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Liquor store Privatization Bill could generate needed revenue

Published February 26. 2011 09:00AM


One of the top priorities of the new governor will be the privatization of the state liquor store system, which has been state run since the prohibition era.

Just this week, the Senate Law and Justice Committee began taking up the liquor store privatization issue by holding its first public hearing collecting testimony from various industry representatives. Several testifiers said that states with government-run stores typically bring in more tax revenue than in states where the liquor system is privatized, expressed concerns for displaced employees and indicated that privatizing state systems has resulted in significantly higher prices to consumers in some states.

These are all issues that bear scrutiny as the Senate continues its hearings. There has not been a privatization bill introduced by the Senate this session, but Rep. Mike Turzai (R-Allegheny), the prime sponsor of the bill in the House last session, is getting ready to reintroduce the bill this session as part of budget negotiations.

As we begin our consideration of this privatization proposal, here are some important facts about the proposal to privatize the liquor system that may help correct any misimpressions about what might happen if the Commonwealth sells its state store system.

Over the past 11 years, the Pennsylvania Liquor Control Board (PLCB) on average transfers approximately $90 million annually in profits to the state's General Fund.

Sales taxes on the sale of wine and spirits currently approach $400 million a year. This revenue will be generated regardless of whether the liquor system is a state-run or a private industry.

The bill is estimated to bring in at least $2 billion initially through the auction of wholesale and retail licenses to private businesses with a reserve price based on their fair market value.

Current plans to modernize the state store system tax structure could bring in $500 million in additional revenue annually and be more in line with a majority of other states.

The 18 percent Johnstown Flood Tax, originally imposed in the 1920s to subsidize reconstruction of Johnstown after a devastating flood, could be abolished.

Artificial mark-ups and handling fees would be eliminated, allowing the free market to dictate the price of wine and spirits.

Current PLCB employees who would be affected by this transition would be provided with tax credits, tuition assistance and civil service preferences to continue working in state government.

The PLCB would still have enforcement powers and oversee licensure, alcohol education and inspections.

I agree there are still some questions that need to be answered, and I look forward to hearing those answers. Do states do a better job than private liquor stores in preventing sales to minors and intoxicated customers? Will prices go up or down after state stores are sold to the private sector? Will revenue and taxes decrease, remain the same or increase? Lastly, will consumers continue to have the same choices of store location and brands that they do now and will problems with quality, availability and selection persist?

Several constituents have contacted me stating that they are in favor of the sale of the state store system, and recent polls have indicated that two-thirds of all Pennsylvanians agree with the sale.

I am always interested in your comments about the issues we are discussing in the state Capitol. Feel free to contact me at or call my office at 110 North Third St., Lehighton, (610) 377-6363.

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