State stores: Half full or half empty?
Trading a sure thing for promises
We are killing the goose that lays the golden egg.
Many Pennsylvanians hate the state store system. It's inefficient and inconvenient, we say; liquor and wine are overpriced. And anyway, why should the state be in the business of selling alcohol?
Why? Because it works.
For 80 years, Pennsylvania has been in the liquor business, and that business has been good to Pennsylvania. Your taxes have been lower than they otherwise might have been because of the fiscal success of this system.
Now, we're on the verge of changing that system; we want to carve open the golden goose, certain that greater riches lay inside. We may get a rude surprise.
In 2011-12, the Pennsylvania Liquor Control Board transferred $494 million to the state treasury. The bulk was liquor and sales taxes, revenue that would still be generated under the privatization plan passed by the state House, backed by Gov. Corbett and now being tinkered with in the Senate.
But some $80 million -- 16 percent -- consisted of profits; money that, in the future, may go into private pockets rather than public coffers.
So how would Pennsylvania make up this shortfall on an annual basis? Privatization backers insist we'll see higher tax revenues, as a privatized system expands access, leading to more booze sold. Add in licensing renewal fees, and the amount generated will surely exceed what we're seeing now.
We hope. And that's what privatization boils down to: trading a sure thing for promises that may -- or may not -- be borne out.
Better hours, bigger selection, lower prices -- that's what everyone wants. That's the ideal that backers of privatization are selling. Are we going to get the ideal, do you think?
Washington state privatized liquor sales, only to see prices rise. But why? Competition was supposed to force prices down!
"The state's previous spirits sales tax and liter taxes stayed in place," reported the Everett (Wash.) Daily Herald newspaper in December. "The state's 51.9 percent markup went away, but has been replaced by fees of 10 percent on distributors and 17 percent on retailers."
And then the private sector added its own markup as well.
In other words, Washington sought to make privatization revenue neutral -- but that wound up reflected in the final cost of the product.
And let's talk about licensing fees. According to a story in our paper, under the House bill it will cost existing beer distributors in Lancaster County $37,500 to sell wine, and $60,000 to sell spirits. New liquor stores will pay $187,500 to sell wine, and $262,500 to sell spirits. And licenses must be renewed every two years at a cost of $1,000.
So in an effort to squeeze as much revenue out of the deal as possible, "reformers" are pricing the mom-and-pops out of the market. Take grocery stores paying $187,500 to sell wine. That might be a small expense for big chains. I'm guessing it's a pretty significant expense for your family-owned stores.
Liquor privatization, then, favors the deep-pocketed -- because in order to make the numbers work, it must.
Finally, let's talk about labor. Much of the privatization push is fueled by the Republican drive to eviscerate unions. Our state stores are unionized, paying decent wages with decent benefits while still transferring all that money to the Treasury.
Under a privatized system, will workers be paid as well? Will they have good benefits? Will they have any benefits at all?
So we should kick these workers off the government payroll to create a system that may or may not lower prices, that may or may not be more convenient, but will definitely benefit those at the top of the economic food chain while adding to the ranks at the bottom?
Yeah. That sounds like a good plan to me.
In a perfect world, I'd support privatization. And I certainly support liberalization of the existing system. But so does the Pennsylvania Liquor Control Board. At a Pennsylvania Senate Appropriations Committee hearing last month, LCB officials pointed out that the Legislature rejected bills that would have allowed more stores to open on Sundays, to stay open longer and to allow wine to be shipped directly to your home. Expanded Sunday sales, they said, could have boosted profits by up to $15 million annually.
But the Legislature didn't want that. It didn't want a little more gold from the goose. It wants to take a butcher's knife to the bird.
We may carve up the goose. But don't be surprised if, down the road, we discover that fiscally and otherwise -- our goose is cooked.
Gil Smart is a Lancaster Newspapers staff writer. Email him at firstname.lastname@example.org, or phone 291-8817.