Corbett moves to privatize liquor sales

If Gov. Tom Corbett gets his wish, liquor distribution will be the business of private entities ­— all in the name of education.

Corbett’s plan is to privatize the entire state liquor retail and wholesale system, auctioning more than 1,200 licenses for businesses to purchase — meaning wine, beer and spirits could be sold by grocery stores, beer distributors and a slew of other businesses — with the surplus of revenue infused into the state education system.

Instead of the consumer hopping from store to store to pick up wine, beer and other necessities for an event, they could visit one shop to purchase all of their fermented products. This would include being able to buy a six-pack of beer, unlike the purchase of an entire case under the current plan.

Corbett’s plan also would create a Passport for Learning block grant, which calls for a $1 billion investment in education, drawn from the sale of the licenses.

Eric Shirk, deputy director of communications in the governor’s office, said that along with the governor’s plan to add $90 million to education — under this plan, the largest amount of Pennsylvania tax dollars would go to educational efforts — outlined in his recently proposed budget, the block grant will act as another successful way to “look out for the future of the people here.”

The block grant, he said, will provide educators with a level of flexibility while also focusing the money in four areas — school safety, early education, STEM programs and individualized learning.

While he acknowledged the limit that a one-time infusion would inherently hold, Shirk said the governor’s plan will benefit schools across the state.

“It is a one-time infusion of cash, but that is what we would be getting for selling the system and we are letting the school districts know this would be one time,” Shirk said. “We are saying, ‘don’t use this for salaries, don’t work this permanently into your budget,’ but that doesn’t mean that it would not have a positive effect for education.”

States can moderate alcoholic beverage sales through a variety of ways. Generally, there are two models: control, under which the state is responsible for some or all facets of sale; and license, which enables private organizers to handle sales. Thirty-two states are license states, while 16 others operate under the control model. Pennsylvania and Utah are the only states that operate under a third, monopolistic model, in which the state government holds a strong public role in regulating all aspects of distribution.

Corbett commissioned a Liquor Privatization Analysis report, published in October 2011, outlining the current state system.

Currently, Pennsylvania has 613 state-run retail stores, operated entirely by almost 5,700 full- and part-time state employees. In 2009-2010, $1.5 billion in revenue was generated through sales and licenses. In the 2012-2013 fiscal year, the net fiscal impact of the Pennsylvania Liquor Control Board was estimated to be $408 million.

If the plan is put into place, the Liquor Control Board will likely consist of 290 equivalent full-time positions, with approximately 3,200 positions eliminated, according to the report.

While the plan would result in job loss by the end of the four-year privatization process, Shirk said the loss would be offset by a net growth of in-state businesses looking to hire and tax credits provided to businesses who hire displaced workers.

“I disagree it will cut jobs. Sure, people who work in Pa. liquor stores now would lose their jobs eventually, but you have to remember that there are 600 state liquor stores and this auctions off 1,200 licenses,” Shirk said. “If these businesses grow, it will double the amount of opportunities.”

But questions still arise over the potential consequences that moving toward less-regulated liquor sales will have on public safety.

Chief among them is the concern of minors acheiving greater access to alcohol.

The Keystone Research Center, a nonprofit group that performs original studies addressing economic and civic problems, published a study in May 2012 focusing on alcohol-related deaths and state control.

“All else equal, a heavy control state with the characteristics of Pennsylvania sees 58 fewer adult deaths each year from alcohol-related traffic accidents than a comparable state that has no such control,” the study stated.

The researchers defined heavy control states as regulating the retail sale of at least two types of alcohol, and controlling at least one type at the wholesale level.

The researchers, Jue Wang, Mark Price and Stephen Herzenberg, also reported that there was no difference in fatality among youth aged 15 to 19.

Corbett has worked to address the fears that some have voiced about underage drinking and greater intoxication by making some adjustments in his plan. Fines for selling to underage and intoxicated individuals will increase, and the state police and Bureau of Liquor Control Enforcement will receive a 22 percent funding boost. The Department of Health will also receive some help through a 75 percent increase in funding toward alcoholism treatment and prevention.

For Shirk, privatization will not only benefit students, but also another key portion of the Pennsylvanian general public — the consumers.

“People have wanted this for a long time,” Shirk said. “We are one of two states that don’t have a privatized system, so that’s 48 other states who are doing this. And people talk to us all of the time — they want to be able to buy a bottle of wine at the grocery store. Consumer convenience is a big benefit.”

But State Rep. Brendan Boyle, D-Montgomery, a member of the State House’s Liquor Control Committee, said these same consumers could pay more if Corbett’s plan passes through the state legislature.

“For the perspective of consumers … people are under the false impression that if we privatize the system, prices for wine and spirits will go down.”

This was true in the state of Washington. When the state switched to privatization, it issued an initiative that resulted in a price increase of around 20 percent.

Additionally, Boyle said, the privatization of the state-run liquor stores would significantly reduce the amount of government revenue after profiting $1 billion from the initial sale of liquor licenses.

“Tom Corbett is so conservative that he seems to think privatizing is always the solution,” Boyle said.

Ultimately, Shirk said, as the governor makes plans to work with the legislature over the next few months, he is optimistic about the plan that has been suggested in the past, but never passed. Corbett, he said, doesn’t think the state should act as a marketer, but merely a regulatory and enforcement body.

“This is an issue that has been in the public eye for years. Gov. [Dick] Thornburgh tried it in the ’70s, but the public wants it now,” he said. “Plus, this is a very important issue for the governor, and he will work hard for it.”