Liquor Store Privatization

Wolf's "Loser" & "Phony-Baloney" Proposals

SEPTEMBER 23, 2015

Last week, Gov. Wolf unveiled new, bad policy ideas—to slightly adjust a misguided pension proposal, and to propose a private manager to a government run liquor monopoly. 

But just as it was with the fabled wardrobe-challenged emperor, we aren't the only ones who have seen through the Governor's new clothes. Editorial boards across Pennsylvania have pointed out Wolf's new proposals are transparent and immaterial.

Lehigh Valley Live writes (emphasis added)

Instead of offering a real compromise, Wolf dredged up what can only be called Reform Lite — privatizing the management of the liquor system (but not the ownership or the workforce). He also came down in price on his hybrid pension proposal, saying that the earnings of new state employees over $75,000 would be shifted to a defined-contribution pension plan (down from his earlier ceiling of $100,000).

Non-starters, both.

Leasing the Liquor Control Board's management function to a private firm 10 to 25 years, as Wolf proposes, is worse than doing nothing, because it would prevent conversion to a market-driven system during that time. Nothing in Wolf's offer would greatly increase service or selection, or reduce prices. The unionized sales force would stay in place. So would the number of stores. Wolf's idea to extend beer and wine sales to convenience stores and restaurants is tepid at best, and pits government against private enterprise.

The Pittsburgh Post-Gazette adds (emphasis mine):

The plan is a loser. It privatizes nothing. What’s worse is that by projecting an aura of private operation it could perpetuate Pennsylvania’s antiquated system for far longer. The state needs to get out of the liquor business, once and for all, as soon as possible, without the use of Tom Wolf’s smoke and mirrors.

The Bucks County Courier Times editorializes (emphasis mine): 

Now that we’ve gotten an unvarnished look at those “historic” reforms, here’s our take: phony-baloney “reforms” that create the appearance of movement for a Democratic governor locked in a budget impasse with Republican legislative leaders. 

Lastly, Lancaster Online pans the proposal, urging Wolf to look to real liquor store privatization:

Forget his proposal last week to offer a long-term lease to manage the state liquor stores; private firms would bid on a contract to manage the system, which would stay under state ownership.

If Gov. Wolf can make a deal with Republican leaders that would make good on his promise to boost  funding for Pennsylvania’s public schools, he should  choose our children over the unions that oppose privatizing our state-owned liquor stores. If he fails to do so, he could lose the support of those who elected him because they’re rightly frustrated with the human costs of the ongoing budget impasse.

Gov. Wolf may have trotted out new clothes last week, but they don't cover up the bad policies he started with.

posted by NATHAN BENEFIELD | 11:38 AM | Comments

New Wolf Offer, Same Bad Policy

SEPTEMBER 17, 2015

Yesterday, 28 days after receiving a budget compromise proposal from legislative Republicans, Gov. Wolf rejected that offer and issued his own plan—hiring a private contractor to manage the government liquor system and slightly modifying his earlier pension proposal.

While Governor Wolf’s proposals are significant, and new to the current budget debate, they represent bad public policy.


  • Wolf’s plan to hire a private manager to run the liquor system replaces a government-run monopoly with a government monopoly run by a private company. In contrast to Wolf’s comments that he doesn’t want to “give this away to a crony,” that is precisely what this plan would do.
  • Consumers will not see better selection, prices, or service.
    • This plan doesn’t provide consumers new choices or true competition
    • This plan retains the one-size-fits all model that Pennsylvania consumers have come to hate—and drive to other states to avoid.
  • Wolf’s proposal doesn’t end the conflict of interest of government controlling and promoting the sale of alcohol.
    • It doesn’t change the fact that we having a single entity (or one person) choosing what products can and cannot be sold in Pennsylvania—which has resulted in rampant corruption and bribery.
  • The idea that wine in groceries and restaurants are “to be negotiated” means he isn’t offering the most basic reform consumers want to see.

Consumers will only see better selection, prices, and service when the government gets out of the wholesale business and allows competition, not monopoly, in wholesale and retail wine and spirits sales.  


  • Wolf’s stacked hybrid pension plan doesn’t offer meaningful reform. It is subject to the same political manipulations that plague the current pension system—increasing benefits and delaying contributions, kicking the can down the road.
    • The salary threshold could be adjusted at any point (Wolf proposed putting salary above $75,000 in a defined-contribution account, vs. his proposal of $100,000 a month ago) cutting into any “savings.”
    • While several states have created hybrid pension plans (part defined contribution, part defined benefit), no one has implemented a stacked hybrid.
  • Wolf’s $3 billion pension obligation (PO) bond proposal should be a nonstarter.
    • PO bonds have been historic failures—almost every city or state that has used pension obligation bonds have seen larger deficits after the bond issues. This includes in Philadelphia and Pittsburgh—where Mayor Peduto spoke out against Wolf’s bond proposal.
    • Wolf’s projected “savings” in reduced pension contributions don't include the interest payments on those bonds.
    • Ratings agencies have cautioned that pension bonds would result in bond rating downgrades.
  • Anti-spiking and revenue neutral option 4 reforms are good, commonsense reforms that protect taxpayers. Wolf should be applauded for supporting these reforms, and almost no one would disagree these are necessary changes.
  • The risk sharing for current employees is a good reform—but the $2 billion “savings” only occurs if the pension funds earn 6.5% instead of the projection 7.5%, an investment return that would create tens of billions in additional costs versus current projections.
  • Reducing Wall Street Investment fees is another good idea—SERS and PSERS have exorbitant costs—but Wolf has indicated he can do this administratively, with no legislation needed. This doesn’t need to be part of a “deal." 

posted by NATHAN BENEFIELD | 09:44 AM | Comments

Audio: Getting Government Out of the Booze Business

SEPTEMBER 16, 2015

A majority of Pennsylvanians support a privatized liquor industry, but government unions use their financial clout to ensure the state government maintains a monopoly over wine and spirits.

WILK’s Sue Henry spoke with CF’s Matt Brouillette to discuss his recent op-ed in National Review that outlines the problems created by the governement's liquor monopoly–including a system of corruption and higher prices for consumers.

Infusing competition into the industry would solve these problems. Matt explains that “competition provides greater choice for consumers, competition for the providers, and ultimately it will result in better prices for all the people who buy alcohol in Pennsylvania.”

Getting the government out of the booze business and dismissing groundless myths will allow the state to focus solely on its role of public safety and enforcing liquor laws, rather than promoting the sales of wine and spirits.

“It’s better to have the government in the role of oversight rather than in the role of selling liquor.”

Click here or listen below to hear more.

The Sue Henry Show airs weekdays from 9:00 a.m. - 12:00 p.m.

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posted by JONATHAN REGINELLA | 09:36 AM | Comments

The PLCB: Fermented Grape's Gatekeeper

SEPTEMBER 14, 2015

Last week 90.5 WESA published a story about the PA Preferred Wine Program—a tool designed to help promote Pennsylvania wines. The program allows in-state wine producers to apply for the chance to sell up to 10 products in state stores.  

According to the rules governing the program, wine producers must pay $150 for each wine application, which can only be submitted during a short “listing period.” Apparently, this is what qualifies as a "business-friendly practice" in the world of the Pennsylvania Liquor Control Board (PLCB).

In reality, the PLCB hinders entrepreneurs looking to sell their products in Pennsylvania. One PLCB-created roadblock is the uncompetitive price system imposed on its vendors. WESA explains:

That system can be a non-starter for some wineries. Reduce their profit margin too much to offset the state markup and they won’t make any profit; sell the wine at a higher price and potentially turn off customers. Some Pennsylvania wineries are simply too small to provide enough wine to sell in stores, while others only want their product available at their home-base, liquor lawyer Mark Flaherty said. [Bold mine.]

If wineries don’t believe they can make a profit selling to state stores, their consumer base in Pennsylvania shrinks dramatically because of the PLCB's retail monopoly:

Pennsylvania is one of the largest buyers of wine and spirits in the world. Because the state owns the system, there’s only one gatekeeper accepting or rejecting the products that make it into the stores.

Concentrating so much power in one agency has predictably led to corruption and mismanagement. To continue with the current system as-is would be a slap in the face to Pennsylvanians. The people of this state deserve better.

To improve the system, the state's liquor laws need to be modified to reflect the age of Uber, rather than the age of Capone.

posted by BOB DICK | 10:30 AM | Comments

Audio: Budget Impasse Debate

SEPTEMBER 10, 2015

With the state budget impasse in its third month, funding for critical things such as education and social services remains in question. 

CF’s Elizabeth Stelle spoke with WHYY’s Marty Moss-Coane and opposite Keystone Research Center’s Stephen Herzenberg regarding the impasse and why a compromise has not been reached in Harrisburg.

Among the key points at issue in the budget discussion have been education funding, Wolf's proposed severance tax, pension reform, and liquor privatization.  

While Gov. Wolf claims to have made concessions on everything, his “compromise” contains most of his original plans to hike taxes on hardworking Pennsylvanians. And despite the legislature's offer to meet in the middle, the governor continues to push for income and sales tax increases.  

Click here or listen below to hear Elizabeth explain what can be done to pass a taxpayer-friendly and fiscally responsible budget.    

Radio Times with Marty Moss-Coane airs weekdays 10-11 a.m. and 11-noon.

Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.

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posted by JONATHAN REGINELLA | 10:12 AM | Comments

Corruption is Spelled P-L-C-B


When it comes to government corruption investigations, Attorney General Kathleen Kane has dominated the conversation this summer. But now, as if seemingly miffed at the spotlight being taken away from their own scandals, the Pennsylvania Liquor Control Board's (PLCB)'s culture of corruption is once again making headlines.

For those of you catching up, we've written about various recent PLCB scandals here, here, here, here, here, here, here, and here.

And today, we add to the list former Director of Marketing & Merchandising James Short. Short pleaded guilty to federal charges of soliciting and concealing bribes and kickbacks that ranged from all-expense-paid golf trips to shiny new cuff links. Short accepted these from vendors seeking to do business with the PLCB at its stores statewide—namely, the stores that Pennsylvanians are forced to shop from if they want to buy wine and spirits in state.

The culture of corruption at the PLCB shows precisely why Gov. Wolf was wrong to veto liquor privatization this summer. When a few bureaucrats like James Short are given the power to control what products Pennsylvania residents can buy, it's no surprise that vendors offer lavish gifts to earn bureaucrats' favor. Clearly some officials are all too willing to accept them.

For years now, the government liquor monopoly’s headlines of ethics scandals have sounded more like a broken record than breaking news. But the biggest scandal of all is that taxpayers continue to fund the state-run system—of which only Utah is a counterpart—that invites this corruption.

As long as Gov. Wolf determines that bureaucrats have the power to determine wine winners and liquor losers, customers, job creators, and taxpayers pay for the scandals, inconvenience and inefficiencies of a government alcohol monopoly.

posted by DAWN TOGUCHI | 02:26 PM | Comments

Audio: Gov. Wolf's Gambling Problem

AUGUST 21, 2015

There are numerous ways Gov. Wolf can balance the budget without raising taxes: reforming the pension system, cutting corporate welfare and selling the liquor business.

Instead, he plans on adding to state debt with pension obligation bonds–essentially borrowing money to gamble in the stock market while hoping for a good return.

CF’s Nate Benefield talks with WAEB's Bobby Gunther about Gov. Wolf’s misguided borrowing plans.

Nate explains how pension obligation bonds have a terrible trackrecord. Even Pittsburgh’s Democratic Mayor Bill Peduto has publicly criticized Gov. Wolf’s plan to use pension obligation bonds, saying his city should be the litmus test that proves pension bonds are not a solution.

Gov. Wolf should listen to his constituents who want long-term solutions, not historic tax increases.

Click here or listen below to hear more.

Bobby Gunther is on WAEB News Radio weekdays from 5 a.m. to 10 a.m.

Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.

And for mobile listening, get the SoundCloud iPhone and Android apps.

posted by JONATHAN REGINELLA | 03:30 PM | Comments

Entrepreneurs Speak Out Against the PLCB

AUGUST 10, 2015

Pennsylvania Liquor Control Board (PLCB) partisans are quick to defend the agency as an asset for the state, but the PLCB’s finances—and the entrepreneurs who deal with the booze bureaucracy—tell a different story.

On the financial front, the board reported $117 million in net income this past fiscal year, representing a decline of 5.41 percent from 2013-2014. The decline coincided with the agency’s best sales year to date. Though, a monopoly reporting record sales isn’t exactly groundbreaking. No one would be particularly shocked if a private business was able to outlaw its competition and increase sales.

The decline in the liquor control board's "profitability" shouldn't come as a shock either. The agency forecasted the possibility in a July 30 memo last year, noting the decline was due to rising operational costs (driven mostly by pensions). The agency proposed increasing product prices by more than 16 percent to boost its profitability, but they quickly abandoned the idea.

Finances are only half the story. The board also causes constant headaches for entrepreneurs.

Ray Hottenstein, testifying in front of the House Liquor Control Committee on behalf of The Pennsylvania Restaurant & Lodging Association (PRLA), said the board's uncompetitive pricing structure is the biggest source of irritation for PRLA members:

It should be no surprise that pricing is the number one frustration of licensees in Pennsylvania. The five levels of mark-ups not only make Pennsylvania uncompetitive with other states but it makes it difficult and sometimes impossible for licensees to resell the product at a fair and reasonable profit. Licensees are not able to purchase wine and spirits from where we can get the best price, we are forced to pay whatever the state dictates with only a 10 percent discount.

Competitive pricing isn’t the only problem, according to Mr. Hottenstein:

The second largest complaint we have heard from our members is the lack of selection and poor customer service they receive at their local state store. Many of our members in less populated areas have said that their store is not regularly stocked and in some cases have to wait weeks for an order to be shipped from another store.

Unsurprisingly, the PLCB's inefficiency isn't confined to product availability. Jason Malumed, President of Chalkboard Wine + Spirits, gives his firsthand account of the state's disorganized liquor monopoly:

There have been many times when a several thousand dollar invoice of mine is at 120+ days past due (the PLCB also pays their invoices net 60, despite the industry standard being net 30), and we have not heard anything fiom the PLCB about why we have not been paid, only to go to the store ourselves, dig through piles of old, cancelled wine that has been sitting in a non-temperature controlled room, and discover an order of ours that was supposed to be returned back to us months ago.

The PLCB’s declining profitability along with its inability to provide true convenience, choice and competitive pricing to consumers and entrepreneurs make the agency a liability, not an asset, for Pennsylvanians.

posted by BOB DICK | 03:48 PM | Comments

Wolf Repeating Same Mistakes of the Past

JULY 9, 2015

Earlier this week, we pointed out how Gov. Tom Wolf's veto of liquor privatization—using talking points from union leaders to justify his action—didn't make much sense.

Wolf’s reasoning can be summarized as this:

We shouldn't get rid of a "government asset." Prices will go up if we privatize. Despite rampant corruption at the agency, we should keep state control and "modernize" the asset.

This mirrors almost exactly the arguments made against leasing the Pennsylvania Turnpike eight years ago:

We shouldn't get rid of a "government asset." Tolls will go up if we privatize. Despite rampant corruption at the agency, we should keep state control and "monetize" the asset.

A proposed lease of the Pennsylvania Turnpike, proposed by Governor Ed Rendell and supported by the Commonwealth Foundation, would have netted Pennsylvania $12.8 billion in upfront lease payments. It would also have capped toll increases (after a planned increase in 2008) to 2.5 percent per year. Instead, lawmakers passed Act 44 of 2007 to "monetize" the Turnpike, requiring annual payments to the state funded by new debt (and backed by higher tolls).

This week, the Pennsylvania Turnpike Commission announced that tolls would increase by 6 percent next year, and 4.5 percent every single year through 2044. Cash tolls have already more than doubled since 2008, and there is no end in sight to increases.

The cost of a one-way car ride from Ohio to New Jersey has gone from $21.40 in 2004 to $48.90 next year.

Turnpike Tolls to 2044

Instead of leasing the Turnpike and receiving $12 billion in upfront funding with a cap on toll increase, Pennsylvanians instead have a massive increase in their debt and skyrocketing tolls.

Gov. Wolf is repeating the same mistakes of the past.

Instead of a liquor privatization plan that would generate additional revenue for the state—while providing consumers greater choice, convenience, and, yes, lower prices—Wolf is pushing for "modernization" which literally calls for raising prices on wine and liquor products.

posted by NATHAN BENEFIELD | 02:26 PM | Comments

Audio: Gov. Wolf's Vetoes Keep the Status Quo Alive

JULY 8, 2015

Gov. Wolf promised to be a governor who would eliminate Pennsylvania’s destructive status quo. So how did he respond when state legislators put a budget without tax increases, a bill to privatize the liquor business and a bill to give more funding to schools on his desk?

Gov. Wolf promptly scribbled his veto pen across all of them, ensuring the status quo lives on.

Matt Brouillette spoke with WPHT’s Rich Zeoli about Gov. Wolf’s decision to veto all of these bills.

He explains Gov. Wolf executed his veto power to “take care” of public sector unions (his biggest campaign contributors) while ignoring the concerns of average Pennsylvanians.

Matt clarifies why Gov. Wolf’s own budget plan got zero votes in the House, saying it “presented spending and tax increases that exceed the other 49 states combined”. Gov. Wolf needs to lose the “my way or the highway” attitude and start chipping away at the status quo rather than allowing it to continue.

Click here or listen below to hear more.

Rich Zeoli appears on WPHT weekdays from 3 pm – 6 pm.

Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.

And for mobile listening, get the SoundCloud iPhone and Android apps.

posted by JONATHAN REGINELLA | 03:29 PM | Comments

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