Highlights from Governor’s Liquor Privatization Summary

Gov. Tom Corbett released a long-awaited study from The PFM Group on state liquor store privatization. Click here for the full study (nearly 300 pages), or here to get the executive summary.

The report supports much of the Commonwealth Foundation’s analysis of Pennsylvania’s government-run monopoly over wine and spirits sales. Here are a few of the highlights.

  • Pennsylvania currently has a higher alcohol tax burden and fewer stores per capita than competitor states. (See CF analysis on liquor store density).
  • The Pennsylvania Liquor Control Board has high operating costs and low profit margin compared with other control states. (See 13 Reasons Why Government-Sold Booze Fails to see why the PLCB is so inefficient.)
  • A proposed gallonage tax would have more impact on lower-priced goods and less on higher-priced goods than current taxes. (See CF analysis of the gallonage tax).
  • Prices for wine and spirits would remain at approximately their current level.
  • Privatization would bring back $100 million in increased sales by ending “border bleed.”
  • Privatization would not result in negative social impacts:
  • Two of the nine models evaluated were recommended: (1) Auction of limited wholesale and retail stores and (2) Auction of wholesale; market-based awarding of retail licenses.
    • PFM had five goals in mind in evaluating options: convenience and competition, strict enforcement of regulations, obtaining up-front value, being revenue-neutral in ongoing revenue, and helping current employees.
    • The tax and fees PFM estimates under each model are based on a system to generate the same amount of state revenue as current government stores.

Limited Retail Option (similar to HB 11)

  • Would auction 1,500 retail licenses (combine competition with keeping stores scarce).
  • Would provide more up front revenue than market-retail option (licenses would be in perpetuity): $1.1 to $1.6 billion in estimated one-time revenue.
  • $406 million in annual taxes and fees ($360 million from gallonage tax, $46 million in fees).

Market Retail Option

  • Would result in approximately 3,500 licensed retailers, which is closer to national average of stores per capita.
  • Up front revenue: $475 to $600 million.
  • Would offer lower alcohol tax rates, higher annual fees from stores than limited retail option: $412 million in annual taxes and fees ($306 million from gallonage tax, $106 million in fees).

For more info, or to take action, visit FreeMyDrink.com