liquor Code (as trumpeted by Governor Wolf, who didn't do anything except sign it). It's the so-called "zombie" license auction, wherein the PLCB has been directed to sell off the approximately 1,200 inactive liquor licenses that are in escrow, suspended, or otherwise not being used.

Many people are freaking out about this, but a lot of us wonder what the hell zombie licenses even are. Why aren't they out there earning a living?

Our weak-kneed, nanny-state legislators are more to blame for the current idiocy than you may realize. The idea of selling the zombie licenses is a futile attempt to solve a problem they created. For reasons known only to whatever power you pray to, the legislature, throughout the past 82 years — on BOTH sides of the aisle — dislikes bars and restaurants more and more with each generation.

When the PLCB was first created, it was decided that your great-grandparents would be allowed to have one "R" license for every 1,000 citizens. Then with Act 702 of 1951 that number was increased to one for every 1,500 citizens. Which was great for the "R" license owners, which was probably reflected in the campaign donations from the tavern and restaurant owners associations.

Then in 1972, Rep. G.R Johnson (R-Delaware) decided that the citizenry were eating out and having entirely too much fun, so he put forth HB 517 which (along with letting stadiums sell beer on Sunday, the sweetener) proposed raising the quota from 1 per 1,500 to 1 per 3,000 residents. After a few rounds of amendments, it was eventually set at 2,000. Why the House and Senate majorities thought this was a good idea is not recorded. So HB 517 passed and was signed into law as Act 108 of 1973.

Between 1935 and 1972 Pennsylvania's population went up about 22%, but the number of licenses per capita was decreased by 50%, relative to the original quota. A prime example how the legislature made things even worse than old Gifford Pinchot wanted in 1934!

But they weren't done. Deciding they hadn't sufficiently put the populace under their control, the legislature again took up the quota system in 1989. Rep Eugene Saloom (D-Westmoreland), the Chair of the House Liquor Control Committee, decided that he had to protect small businesses that didn't yet exist by raising the quota to 1 per every 3,000 residents.

This is a quote of the logic (or lack of) for his decision. "Some of the urban area's population is shifting to the suburban districts, and one thing they don't need are additional beer distributors and additional bars. We know that if it isn't changed there will be a lot of people in business not making a profit." A quota of 1 per 2,000 had allowed people to make a profit, but even if that didn't change in the suburbs, it suddenly that wasn't enough. Saloom's HB 1946 marched on to become Act 160 of 1990.

Now you can think that maybe this guy is just an idiot. But that means the entire legislature were idiots too. While the House and Senate were again controlled by the Democrats, this passed with overwhelming bipartisan support: 187-4 in the House and 48-0 in the Senate. Why was this so important?

It's 1991, population has increased only 150,000 (1.2%) since the last time the quota was raised in 1973 and the licenses were reduced by a 50% ratio AGAIN! This must have made the restaurant and tavern owners ecstatic. I'm sure that contributions just rolled in over and under the table.

To exacerbate the problem, licenses could be held without being used indefinitely, and those that were turned back into the state disappeared from the market completely, reducing the total number under the quota system, and thereby raising the price of those that were still active. Pretty nice when the state itself limits your competition, reduces entry into the market, and gives you ownership of the license unlike any other licensed activity.

Pennsylvania Legislators, both Republican and Democrat, need to pull off the blinders and stop putting band-aids on the sucking chest wound that is Pennsylvania alcohol policy. They can start by doing things that benefit the citizens. Not the clerks. Not the Tavern owners. Not the Beer Distributors. US.

Start with changing the quota back to what the cowering semi-Wets of 1934 thought was sufficiently draconian: 1 license per 1,000 people in a county. If that's too many, the market will sort it out quite efficiently, like it does when there are too many Starbucks in an area.


(edited 9/30/16 to update 1951 quota info)

More PLCB convenience

On  April 16th, 2011 the PLCB increased convenience, affecting the 4,200 residents of Renovo and the immediate surrounding area, by closing the State Store in town. They decided it was much more convenient — for the PLCB, apparently — to have the residents drive a minimum of 55 miles round trip to the State Store in Loch Haven: the only State Store in all 900 square miles of Clinton County, the only State Store for all 40,000+ residents of that county. 

Of course, the PLCB has said they are "actively looking" for a replacement spot in Renovo. I'm pretty sure that after five years some lard-assed PLCB real estate drone could have walked to every building in Renovo and the surrounding area. So I have to question on how "actively" they are "looking," or if they are just "actively" running their mouth trying to obfuscate the fact they aren't really doing anything. Last year I suggested the empty store at 112 St. Clair Street and Third St. in Renovo, which has parking and a loading dock, but no one "actively" did anything, and now it isn't available.

So how fair is this? Let's look at it the PLCB Way. The Almighty Liquor Code favors quotas: so many bar and restaurant licenses for so many residents, so many beer distributors and importing distributors per so many citizens...that sort of thing. Once it was one "R" license (a 'bar license,' roughly) for every 1,000 citizens, now it is 1 for every 3000. Apparently we don't need as many restaurants with beer and wine anymore; when did that change? What about State Stores? 45 years ago, there was one store for every 15,608 citizens. As of today, there is one store for every 21,225 citizens. Population went up, number of stores went down a lot, almost 25% down. That makes it more convenient for the PLCB and their ever-increasing operating costs, but what about you?

Based on that current ratio, Clinton County should have two State Stores, but they don't, and after five years they still don't (and of course, they're still screwing around with where they're going to have that one store!). I have to give the citizens credit for being so patient. Looking at the U.S. average, Clinton County should have seven liquor/wine stores, and they probably would under privatization, despite what the PLCB and its lockstep lackeys in the Legislature keep saying about a vast booze desert in upstate if privatization takes place.

It's a simple proposition. Renovo has two area grocery stores, one area beer distributor, and three area drug stores. Do you think any of those would have liquor and wine if allowed? You bet they would, because they know how to run a business already. Would the selection be better than the State Store? I guarantee it, in writing, and I'll eat my computer if I'm wrong! I'm not worried, it's an easy bet. Any selection is better than what the PLCB is providing now in Renovo: zilch, squat, zero, nada, nothing.

As long as we have the police-enforced monopoly State Store System, there will be less service in rural areas, because only the with the featherbedding incompetence of an institutionally corrupt and directionless agency like the PLCB can a state-backed complete monopoly not break even with the only liquor store in town. Privatization will at least allow somebody to provide what the PLCB won't, or can't. Privatization will bring small stores, large stores, specialty stores, and CONVENIENT stores. Will they carry everything? Of course not, but they will carry more than a closed store or a store that currently doesn't exist. A win for Clinton County! 

You have to wonder why Clinton County's representative in the House, Michael "Mike" K. Hanna, consistently votes against privatization. Is it because of the tiny handful of votes represented by the employees of the State Store in Lock Haven and their families? (Er...in Lock Haven for now, that is.) Or is it because he doesn't think his constituents can handle more than one liquor store? Or is it because he likes inconveniencing the thousands of tourists, hunters, and fishers that visit Clinton County every year, the hundreds of people who are working in the gas fields in Clinton, and the students (of legal age) and faculty at Lock Haven University? Because he does vote consistently against privatization (of course he does, he's the Democratic whip). If you live in Clinton County, why don't you ask him why he keeps voting against your convenience?

The PLCB vs. Real Business

Retail exists for the benefit of the consumer. The PLCB exists for the benefit of the people working at the PLCB. The consumer doesn't even enter into it, as admitted by the PLCB when they said they don't try to get the best pricing, they just pay whatever the producers ask. Now they say they want to "negotiate" as part of "modernization"; they aim to keep the difference between what they now pay and the lower price to maintain their bloated structure, not to lower prices for you and me. As if!

We deserve better. The State Store System had 82 years to prove their case, and the court of the public has said they failed. Just ask the people of Clinton County how well they are doing their job.

END IT, DON'T MEND IT. 

Beer in Supermarkets: the Down Side

Giant Market plans to sell beer at their Stone Mill Plaza store in Lancaster County!

Weis Market opens beer cafe in Mechanicsburg!

Yeah, really, beer in Da Grocery Store in Da Commonwealth!!!!

Is this great? Or is it pathetic?

I asked that question seven years ago, when I first bought a beer at a Pennsylvania supermarket. It's high time that the question was asked again, because things are accelerating. We're seeing more and more big supermarkets adding "beer cafes" and selling sixpacks, and there are going to be consequences; we need to look ahead at what may happen and consider action to head it off.

It's a simple problem. It's great that Pennsylvania supermarkets have figured out a way to sell beer, a workaround that involves sacrificing part of their building to create a "cafe" where people could have a beer if they really wanted to (but mostly don't, with a few cool exceptions where the idea's been embraced) and buying a tavern license, which can be wicked expensive (check by county; hello, Chester!). But clearly the big chain supermarkets -- Giant, Wegmans, Weis, Whole Foods, Giant Eagle -- have found that the profit is worth the cost, because it seems like a month doesn't go by without another opening.

Why is that a problem? A few things. First, Pennsylvania has a "quota system" for liquor licenses: one per 3,000 people in a county. It's essentially a broken system, as it's never really kept up with population shifts, and there are a ton of "grandfathered" licenses in counties that have lost population, and there are a number of exceptions (The Almighty Liquor Code has a silly number of kinds of licenses), but essentially, there are no new tavern licenses being issued. If you want a liquor license, you have to buy one on the open market, because the Legislature foolishly made them transferable and salable. I say "foolishly" because when a liquor license -- a piece of paper issued by the State with no intrinsic value except what the State-enforced "quota system" has given it -- is sold in Chester County, for instance, for $270,000, the State gets next to nothing. Even though the full value of that license only exists because of State law. Yeah, I call that foolish.

That's a problem, because every time a supermarket simply wants to sell beer, it buys up another of these limited licenses, which then become more scarce, and therefore more expensive if you want to buy one to open an actual bar, tavern, brewpub (you need a license to sell anything other than your own beer or Pennsylvania wines at a brewpub), or restaurant. As licenses get more expensive, you get more chain restaurants and fewer independent operators opening (because they don't have the deep pockets); you get more nuisance bars (because they have to sell more booze to make their loan payment), and you get more high-end places with expensive booze (which isn't bad in and of itself, but if the ratio is unbalanced, people have fewer choices).

Another part of the problem is that it creates two tiers of grocery stores: the ones with beer and the ones without. I recognize that some grocery stores don't want to sell beer; especially in rural Pennsylvania, where there are some family-owned places that simply don't hold with alcohol at all. Fine, no reason to force stores to sell beer, but there are stores that would like to and simply can't afford the ridiculous unnecessary expense of buying a tavern license and tying up a substantial amount of retail space and equipment in a "cafe" with separate beer cashiers.

This was brought up at the McIlhinney Hearings in 2013, by a representative from Redner's Warehouse Markets, and Senator McIlhinney's response was essentially 'that's nice, but that ain't gonna happen.' Since then, there have been attempts to come up with a separate license for grocery store sales (of course, another type of license is exactly what we need!), none of which went anywhere. Given the tenacious opposition of the beer distributors to any expansion of grocery store beer sales (and the likely opposition of the already-licensed groceries), I doubt this will fly, and...

That is going to mean we'll have this half-assed workaround forever. The stores that got a liquor license won't be happy with anything that devalues that major investment, so they'll be fighting it. And Pennsylvanians are pathetically grateful for anything that even looks like buying beer in grocery stores (and having a liquor license actually puts the stores one tiny step away from selling wine, as there's already been a push to allow taverns to sell "to-go" bottles of wine), so if we think we have it, we're not going to push for it; we're just going to go to the stores that sell beer. That means that more and more supermarkets are going to go after tavern licenses, which is going to accelerate the scarcity issue (more chains and more nuisance bars!), and put even more pressure on the family-owned supermarkets to sell or close.

Well, hello, unintended consequences!

More crappy nuisance bars. Friendly neighborhood bars will sell their licenses at top dollar while they can, and the families will retire. And we get further away from a REAL solution to the problem.

This is yet another fine mess the PLCB and the Legislature have gotten us into, with the help of the MBDA and the behind-the-scenes maneuvering of Bucks County beer mogul (and SEPTA Board and Turnpike Commission member; and did you know he also owns 4% of the Sands Casino?) Pat Deon. Please note that I do NOT blame the supermarkets; they're just playing the hand that was dealt to them, and playing it well.

The only solution to Pennsylvania's alcohol beverage sales quagmire is going to be an all-alcohol solution, some grand bargain that fixes everything. More on that to come.