Former Republican Governors Dick Thornburgh and Tom Ridge tried to divest Pennsylvania of its state store system and both failed. They had argued that Pennsylvania’s liquor monopoly was antiquated (the PLCB began post-Prohibition in 1933), anti-consumer, inherently inconvenient and often overpriced. But a coalition of state-store workers’ union members, Mothers Against Drunk Driving advocates, family-values supporters and state lawmakers nervous about angering those constituencies succeeded in drowning the bills. A poll released last month shows the tide of public opinion, however, has shifted in favor of selling this asset to help ameliorate the state's fiscal challenges. Jeff Coleman, a principal with Churchill Strategies and a senior fellow at The Commonwealth Foundation for Public Policy Alternatives, supports privatization and will join our conversation. He'll face off against Wendell Young, president of the United Food and Commercial Workers Union Local 1776, which represents PLCB employees.
With the commonwealth facing a $4-$5 billion budget shortfall, a $472 million transportation funding pothole, and looming public-pension bills, calls are rising to sell the liquor system. Under Rep. Turzai’s plan, the Pennsylvania Liquor Control Board’s 750 retail and 100 wholesale licenses would be auctioned to the highest bidder. He estimates the sale could ring in $2 billion. To ensure a competitive market, no bidder could own more than 10 percent of those licenses. Enforcement, inspection, licensing and public education still would be done by the PLCB.
Turzai’s plan envisions help for the more than 4,000 displaced PLCB workers. Some would remain employed by the agency to carry out its continuing functions. Others would get preferential consideration for state civil-service jobs, tuition assistance to explore a new career, and private-sector employers who hire them would get a tax credit. Wine and spirits would be taxed by the gallon, while retail sales would be subject to the state sales tax. Turzai claims annual revenue from liquor sales would likely rise because more private operators would be paying taxes.
Right now, Pennsylvania’s liquor system essentially pays for itself. The PLCB runs 621 state stores. The system generates $466 million that flow into the state's General Fund. Turzai projects that his plan would still bring in about $500 million a year. State stores currently impose a 30-percent markup and an 18 percent “Johnstown Flood” tax. They both would be replaced by a per-gallon tax on wine and spirits ranging from $2 to $6. That’s similar to the taxes assessed in 26 states on spirits and 35 states on wine. Retail customers would continue to pay the 6 percent sales tax. However, restaurants, clubs and bars would not. Instead, they would impose the sales tax on drinks they sell. Turzai projects the plan also would create 850 new businesses that would pay either corporate net or personal income taxes.
Turzai’s private-enterprise plan has garnered widespread editorial support. But the unions representing state-store managers (the Independent State Store Union), clerks (the United Commercial Food Workers Union) and PLCB office workers (the American Federation of State, County and Municipal Employees Union) are staunchly anti-privatization. They liken it to union busting. And they argue that private liquor stores would offer less accountability, make enforcement and tax collection more difficult, open the door to more sales to underage drinkers, and potentially increase the number of impaired-driving traffic fatalities. They also claim rural Pennsylvanians would see state stores close with no private operators stepping in because their remote locations are not profitable. And they have found their own editorial supporters who question the basic financials underpinning privatization. For more, check out the Radio Smart Talk from Tuesday.
A report published in 2009 by two Duquesne University professors with ties to the Commonwealth Foundation, however, seemed to negate some of those points. Their research found that, "A comparison of states with varying degrees of privatization in the retail and wholesale markets for alcohol over the period 1970 through 2006 suggests that privatization is associated neither with increased alcohol consumption nor increased traffic fatalities involving impaired drivers."
Leaders of the PLCB decline to appear on our program. They say it’s a policy issue best left to the governor and General Assembly. PLCB executive director Joe Conti told the Pittsburgh Post-Gazette's Tom Barnes last spring that the LCB, "enforces the liquor code and operates the business the best we can. I think we do a fine job of both tasks ... they will see there is great value in the system that exists today -- value to the commonwealth, to taxpayers and to consumers."
And Conti wants to increase revenue through several new features for which the board seeks legislative approval: issuing coupons to “regular customers;” adding State Lottery ticket machines in their stores; and, installing more self-serving wine kiosks in grocery and convenience stores. The wine kiosks have become a bit of a fiasco so we'll have to see if that innovation survives.
These are all measures that put the Pennsylvania Liquor Control Board in the odd position of ginning up sales of alcohol while decrying the dangers of drinking in excess. It’s a dicey situation but one that is bound to occur when you're playing Liquor Monopoly. Please join us Thursday night at 8 for Smart Talk and let us know what you think of the privatization plan by calling in live to 1-800-729-7532, emailing us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or posting a comment on www.facebook.com/witf.org.
