Last year, my colleague Dawn did us all a favor by providing a summary of the Pennsylvania Liquor Control Board’s (PLCB) annual report. This year, I drew the short straw.
Similar to last year the PLCB is once again touting record sales, but the agency is a monopoly. If the government granted one company the exclusive right to sell shoes, and the company reported record sales, would you be impressed?
Aside from a monopoly posting record sales, there are a number of red flags to note.
The first, and most important fact, is the PLCB’s fiscal health. The agency’s net income declined from $128.4 million in 2012-2013 to $123.7 million in 2013-2014. Back in September, the PLCB said the drop in net income should be attributed to a credit from 2012-2013, which inflated the net income figure. However, mention of this credit was conspicuously absent when the PLCB reported a 24 percent increase in net income for 2012-2013. In fact, the PLCB credited the growth in net income to “strong sales and expense control.”
While the PLCB’s net income is technically at an all-time high, its fiscal future looks bleak. If you remember, back in August, the PLCB floated the idea of increasing the mark-up price for its products due to growing operating costs. This past fiscal year, operating costs, driven by pension contributions, increased by more than $20 million or 5.24 percent. According to the Tribune Review, the increase in operating costs for this fiscal year (2014-2015) will result in a net income drop of more than 20 percent.
One argument consistently used against privatization is that the government-run liquor stores are an asset for Pennsylvania and privatization would reduce revenue to the state. Yet, taxes comprise nearly 85 percent of the PLCB’s transfers to Pennsylvania’s Treasury. If the system were privatized, the revenue derived from the current tax structure would continue to flow to state coffers.
Our government-run liquor system is both a promoter of liquor consumption and discourages alcohol abuse. In the last year, the PLCB monopoly spent $5.1 million advertising its products. At the very same time the PLCB spent other tax dollars to encourage responsible alcohol use through education and regulation. It appears there’s a slight conflict-of-interest here.