Privatization

To address mounting debt, strained budgets, and underfunded pension systems, lawmakers need to reexamine all aspects of government and seek new and innovative policy solutions. CF’s privatization work looks to apply the “Yellow Pages test” to all levels of government. This test says that if a service can be found in the yellow pages of a phone book, government should look to the private sector rather than public employees to provide it. In well-structured privatization initiatives, the government and taxpayers gain accountability, cost savings, higher quality services, and greater innovation.


Liberals and Conservatives Agree: Let Go of Our Liquor

October 7, 2013 | Commentary by Matthew Brouillette, Jon Geeting

As the partisan divide plays out in Washington, it's encouraging to see one policy battle in Pennsylvania with support on both sides of the political spectrum. Across the state, voters remain unified in their support of allowing private stores to sell wine and liquor. Unfortunately for consumers, inside the state Capitol, bipartisan unity on this issue has been harder to come by.



Corruption is Spelled P-L-C-B

SEPTEMBER 1, 2015

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

Ridesharing Freedom En Route to Pennsylvania

AUGUST 28, 2015

Uber and Lyft provide inexpensive rides to customers across the country despite numerous regulatory hurdles—chief among them the Philadelphia Parking Authority, which has previously thwarted the businesses from operating within the city. Recently introduced Senate Bill 984, however, would allow Uber and Lyft to compete in Philadelphia.  

This legislation, sponsored by Sen. Camera Bartolotta, establishes the framework under which ridesharing companies can freely and safely operate within all 67 counties of the commonwealth. SB 984 requires background checks and a zero tolerance policy on drug and alcohol use for prospective drivers. Uber and Lyft will also be required to maintain insurance coverage and abide by vehicle safety regulations.

According to a recent study from the Cato Institute, many concerns surrounding ridesharing are unfounded. Critics typically point to safety concerns as their primary objection, but Uber and Lyft actually offer a safer alternative to the taxicab monopoly—both for drivers and passengers.

A major factor ensuring this increased safety is the utilization of an electronic payment system. All Uber and Lyft transactions are completed via their respective smartphone apps. This eliminates many of the risks facing drivers. Since cash never changes hands, drivers are less vulnerable to robbery.

Additionally, unlike a traditional taxi service, where passengers are anonymous, Uber and Lyft customers must create electronic profiles to use the ridesharing services. These measures ensure added safety for drivers, as any criminal activity could easily be linked to a user’s profile information stored on the ridesharing app.

The structure of Uber and Lyft protects the passengers, too. The passenger knows the name of the driver, the make and model of the car, and the license plate number upon ordering a ride.

Immediately after the ride is over, the passenger can rate the driver from their smartphone, which gives passengers influence over future demand for the driver. Indeed, user ratings, combined with the ability to choose your driver, provides riders far more protection than government licensing mandates.

Sen. Bartolotta’s legislation will increase competition and provide consumers with more options at better prices. It’s time to bring ridesharing freedom to Pennsylvania.

posted by JAMES PAUL | 09:14 AM | 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

Ink Running Dry on Wolf’s Veto Pen

JULY 6, 2015

Gov. Tom Wolf’s veto pen may be running out of ink. 

In the span of one week, Pennsylvania’s “different kind of governor” vetoed a no-tax-hike budgetliquor privatization, the school code and the fiscal code. He is currently debating whether or not to veto pension reform, as well. But that’s not an exhaustive list.

By vetoing the budget bill, Gov. Wolf turned down a $100 million increase for Basic Education, a $20 million increase for Special Education, a $30 million increase for early education, and $50 million more for higher education. He even vetoed the implementation of a new, bipartisan school funding formula—particularly curious since the formula, which would distribute funds based on student need, has been universally applauded.

At every turn, Gov. Wolf has embraced and perpetuated the myth that Pennsylvania schools are underfunded and suffering from a phony “billion dollar cut.” The administration conveniently ignores the fact that Pennsylvania spending per student ranks 10th in the country, and total school spending is at an all-time high. Seemingly nothing can deter Gov. Wolf on his quest to raise taxes—in the form of income, sales, and severance taxes—on families and small businesses.

Rather than seek common ground or areas of compromise, the governor insists on a budget—his own—that was voted down 0-193.

Thankfully for working families who would be burdened by Wolf’s tax increase, even 4 billion vetoes cannot enact $4 billion in new taxes.

posted by JAMES PAUL | 04:00 PM | Comments

One Signature Will End PA's Prohibition

JULY 1, 2015

The Pennsylvania legislature made history yesterday. For the first time since the creation of the state-controlled liquor system in 1933, both houses of the General Assembly voted to remove government from the business of selling wine and spirits.

The Senate voted 27-22 in favor of privatization while the House voted 113-82 to remove government from the booze business.

The privatization plan, HB 466, would gradually phase out the state stores and lease wholesale responsibilities to the private sector for a period of 10 years. After the 10 years is up, the state would completely divest itself of the wholesale system.

The bill gives beer distributors the exclusive right to purchase a permit to sell wine and spirits for six months. After six months, any remaining permits will be auctioned off to interested buyers. Establishments with a "R" license (taverns, restaurants, hotels, grocery stores) will also be allowed to purchase a permit to sell wine and liquor. The entire plan is expected to net the state $220 million annually, mainly through the sale of permits, licenses, and renewal fees.

While the bill is far from perfect, it takes a big—historic—step toward ending the PLCB's stranglehold on one of the last vestiges of Prohibition in the country. Now, the only person standing in the way is Gov. Wolf. Let's hope he sides with the majority of voters over special interests.

Join us in thanking the legislators that voted for this bill. To see if your lawmaker was one of them, click the vote counts above and take a minute to send them a note of thanks.

posted by BOB DICK | 03:17 PM | Comments

Strip Clubs and the Case for Liquor Privatization

JUNE 24, 2015

  1. Strip club entertainment
  2. A stay at the Ritz Carlton
  3. Pittsburgh Steelers tickets
  4. Philadelphia Eagles tickets
  5. iPad 2
  6. World Series ticket

This is a just a short list of the items that former Pennsylvania Liquor Control Board (PLCB) official Timothy Fringer illegally accepted, according to the State Ethics Commission and reported by Kari Andren at the Tribune-Review.

Mr. Fringer joins a long list of PLCB officials accused of accepting bribes and committing ethics violations (you can read more from CF about those here, here, here, here, here, here, and here). In fact, Mr. Fringer is the fifth official to be charged just this year.

Corruption and waste have become synonymous with the PLCB. And it's important to remember that as long as the governor and the government unions blast privatization the culture of corruption at the PLCB will remain.

PLCB ineptitude is hardly the reason why the vast majority of Pennsylvanians—liberal, conservative, Democrat, Republican—support privatization. In short: Government has no business selling and advertising alcohol.

In addition to ending corruption and complying with public opinion, privatization makes financial sense. The vast majority of the PLCB's "profits" are simply tax revenue—revenue that would be generated by privately-owned businesses as well. Privatization would help recover the millions lost in border bleed to states like Delaware. And it would allow entrepreneurs to innovate, create jobs, and meet customer demand.

Until we get out of the booze business corruption will continue, Pennsylvanians will continue to cross state lines to buy their booze, and the PLCB will struggle to increase revenues.

posted by DAWN TOGUCHI | 04:30 PM | Comments

Lesson from Washington State: Privatization Works

MARCH 9, 2015

Is liquor privatization in Washington State a “failed experiment"? That's the bold assertion from opponents of unshackling Pennsylvania from the chains of a government liquor monopoly. It’s also wrong.

Washington State’s Office of Financial Management released a report back in January on the impact of liquor privatization. Their findings decimate the claims that privatization is a failed experiment. On the contrary, privatization led to a number of positive developments:

  1. Liquor sales increased by 13 percent.
  2. Revenue collections increased by 18 percent.
  3. The number of liquor stores increased by 327 percent.
  4. Liquor store employment increased by 91 percent. (The report states that some of this growth may have occurred absent privatization.)
  5. Per-liter prices increased by 8 percent on average. This increase can be attributed to additional fees included as part of the privatization conversion and the state’s $35.22 per gallon excise tax— the highest spirits excise tax rate in the country.
  6. The costs of running the liquor system fell by 77 percent.

If Pennsylvania turns over the sale of liquor to the private sector without increasing taxes and fees (and we’re one step closer!), expect more jobs, better convenience, and competitive pricing.

For more on liquor privatization, check out this one-stop shop

posted by BOB DICK | 00:55 PM | Comments

A Toast to the House, but Challenges Lie Ahead

FEBRUARY 27, 2015

On Thursday, the Pennsylvania House of Representatives passed liquor privatization legislation sponsored by Speaker of the House Mike Turzai. You can see how your legislator voted in this interactive graphic from PennLive.com.

Back in 2013, the House passed the first liquor privatization bill since the end of Prohibition more than 80 years ago. With yesterday's vote, the House has recommitted to expanding choice and convenience for consumers by getting government out of the booze business.

We applaud the House for acting in the best interests of taxpayers and consumers and again recognizing that the vast majority of Pennsylvanians—no matter their political leanings—want government out of the liquor business.

Even with this victory, the liquor privatization debate is only just heating up. As talks continue, it's critical that these principles of liquor privatization undergird any changes to the legislation:

  • Government should permanently and unequivocally get out of the business of selling alcohol and end the system in which state-run liquor stores, with all their advantages and taxpayer subsidies, compete against private mom & pop businesses.
  • Only full privatization ends the conflict of interest inherent in having the Pennsylvania Liquor Control Board both regulate and promote wine and liquor sales with tax dollars. Modernization would allow the PLCB to continue to produce government-brand wine and fiascos such as the failed wine kiosk program, undermining Pennsylvania wineries, consumers, and taxpayers alike.
  • Modernization or other measures that maintain the current state store system fail to move Pennsylvania into the 21st century and deliver the choice and convenience Pennsylvanians want.  Modernization is like offering consumers a "touch-tone" phone—it's better than a rotary phone, but is a far cry from the smart phones consumers really want in 2015.
  • To promote competition, lower prices, selection and convenience, lawmakers should allow the market to decide the number of outlets that can sell wine and spirits.  At the least, the number of licenses should be set to the national average of retail outlets based on population, to keep Pennsylvania competitive with the rest of the nation.
  • While beer distributors cannot expect to retain their protected oligopoly, proposals should treat them fairly in consideration of how much time and money they have invested in their business, including minimizing the cost of upgraded licenses and guaranteeing loan financing for new licenses.

Get a printable handout of these principles here.

Opponents of consumer choice will continue to employ the same scare tactics about privatization, but their arguments ring hollow (brush up on your facts and responses here). At the end of the day, government booze doesn't make us safer or economically stronger.

It's time to end Pennsylvania's Prohibition era once and for all.

posted by DAWN TOGUCHI | 10:00 AM | Comments

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The Commonwealth Foundation is Pennsylvania's free-market think tank.  The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.