Liquor “Modernization” a Financial Flop
Last year, the legislature enacted a law allowing restaurants and a small number of grocery stores to sell wine and “modernizing” the government liquor stores to “run more like a business.” This modernization has woefully underperformed on its promises.
While lawmakers and the Wolf administration projected $149 million in new revenue—based on promises from PLCB officials—actual revenue has been far less.
The PLCB’s projections included $35 million ($65 million for 2017-18) from “flexible pricing”—i.e., arbitrarily raising prices on consumers for top-selling products—$12 million more from expanded store hours, and $8.5 million from coupons and marketing.
Many, including the Commonwealth Foundation, found these “modernization” efforts absurd ways of empowering the government to do things it shouldn’t—arbitrarily increase prices and try to market alcohol consumption. And we questioned the rosy revenue forecasts.
So far, we’ve been proven right. The Independent Fiscal Office, which originally predicted $105 million, has twice lowered its forecasts and is now estimating liquor modernization will generate $43.5 million. (The IFO does caution that “Limited actual data are available because some of the most significant provisions [e.g., flexible pricing, Sunday/holiday sales, customer relations program] are not easily measured.”)
That is, modernization will generate only 29 percent of what the PLCB promised (see chart below).
In fact, the liquor board admits it has had to dip into its reserve funds this year to make its promised payments to the state.
It’s time to give up these dreams of a better-run government monopoly, and get government out of the booze business once and for all.
Letting private retailers sell wine and spirits and letting private companies distribute liquor to stores or restaurants would actually generate more money than the current monopoly. The reason? We’d see higher tax collections because of less “border bleed” (fewer residents shopping out of state) and more revenue from annual license fees paid by private retailers and wholesalers.
That said, the debate over privatizing alcohol sales shouldn’t focus on raising money for state government.
Rather, lawmakers should prioritize delivering better prices, more choices, and greater convenience to Pennsylvania consumers by ending our antiquated government-run liquor monopoly.