The Liquor Control Board is a Jobs Program, Not a Business

The Pennsylvania Liquor Control Board (PLCB) recently announced “record sales and record net income” for the year ended June 30th. Such wording is the language of a business proudly announcing good results to its shareholders.

The PLCB is no such thing. It is a government monopoly with a captive customer base.

To turn a profit is hardly impressive: it has exclusive control of alcoholic beverage distribution in a state of nearly 13 million people. It would be easier to lose money running a gold mine than a liquor monopoly.

Despite its monopoly power, though, the PLCB manages to squeeze out only a 9% profit margin. Those margins aren’t slim because customers or suppliers are getting a break: shelf prices in Pennsylvania are as high as anywhere else, and the selection of wines is poor outside of designated premium stores. The PLCB also sets prices in a secretive manner that frustrates suppliers and has come under legislative scrutiny.

The PLCB does claim to have cut operating expenses by $33 million over the past two years (unaudited financial information below). Unfortunately it also just inked a new union labor contract with the powerful UFCW Local 1776 that would mostly wipe those savings out. The contract terms will add $30.7 million to labor costs by 2023, according to the Independent Fiscal Office. Also, retirement liabilities total $1.1 billion dollars and the PLCB has a gap of $1.1 billion dollars between its total assets and its total liabilities.

Chart: PLCB Income Statement

Labor costs are a main reason why the PLCB delivers a modest financial return despite its fantastic privileges, and why its liabilities are out of control. The PLCB employs about 1,500 unionized clerks according to the Pa. State Workforce Statistics. They currently earn close to $68,000 on average, split evenly between salary and benefits.

Workers are entitled to fair pay, but the union has managed to lock in pay and benefits far beyond what would be economical for a private store chain. The PLCB in its present form is a jobs program, not a viable business. Local 1776 and PLCB management both know this, and they are fighting legislative threats to each other’s power side-by-side.

In fighting to preserve their power, however, Local 1776 and the PLCB are legally bound to respect the rights of individual employees. A suit being litigated by The Fairness Center, a public interest law firm, alleges that they have failed to do that. The lawsuit alleges that John Kabler, a PLCB store clerk, was told in a group orientation meeting and in writing that union membership was a job requirement. When he learned that wasn't true and resigned, the union still continued to take his money. These are serious allegations: the Supreme Court ruled in Janus vs. AFSCME that public employees have the right not to make any payments to a union.

PLCB management have declared neutrality on the matter of Janus rights, declining to take direct responsibility for protecting employees. “Neutrality” may not be the right word for disregarding credible claims that one’s employees are being deceived or intimidated.

Some legislators are fortunately taking the matter more seriously. The Public Employee Relations Act (Rep. Kate Klunk's House Bill 785  and Sen. Scott Martin's Senate Bill 317) would ensure workers are informed of their right to voluntary union membership.

Deceptive union tactics, high costs and high prices show that the PLCB does not serve the public.  The PLCB serves itself.