Long-awaited bill to privatize Pa. liquor store system is unveiled

Posted: July 14, 2011

HARRISBURG - Last call for the state liquor store system?

House Majority Leader Mike Turzai (R., Allegheny) is making a hard push for it to be so, unveiling a long-awaited bill Wednesday to wrest control of the sale of wine and hard liquor from government and put it in the hands of private operators.

Doing so, Turzai argued, would improve selection, bring down prices, and make buying booze a more pleasant experience for millions of adults who for years have loved to hate the State Store system.

"We think this is a win-win-win opportunity for everyone, and certainly for the state of Pennsylvania," Turzai said Wednesday at a packed news conference in the Capitol. "This is about moving away from a public sector dinosaur and into the 21st century."

His bill would double the number of liquor stores the state has, auctioning off 1,250 retail licenses to the highest bidder. Of those, 750 would go to big retailers, such as supermarkets and other chain stores with more than 15,000 square feet; the remainder would be sold to smaller outlets, such as mom-and-pops with fewer than 15,000 square feet of retail space.

The legislation also calls for changing the tax structure. Turzai would do away with the automatic 30 percent markup that the Liquor Control Board (LCB) slaps on its products, as well as the 18 percent levy known as the Johnstown flood tax. The bill calls for replacing this with a tax ranging from $8.25 to $12 per gallon, depending on product type and alcohol content.

Turzai would not put a firm number on how much projected revenue the auction of liquor-store licenses would reap for Pennsylvania. In the past he has estimated around $2 billion. On Wednesday, he said it could fetch "up to" that amount, although critics of privatization have disputed that figure.

His office hopes for a vote on the bill this fall, when the Republican-controlled legislature returns from its summer recess.

"It's going to be at the top of the agenda," said Turzai, adding: "I don't think it's going to be a hard sell."

That may not be the case.

Gov. Corbett, though a supporter of privatizing the LCB, has yet to endorse the bill. He has said he wants to wait on the results of a study he has commissioned.

"I don't think we should be in the business, that's number one," Corbett said Tuesday when asked about Turzai's proposal. "How you get there, how you get to that point and what you privatize and how much revenue comes into it, that has to be worked on."

Turzai's latest effort to drive a stake through heart of the state system is hardly the first.

The system has been in place since 1933, when Prohibition ended. Since then, three aggressive and popular governors, dating back to the 1970s, have tried and failed.

Their efforts were largely thwarted by a strange-bedfellows alliance including unions that want to protect the jobs of state workers, and the those who believe alcohol should be tightly controlled and regulated.

Their argument, as it's evolved, has been three-fold: One, selling the system will spike underage drinking as well as drunken-driving tragedies. Two, the system reaps hundreds of millions in taxes and profits every year for the state. Three, State Store customers have access to improved stores with good selections and values.

"We deliver among the highest dollar amount per gallon of alcohol sold and we have the absolute lowest death rate related to alcohol consumption," said Wendell W. Young 4th, president of the United Food and Commercial Workers Local 1776, which represents 3,000 employees in the state's wine and spirits shops."Why would we change it to benefit a few private retailers who will make a lot of money and who are friends of the current party leadership?"

Just last week, LCB officials trumpeted record sales of nearly $2 billion for the fiscal year that ended June 30. This allowed the agency to transfer a record $496 million to the state treasury.

"I just don't see how what [Turzai proposed] is necessary," said House Minority Leader Frank Dermody (D., Allegheny). "What we really should be talking about is taxing natural gas [extraction] from the Marcellus Shale, and how to continue funding our transportation needs. Instead, he's talking about taking a system out of place that employs 5,000 people. It's part of the all-out attack on the middle class."

Turzai's bill would provide tax credits for private employers who hire former LCB employees; tuition grants to those employees who want to go back to school; and preferential status when applying for other civil service positions in the state.

One thing Turzai may have going for him is public opinion. In recent polls, a majority of Pennsylvanians say they are ready to shelve the LCB.

But first they will get to hear plenty of arguments from the system's defenders - such as Young, the union leader, who said Wednesday he'd seen no evidence that other states have better prices or a bigger selection. Pennsylvania, he said, is the single biggest buyer of liquor in the nation and gets "the best price on almost all products, consistently and for decades."

Turzai's proposal, Young contended, "is going to hurt consumers and generate less revenue."


Contact staff writer Angela Couloumbis at 717-787-5934, acouloumbis@phillynews.com, or @AngelasInk on Twitter.

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