Is it time for Pennsylvania to get out of the booze business? | Pro/Con

Since the end of Prohibition, Pennsylvania has maintained control over sales of booze. And Republicans don’t like it.

In a latest attempt to dismantle the Pennsylvania Liquor Control Board, State Rep. Natalie Mihalek has proposed a constitutional amendment to ban the state from selling alcohol. If it passes the state Senate and House, it will go before voters as a ballot question.

It’s a complicated decision, with many aspects to consider. We asked two local stakeholders to weigh in: Is it time for the state to get out of the booze business?

By Gene Barr

Almost 90 years ago, Prohibition ended in the U.S. and Pennsylvania adopted a system of state control over the sale of wine and spirits. Then-Gov. Gifford Pinchot convened a special session of the state’s General Assembly to “discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.” While the motives for retaining this archaic system may have evolved over the decades, this original vision of Pennsylvania’s system of alcohol sales holds true today, inconveniencing consumers and depriving private-sector businesses of economic opportunity.

In a free enterprise economy, the government should generally not sell products that could be sold by private employers, let alone enjoy a monopoly on the sale of those products. Consumers depend on the private sector for practically everything they use and consume in their daily lives. Consider your neighborhood pharmacy: Private entities sell prescriptions that many people rely on for survival, can cause impairment, and are strictly regulated. What is the public policy rationale for a private system of prescription drug sales but state control over alcohol sales?

“What is the public policy rationale for a private system of prescription drug sales but state control over alcohol sales?”

We are one of two states in the entire nation with a government monopoly on the sale of liquor. In 48 other states, the business community has shown that it can sell alcohol responsibly, and more recently, Pennsylvania businesses have, too. In 2016, the state implemented several reforms, including allowing wine and beer sales in grocery and convenience stores. Despite somewhat draconian eligibility standards and cumbersome regulations, these retailers have demonstrated their ability to enforce the rules and conduct this part of their businesses under various laws and regulations.

Privatizing alcohol sales in the commonwealth will increase competition, benefiting consumers as employers expand their customer base. It will also mitigate “border bleed,” when consumers cross state lines to shop for alcohol. These are Pennsylvania dollars that should benefit our economy, increase tax revenue, and contribute to job growth.

Advocates for the current system are correct when citing revenue the Pennsylvania Liquor Control Board transfers to the commonwealth. Yet, over 75% of money transferred to the General Fund last year was derived from taxes, which presumably would be retained by employers under a private system. And once the private sector improves customer convenience and choice, sales — and tax revenues — will almost certainly increase.

» READ MORE: Pennsylvania’s weird liquor laws, explained

Moreover, the Pennsylvania Liquor Control Board’s 2020-2021 report shows serious areas of concern and predicts a worsening financial situation for the existing system over time. Despite operating a profitable enterprise, the report concludes that the system is running a roughly $1.3 billion deficit when all assets and liabilities are considered. It also shows pension costs and other employee retirement liabilities continue to increase. These trends should concern all of us.

Simply put, state government should focus its attention and resources on enforcing the laws it creates and combatting abuse and underage drinking. It’s time to get Pennsylvania out of the booze business.

Gene Barr is the president and CEO of the Pennsylvania Chamber of Business and Industry, the state’s largest broad-based business association, with its statewide membership comprising businesses of all sizes and across all industry sectors.

By Wendell Young IV

Dismantling the Pennsylvania Liquor Control Board is a terrible idea — it will put thousands of state residents out of work, raise taxes, and could make wine and spirits more expensive.

As the president of United Food and Commercial Workers (UFCW) Local 1776, I represent 35,000 workers, including 3,500 PLCB employees. I make no bones about it: My job is to protect my members’ jobs. I have a bias, but I can still see clearly that any privatization plan of the state liquor board is a bad thing.

But you don’t have to take my word for it. Privatization has been studied by independent experts hired by Republican governors who had championed these proposals. The results were not helpful to their cause.

Former Gov. Tom Corbett hired financial consultant Public Financial Management to study privatization, and its analysis found it could cost the state at least $1.4 billion in transition costs alone to unwind the current system.

In plain English: Privatizing this system will blow a hole in the state budget that lawmakers will have to fill by raising taxes. The report also found that prices for wine and spirits could increase in many parts of the state, and other states that had privatized recently, such as Washington, have experienced price hikes.

» READ MORE: New effort to eliminate the Pennsylvania Liquor Control Board via constitutional amendment

Public Financial Management’s analysis found that 2,302 full-time equivalent employees who work for the Pennsylvania Liquor Control Board will go on unemployment. Its report said that some of these workers may struggle to find new jobs; in particular, “employees in rural counties will have fewer opportunities for state reemployment.” The report estimated that would cost the taxpayers anywhere between $64 million-$68 million in unemployment compensation costs over a five-year period.

Let’s not forget a key point: PLCB makes money for the state. A lot of money. Last fiscal year, its reported sales reached nearly $3 billion, with a record net income of $270 million. Selling such a valuable asset for the state would be reckless and irresponsible. What’s more, the U.S. Centers for Disease Control and Prevention has recommended that states avoid privatization and keep monopolies on alcohol sales, which research shows can reduce excessive drinking and the costs/harms associated with it.

“Let’s not forget a key point: PLCB makes money for the state. A lot of money.”

This push for privatization isn’t new. For generations, Republicans have been trying to end the state’s monopoly on the liquor business. What is new, however, is the latest attempt by State Rep. Natalie Mihalek (R., Allegheny), who has proposed a constitutional amendment. If passed by both the state House and Senate, it would go to voters to decide.

Previous privatization efforts resulted in thousands of pages of legislation and analysis. This is a complex system with many impacts. State Rep. Mihalek’s approach is dishonest. Rather than tell the voters what our current system will be replaced with, she is proposing a two-sentence, less than 25-word amendment.

PLCB employs thousands of Pennsylvanians. It was appalling to read State Rep. Mihalek refer to these workers as “special interests” and “accomplices” to Gov. Tom Wolf. These workers are taxpayers. They have families. They coach Little League teams and help at school events. They are our neighbors, and they deserve better than this.

Wendell Young IV is president of UFCW Local 1776, which represents 35,000 workers, including 3,500 employees of the Pennsylvania Liquor Control Board.