Why PA won't lose money privatizing

There are two conflicting arguments proponents of the State Stores use to say we shouldn't privatize. The first is the old "liquor store on every corner" lie, trying to scare us with images of urban decay, and the second is that prices will go up (because you know, like how competition always makes prices go up) and selection will go down. The selection part is just laughable, since we all know what the private sector can provide. If somebody wants it, the private sector will provide it: that is just how free markets work, as shown by everything else you purchase. If you don't believe it, think about how many different candy bars and single-serving drinks the average Sheetz offers.

That leaves "but we'll have too many stores," although nobody can define what the right amount of stores are except for the free market - stores that fill customer needs will survive, and if they don't, they won't. What does that mean for the state?  It means that it will collect more license fees, more business taxes, more sales taxes, and more excise tax and of course, more people will have to be working because all those stores don't exist since they can't all be current existing stores. So according to the pro-State Store folks, using their weak logic, amounts collected have to be greater than the current amount because more is being sold at a higher price.

We know sales will go up because they have elsewhere. PA isn't going to be special in that regard.  Will they go up 44% like the favorite CDC report the UFCW uses - doubtful since they haven't anywhere else. Will they eventually get up to the national norm? Probably, if they open more stores than the relatively small amount called for in HB 466 or Senator Wagner's proposed bill.

In the only recent example of privatization of a control state, total sales in Washington went up about 15%; 8-9% internally and 7% went out of the state, the increase in border bleed. Adding 27% in new fees probably had a lot to do with the increase in border bleed, so the lesson for PA is don't do that. Let's pick a reasonable number for how much prices may go up -- say 5% -- and let's stick with a 15% increase in sales. I think that will be a little low since we will be privatizing both wine and spirits while Washington only did spirits but I'll stick with it since it is a real number. That means the total sales will be about $465 million more than they were last year, or an increase of about $116 million in just tax revenue not counting all the other stuff, or pretty much a zero net in terms of liquor revenue but a larger gain in overall economic activity.

Border bleed will probably stay close to what is is because greater convenience will cause people to buy locally and the slight price increase won't change the buying habits of too many. But then you have all the new employees working, delivering to bars and restaurants, more distributors with new warehouses, new superstores being built where none exist today. All of that adds to the economy too, and all of that is something the PLCB won't provide; can't provide.

There's a sub-argument that private stores can't survive on the wholesale and retail markup of 30% like the state stores do. Bullshit. The PLCB doesn't survive on only 30%, they currently have an effective 45.2% markup (Gross Revenue From Sales divided by COGS), and they get there with all sorts of hidden fees and charges generally unknown to the buying public while all the while saying the markup is only 30%. They lie. The 5% increase I mentioned above would move that to just over 50% and lots of businesses would love to have that or even the 45.2% effective rate the PLCB has now.

Now let's say - horror of horrors - that prices actually decline. Lower prices increase demand which means more workers are required to fill that demand, which means more product is being sold which means that more sales tax is being collected.  The excise tax collection will go up too. Lower prices will decrease border bleed as competition and convenience cause more people to buy locally; as it will be is easier and/or cheaper or both. That causes sales to rise even more. There might even be an increase in out of state buyers that come into PA to buy.  So where do we end up?  Ahead of where we are now that's for sure. Ahead in jobs, ahead in tax collection, ahead in license fees, ahead in business taxes, ahead in income taxes, ahead in paying less future pension debt, ahead in convenience and ahead in consumer satisfaction.

Don't listen to him Tim and Skip - he's talking that crazy talk!

So if all the other states surrounding us have higher prices, as numerous state store people say, then if PA prices rise we'll be normal, if prices go down and get close to what most people believe are the better prices in New Jersey and Maryland, we'll be normal. And if we get the state out of the liquor business, we'll be normal like most states.

I vote for normality, not monopoly. Dump the system and move Pennsylvania back to normal.

40 years of…….……nothing.

As you read this I want to remind you that A. Democrats have been in power 21 of the past 40 years and B. Shapp was a Democrat.

This story from 1973 illustrates that after 40 years the Union and PLCB have done almost nothing for the consumer. Let’s take the points one by one.

1.       The union proposed more stores, particularly self-service ones. Self-service stores like we have now were introduced in January of 1969 and 34 years later, or 30 years after this article was written, the last counter store finally closed. There were 750 stores in 1973 - we have 600 now. I would call that a double failure. (For those of you not old enough to remember, Pennsylvania had “Counter Stores” exclusively for the first 35 years after Repeal. You walked up to a front counter, marked a printed list of what you wanted or wrote down the code number, and gave it to the clerk, who then went into the back to get it for you. The last one closed in FY 2003-04.)

2.       Permit credit cards. While the union may have proposed this it was customers, particularly licensees that brought about this change in 1987 - 14 years later and at least 15 if not 20 years after other business of this size did. Certainly a failure at the time.

3.       Provide home delivery for large orders.  I would think that businesses would like delivery too since they place larger orders than most residents but notice how they weren’t mentioned.  A continuation of the PLCB “don’t rock the boat or we’ll screw you” policy still in effect today. In any case there is still no delivery. Another failure.

4.       Adjust markup on items.  You thought this was thought up recently didn’t you? 40 years later still nothing.  I’d call that a failure too.

5.       The union report claims that prices are no higher than in New Jersey.  Sound familiar? After 40 years the citizens still think New Jersey prices are better – mainly because it is true and the over $300 million in border bleed and the building of the outlet stores prove it.*

The fear-mongering hasn’t changed at all. Prices will go up if we raise taxes they say in the last paragraph.  Well DUH.  Don’t raise taxes, increase convenience and sales will go up and revenue will go up, border bleed will go down and everybody, especially the citizens, will be much happier that they don’t have to deal with the state store system. At least the union didn’t come up with “Privatization killed my daddy” in 1973 like they did this year although it was Wendell Young’s father in charge of the union back then.  Some things never change.

(*) For more information on outlet stores read this article

This quote is from the PLCB about the history of the PLCB. "June 3, 2003 - The PLCB opens its first PA Wine & Spirits outlet stores in Gettysburg (now closed), Hermitage and Franklin Mills. The stores, aimed at preventing customers from going out of state to buy alcohol, offer a large selection of products at discounted prices."  

Of course, this begs the question that if PA prices, selection, and service are better than surrounding states as the PLCB and Union claim…….why do we have to prevent people from going out of state?  The parenthetical information is mine.

Do you really want them in charge of "modernization" with a record like this?

Privatization IS modernization. Accept nothing less.

The Circle Game

The Tribune-Review ran this piece today with this stunning headline (be prepared for a shocker):

Reform at Liquor Control Board awash in politics 

Say it ain't so!


"A lot of people like that reform. Maybe we should get us some."

Thanx for the bux, suckers!

And where there's liquor, and politics, and a notable need for reform...there must be Joe "Da ex-CEO" Conti. In this case, it's his job: CEO of the PLCB. Given that the PLCB doesn't even have the required three members on the board (another ethics-challenged blast from the past: it's PJ "Call Me PJ" Stapleton's empty slot that hasn't been filled), and it doesn't look like they're going to be filled anytime soon (since the dysfunctional Senate is now ignoring the Governor's second nominee for the position), really? Why the hell do we need to start paying another political hack $156,700 a year? 

Without it, supporters say, the agency loses a level of professional management and efficiency only possible with a full-time chief executive.

It is to weep. Joe Conti, the embodiment of "professional management and efficiency." Well, look, if I have to remind you...just read the Litany of Conti here. Wow, just can't wait to get someone else in there to get things popping again!

Eventually, the piece comes around to privatization. "A proposal by Senate Majority Leader Dominic Pileggi, R-Delaware County, to phase out state stores and expand where beer, wine and liquor could be sold would recast the chief executive position as an “executive director."" I must have missed this proposal, but that doesn't surprise me; there was a lot going on behind the scenes.

Hey, Norm! What's up with that?

So is this proposal still in play for the September session? It must be, since Senator Jim "Sheetz-Damning" Ferlo is still bad-mouthing it.

“I think the Pileggi model was to micromanage,” Ferlo said. “There's a way for the... Legislature to have oversight, and that's through our appropriations.”

Yeah, except you don't make appropriations for the PLCB, Senator; they have their own sources of revenue (and their own cops, and their own courts, and their own grievance system (it's on page 8)). They don't need you, which is why they ignore you and all of us...until we want privatization. And then they prostrate themselves and suddenly service and selection gets better...until the threat of privatization goes away.

Mark my words: if privatization fails in this legislative session, the State Stores will slowly slide back to Suckville. And then in 10 or 15 years, we'll go through this whole charade again, and someone will call for privatization, and service and selection at the State Stores will remarkably improve...till the proposal fails, and around it goes again. How long do you want to keep playing this stupid game?

PRIVATIZATION IS MODERNIZATION. Accept no substitutes.