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Senate of Pennsylvania
Session of 2015 - 2016 Regular Session


Posted: February 13, 2015 04:29 PM
From: Senator Stewart J. Greenleaf
To: All Senate members
Subject: Wine/Beer/Liquor Reform Proposal
I plan to introduce legislation amending the Liquor Code to improve the sale of wine, beer and liquor in the Commonwealth which will enhance consumer convenience and generate additional revenue for the state.

First, my proposal would permit current holders of a Restaurant liquor “R” license to acquire a wine permit to sell up to three bottles of wine for off premise consumption in a single transaction. Wine shall be sold in a specifically designated interior area and sales must occur at designated registers staffed by a person at least 18 years of age. Transaction scan devices would be required. The proposal does not change the seating requirement for restaurant licensees and maintains the prohibition of sale of alcohol where gas is sold.

While “R” licensees like supermarkets can presently sell six and 12 packs of beer under certain requirements (café seating and separate cash registers) for off-premise consumption, they are not permitted to sell bottles of wine. This revision would give over 10,000 current “R” license holders the ability to sell their customers several bottles of wine in addition to beer. Also, there are over 800 “R” licenses presently in safekeeping which could sell wine in the future when they are activated. This will expand the opportunities for consumers to purchase their wine and at greater convenience.

Second, the measure would provide for direct shipment of wine to residents of the Commonwealth, thus adding convenience for consumers. It would allow a wine producer to ship up to 18 liters of wine per month to a resident. It would provide for the licensing of a direct wine shipper by the Pennsylvania Liquor Control Board (PLCB). The direct wine shipper will be required to collect the 6% sales tax and the 18% Johnstown Flood Tax on all shipments of wine into the Commonwealth and remit the same to the Department of Revenue on a quarterly basis. All wine shipped into the Commonwealth must be conspicuously labeled as containing alcohol. Furthermore, no wine may be shipped into the Commonwealth until proof of age of the recipient is ascertained.

Third, the proposal would provide for beer package reform, allowing establishments who retail beer to sell different amounts. Distributors are currently limited to selling no less than a case or single containers holding 128 ounces or more for off-premises consumption while restaurants and taverns can sell in quantities not to exceed 192 ounces (no more than two six-packs) at a time for take-out. My proposal would permit distributors to sell beer in quantities as small as a six-pack containing not less than 42 ounces. In addition, restaurants and taverns could sell beer for consumption off the premises up to three six-packs or one twelve-pack and one-six pack in a single sale consisting of not more than 288 ounces. This revision will enable beer establishments to offer different packages which will give consumers greater choice, making it easier for consumers to buy beer.

Fourth, the measure contains several initiatives aimed at strengthening our current state liquor store system and increasing customer convenience. The reforms include removing Sunday Sales limitations on state store openings and hours of operations; providing the PLCB greater flexibility in pricing; offering customer service (loyalty) programs; selling lottery tickets within stores; expediting review of PLCB leases (relocate stores adjacent to shopping centers with supermarkets or retail stores); creating a modular wine and spirit store for use in supermarkets and large retail stores (particularly benefit underserved rural areas); shipping product out of state; and buying products through a consortium to secure best price. These initiatives could generate at least $185 million in new revenue in the first year. When you add this to the $123.6 million in net income (profit) the state store system raised in FY 2013-2014, it will provide over $300 million in profit in the first year of implementation.

Our state store system is a valuable asset which generated $566 million in taxes, profits and other transfers in FY 2013-2014 and can provide even more funding to the Commonwealth through the initiatives mentioned above that will update and improve the system. A 2011 study commissioned by the Governor’s Budget Office involving Public Financial Management analyzing liquor privatization found that divesture of the retail and wholesale operation of the PLCB would
cost about $1.4 billion over 5 years in transition costs. Those cost would include existing transfers to state agencies, unemployment compensation, paid leave and early retirement costs and operational costs.

Since the voters of Washington approved the privatization of liquor sales in November 2011, the price of liquor has skyrocketed, forcing residents to cross the border to stores in other states. A recent study, which is ongoing and paid for by the Robert Wood Johnson Foundation, found the following: Emergency room visits for alcohol-related problems went up "significantly," especially among minors and adults over 40; Stores saw a dramatic increase in liquor theft, particularly by youths; and Youths showed increased acceptance of drinking.

West Virginia, which privatized wholesale and retail wine in 1981 and retail liquor in 1990, experienced a significant reduction in revenue following privatization. In 1980-81, just prior to privatizing wine sales, the state received $21.8 million in revenue from the Alcoholic Beverage Control Administration (ABCA) for wine and liquor sales. In the first year under a private wine system, the amount of revenue transferred by ABCA to the state dropped to $19.1 million and by 1989-90 it plunged to $9.7 million. West Virginia also experienced a drop in revenue transferred by ABCA in the years following retail liquor privatization. The same was true with Iowa which experienced a loss of $18 million in revenue in the first year (1987) that retail liquor sales were privatized. Prior to that, Iowa privatized wholesale and retail wine sales in 1985. In three years after wine was privatized, revenues dropped by $20 million annually.

Finally, the proposal contains a public safety component aimed at addressing underage drinking and drunk driving. In an effort to curtail underage drinking, the legislation requires each purchaser of a beer keg to complete a numbered form listing his or her name and address. The beer distributor will then place an identification tag on the keg that corresponds to the number on the form completed by the purchaser. Keg tagging will make it more difficult for adults to buy beer for minors and help police track down and prosecute adults who let minors drink beer at keg parties. According to the National Institute on Alcohol Abuse and Alcoholism, 31 states have requirements for keg registration. The Maine Bureau of Liquor Enforcement reported “an 80% reduction in keg parties in the State of Maine since the passing of the law in regards to registration of kegs. The registration of kegs has also led to several convictions for procuring liquor to minors that would have otherwise been impossible.”

The bill also requires the PLCB to establish a Safe Ride Home Grant Pilot Program to provide safe transportation home to persons suspected of having a prohibited blood alcohol concentration. A SafeRide Home Grant Pilot Program would represent another tool to combat drunk driving. The goal of the program is to provide an alternative means of transportation, thus decreasing the accidents, injuries and deaths that happen when an intoxicated patron attempts to drive home. The board may work in collaboration with private organizations such as existing groups who are ready to implement the program. While the General Assembly has enacted numerous laws to crackdown on drunk driving, and the Pennsylvania State Police (PSP) and municipal police have aggressively enforced the laws to prevent and deter drinking and driving, the statistics show that thousands of Pennsylvanians still get behind the wheel when they are intoxicated. According to 2011 Crash Facts and Statistics issued by the Pennsylvania Department of Transportation, 11,805 alcohol-related crashes occurred. Alcohol-related deaths in 2011 were 33% of the total traffic deaths, the same as in 2007, 2008 and 2009. PSP enforcement statistics for 2010 showed that DUI arrests (17,695) were up over 4% from 2009.

This proposal provides for a modernized liquor system with private wine sales (including direct wine shipment) and beer packaging aimed at increasing consumer access and convenience while retaining ultimate control of hard liquors and promoting public safety. I believe this plan represents a balance approach which helps to strengthen all three systems while insuring that the Commonwealth does not suffer any unintended consequences such as significant loss of revenue from total privatization as in other states. This will benefit Pennsylvania consumers of wine, beer and spirits and produce much needed revenue for the Commonwealth.

Introduced as SB651