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Pennsylvania Liquor Store

Senate Inches Toward Liquor Reform

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After months of hearings, public rhetoric and legislative wheeling & dealing, the state Senate passed an amendment to the House liquor expansion bill early this morning.

Senate Republican Leader Dominic Pileggi says his amendment would allow beer distributors to sell wine and liquor, while also paving the way for convenience stores and gas stations, as well as supermarkets that meet certain requirements similar to existing laws regarding beer sales. The bill would also allow the Pennsylvania Liquor Control Board to lease the wholesale end of the liquor business for up to 10 years.

Pileggi introduced the amendment after privately securing the votes needed for passage.

Debate on the amendment did not begin until well after midnight, with the amendment vote coming after 1am. The amended legislation now goes back to the Senate Appropriations Committee and is expected to come back to the Senate floor this weekend. Both the House and Senate are scheduled to be in session throughout the weekend heading up to the state budget deadline Sunday night.

Such late-night votes had become taboo in recent years, dating back to the highly controversial 2005 legislative pay raise that outraged voters and cost several high-ranking lawmakers their offices. Several Democrats criticized the timing of the vote.

The amendment passed 27-23.

 

LCB Approves Price Increases on More Than 300 Items

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The Pennsylvania Liquor Control Board has approved requests from suppliers for higher prices.  That means the 18 month moratorium on price increases at state stores, due to the economic downturn,  is coming to an end. 

The Liquor Control Board voted to approve higher prices on 313 items requested by suppliers of those brands.  CEO Joe Conti says suppliers told them they were facing increased costs for raw product and transportation.

Conti says a “no” vote could have affected selection at state stores.  He says certain lines of product may have decided not to be offered in Pennsylvania.  He says while the board understands price is important, selection is also important. He says for most of the items facing price increases, there are comparable products that won’t increase in price.

Prices will increase on 271 items on February 1st. Prices will increase on the remaining 42 items on March 1st. By comparison, the system offers about 30 thousand different types of wine and liquor, with a variety of between 4 and 5 thousand offerings in most of the individual stores.

Conti says some popular brands are affected by the increases, including Crown Royal, Jack Daniels and Bacardi.

PA’s Fiscal Watchdog Opposes Liquor Privatization Bill

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Auditor Genral Jack Wagner

Auditor General Jack Wagner addressed the media on Wednesday.

The proposal to privatize Pennsylvania’s wine & spirits stores is a bad deal for taxpayers and customers alike, according to Auditor General Jack Wagner.   “Would you sell a reliable asset that brings in a profit of at least $100-million dollars a year… losing 5,000 jobs during tough economic times?”  Wagner asked.  “I don’t think so.”  Wagner shared his concerns with reporters in Harrisburg before traveling to Philly to testify before the state House Liquor Control Committee. 

Wagner calls the Pennsylvania Liquor Control Board one of the few profit-making ventures in state government, and balked at estimates that Pennsylvania could generate an up-front windfall of $1 – $2-billion dollars by divesting its liquor stores.  “Wouldn’t it be an embarrassment if this legislation passed and we got virtually nothing for the LCB?”

While he’s not opposed to the concept of privatizing certain state operations, Wagner doesn’t think it makes sense in the case of the state-run liquor stores.  Wagner suggests modernizing the system as the preferred option, noting that state lawmakers need to take the handcuffs off of the PLCB. 

While the Auditor General doesn’t see the logic behind this privatization movement, Governor Tom Corbett says it starts with philosophy.  He says the LCB’s dual role of selling and regulating alcohol is a conflict of interest.  “We are enforcing the liquor laws, we are enforcing the drunk driving laws, we are enforcing the drinking laws, yet we have the main agency when it comes to liquor saying drink more,” Corbett told a recent Pennsylvania Press Club luncheon.  “Get out of the business.” 

The state House Liquor Control Committee is in the midst of two days of hearings on the privatization bill in Philadelphia.  HB 11 is scheduled for a committee vote in mid-December.

Wine Kiosk Program Ends in Contract Dispute

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The deadline has passed without a resolution in a contract dispute between the Pennsylvania Liquor Control Board and the vendor for its wine kiosk program.   It means that the experiment with the wine vending machines at grocery stores has come to an end.

LCB spokeswoman Stacey Witalec says the kiosks are no longer open and they’re working with the vendor, Simple Brands LLC, on a removal schedule.  There were 21 of the kiosks still operating after Wegmans pulled out of the program earlier this year.  

The LCB says Simple Brands should reimburse over one million dollars in expenses incurred with the kiosk program. The company disputed the amount, saying some of the expenditures were unnecessary.   The LCB exercised a 45 day cure period in the contract and that period came to an end Monday night without a resolution.  The machines did not open on Tuesday morning.

The LCB plans to hold Simple Brands accountable, according to Witalec.

The stores that housed the kiosks have the option of applying for a license that would allow them to sell limited amounts of beer and wine.  The Wegmans store on the Carlisle Pike in Mechanicsburg has such a license. Witalec says over 80 grocery stores have already applied for similar licenses. She says interested stores have to go through the typical licensure process.

Witalec says they’ve also been discussion with a number of retailers who are interested in having one of their brick and mortar stores connected or within their established locations. She says these are known as one stop locations and there are currently 19 in the Commonwealth.  She says it’s another model that is successful and they look forward to utilizing as well.

The experiment with the kiosks began last year and had come in for recent criticism from the Auditor General and others for not meeting its goal of customer convenience. Meanwhile, the state House Majority Leader launched a campaign this summer to privatize liquor sales in Pennsylvania.

Bill Would Get Pennsylvania Out of the Booze Business

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State Rep. Mike Turzai

House Majority Leader Mike Turzai Discusses his Privatization Plan at a Capitol News Conference

Spirits are high as House Majority Leader Mike Turzai (R-Allegheny) mounts a new campaign to privatize Pennsylvania’s liquor stores.  “We should not be in the business of pushing alcohol sales… while at the same time being the agency that is charged with law enforcement,” Turzai says, referring to the current control system.  In fact, Pennsylvania and Utah are the only two states that exercise complete control over their liquor systems. 

The Turzai plan (HB 11) would auction off 1,250 retail liquor licenses to the highest responsible bidders in the private sector.  750 of those licenses would be for outlets with at least 15,000 square feet of retail space, while the remaining 500 licenses would be for smaller retailers.  “We will absolutely maintain the tax revenue structure for the General Fund,” Turzai told reporters at a capitol news conference.  “In addition, with the auctioning of the retail licenses and the sale of the wholesale licenses, we will absolutely make an upfront value.” 

Rep. Turzai estimates that upfront windfall to be up to $2-billion dollars.  The bill does not discuss how to spend that cash.  Turzai says there will need to be a policy discussion on that, but points to state pension obligations and transportation infrastructure as two possibilities. 

The Pennsylvania Liquor Control Board (PLCB) currently operates about 644- wine & spirits stores.  All bottles receive a 30% markup and a handling fee, on top of the 18% Johnstown Flood Tax.  The Turzai plan would replace those levies with a “Gallonage Tax.”  Though – as alluded to in the earlier quote – Turzai believes the state will still collect $400 million dollars in taxes, each year.    

Governor Tom Corbett does not believe Pennsylvania should be in the business of selling liquor and wine.  He made that point clear when speaking to reporters on Tuesday.  But, he had not yet seen Turzai’s proposal.  “If we’re not to be in the business, how do we get out of it and where does it go, and where does the state get revenue.  That all has to be taken into consideration,” Corbett said.

Privatization supporters will tell you that Pennsylvania consumers would benefit from the competition.  They say privatization would lead to better selection, prices and convenience.  But, opinions are mixed. 

Wendell Young

UFCW Local 1776 President Wendell Young Opposes Privatization

One of the biggest critics of privatization is Wendell Young, president of the United Food and Commercial Workers (UFCW) Local 1776, which represents about 3,500 employees at Pennsylvania’s wine & spirits stores.  Young believes privatization would be a loss from day one.  “Pennsylvanians end up getting hosed with the cost of privatization, while the ones that buy the licenses end up with the profit that the state currently enjoys,” Young has said.  He contends that Pennsylvania has the best of both worlds right now: low consumption and high returns.  Young also believes that privatization would cost 5,000 wine & spirits store workers their jobs.

How About Another Round of Liquor Store Privatization Debate?

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Debate over state control of wine & spirits stores could be on tap, this fall, at the capitol.  House Majority Leader Mike Turzai (R-Allegheny) is already seeking co-sponsors, and could unveil his latest bill soon.  Supporters say Pennsylvania shouldn’t be in the booze business in the first place.  In fact, Pennsylvania and Utah are the only two states that maintain complete control over their alcohol and wine systems.  “That points to how antiquated, absurd and un-American this issue really is,” says Jay Ostrich, director of public affairs for the Commonwealth Foundation.

Ostrich says Pennsylvania consumers would be better off.  “They’re seeking better choices and better prices, more economic and personal freedom.  We believe liquor freedom, through privatization, will certainly give them just that,” he tells us. 

But opponents say privatization doesn’t make financial or social sense.  “The current system raises a lot of money for the state.  There’s a lot of very strong evidence that we get more, because of the state’s monopoly of wine & spirits distribution, than states where it’s privatized,” says Stephen Herzenberg, executive director of the Keystone Research Center.  Herzenberg points to research that suggests privatization would lead to more excessive consumption of alcohol.  “The way we do it here helps reduce alcohol abuse and related social problems,” he says. 

Herzenberg also stresses that no reliable estimate exists for the up-front revenue the state would receive if its 644 liquor stores were privatized.         

The bill that Rep. Mike Turzai introduced last year would have created a new tax and fee structure.  It would have started by nixing the Pennsylvania Liquor Control Board’s 30% markup and the 18% Johnstown Flood Tax.  His plan called for a new “gallonage tax” instead.  Full details of this year’s proposal aren’t yet available, but Turzai does have two new developments working in his favor: 1) his caucus is now in the majority, and 2) new Governor Tom Corbett does not believe the state should be in the business of selling liquor and wine. 

The Pennsylvania Liquor Control Board wouldn’t be completely out of the picture, if wine & spirits stores were privatized.  “We have an obligation to regulate and tax, but we don’t have to own and operate,” Turzai said in an interview with Radio PA this spring.  Meanwhile, the PLCB reported record sales for the fiscal year that ended on June 30th.  Nearly $2-billion dollars in sales brought in nearly $500-million dollars worth of tax revenue and profit transfers for the state.

PLCB Holds the Line on Prices Again

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The Pennsylvania Liquor Control Board will hold the line on prices this summer.  The board has rejected more than 400 price increases requested by its suppliers. Chairman Patrick J. Stapleton says it was just not a good time to raise prices on consumers, who have already been facing higher prices at the supermarket and gas pump.  

Stapleton says that after looking at the numbers and the buying patterns of Pennsylvanians, it was clear that consumers could not sustain any price increases at this time. He says customers are continuing to “buy down”, picking up cheaper items. 

Stapleton says maintaining current shelf prices ensures people can enjoy their favorite wine or spirit without sacrificing the family budget.

Stapleton says the board  also gave consideration to its licensees, such as restaurants and other establishments, who are just finally starting to pull out of the recession.     

Stapleton says the board will take another look at the issue in three months, because price requests are usually submitted quarterly. The PLCB had earlier implemented a moratorium in November, while also maintaining its own operational costs.