Is Pennsylvania Getting Out of the Booze Business?

Should Pennsylvania let private businesses sell alcohol?

That's the question state lawmakers will be pondering in the coming months as legislation that would privatize the liquor industry in the state appears to be gaining momentum.

A vestige of Prohibition, Pennsylvania is one of 18 states that exercise control of all or most aspects of wine and liquor sales and, next to Utah, the one that keeps the tightest grip on operations. But now, at the urging of House Majority Leader Mike Turzai (R-28) and with the endorsement of a just-released report commissioned by Gov. Tom Corbett, the idea of relinquishing this control appears to be getting traction in Harrisburg, though Bryn Mawr's state senator and representative have their own reservations.

"The state needs to exit a business it should never have been in to begin with. Captive markets do not make for a free people," Corbett said in a statement signalling his support for the initiative.

More Stores, Higher Prices 
Though it's unclear exactly what the new system would look like—the bill is still in committee in the House and has made no real progress in the Senate—Corbett and Turzai have each endorsed a limited auction of wholesale and retail liquor licenses, the sale of which would net the state between $1.1 and $1.6 billion according to the report by Public Financial Management Inc.

For consumers, Pennsylvania's wine and spirits landscape would shift considerably. By the reckoning of PFM, under the Corbett/Turzai plan, its number of retailers would increase by almost 150 percent—from 613 to approximately 1,500—while prices—already considerably higher than the national average—would likely increase as well, albeit more modestly. And because the state would almost certainly switch from a per-bottle to a per-gallon tax model, the cost of less expensive spirits would rise more than the top-shelf.

But Does Privatization Make "Cents?" 
Momentum aside, the plan is not without its detractors.

Rep. Tim Briggs (D-149) said he views the proposal as misguided.

"Most people complain about having to go to multiple places to get wine and beer," said Briggs, a problem Wine and Spirits privatization doesn't address.

"I'm skeptical," Sen. Daylin Leach (D-17) told Patch. "While it would be nice for customers to have easier access to wine and spirits, I'm troubled by the numbers."

Leach, Briggs, and other Democrats worry the state might be selling too low on a reliable revenue stream. Pennsylvania's annual liquor profits are substantial and could soon, they argue, make even a $1.6 billion windfall look like a loss.

"I want to see not a one-time infusion of cash, but something sustainable," said Leach, who added he was dubious of the $1.6 billion estimate as well. "And right now we have a good, solid stream of revenue."

Representing Delaware County, Rep. Tom Killion (R-168) is also a champion of privatization and a cosponsor of Turzai's bill.

"People are realizing that this is the way we need to go," he said. "I live six miles from the Delaware border and 10 miles from Total Wines and I can tell you my neighbors don't shop in our state stores. They shop in Delaware."

While the PFM study estimated that privatization would cost the state $408 million in 2012-13, it also held that the liquor business has grown less profitable for the state in recent years and will continue to do so. Over the last 10 years, according to the report, expenses for the Pennsylvania Liquor Control Board have grown at 5.5 percent annually compared to 3.5 percent revenue growth.

"If we privatize our liquor system, it's going to be more revenue, not less," Killion said.

The plan has also found union opposition. The United Food and Commercial Workers Local 1776, which represents 3,000 Wine and Spirits workers in the state, has suggested a shift to privatization could cost 5,000 jobs. The PFM estimated 3,200 will be lost, but didn't rule out the possibility that these losses could have a "multiplier effect"—depressing the economy and triggering other layoffs.

Concern about the legislation's potential social costs has also been raised. Some are worried that the combination of an increase in stores and unshackling of the profit motive will enable more underage drinking.

The PFM report acknowledged that it's unclear what effect privatization would play on underage drinking and DUI incidences, but said there is some indication that "control" states like Pennsylvania are better able to restrict minors' access to alcohol.

Concerns aside, Briggs said he agrees with privatization in principle but thinks it may not be the best thing for Pennsylvania.

"I wouldn't set it up this way," he said. "But we're getting good revenue."

Rep. Michael Gerber (D-148) was unable to comment for publication.