Privatization can end PA’s Prohibition

If you’ve hit that pivotal age of 21, you’ve probably raided the Fine Wine and Good Spirits liquor store on Atwood Street. Perhaps you’ve winced at their prices — a stretch for a college budget. Begrudgingly, you’ve dished out the dough — what other choice did you have?

Imagine the same scenario — but with the option of walking out of the store and into one with lower prices. With the privatization of Pennsylvania’s state-controlled liquor stores proposed by House Bill 466, that scenario could have been a reality. But when Gov. Tom Wolf recently vetoed the bill, the scenario was once again relegated to dreams.

In 1933, following the nationwide repeal of Prohibition, Pennsylvania Gov. Gifford Pinchot hurriedly called the state legislature into a special session to deal with the relaxation of alcohol laws.

The Pennsylvania Liquor Control Board was the result of this last-ditch effort at keeping Pennsylvanians’ hands off the bottle, a project that did not bode well with the free wills of legal-age drinkers. More than 80 years after its less-than-ideal founding, the PLCB faced one of the strongest challenges to its stranglehold on the sale of wine and spirits this summer during the state budget battle in Harrisburg.

A Republican-sponsored bill passed the state legislature in early July, giving Wolf the chance to finally put the last nail in the coffin of Prohibition and privatize the state liquor system. Only 18 states have clung to state control of liquor sales. The other 32 have moved on from Prohibition — to privatization. But despite the historic opportunity to reverse a long-standing mistake, Wolf vetoed House Bill 466. The bill would have gradually replaced Pennsylvania’s more than 600 state stores with privately licensed stores.

With the decision, Wolf took an unacceptably partisan stance on the one topic in the pack of budget-related issues on which there should be a consensus. State control of the alcohol industry in Pennsylvania is both “inconvenient and expensive” and must end.

College-aged residents of the state who exist on the cusp of both legal and financial access to alcohol are among the most inordinately affected by the PLCB.  The fact, for example, that the Atwood Street state store, Fine Wine and Good Spirits, is the only retailer of hard liquor in South Oakland — an area where demand is undeniably enormous — and that it can charge the prices it does, is something that would not be possible if privatization allowed the introduction of competition. New locations would be free to open, and lower prices would be offered to bring in customers. For example, according to the Fine Wine and Good Spirits website, the cheapest handle of vodka you can purchase in Pennsylvania will cost you about $19. In a privatized state like California, the same amount and type of liquor will cost you about $6.50, according to the Mission Wine and Spirit website.

Coming into existence a mere four days before the end of Prohibition, the PLCB has indefinitely extended its founders’ fantasies of widespread alcohol abstinence by consistently keeping prices higher and impeding practical distribution of wine and liquor. The negative effect of the PLCB on Pennsylvania’s liquor industry has been abetted in no small part by its employees’ unions and their largely Democratic allies in state government, who have consistently blocked efforts over the last 40 years to pass liquor reform through the state government.

An impending $1.2 billion state deficit was one of the many motivations for legislators to pass a privatization bill and use the proceeds from issuing licenses to patch up the budgetary shortfall. However, the state budget battle remains stuck at an impasse between Wolf and Republican legislative majorities. In this light, Wolf’s observations about the bill he vetoed are particularly Orwellian. Not only does he believe “this plan would result in higher prices for customers,” but the Governor is also apparently reluctant to privatize before he can finish “maximizing [the] value” of the 82-year-old PLCB.

In defense of his actions, Wolf attempted to steer conversation toward modernization. “Modernization of our state liquor system would provide additional revenues to the commonwealth and save important, family-sustaining jobs,” he said. “We can support and bolster consumer convenience without selling an asset and risking higher prices and less selection for consumers.”

Despite his assumptions of voters’ interests, Wolf’s veto refuses to take their desires into account. According to a March Franklin & Marshall College Poll, 49 percent of voters would like to see the privatization of wine and spirits, while 37 percent prefer the system remaining under government control.

Wolf did not go on to explain how the gradual transition of the state monopoly’s 601 locations into 14,000 competing private licenses would result in higher prices. The self-described “neo-prohibitionist” Mothers Against Drunk Driving has repeatedly expressed opposition to privatization. If MADD believed Wolf’s claim that privatization really would result in less access to inexpensive alcohol, it would be all in favor of reform. Nevertheless, MADD declared privatization “counter to MADD’s mission” and threw out Wolf’s opinion that privatization would be anything but cheaper and more convenient than the state monopoly.

Supporters of the privatization bill, like Rep. Mike Turzai, R-Allegheny, claimed the overall gradual process of selling off existing state stores and issuing private licenses would generate slightly more than $1 billion in revenue for the state. A privatization study conducted by Public Financial Management found the up front revenue gained from the move toward privatization would be about $137.5 million.

After the transferal of control of liquor sales from the public to the private sector, supporters estimate an annual revenue in fees — not including sales tax — of about $31.4 million thereafter. Although this number is less than half the $80 million the PLCB contributed to the state’s general fund in 2014, it bears acknowledging that — far from simply disappearing — this “lost” revenue will instead be flowing into the pockets of Pennsylvania businesses licensed to sell wine and liquor and Pennsylvania customers benefiting from the removal of the state monopoly.

The last remaining argument — one declaring that state-regulated liquor sale prevents excessive alcohol consumption is also unfounded. A 2009 report by the Commonwealth Foundation looked into the effects of privatization and found that total alcohol consumption fell after the change in law was initiated in Iowa in 1987 and in West Virginia in 1990.

One of the few counts on which the Liquor Control Board does live up to its lofty moralizing mission is in its founders’ dictum that the board make alcohol “inconvenient and expensive” for Pennsylvanians. According to Mark A. Noon’s “Yuengling: A History of America’s Oldest Brewery,” Gov. Gifford Pinchot stated that the purpose of the Board was to “discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible” upon its creation.

Now, Wolf has decided to propagate PLCB’s moral mission. In the process, he has just been saddled with the responsibility of keeping an inefficient relic of  Prohibition as a part of the state bureaucracy — and the blame for postponing meaningful reform for the near future.

Write Henry at hgg7@pitt.edu.