Liquor Privatization Done Right

Liquor Privatization Done RightPicture this: You’re on your way home from visiting family in Delaware and decide to stop at a wine store near the Pennsylvania border. As you walk through the parking lot, something seems off.  For every Delaware license plate you see, there are three Pennsylvania plates. An aberration?  Hardly. 

As a recent investigative video shows, liquor stores in New Jersey and Delaware are filled with Pennsylvania shoppers every day.  The video, produced by the state chapter of the National Federation of Independent Businesses, should shock no one.

We already know consumers shop with their feet—even the Pennsylvania Liquor Control Board acknowledges it.  Their survey of Philadelphia region residents found nearly half shop in other states, costing the commonwealth hundreds of millions annually in sales due to “border bleed.”

Consumers want greater convenience, selection, and lower prices.  They want beer, wine, and liquor to be sold in local grocery stores.  They don’t want to drive as far, or make multiple stops.  And they want the ability to buy alcohol in whatever quantity they choose.  That’s why a Delaware shop had three times as many Pennsylvanians as Delaware shoppers.  But we can bring them back.

Lawmakers, customers, and activists celebrated the historic vote in the Pennsylvania House to end the government liquor store monopoly. Indeed, lawmakers accomplished what many pundits doubted was possible—and what several governors had tried and failed to do—by even holding a vote on a liquor store privatization bill.

But consumers and taxpayers have nothing to toast—not until the Senate and House agree to legislation that will earn Gov. Corbett’s signature. The challenge for lawmakers is balancing the free market consumers want with the demands of those already vested in the current system.

The state Senate has begun hearings on privatization and it is a near certainty they will do something, but what that something will be is far from certain.  Sen. Chuck McIlhinney, who chairs the committee taking up the House-passed bill, says he supports privatization, but what does privatization really mean?

Here are two key things that must happen in any bill to deliver for consumers and taxpayers:

First, lawmakers must increase retail competition.  This means licensing more stores to sell wine and spirits so consumers don’t need to cross state lines, allowing beer distributors and grocery stores to carry wine and liquor for greater convenience, and creating meaningful competition even if they don’t shut down the state-run stores immediately.

No Pennsylvanian wants to see a government monopoly replaced with a private one.  And providing a mechanism to close down state stores once private competition has ramped up, as the House-passed legislation did, will finally get government out of the booze business and allow the PLCB to focus on its regulatory mission.

Second, lawmakers must end the government monopoly over wholesale operations.  The wholesale monopoly allows government bureaucrats to determine what is sold in Pennsylvania and what isn’t, to set artificially high prices for every bottle sold, and to limit competition and selection.   

The PLCB’s wholesale monopoly is the source of endless frustration for restaurant, winery, and bar owners and has produced a series of boondoggles on the taxpayer’s dime.  One of the biggest PLCB blunders is the branding and marketing of their own wine label, TableLeaf.  This government wine takes prominent shelf space away from Pennsylvania labels, yet the brand state taxpayers own is actually grown and bottled in California and directly competes with wineries right here in the Keystone State. 

Thanks also to the PLCB wholesale monopoly, consumers were treated to the infamous wine kiosk program—elaborate vending machines in grocery stores that required a public breathalyzer test, identity verification, and a video sobriety test prior to allowing a sale.  

It’s decades past time to get government out of our Prohibition-era liquor system. Pennsylvanians have suffered from the PLCB’s conflicts of interest and taxpayer-funded boondoggles for far too long.  Until lawmakers pass a plan that satisfies both consumers and stakeholders, we will continue to see shoppers stream across state lines for the convenience our government monopoly has failed to deliver.

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Nathan A. Benefield is Director of Policy Analysis with the Commonwealth Foundation (