Even a beer?

Columnist : Albert Paschall

I thought I had left the state.  I knew I hadn’t driven far enough to do that but here I was in my local supermarket and there it was right in front of me for sale: a bottle of wine.  It was surrounded by all kinds of wine and spirits, right there next to the meat section.

It’s mystified people who move here from another state how Pennsylvania’s archaic system of alcoholic beverage sales has evolved.  In some stores and bars people can buy six-packs of beer to a limit.  To get cases or kegs of beer one has to visit a distributor, basically a beer store that sells to the public and to area bars and restaurants.  To buy wines and spirits you shop at one of the 643 retail stores owned by the Pennsylvania Liquor Control Board, commonly called: “state stores.”

The state’s liquor control board dates back to 1933 when Prohibition was ending.  Back then Pennsylvania was a conservative state and the conventional wisdom of the day started a state run monopoly that controlled everything from purchasing to transportation as well as wholesaling and retailing.  The idea was that consumption of demon rum in the Keystone State could be minimized.  It seems that concept lasted until about an hour after the bars opened.

By the early 1990’s people had enough of the state’s control as well as the sour attitude, lousy hours and poor selection that the LCB offered.  Another whiskey rebellion seemed to be brewing in the state.  Former Governor Tom Ridge rode to victory in part on his promise to break the system up into little pieces and sell them off to the private sector.

But Ridge hit the two big questions that every crusader who ever thought of selling the LCB has encountered.  Where will the state make up the revenue?  And the more dangerous proposition:  what happens when a couple of billion extra dollars hits Harrisburg all at once?

The first one is the big one.  In its last fiscal year, the LCB had contributed $91 million in state and local taxes and an additional $223 million from an 18% liquor tax that is buried in the retail price.   On top of that came another $80 million in profit to the state treasury.  So finding another $400 or so million dollars from the tax payers wouldn’t be an easy bottle to pop.  While those of us who always favor private sector solutions can clearly make the case for divesting the system the arguments go flat when the state loses the profit piece entirely.

With the all of the legislatures in the last decade the contrary argument is also persuasive.  Under Ridge’s plan licenses or franchises would have been sold on the wholesale and retail level.  At the time it was estimated that the auction could have brought as much as $2 billion in new revenue into the state treasury to be spent at the discretion of the General Assembly.  Two billion in the state’s bank could be very intoxicating to the legislature.  The fear always was they would start spending it like whatever drunken stereotype you might favor.

Confronted with the reality of the dollars the Ridge/Schweiker administration turned to a Philadelphia lawyer, Jonathan Newman, to turn the system around.  As chairman of the LCB he’s made progress.  Held over by Rendell, Newman introduced credit cards, 7 day operations and broader wine selections to LCB stores.   A customer service campaign has produced somewhat better attitudes in most staff and now supermarket sales, convenient stores within the store, are popping up all over the state.  Who knows?  With wine now next to the meat counter someday there might even be a beer in the pretzel aisle.

Albert Paschall
Senior Fellow
The Lincoln Institute of Public Opinion Research, Inc.