State Budget Solution #2: Liquor Privatization

Getting Government Out of the Booze Business Could Bring $1 Billion+ Windfall

January 19, 2017, Harrisburg, Pa.—This week marks the 98th anniversary of the ratification of the 18th Amendment—better known as Prohibition. While the antiquated amendment met its demise, Pennsylvanians still suffer under Prohibition-era liquor laws.

As Governor Wolf and legislative leaders seek a balanced budget with no broad-based tax hikes, Commonwealth Foundation has outlined multiple policy solutions to close the budget deficit and help put the commonwealth on stable financial footing.

Solution #2: Liquor Privatization

The Independent Fiscal Office estimates next year’s budget shortfall will be $1.7 billion. Privatizing liquor and auctioning off wholesale and liquor licenses could close up to 94 percent of this shortfall, delivering $1.1 to $1.6 billion in up-front revenue, according to a 2011 Public Financial Management Group study.

Last year’s Act 39 allowing wine sales in select grocery stores was only a first step toward full privatization. While the state no longer holds a total monopoly on wine sales, it still controls the wholesale and retail sides of most wine and all liquor sales. Only Utah maintains a similar grip on liquor.

Meanwhile, the state loses at least $180 million in sales each year due to border bleed, as Pennsylvanians cross state lines to buy liquor, according to a survey conducted for the Pennsylvania Liquor Control Board. In fact, border bleed from just a handful of counties costs the commonwealth more than $40 million in lost tax revenue each year.

“Governor Wolf and lawmakers have signaled their intent to redesign state government. Any effort to do so should include ending Prohibition-era liquor laws.” commented Bob Dick, senior policy analyst with the Commonwealth Foundation. “The majority of Pennsylvanians want government out of the liquor business. Liquor privatization makes sense for consumer convenience and choice and for the state’s financial future.”  

Note: Leading up to the state budget address, Commonwealth Foundation will highlight additional budget solutions.

See also: Solution #1: Corrections Reform

Bob Dick and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or [email protected] to schedule an interview.

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The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.