Pennsylvania Liquor Control Board - Efforts To Privatize

Efforts To Privatize

For nearly thirty years, starting with the administration of Governor Richard Thornburgh, efforts have existed to abolish the Board and privatize liquor sales in Pennsylvania. Critics of the Board argue that the Commonwealth would generate $1.7 billion in income by selling state liquor stores to private entities while continuing reap $102 million in annual sales taxes from alcohol sales and $251 million in liquor tax revenues. Further, it has been cited that customers could benefit from lower prices, longer hours, and wider selections at privately-run liquor stores. In addition, privatizing liquor sales would allow the Commonwealth to recoup taxes from sales in neighboring states with wider selections such as New Jersey, Ohio, and Delaware, to Pennsylvania residents. Despite these arguments, efforts to privatize have largely stalled. According to Thornburgh, "the principal roadblock to reform has traditionally been an odd coalition of state store employee unions, fundamentalist anti-alcohol groups, and organizations such as Mothers Against Drunk Driving, all of which perceive that they have legitimate interests which are not susceptible to statewide budgetary considerations. It would take some courageous leadership to stare down this combination, something I do not see in the Commonwealth today."

Opponents of privatization argue that the PLCB is the goose that lays the golden egg, and although it is claimed the Commonwealth would quickly gain $1.7 billion by selling the liquor stores, keeping the stores public would generate significantly more money over time.

The PLCB's operating expenses over time, however, the percentage of actual profit from sales has dwindled from a 7.65% profit margin on gross sales in FY 2000–01 to less than 2.5% in FY 2009–10. In 2000–01, gross sales were $1,140,203,662 and actual profit from sales was about $78 million. However, with nearly $1.9 billion in sales in FY 2009–10, the Board generated only $49.5 million from sales.

Without an immediate infusion of revenue via new fees or increasing the cost of wine and spirits in the Commonwealth or decreasing the contribution to the general fund as they did for FY 2011-12, the Board may end FY 2012-13 still with negative net retained earnings. The Board finished FY 2011–12 with a negative retained earnings for the third year in a row. Net retained earnings (historically explained as "operating cash on hand used to purchase product" by the Board) for 2009–10 was -$8.2 million and in 2010-11 was -$31.2 million and for 2011-12 was -$9.8 million.

The remaining amounts of revenue (the $380 million "golden egg") is actually generated through the collection of sales tax and the often maligned "Johnstown Flood Tax." This revenue, proponents argue, would continue to be collected by private industry.