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Senate of Pennsylvania
Session of 2015 - 2016 Regular Session

MEMORANDUM

Posted: March 31, 2015 04:36 PM
From: Senator Scott Wagner
To: All Senate members
Subject: State Store Divestment
 
In the near future, I plan to introduce legislation that will pave the way for Pennsylvania to exit the wine and spirits business and make Pennsylvania the 35th License state in the country, joining our neighbors in New York, New Jersey, Maryland, and Delaware, and give Pennsylvania consumers what they have been demanding.

I am sponsoring this legislation because private enterprise always does a better job selling a product than government, and the PLCB is facing financial trouble, which will soon become the Commonwealth’s problem.

Pennsylvania’s wine and spirits business is financially unsustainable. In the summer of 2014, an internal PLCB memo stated that “the long term financial health of the state store fund, including the annual $80 million profit transfer to the General Fund is in jeopardy as cost growth for PLCB operations and the State Police enforcement is outpacing the revenue growth from the sale of wine and spirits.” Further, a recent internal document from the Commonwealth’s Budget Office predicts that the PLCB State Store Fund will lose more than $10 million in FY 2017-2018 and the loss will balloon to $125 million in FY 2019-2020. These fiscal realities make changing the present PLCB system a legislative priority. The numbers were validated by the PLCB earlier this year.

The current spirit and wine retail business, with roughly 600 retail stores, is wholly inadequate for Pennsylvania consumers. Our lack of retail outlets and quality stores has led Pennsylvania to rank at the bottom of the country in adult per capita basis sales of wine and spirits. The low number of retail outlets and poor selection force many consumers in my York County district to travel to Maryland to purchase spirits and wine for their personal use. This process is repeated across the heavily populated eastern part of Pennsylvania where many Pennsylvanians travel to Delaware, Maryland, or New Jersey to purchase spirits and wine. Pennsylvania loses hundreds of millions of dollars a year in spirits, wine, and beer sales to neighboring states that have far more retail outlets per capita and allow for one stop shopping.

The answer to this problem is pro-consumer legislation to get Pennsylvania out of the spirits and wine business and make it like the beer business.

It is time for the Senate to show leadership on the issue of PLCB privatization. Half measures sold as incremental “modernization” are unacceptable, because some have been tried before and failed, while others are illegal and still others just don’t make business sense. Modernization will not produce near the revenues that are suggested. The modernization proposals floated by Governor Wolf are not realistic.

To help address our budget deficit and bring a true modern retail environment to Pennsylvania’s adult beverage consumers, 2015 must be the year to privatize the Pennsylvania Liquor Control Board. To that end, it is my intention to introduce legislation that will privatize the PLCB.

My legislation will improve upon legislation passed in the House and include the following:
  • The ability of existing alcohol beverage licensees, such as those with D and R licenses, to obtain an expanded spirit and wine license to sell beer, wine, and spirits in a one-stop fashion desired by consumers, with D’s being able to sell any amount of spirits and wine and R’s being restricted to 3 liters of spirits and 3 liters of wine;
  • No new licenses will be created;
  • Initial license fees for this retail expansion will be reasonable so as to encourage existing retail adoption;
  • Language will be included to encourage those with an existing R or D license in safekeeping to use or sell that license within one year of passage;
  • The wholesale system will be privatized whereby wine and spirit suppliers will choose their wholesaler and private wholesalers will service all retail licenses both on-premise and off-premise;
  • Existing state stores will be phased out gradually. State stores will buy spirits and wine from private wholesalers and mark up product as they see fit just as private retailers do. As state stores close, spirit/wine retail licenses will become available for purchase or auction to private enterprise;
  • Language will be included to assist displaced PLCB employees, such as additional training and incentives for private retailers to hire these employees;
  • There will be no changes to the sale of beer in the Commonwealth. Beer is already privatized and changes in those rules should be left to another piece of legislation.
These changes will prevent a financial disaster at the PLCB and generate at least $600 million for the Commonwealth this year. As sales grow through more retail outlets, incremental tax revenue will increase substantially.

If you support a method allowing Pennsylvania to exit the wine and spirits business, please consider co-sponsoring this legislation. If you have any questions, please refer them to my Chief of Staff, Jason High, at 717-787-3817 or jhigh@pasen.gov.


Introduced as SB908