Here in Pennsylvania, state run liquor stores and restrictions on beer sales are familiar gripes. While nearly anywhere else in the country consumers are able to pick up a six-pack or bottle of wine at any grocery or convenience store, Pennsylvanians can only buy wine and liquor from state-run stores and beer has to be purchased by the case at a distributor, or by the six-pack at a bar or restaurant. Recently though, privatization of the state’s booze monopoly (hint hint, Parker Brothers) has become a hot issue in the state legislature and the blogosphere. As a conscientious and patriotic inebriate, I took it upon myself to learn more about the debate and the potential advantages/consequences of privatization.
The Argument for State-Run Stores
Many would argue that the harder it is for the public to get their hands on alcohol, the better off society will be. We here at IPTB obviously disagree with that idea, but this is a powerful argument for many social conservatives, especially the religious right. From a more economic perspective the Pennsylvania Liquor Control Board (PLCB), the government body that operates the state liquor stores, each year contributes almost $500 million to the state’s general coffers [Source]. In addition, individual liquor stores are a boon to the local economy. Short of high-risk blue collar work like mining, working as a liquor store clerk is one of the best paying jobs you can get without a college degree, plus benefits and a pension [Source].
The Argument for Privatization
Many Pennsylvanians see the PLCB as Big Brother, telling us what we can drink and where we have to get it; and whether corporate or government run, monopolies can lead to price hikes and other abuses of the consumer. Because it’s illegal to bring alcohol into Pennsylvania, whether by hand or by mail, the PLCB stifles market variety. If the state stores don’t carry a specific brand, then Pennsylvanians cannot get it without breaking the law. Many pro-privatization activists have also pointed out that the PLCB’s dual role as both purveyor of liquor and oversight against alcohol abuse creates a conflict of interest which prevents them from being effective at either. In fact, the PLCB has been accused of gross mismanagement and cronyism which has cost something to the tune of $70 million over the past few years. But most pertinent to PA drinkers and the reason why a reported 70% of Pennsylvanians support privatization is the fact that the current system is simply inconvenient.
What the Statistics Say
First off, let’s get some facts straight. According to the Commonwealth Foundation, an organization that has made it’s pro-privatization stance very clear, the PLCB’s prices on liquor are on par with (and occasionally cheaper than) prices in bordering states, and wine prices are only marginally higher here [Source]. Since the PLCB acts as one entity, it is able to leverage tremendous purchasing power. This leverage translates to discounts in the PLCB’s wholesale liquor and wine purchases. These discounts then offset the controversial 18% Johnstown Flood Tax which constitutes most of the $500 million that the PLCB contributes to the state.
Second, many of the measures that make the current system so inconvenient are attempts to discourage alcohol abuse, drunk driving, and underage consumption. The restrictions on beer purchasing and the early hours kept by liquor stores are chief among them. But statistics show that these measures are entirely ineffective. A comparison of statistics between Pennsylvania and Illinois (the state with the most comparable population in 2010: 12.8 million compared to PA’s 12.7 million) reveals that PA had 87 more DUI related deaths in 2009 than IL [Source]. In addition, a 2007-2008 study by the U.S. Department of Health and Human Services shows that Pennsylvania is ahead of the national average in underage drinking, binge drinking, and underage binge drinking. Clearly, the effectiveness of the PLCB as an enforcement and oversight organization is not a strong argument.
So what would happen if we dumped the state liquor system tomorrow?
We’ve shown that prices would more or less stay the same. Variety of products would increase, though you’d probably have to go to more expensive boutique shops to find things like Galliano and maraschino liqueur. More popular spirits, on the other hand, like Jack Daniels, Absolut Vodka, etc. would likely drop in price. So for the average consumer, buying booze would be generally the same but a bit more convenient with beer and wine available at grocery stores and gas stations.
There’s more to this question than the consumer end, though. Initially, the state would incur a huge windfall of funds from the sale of liquor licenses. The Commonwealth Foundation’s conservative estimate is a little over $1.2 billion. While this would be tremendously helpful to the state in its current budgetary crisis, Pennsylvania has a poor record of handling windfall money. In fact, the current budgetary trouble is in part due to the state’s failure to account for the fact that federal stimulus money would eventually run out. It’s not hard to imagine that same mistake being made again, this time leaving a $500 million hole behind.
Then there’s the issue of jobs. Currently, the PLCB provides over 3,000 good jobs to Pennsylvanians with a livable wage, benefits package, and a pension. While privatizing liquor sales may increase the number of jobs, it will also decrease the quality of those jobs and their benefit to the community.
Applying Common Sense
This is a difficult situation and there are strong opinions on both sides. However, with a few tweaks it would be possible to maintain or increase the PLCB’s economic advantage within the state while loosening the state’s draconian grip.
First off, state law should allow grocery and convenience stores full access to the sale of beer and wine. The first few steps have already been taken in this direction, tentative and faltering as they may be. The state doesn’t derive any additional income from the sale of beer aside from normal sales tax and the current restrictions on sales of cases and six packs have proven ineffective at preventing DUI and underage drinking. Therefore there is no reason, economic or moral, to maintain these restrictive laws. And when sold in groceries stores, the state can still levy the 18% tax on wine so that increased convenience will actually boost the state’s income from wine sales.
The state-run liquor stores can remain essentially the same. Their business won’t be threatened by the changes because they’re still the only brick-and-mortar locations to purchase liquor and they’ll be able to offer a wider variety of wine than a grocery store’s limited shelf space would be able to accommodate. This will also maintain the economic benefit from the stores’ income and creation of well-paying jobs.
In addition, the state should open up the sale of alcohol through the mail from outside PA. This will allow Pennsylvanians to have access to products not carried by the state liquor stores, and it will ensure that the PLCB’s prices remain competitive. Due to the inconvenience and cost of shipping though, this should not significantly threaten the state stores’ business.
As unfriendly as PA law is to selling alcohol, it’s even meaner to producers of alcohol. The licensing, paper work, and red tape that stand between a potential brewer/distiller/vintner and his or her customers is astounding. Recently the state legislature has realized the value of vineyards as tourist attractions and loosened some of those restrictions. Vineyards are now able to sell their product on location. But as many other states and countries have found (most notably Scotland), breweries and distilleries can have the same draw for tourists. We need to make it easier for alcohol producers to set up shop in PA and draw customers to their locations.
And finally, the PLCB itself needs to be examined. Right now, the state liquor stores constitute an industry that’s being run by a bureaucracy, which will necessarily lead to waste, corruption, and nepotism. There needs to be more oversight and accountability within the PLCB management, starting with giving store managers more latitude on what products to stock and what promotions to run. From there all the way up to the board chairman, management and executive employees need to be held to the same standard of competency and efficacy as private-sector executives.
Now as much as I believe in these measures, there is an inherent flaw here. This sort of nuanced, middle ground solution is exactly the type of bill that either gets no traction in legislation or ends up warped beyond any usefulness. And enforcing oversight of any government organization has always proved difficult bordering on impossible.
When the PLCB was established in 1933 at the repeal of Prohibition, then-Governor Pinchot famously proclaimed that the purpose of the board was to “discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.” While that mission statement may not still remain, the general patronizing attitude lingers. Good booze is a beautiful and nuanced experience and we should be encouraging people to enjoy it responsibly.
There are a wide variety of opinions on this topic, and mine is only one. We’d love to hear yours in the comments!