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Pennsylvania House of Representatives
04/23/2024 09:30 PM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20170&cosponId=24478
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House of Representatives
Session of 2017 - 2018 Regular Session

MEMORANDUM

Posted: September 5, 2017 10:46 AM
From: Representative Gene DiGirolamo
To: All House members
Subject: Alternative to Privatization, Liquor Code Amendments
 

I am pleased to offer for your co-sponsorship consideration a bill to amend the Pennsylvania Liquor Code as an Alternative to Privatization. This legislation would provide greater convenience to the customer and increase the profit of the PLCB to enhance the return for the taxpayer.

This legislation would build on the passage of Act 39, which adopted many of the modernization initiatives my legislation has proposed in the past. What my new liquor proposal would do is adopt the remaining modernization initiatives my past legislation called for.

In fiscal year 2015/2016 the PLCB returned over $626 million in taxes and profit as revenue for the General Fund. This is important to note as we look for ways to close our structural budget deficit in Pennsylvania. My legislation would further enhance revenue at the PLCB, rather then privatize this valuable asset and risk losing hundreds of millions of dollars in state revenues.

For illustration, the 2015/16 fiscal year financial performance net of taxes is as follows:

Sales Net of Taxes……………$1,937,884,590
Net Income (Profit)……………$103,856,933; a profit of 5.35%

These figures are provided by the Comptroller of the PLCB in the Governor’s Office of the Budget not the PLCB.

This legislation would amend the liquor code in the following ways with measurable increases of profit as testified by the PLCB in past Appropriation hearings:

Sources of Additional Revenue
  1. Full Flexible Pricing – Act 39 allowed the PLCB to bypass a uniform markup on the top 150 selling brands of both wine and spirits, giving the agency discretion to decide mark-ups on those products. Allowing a full flexible mark-up/pricing policy would allow the PLCB to negotiate with their suppliers on ALL items, rather than the top 150 brands. The result would lead to more competitive prices and higher tax revenues for the state treasury.
  2. Modular Fine Wine and Good Spirit Stores within a Large Retail Store- this legislation would urge the PLCB to expedite a program, currently on hold, for a 400 sq. ft. modular store for use in supermarkets and large retail stores. The store would hold more SKUs (Stock Keeping Units) or selection of items then supermarkets in open states. This initiative would particularly benefit underserved rural areas.
  3. Expedited Review of PLCB Leases by the Department of General Services-this legislative mandate is very important for the aforementioned “store within a retail store”. PLCB lease review has been intentionally slowed down by DGS from a one month review in prior administrations to over one year currently. Every lease, whether new or renewal, is subject to this unfortunate time line. Of the over 600 PLCB stores, around 250 are located in shopping centers with supermarkets or retail stores. The PLCB would like to re-locate this stores adjacent to these supermarkets and retail stores for customer convenience. This legislation would mandate a 45 day review window on all leases approved by DGS. Proper location of PLCB stores for the benefit of customer convenience would take place in several months rather then years and also would benefit the Pennsylvania developers and landlords of these properties.
  4. Consortium Product Buying-this legislation would make clear that the PLCB may take the lead in joining some of the other 18 control states, like Michigan, Virginia, Ohio and New Hampshire, in buying product in unified fashion to help secure the very best price for the Pa consumer on the PLCB store shelf.
The fiscal impact of increased profits of these initiatives as projected at the conclusion of year one of implementation is as follows:

Additional Projected Revenue
  1. Full Flexible Pricing………………………... Revenue is to be determined, based on current supplier negotiations with the PLCB
  2. Store Within a Store/Expedited Lease Review….. $25 million
  3. Consortium Buying…………....…… $10 million

This legislation would raise at least $35 million in additional revenue, which is a conservative estimate due to the lack of a revenue projection on full flexible pricing. A more fair revenue number can be generated once results from the partial flexible pricing are available from Act 39.

Please consider supporting Pennsylvania Liquor Code amendment reform as an alternative to privatization for the benefit of the PA customers of wine and spirits and enhanced revenue for the General Fund.